Issue Of Limitation Not To Be Examined While Considering Application Seeking Appointment Of Arbitrator: SC [Read Judgment]

The Supreme Court has observed that, while considering an application under Section 11 of the Arbitration and Conciliation Act seeking appointment of an arbitrator, scope of examination by the Court is to be confined only to the existence of the arbitration agreement and nothing more. .

Once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections and limitation are to be decided by the arbitrator, the bench of Justice Indu Malhotra and Justice Ajay Rastogi observed.

The High Court, while considering a Section 11 application, had held that the claims of Contractor were barred by limitation, and therefore an arbitrator could not be appointed under Section 11 of the Act.

While considering the appeal [M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited Northern Coal Field Limited], the Apex Court bench noted that the 2015 Amendment Act brought about a significant change in the appointment process under Section 11. It said:

First, the default power of appointment shifted from the Chief Justice of the High Court in arbitrations governed by Part I of the Act, to the High Court; second, the scope of jurisdiction under sub¬section (6A) of Section 11 was confined to the examination of the existence of the arbitration agreement at the prereference stage.

Doctrine of "Kompetenz-Kompetenz

In view of the legislative mandate contained in Section 11(6A), the bench observed, the requirement is 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¬Kompetenz principle. The bench then explained the aforesaid principle as follows

The doctrine of "Kompetenz-Kompetenz", also referred to as "Compétence-Compétence", or "Compétence de la recognized", implies that the arbitral tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues, and the existence or validity of the arbitration agreement. This doctrine is intended to minimize judicial intervention, so that the arbitral process is not thwarted at the threshold, when a preliminary objection is raised by one of the parties

The doctrine of kompetenz-kompetenz is, however, subject to the exception i.e. 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. The draft agreement would be a mere proposal to arbitrate, and not an unequivocal acceptance of the terms of the agreement. Section 7 of the Contract Act, 1872 requires the acceptance of a contract to be absolute and unqualified . If an arbitration agreement is not valid or non-existent, the arbitral tribunal cannot assume jurisdiction to adjudicate upon the disputes. Appointment of an arbitrator may be refused if the arbitration agreement is not in writing, or the disputes are beyond the scope of the arbitration agreement.

The Court further observed that Section 16 is as an inclusive provision, which would comprehend all preliminary issues touching upon the jurisdiction of the arbitral tribunal. While allowing the appeal, the bench said:

"The issue of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator under Section 16, and not the High Court at the pre¬reference stage under Section 11 of the Act. Once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections are to be decided by the arbitrator." 

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