Article 137 of Limitation Act will govern the limitation period u/s 11 for appointment of arbitrator
Case Law Details
Bharat Sanchar Nigam Ltd. Vs Nortel Networks India Pvt (Supreme Court)
Conclusion: Notice invoking arbitration was issued 5 1/2 years after rejection of the claims on 04.08.2014. Consequently, the notice invoking arbitration was ex facie time barred, and the disputes between the parties could not be referred to arbitration.
Held: The two important issues arose for consideration was that the period of limitation for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”); and whether the Court might refuse to make the reference under Section 11 where the claims were ex facie time-barred. BSNL submitted that the cause of action for invoking arbitration arose on 04.08.2014 when the claim made by Nortel was rejected by making deductions from the Final Bill. It was contended that Nortel had slept over its alleged rights for over 5 1/2 years, before issuing the notice of arbitration on 29.04.2020. From 04.08.2014 till 29.04.2020, Nortel did not take any action whatsoever. Consequently, the notice invoking arbitration had become legally stale, non-arbitrable and unenforceable. High Court had erroneously proceeded on the premise of mere existence of a valid arbitration agreement, without considering that such an agreement was inextricably connected with the existence of a live dispute. However, Nortel contended that the starting point of limitation for initiating a proceeding under Section 11 was the expiry of 30 days’ from the date of issuing notice of arbitration on 29.04.2020. The cause of action was, therefore, a continuing one. The High Court had rightly held that the issue of limitation must be decided by the arbitral tribunal. It was held that the application under Section 11 was filed within the limitation period prescribed under Article 137 of the Limitation Act. Nortel issued the notice of arbitration vide letter dated 29.04.2020, which was rejected by BSNL vide its reply dated 09.06.2020. The application under Section 11 was filed before the High Court on 24.07.2020 i.e. within the period of 3 years of rejection of the request for appointment of the arbitrator. Applying the law to the facts of the present case, it was clear that this was a case where the claims are ex facie time barred by over 5 1/2 years, since Nortel did not take any action whatsoever after the rejection of its claim by BSNL on 04.08.2014. The notice of arbitration was invoked on 29.04.2020. There was not even an averment either in the notice of arbitration, or the petition filed under Section 11, or before this Court, of any intervening facts which may have occurred, which would extend the period of limitation falling within Sections 5 to 20 of the Limitation Act. Unless, there was a pleaded case specifically adverting to the applicable Section, and how it extended the limitation from the date on which the cause of action originally arose, there could be no basis to save the time of limitation.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
1. The present Appeals raise two important issues for our consideration : (i) the period of limitation for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”); and (ii) whether the Court may refuse to make the reference under Section 11 where the claims are ex facie time-barred?
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In deciding claims in a domestic Arbitration, the limitations provided in the agreement for raising the claim superseded by provisions of the Limitation Act, if so in what conditions?