Application For Appointment Of Arbitrator Filed After Many Years : Jharkhand High Court Dismisses The Application

The Single Bench of Justice Sujit Narayan Prasad held that, in view of the decision of the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another versus Nortel Networks India Private Limited (2021), the issue of limitation is required to be answered at the threshold itself, i.e., at the stage where the application filed under Section 11(6)(c) of the A&C Act is considered by the Court.

The petitioner/applicant Jharia Petrol Supply entered into a dealership agreement with the respondent Indian Oil Corporation Limited for sale of petroleum products. After the said agreement was terminated by the respondent, the petitioner filed a writ petition before the Jharkhand High Court challenging the termination of the agreement. The writ petition was dismissed by the High Court on the ground that the alternative remedy of an arbitration clause in the said agreement was available to petitioner. Against this, the petitioner filed an intra court appeal before the Division Bench of the Jharkhand High, which was also dismissed on the ground of availability of the alternative remedy of arbitration. The Division Bench, while dismissing the appeal, granted liberty to the petitioner to approach the respondent for appointment of Arbitrator. After the respondent failed to respond to the request for appointment of Arbitrator, the petitioner filed an application under Section 11(6)(c) of the A&C Act for appointment of Arbitrator before the Jharkhand High Court.

The respondent Indian Oil Corporation submitted before the High Court that the application filed by the petitioner was not maintainable since it was filed after an inordinate delay of 20 years from the date of passing of the order by the Division Bench, wherein liberty was granted to the petitioner to approach the respondent for appointment of Arbitrator. The respondent added that the request for appointment of Arbitrator was also made by the petitioner to the respondent after a lapse of 16 years from the date of the said order.

The respondent contended that in view of the decision of the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another versus Nortel Networks India Private Limited (2021), the provisions of Article 137 of the First Schedule of the Limitation Act, 1963 would be applicable to the application filed for appointment of the Arbitrator under Section 11 (6) of the A&C Act. Hence, the respondent averred that the application for appointment of Arbitrator filed by the petitioner was barred by limitation since it was filed beyond the period of three years, as provided under Article 137 of the First Schedule of the Limitation Act.

The Court observed that the petitioner had not acted immediately after the passing of the order by the Division Bench of the High Court, and that the petitioner made a request to the respondent for appointment of Arbitrator after a lapse of 16 years from the passing of the said order.

The Court noted that the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another versus Nortel Networks India Private Limited (2021) had held that the provisions of Article 137 of the First Schedule of the Limitation Act, 1963 are applicable to the proceedings where an application filed under Section 11(6)(c) of the A&C Act is under consideration of the Court.

The Court ruled that since the order passed by the Division Bench was not challenged by the petitioner, hence, it remained conclusive. Therefore, the Court held that the limitation period of three years was required to be counted from the date of the order passed by the Division Bench of the High Court.

The Court held that though the limitation can be condoned if the party shows a sufficient cause for its condonation, however, the petitioner had failed to give any such reason.

The Court observed that the petitioner had relied upon the judgment of the Supreme Court in the case of Uttarakhand Purv Sainik Kalyan Nigam Limited versus Northern Coal Field Limited (2019), in support of its contention that the issue of limitation should not be considered by the Court at the stage of deciding an application for appointment of an Arbitrator, and that the issue of limitation should be adjudicated upon by the Arbitrator.

The Court noted that the Supreme Court in the case of Uttarakhand Purv Sainik Kalyan Nigam (2019) had held that the issue of limitation is a mixed question of fact and law, and that a finding on the issue of limitation would be a jurisdictional issue. Hence, the Court observed that the Supreme Court had ruled that the issue of limitation being a jurisdictional issue would have to be decided by the Arbitral Tribunal.

The Court observed that the decision in Bharat Sanchar Nigam Limited and Another (2021) was rendered after the decision in Uttarakhand Purv Sainik Kalyan Nigam Limited (2019). The Court held that it is a settled law that the recent decision of the Supreme Court will have binding precedence over its former judgments that deal with the same issue.

The Court added that the Supreme Court in Bharat Sanchar Nigam Limited and Another (2021) had taken into consideration the ratio laid down in Uttarakhand Purv Sainik Kalyan Nigam Limited (2019), before passing its judgment.

Thus, the Court held that in view of the law laid down in Bharat Sanchar Nigam Limited and Another (2021), if the application for appointment of Arbitrator under Section 11(6)(c) of the A&C Act is itself not maintainable on the ground of inordinate delay in filing it, the issue of limitation cannot be referred to the Arbitrator for adjudication. The Court added that the issue of limitation would be required to be answered at the threshold, i.e., at the stage where the application filed under Section 11(6)(c) of the A&C Act is considered by the Court.

Therefore, the Court ruled that the application filed by the petitioner under Section 11(6)(c) of the A&C Act after a lapse of more than 16 years from the date of the order passed by the Division Bench, was barred by limitation since it was filed after a delay of more than three years, as provided under Article 137 of the First Schedule of the Limitation Act, 1963.

The Court thus dismissed the application.

Case Title: Jharia Petrol Supply versus Indian Oil Corporation Limited

Citation : 2022 LiveLaw (Jha) 62

Dated: 02.03.2022 (Jharkhand High Court)

Counsel for the Petitioner: Mr. Vipul Poddar, Advocate

Counsel for the Respondent: Mr. Rahul Lamba, Advocate

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