Kerala HC: Issue of limitation period with regard to a claim is a jurisdictional issue to be decided by the Arbitrator

 

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The Kerala High Court bench comprising of J. A.K.Jayasankaran Nambiar in the case of M/S.Nortel Networks (India) Pvt. Ltd v. Bharat Sanchar Nigam Limited (BSNL), on October 13, 2020 decided on the issue of limitation with regards to a claim raised by the Petitioner.

The Petitioner successfully acquired the tender from Respondent for planning, engineering, supply, installation, testing and commissioning of GSM based cellular mobile network. Pursuant to which, a purchase order was placed by the Respondent and accordingly, the Petitioner executed the work. However, it is the claim of the Petitioner that the Respondent had withheld an amount of Rs.99,70,93,031 towards liquidated damages and other deductions. Thereafter, the Petitioner raised a claim which was denied by the Respondent. Subsequently, the Petitioner invoked the Arbitration clause incorporated in the Purchase order. In response to which, the Respondent raised the plea that the claims raised by the Petitioner are barred by time.

Decision

The Court decided on the following issues:

(i)   Issue of Limitation with regard to Claim raised by a party

The Court, relying on the Supreme Court Judgement of Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd (Read judgement here), upheld that the issue of limitation being a mixed question of law and fact must be considered by the Arbitrator under the Doctrine of Kompetenz-kompetenz. Further, the issue of limitation is a jurisdictional issue which informs the jurisdiction of the arbitrator, and therefore, must always be considered by the Arbitrator in the proceedings before him.

(ii) Issue of Limitation with regard to maintainability of application under Section 11

The Court observed that the distinction between the limitation period for raising a claim against one party and for maintaining an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) ceased to exist post- 2015 Amendment, and therefore, the High Courts have a limited role of only ascertaining whether there exists a valid Arbitration Agreement between the parties. It was also upheld that any application under Section 11 must be made within 3 years from the expiry of 30 days of the receipt of notice regarding invocation of Arbitration agreement.

(iii) Appointment of Arbitrator by an interested party

The Arbitration Clause contained in the Purchase Order required the arbitration to be referred to the Sole Arbitration of CGM, BSNL, Kerala Circle. The CGM was further empowered to appoint an arbitration in case he was unable or unwilling to act as the arbitrator. This was challenged by the Petitioner on the ground that the CGM is an interested party. The Court, deciding in favour of the Petitioner, stated that post- 2015 Amendment, it has been made clear under Section 12(5) of the Arbitration Act that the interested parties to a dispute cannot be empowered with the function of appointing an arbitrator.

The Court further upheld that in cases where an interested party is entrusted with the task of appointment, the Courts must ignore such clause and appoint a sole arbitrator. Accordingly, the court appointed an independent sole arbitrator for adjudicating the present dispute between the parties.

Read judgement here

By Sakshi Dewangan