BHARAT SANCHAR NIGAM LTD & Anr. v. M/S NORTEL NETWORKS INDIA PVT. LTD

1.2 Given the vacuum in the law to provide a period of limitation under Section 11 of the Arbitration and Conciliation 1996, the Courts have taken recourse to the position that the limitation period would be governed by Article 137, which provides a period of 3 years from the date when the right to apply accrues. However, this is an unduly long period for filing an application u/s. 11, since it would defeat the very object of the Act, which provides for expeditious resolution of commercial disputes within a time bound period. In view of the legislative intent, the period of 3 years for filing an application under Section 11 would run contrary to the scheme of the Act. It would be necessary for Parliament to effect an amendment to Section 11, prescribing a specific period of limitation within which a party may move the court for making an application for appointment of the arbitration under Section 11 of the 1996 Act. In the present case, it is found 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. [Paras 17, 18][661-C-H]

2.1 Whether the Court may refuse to make the reference under Section 11 where the claims are ex facie time-barred Legislative History of Section 11 Pre-amendment position Under the principal Act, the legislative scheme under Section 11 was that if the parties had agreed on a procedure for BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS INDIA PVT. LTD. 647 appointment of the arbitrator, the appointment had to be made in accordance with that procedure. Absent an agreement between the parties, the default power of appointment in a domestic arbitration would be exercised by the Chief Justice of the High Court, or person, or institution, designated by him. In the case of an international commercial arbitration, the default power would be exercised by the Chief Justice of India, or the person, or institution, designated by him. The object of conferring the power of appointment on the highest judicial authority was to give credibility to the procedure of appointment. [Para 19][662-A-E] Post-amendment position The 1996 Act was amended by the Arbitration and Conciliation (Amendment) Act, 2015 which came into force with effect from 23.10.2015. The 2015 Amendment Act replaced the Chief Justice of the High Court as the appointing authority for exercising the default power of appointment in the case of domestic arbitrations, by the concerned High Court; and, in respect of international commercial arbitrations, the default power would be exercised by the Supreme Court, in place of the Chief Justice of India. It inserted Sub-section (6A) and (6B) in Section 11. The effect of the amendment was that if the existence of the arbitration agreement was not in dispute, all other issues would be left for the arbitral tribunal to decide. This was in reinforcement of the doctrine of kompetenz-kompetenz, which empowers the tribunal to rule on its own jurisdiction, including any objections with respect to the validity of the arbitration agreement; and thereby minimize judicial intervention at the pre-reference stage. In view of the legislative mandate contained in the amended Section 11(6A), the Court is now required only to examine the existence of the arbitration agreement. All other preliminary or threshold issues are left to be decided by the arbitrator under Section 16, which enshrines the kompetenz- komptenz principle. The doctrine of kompetenz-komptenz implies that the arbitral tribunal is empowered, and has the competence to rule on its own jurisdiction, including determination of all jurisdictional issues. This was intended to minimise judicial intervention at the pre-reference stage, so that the arbitral process is not A B C D E F G H 648 SUPREME COURT REPORTS [2021] 2 S.C.R. A thwarted at the threshold when a preliminary objection is raised by the parties. [Paras 23, 26][665-C-F; 666-B-C; 668-E-G]

2.2 Issue of Limitation Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of ‘jurisdiction’ pertains to the power and authority of the arbitrators to hear and decide a case. 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. Issues with respect to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to the jurisdiction of the tribunal. 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. Admissibility relates to the nature of the claim or the circumstances connected therewith. An admissibility issue is not a challenge to the jurisdiction of the arbitrator to decide the claim. The issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal. For instance, a challenge that a claim is time-barred, or prohibited until some pre- condition is fulfilled, is a challenge to the admissibility of that claim, and not a challenge to the jurisdiction of the arbitrator to decide the claim itself. Applying the “tribunal versus claim” test, a plea of statutory time bar goes towards admissibility as it attacks the claim. It makes no difference whether the applicable statute of limitations is classified as substantive (extinguishing the claim) or procedural (barring the remedy) in the private international law sense. The issue of limitation which concerns the “admissibility” of the 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. It is only in the very limited B C D E F G H BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS INDIA PVT. LTD. 649 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, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal. [Paras 30-32, 34, 35 and 37][670-D-H; 671-A-B; 672-C-E; 675-A-B]