Whether a Section 11 Application can be Dismissed on the Grounds of Limitation?

[Piyush Rathi is a 4th Year B.A. L.L.B student at NALSAR University of Law]

The Supreme Court in Uttarakhand Purv Sainik Kalyan Nigam Limited v Northern Coal Field Limited (27 November 2019) obtained a chance to expand on the jurisprudence relating to the approach of ‘minimal intervention of courts in arbitral process‘ taken by the legislature. The issue faced by the Supreme Court was whether the High Court was correct in rejecting the application under section 11 of the Arbitration and Conciliation Act, 1996 (the “Act”) on the ground that the same was barred by the law of limitation.

The Arbitration & Conciliation (Amendment) Act 2015 brought out significant changes in the appointment process under section 11 of the Act. The most important change related to the curtailment in the scope of jurisdiction of the court to inquire into the existence of the arbitration agreement at a pre-reference stage under section 11(6A) of the Act. The Court, while reinforcing the principle of kompetenz kompetenz, which implies that the arbitral tribunal is empowered and has competence to rule on its own jurisdiction, held that issues that  relate to preliminary or threshold issues are to be decided by the arbitrators in accordance with the powers provided to them under section 16 of the Act. Therefore, the Court in the present case overturned the decision of the High Court and held that the present subject matter is beyond the jurisdiction of the court and directed the issue of limitation to be decided by the arbitral tribunal that will so get constituted.

The Court also held that the doctrine of kompetenz­ kompetenz is, subject to an exception, viz., when the arbitration agreement itself is impeached as being procured by fraud or deception. This exception would also apply to cases where the parties, in the process of negotiation, may have entered into a draft agreement as an antecedent step prior to executing the final contract, as the draft agreement is a mere proposal to arbitrate and the contract has not been unequivocally accepted; hence, the arbitral tribunal cannot assume jurisdiction.

This power given by the legislature to the arbitral tribunal to rule on its own jurisdiction has been framed in accordance with Article 16 of the UNCITRAL Model Law. Its subsequent application by the court is a welcome step towards building India an arbitration-friendly nation. It is also imperative to point out here that section 11(6A) has been omitted by the Arbitration and Conciliation (Amendment) Act, 2019. This has more to do with the institutional orientation which legislature has sought to provide to arbitration in India.

Piyush Rathi

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