Whether Claims Of Party Are Barred By Limitation, Need To Be Decided By Arbitrator Under Section 16 A&C: Telangana High Court

Sub-section (1) of Section 16 explicitly empowers the Arbitral Tribunal to rule on its own jurisdiction, encompassing any objections related to the existence or validity of the arbitration agreement. Section 16, being an inclusive provision, covers all preliminary issues concerning the Tribunal's jurisdiction.

Brief Facts:

The Applicant filed an application under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), seeking appointment of a nominee arbitrator on behalf of the Respondent to resolve claims and disputes arising from the Agreement for Development & Raising Contract between Uranium Corporation of India Limited and SMS Infrastructure Limited (Contractor) for Tummalapalle Project. The Applicant entered into this agreement with the Respondent, a Public Sector Undertaking under the Department of Atomic Energy, Government of India, granting exclusive rights for mining and processing uranium in India.

Under the Agreement, the Applicant was entitled to undertake mining activities in Tummalapalle for eight years, with a total value of Rs. 626,04,44,749.53 crores. Despite alleged deviations from the Agreement's terms by the Respondent, the Applicant fulfilled its obligations according to the specified timelines and specifications. However, additional expenses were incurred by the Applicant, which were communicated to the Respondent through a letter, with a request for amicable settlement. No response was received from the Respondent.

Arbitration proceedings were initiated by the Applicant, appointing Mr. Justice A.K.Sikri as its nominee for the Arbitral Tribunal. Despite being called upon to nominate its arbitrator within thirty days, as per the Agreement, the Respondent failed to respond or nominate its arbitrator. Consequently, the Applicant filed the application under Section 11(5) and (6) of the Arbitration Act.

The Respondent argued that the arbitration clause ceased to subsist upon the expiration of the main agreement/contract on 06.03.2020.

Observations by the High Court:

In the proceeding under Section 11(6) of the Arbitration Act, the High Court held that it has the responsibility to ensure that the underlying contract contains an arbitration agreement applicable to the disputes at hand. It is noteworthy that the Respondent did not contested the existence of the Agreement dated 06.02.2008, which includes an arbitration clause. The High Court held that an arbitration clause within a contract is considered an independent agreement, surviving even after the expiration of the main contract. Therefore, the arbitration clause in this case remains valid despite the expiration of the Agreement.

The High Court held that the actions taken by the Applicant further affirmed the existence and intent to arbitrate disputes. The High Court noted the distinction between jurisdictional and admissibility issues concerning arbitration. It held that the issue of limitation, which pertains to the admissibility of a claim, falls within the purview of the Arbitral Tribunal. This principle is further underscored by Section 16(1) of the Arbitration Act, which grants the Arbitral Tribunal the authority to rule on its own jurisdiction.

Referring to the doctrine of kompetenz-kompetenz, the High Court emphasized the intent to minimize judicial intervention in arbitration proceedings. Section 16 of the Arbitration Act, being an inclusive provision, encompasses all preliminary issues touching upon the Tribunal's jurisdiction.

The High Court held that the issue of whether the Applicant's claims are time-barred requires adjudication by the Arbitral Tribunal. It clarified that no opinion was expressed regarding the limitation of the Applicant's claims, as this matter falls within the Tribunal's jurisdiction.

Consequently, the High Court appointed Justice V. Ramasubramanian, former Judge of the Supreme Court, as the nominee arbitrator on behalf of the Respondent.

Case Title: M/S Sms Limited vs Uranium Corporation Of India Limited

Case Number: ARBITRATION APPLICATION No.175 of 2023.

Advocate for the Applicant: Mr. Paras Kuhad.

Advocate for the Respondent: Mr. Vedula Venkataramana.