Asmita Kuvalekar | Government Law College, Mumbai | 13th March 2020.
M/s. UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITED V NORTHERN COAL FIELD LIMITED (SPECIAL LEAVE PETITION (C) NO. 11476 OF 2018)
FACTS OF THE CASE:
This appeal originates from the High Court’s rejection of an application filed under Section 11 of the Arbitration and Conciliation Act 1996. The ground for rejection was the bar of limitation. The Supreme Court was tasked with determining the legal tenability of the High Court’s decision. The case assumes importance because of the Court’s recognition of the true legislative intent behind the 1996 Act which is to have autonomous tribunals with full power to decide matters. Thereby, it underlines the principle of Kompetenz-Kompetenz that advocates minimum Court intervention.
ISSUE:
- Do High Courts have the power to decide whether an arbitration is barred by limitation law?
JUDGEMENT:
First and foremost, the Supreme Court highlighted that the case has to be decided in accordance with the 2015 amendment to the 1996 Arbitration and Conciliation Act. This amendment made significant changes to the Act including some in Section 11. One of the outstanding changes by way of Section 11 6A, is that the High Courts on an application under this section, are confined to determining the legal existence of an arbitration agreement and nothing beyond that.
The Apex Court acknowledged its earlier, pre-amendment view on the subject, seen in SBP & Co. v. Patel Engineering Ltd.1. and other cases. A combined understanding of these judgements shows that for applications made under Section 11, the power of High Courts was confined to the following:
- Whether the arbitration agreement is valid and legal
- Whether the applicant is party to the arbitration agreement in question
- Whether the High Court approached has jurisdiction in the matter
However, as per the 246th Report of the Law Commission which served as the basis of the 2015 amendment, if the Court refers the parties to arbitration on the belief that the arbitration clause exists, all future potential questions about its existence have to be decided by the arbitral tribunal. Thus, hitherto decisions like Patel Engineering (supra) stand overruled. Now the only requirement is for the High Courts to look into the validity of the arbitration agreement. Therefore, all other peripheral matters, significant or otherwise are to be decided by the arbitral tribunal as per Section 16.
Such demarcation embodies the well-settled Kompetenz-Kompetenz principle. Alluding to the sufficient competence of the arbitral tribunal, this principle affords independence and weight to the decisions of the tribunal with bare minimum interference from Courts. The intent of the Arbitration and Conciliation Act, as noted in this case, is to provide a faster alternative resolution of conflict without Court intervention if possible. Thus, arbitral tribunals are expected to have decisive, final authority in all matters once the preliminary issue of validity of the arbitration agreement has been settled by the Court. This preliminary issue being a mere “pre-reference” issue, all subsequent questions are to be determined by the tribunal. Section 16 (1) of the Act being inclusive in nature, allows for the same.
Lastly, the Supreme Court reiterated that limitation is a “mixed question of fact and law” and per its decisions in ITW Signode India Ltd. v Collector of Central Excise2 and NTPC V Siemens Atkein Gesell Schaft3 as well as M/s Indian Farmers Fertilizers Cooperative Ltd. v Bhadra Products4, limitation as a jurisdictional contention can be dealt with by the tribunal and shouldn’t be pursued at the “pre-reference” stage under Section 11. In line with the above ruling, the High Court order was dismissed with the Supreme Court declaring that the arbitral tribunal would have the power to decide upon the issue of limitation in this case.
- (2005) 8 SCC 618
- (2004) 3 SCC 48
- (2007) 4 SCC 451
- (2018) 2 SCC 534
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