REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Special Leave Petition (C) No. 11476 of 2018

M/s. Uttarakhand Purv Sainik  Kalyan Nigam Limited                   …Petitioner

Versus

Northern Coal Field Limited              …Respondent

O R D E R     

INDU MALHOTRA, J.    

1. The issue which has arisen for consideration is whether the

High Court was justified in rejecting the application filed under

Section 11 for reference to arbitration, on the ground that it

was barred by limitation.

2. The factual background of the case arises from an agreement

dated 21.12.2010 entered into between the parties, under

which the Petitioner – Contractor was to provide security to the

1

Respondent – Company around the clock on need basis, as per

the agreed contractual rates.

The Agreement contained an arbitration clause which reads

as follows :

“13.   Arbitration : 13.1 If any dispute, difference, question or

disagreement shall at any time hereafter arise between the parties hereto or the respective or assigns in connection with or arising out of or in respect of contract, application of provision thereof, anything there­under contained or arising there­under or as to rights, liabilities or duties of the  said  parties  hereunder or  any matter whatsoever  incidental to this contract shall be referred to the sole Arbitration of the person  appointed  by  Director (Pers.) of  NCL. CONTRACTOR shall have no objection to any such appointment that the arbitrator so appointed  is  an employee of  NCL or  that  he had dealt with the matter to which the contract related and that in the course of his duties  as  NCL  employees  he  has  expressed views on all or any of the matter of disputes or difference.

13.2   If the arbitrator to whom the matter is originally by referred dies or refused to act or resigns for any reason from the position of arbitrator, it shall be lawful, for Director (Pers.) of  NCL to  appoint  another  person to  act  as Arbitrator. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor or to precede denovo.

13.3  It is agreed that no person other than the person appointed by Directed (Pers.) of NCL as aforesaid shall act as Arbitrator.

13.4  It is term of the contract that the CONTRACTOR shall not stop the work under this contract and the work shall continue whether the arbitration proceedings were commenced or not.

2

13.5 It is term of this contract that the parties invoking the arbitration shall specify the dispute to be referred for arbitration.

13.6  The  Arbitrator shall give reasoned  award  in respect of each  of the  difference referred to him. The  award  as  aforesaid shall be final and binding on all the parties to this contract in accordance with the law.

13.7 The venue of  arbitration shall  at  Singrauli in India and subject as aforesaid, the provisions of Indian Arbitration and Conciliation Act, 1996 and any statutory modification or reenactment thereof  and rules made there­ under  and for the time being in force shall apply to the arbitration proceedings under this clause.”

(emphasis supplied)

3. Disputes arose between the parties with respect to payment of

amounts under the contract by the Respondent – Company,

and the deduction of the security amount from the running

bills.  

The Petitioner – Contractor issued a Legal Notice dated

29.05.2013 demanding payment of amounts to the tune of Rs.

1,43,69,309/­ alongwith interest from the Respondent –

Company.

4. On 09.03.2016, the Petitioner – Contractor issued a Notice of

Arbitration calling upon the Respondent – Company to

nominate a Sole Arbitrator in terms of the arbitration clause,

to adjudicate the disputes between the parties.

3

The Respondent – Company did not respond to the Notice

dated 09.03.2016.  

5. The Petitioner – Contractor sent a further notice on

30.05.2016 to the Respondent – Company proposing the name

of Mr. Jai Singh, a retired Additional District Judge for

appointment as the Sole Arbitrator. The Respondent – Company did not respond to this Notice

as well.  

6. The Petitioner – Contractor filed an Application on 20.09.2016,

under Section 11 invoking the default power of the High Court

to make the appointment of a sole arbitrator.

7. The High Court vide the impugned Order held that the claims

of the Petitioner – Contractor were barred by limitation, and

therefore an arbitrator could not be appointed under Section

11 of the 1996 Act.

8. Aggrieved by the impugned Order dated 11.01.2018, the

Petitioner has filed the present Special  Leave Petition before

this Court.

9. We have heard learned Counsel for the parties and perused

the pleadings.   

4

9.1. Section 21 of the 1996 Act provides that arbitral

proceedings commence on the date on which a request

for disputes to be referred to arbitration is received by

the respondent.

9.2. In the present case, the Notice of Arbitration was

issued by the Petitioner – Contractor to the

Respondent – Company on 09.03.2016.  

The  invocation  took  place  after  Section 11 was

amended by the  2015 Amendment  Act,  which came

into force on 23.10.2015, the amended provision would

be applicable to the present case.  

9.3. The 2015 Amendment Act brought about a significant

change in the appointment process under Section 11 :

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 sub­section

(6A) of Section 11 was confined to the examination of

the existence of the arbitration agreement at the pre­

reference stage.

5

9.4. Prior to the coming into force of the 2015 Amendment

Act, much controversy had surrounded the nature of

the power of appointment by the Chief Justice, or his

designate under Section 11.  

A seven judge constitution bench of this Court in

SBP & Co. v. Patel Engineering Ltd.,1 defined the scope

of  power of the Chief  Justice under Section 11. The

Court  held that the  scope of  power  exercised under

Section 11 was to first decide :

i. whether there was a valid arbitration agreement;

and  ii. whether the  person who has  made  the  request

under Section 11, was a party to the arbitration

agreement; and iii. whether the party making the motion had

approached the appropriate High Court.  

Further, the Chief Justice was required to decide all

threshold issues with respect to jurisdiction, the

existence of the agreement, whether the claim was a

dead one; or a time­barred claim sought to be

resurrected; or whether the parties had concluded the

1 (2005) 8 SCC 618.  

6

transaction by recording satisfaction of their  mutual

rights and obligations, and received the final payment

without objection, under Section 11, at the pre­

reference stage.  

The decision in  Patel Engineering  (supra) was

followed by this Court in  Boghara Polyfab2,  Master

Construction3, and other decisions.   

9.5. The Law Commission in the 246th  Report4

recommended that:

“the Commission has recommended amendments to sections 8 and 11 of the Arbitration and Conciliation Act, 1996.  The scope of the  judicial  intervention  is only restricted to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void. In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it  shall  refer  the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal.”

(emphasis supplied)

2 National Insurance Co. v. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267. 3 Union of India & Ors. v. Master Construction Co., (2011) 12 SCC 349. 4  Amendments to the Arbitration & Conciliation Act, 1996, Report No. 246, Law Commission  

of India (August 2014), p. 20.

7

9.6. Based on the recommendations of the Law

Commission, Section 11 was substantially amended by

the 2015 Amendment Act, to overcome the effect of all

previous judgments rendered on the scope of power by

a non obstante clause, and to reinforce the kompetenz­

kompetenz  principle enshrined in Section  16 of the

1996 Act.  

The  2015  Amendment  Act inserted  sub­section

(6A) to Section 11 which provides that :  “The Supreme Court or, as the case may be, the High Court, while considering any application under sub­ section (4) or sub­section (5) or sub­section (6), shall, notwithstanding  any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

(emphasis supplied)  

By virtue of the non obstante clause incorporated

in Section 11(6A), previous judgments rendered in

Patel Engineering (supra) and Boghara Polyfab (supra),

were legislatively over­ruled. The scope of examination

is now confined only to the existence of the arbitration

agreement at the Section 11 stage, and nothing more.

8

9.7. Reliance is placed on the judgment in  Duro Felguera

S.A.  v.  Gangavaram Port Limited,5  wherein this Court

held that :

“From a reading of Section 11(6A),  the intention of the legislature is crystal clear i.e.  the Court should and need only look into one aspect­the existence of an arbitration agreement.  What are  the  factors  for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple ­ it needs to be seen if the agreement contains a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.”

(emphasis supplied)

9.8. In view of the legislative mandate contained in 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 Kompetenz­Kompetenz principle.  

9.9. The doctrine of “Kompetenz­Kompetenz”, also referred

to as “Compétence­Compétence”, 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

5 (2017) 9 SCC 729. Refer to T.R.F. Ltd. v. Energo Engineering Projects Ltd. (2017) 8 SCC 377.

9

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 kompetenz­kompetenz 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 unqualified6. If an arbitration agreement

is not valid or non­existent, the arbitral tribunal

cannot assume jurisdiction to adjudicate upon the

disputes. Appointment of an arbitrator may be refused 6 Dresser Rand SA v. Bindal Agro­Chem Ltd. (2006) 1 SCC 751.

See also BSNL v. Telephone Cables Ltd. (2010) 5 SCC 213. Refer to PSA Mumbai Investments PTE Ltd. v. Board of Trustees of the Jawaharlal  

Nehru Port Trust & Anr. (2018) 10 SCC 525.

10

if the arbitration agreement  is  not  in writing,  or  the

disputes are beyond the scope of the arbitration

agreement.  

Article V(1)(a) of the New York Convention states

that recognition and enforcement of an award may be

refused if the arbitration agreement ‘is not valid under

the law to which the parties have subjected it or,

failing  any indication thereon,  under the law of the

country where the award was made’.  

9.10. The legislative intent underlying the 1996 Act is party

autonomy and minimal judicial intervention in the

arbitral process. Under this regime, once the arbitrator

is appointed, or the tribunal is constituted, all issues

and objections are to be decided by the arbitral

tribunal.

9.11. In view of the provisions of Section 16, and the

legislative policy to restrict judicial intervention at the

pre­reference stage, the issue of limitation would

require to be decided by the arbitrator.  

Sub­section  (1)  of  Section 16  provides that the

arbitral tribunal may rule on its own jurisdiction,

11

“including any objections” with respect to the existence

or validity of the arbitration agreement. Section 16 is

as an inclusive provision, which would comprehend all

preliminary issues touching  upon  the jurisdiction of

the arbitral tribunal. 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 pre­reference 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.

9.12. In the present case, the issue of limitation was raised

by the Respondent – Company to oppose the

appointment of the arbitrator under Section 11 before

the High Court.   

Limitation is a mixed question of fact and law. In

ITW Signode India Ltd. v.  Collector of Central Excise7 a

three judge bench of this Court held that the question

of limitation involves  a  question  of jurisdiction.  The

7 (2004) 3 SCC 48.

12

findings on the issue of limitation would be a

jurisdictional issue. Such a jurisdictional issue is to be

determined having regard to the facts and the law. Reliance is also placed on the judgment of this

Court in  NTPC  v.  Siemens Atkein Gesell Schaft8,

wherein  it  was held that  the arbitral tribunal  would

deal with limitation under Section 16 of the 1996 Act.

If the tribunal finds that the claim is a dead one, or

that the claim was barred by limitation, the

adjudication of these issues would be on the merits of

the claim.  Under sub­section (5) of  Section  16, the

tribunal has the obligation to decide the plea; and if it

rejects the plea, the arbitral proceedings would

continue, and the tribunal would make the award.

Under  sub­section  (6)  a  party  aggrieved  by  such an

arbitral award may challenge the award under Section

34.  

In  M/s. Indian Farmers Fertilizers Cooperative

Ltd. v. Bhadra Products9 this Court held that the issue

of limitation being a jurisdictional issue, the same has

8 (2007) 4 SCC 451. 9 (2018) 2 SCC 534.

13

to be decided by the tribunal under Section 16, which

is  based  on Article  16  of the  UNCITRAL Model  Law

which enshrines the Kompetenze principle. 10. In view of the aforesaid discussion, we set aside the impugned

judgment and order dated 11.01.2018  passed  by the High

Court, and direct that the issue of limitation be decided by the

arbitral tribunal.  

11. With the consent of Counsel for the parties, we appoint Mr.

Justice (Retd.) A. M. Sapre, former Judge of this Court, as the

Sole Arbitrator, subject to the declarations being made under

Section 12 of the 1996 Act (as amended) with respect to the

independence and impartiality of the arbitrator, and the ability

to devote sufficient time to complete the arbitration within the

period specified by Section 29A of the 1996 Act.

12. The arbitration agreement states that the arbitration will be at

Singrauli, Madhya Pradesh. Consequently, the seat of

arbitration is  at  Singrauli, subject to  any  modification that

may  be  made  by consent of the parties. The arbitrator is,

however, at liberty to conduct the proceedings at a convenient

venue as per the convenience of the arbitrator and the parties

if so required.  

14

The Arbitrator will be paid fees in accordance with the

Fourth Schedule of the 1996 Act. Both parties will share the

costs of the arbitration equally. 13. The Registry is directed to despatch a copy of this Order to Mr.

Justice (Retd.) A. M. Sapre, Former Judge, Supreme Court of

India at the following address: “Mr. Justice (Retd.) A. M. Sapre,   Former Judge, Supreme Court of India,  C­203, Second Floor  Sarvodaya Enclave  New Delhi – 110017  Tel No.: 011­40254823  Mob. No.: 7042955488”

The parties are directed to appear before the learned

Arbitrator on 02.12.2019 at 2 p.m.

The matter is disposed of accordingly.

…..……...........................J. (INDU MALHOTRA)

..….……..........................J. (AJAY RASTOGI)

New Delhi November 27th, 2019.

15