Vipul Ganda is an Independent Litigation Counsel with over 14 years of experience and a proven track record in Litigation and Dispute Resolution.
Bharat Sanchar Nigam Ltd. & Ors. Versus Nortel Networks India Pvt. Ltd.
Court / Forum : Supreme Court of India Citation : (2021) 3 MLJ 131 Coram : Justice Indu Malhotra and Justice Ajay Rastogi Subject : Sections 11 and 43 of the Arbitration and Conciliation Act, 1996 Article 137 of the Limitation Act, 1963 Date of Decision : 2021-03-10
Bharat Sanchar Nigam Limited (“BSNL” or “Appellant”) invited bids for planning, engineering, supply, insulation, testing and commissioning of GSM based cellular mobile network. Nortel Networks India Private Limited (“Nortel” or “Respondent”) was awarded the purchase order by BSNL, in the tender process.
On completion of the work under the purchase order, BSNL deducted/ with held certain amount towards liquidated damages and other levies. Pursuant to which, Nortel raised a claim on May 13, 2014, which was rejected by BSNL on August 4, 2014.
On April 29, 2020, Nortel invoked the arbitration clause and requested for the appointment of an arbitrator, after a period of over 5 years. The same was rejected by BSNL by stating that the claims were time barred.
Thereafter, an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) was filed by Nortel before the High Court of Kerala. The High Court of Kerala referred the disputes to arbitration.
The said order was taken up in review, however, the same was dismissed. Pursuant to which, the Appellant preferred an appeal before the Hon’ble Supreme Court of India.
What is the limitation period for filing an application under Section 11 of the Arbitration Act?
Whether the Court may refuse to make the reference under Section 11, if the claims are ex facie time barred?
While deciding the first issue, the Hon’ble Supreme Court of India observed that Section 11 of the Arbitration Act does not prescribe any time period for filing an application for the appointment of an arbitrator.
Since Section 43 of the Arbitration Act provides that the provisions of the Limitation Act, 1963 (“Limitation Act”) shall apply to arbitrations, as it applies to proceedings in Court. Thus, it was held that the time period for filing an application under Section 11 of the Arbitration Act would be governed by the residual provision, i.e., Article 137 of the First Schedule of the Limitation Act.
While deciding the second issue, the Hon’ble Court observed the distinction between issues of ‘jurisdiction’ and ‘admissibility’ and stated that ‘jurisdictional issues’ pertain to power and authority of the arbitrators to hear and decide a case. Whereas ‘admissibility issues’ relate to the procedural requirements of pre-arbitration requirements.
The Hon’ble Court, after relying on the decisions of the Singapore Court of Appeal applied the ‘tribunal versus claim’ test which asks that whether the objection is targeted at the tribunal or at the claim. Thus, it was obseved that the issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal.
The Hon’ble Court, however, also referred to its decision in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, and concluded that a Court may interfere ‘only’ when it is ‘manifest’ that the claims are ex facie time barred and dead, or there is no subsisting dispute.
The Courts should refuse to refer a dispute to arbitration under Section 11 of the Arbitration Act only in very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time barred, or that the dispute is non-arbitrable.
In the present case, the Hon’ble Court disregarded Nortel’s contention on extended limitation period, in light of exchange of correspondence or even settlement discussions. It was observed that no pleadings were set out on any intervening facts which would extend the limitation period under the Limitation Act.
The Hon’ble Court concluded that Nortel’s claims are ex facie time barred as Nortel raised the notice of arbitration on April 29, 2020, i.e., over 5 years after Nortel’s claims were rejected by BSNL on August 4, 2014. Accordingly, the appeal was allowed.
Vipul Ganda is a Delhi based Advocate practicing largely at the Delhi High Court. His practice focus is Dispute Resolution and Litigation and his practice areas include Arbitration, Commercial, Civil, Constitutional, Corporate and Criminal Litigation.