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The Top Court has held that only in very limited cases where the claims are ex facie time-barred, can the Court refuse to make reference under Section 11 Arbitration and Conciliation Act, 1996. For computation of Limitation by applying Section 137 Limitation Act, 1963, Court specified, “Parliament may consider amending Section 11 of the 1996 Act to provide a period of limitation for filing an application under this provision, which is in consonance with the object of expeditious disposal of arbitration proceedings.”

A Division Bench of Justice Indu Malhotra and Justice Ajay Rastogi, while allowing the present appeals held, Period of limitation for filing an application under Section 11 Arbitration and Conciliation Act would be governed by Section 137 of the First Schedule of the Limitation Act, 1963.

Further, no matter Limitation being an exclusive domain of the Arbitral Tribunal, Courts retain the power to dismiss a reference where claims are apparently time-barred.

Factual Matrix

Appellant company issued a tender inviting bids for planning, engineering, supply etc. of GSM based cellular mobile network in Kerala, Karnataka, Tamil Nadu, Andhra Pradesh Circles and the Chennai telephone district. In the tender process, the Respondent-Company was awarded the purchase order.

On completion of the work, Appellants withheld an amount of Rs 997093031 towards liquidated damages and other levies.

Respondents vide communication dated 13.05.2014 raised a claim for payment of the said amount which was rejected by the Appellants.

Thereby, after a lapse of over 5 ½ years, Respondents through letter dated 29.04.2020 invoked the arbitration clause and requested for appointment of an independent arbitrator, contending that the dispute of withholding the aforesaid amounts would fall within the ambit of arbitrable disputes under the agreement.

Appellants contended that the request for appointment of an arbitrator could not be entertained as the case had already been closed on 04.08.2014 and as per Section 43 of the 1996 Act, the notice invoking arbitration was time barred.

Consequently, Respondents filed an application under Section 11 of the 1996 Act before the Kerala High Court for appointment of an arbitrator wherein, the High Court referred the disputes to arbitration through an Order dated 13.10.2020. Appellants moved a review petition before the High Court, which was dismissed through order dated 14.01.2021.

The matter followed to the Top Court under a Civil Appeal against orders dated 13.10.2020 and 14.01.2021 respectively.

Issues: (1) Computation of limitation for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996 (ii) Whether Court may refuse to make the reference under Section 11 where the claims are ex facie time-barred.

Since there is no period of limitation prescribed as such under the Arbitration and Conciliation Act, 1996, Court proceeded under Section 137 of the Limitation Act.

“… Limitation for filing an application under Section 11 would arise upon the failure to make the appointment of the arbitrator within a period of 30 days from issuance of the notice invoking arbitration. In other words, an application under Section 11 can be filed only after a notice of arbitration in respect of the particular claim(s)/dispute(s) to be referred to arbitration [as contemplated by Section 21 of the Act] is made, and there is failure to make the appointment,”

In facts and circumstances of the present case, Court held that the application was filed well within the limitation period.

On applicability of Section 137 Limitation Act, Court referred Leaf Biotech v. Municipal Corporation, 2010 (6) Mh LJ 316 and Deepdharshan Builders v. Saroj, (2019) 1 AIR Bom R 249.

Observing that Limitation is essentially a mixed question of fact and law, to be decided by the Arbitral Tribunal, the Bench carved out significant differences between Jurisdictional and Admissibility Issues.

“Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, such as lack of consent, or a dispute falling outside the scope of the arbitration agreement. Admissibility issues however relate to procedural requirements, such as a breach of pre-arbitration requirements, for instance a mandatory requirement for mediation before the commencement of arbitration or a challenge to a claim or a part of the claim being either time-barred or prohibited until some pre-condition has been fulfilled.”

The issue of limitation which concerns the ‘admissibility’ of a claim, must be decided by the arbitral tribunal either as a preliminary issue or at the final stage after evidence is led by the parties, noted the Bench.

However, “Present case is a case of deadwood/no subsisting dispute since the cause of action arose on 04.08.2014, when the claims made by Nortel were rejected by BSNL. The Respondent has not stated any event which would extend the period of limitation, which commenced as per Article 55 of the Schedule of the Limitation Act immediately after the rejection of the Final Bill by making deductions”, the Bench said.

Reliance was further placed on Section 9 of the Limitation Act which mandates continuous running of limitation period notwithstanding any subsequent disability or inability.

Setting aside the impugned orders of the High Court, it was conclusively held, “In rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference.”

Case Title: Bharat Sanchar Nigam Ltd v. M/s Nortel Networks | CIVIL APPEAL NO. 843-844 of 2021

Provisions/Statute involved: Section 9, 43, 55, 137 Limitation Act, 1963, Section 11 Arbitration and Conciliation Act, 1996.

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