The scope of powers exercised by a judicial authority appointing an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (Act) has constantly been changing shape. Prior to the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment), since the text of the section itself did not provide much clarity as to the issues that may be examined in allowing or rejecting an application under Section 11, the law in this regard had evolved only through case laws.
A seven-judge constitution bench of the Supreme Court in SBP & Co. v. Patel Engineering Ltd.,1 had defined the scope of power exercised under Section 11 as follows:
- determining whether there is a valid arbitration agreement between the parties;
- determining whether the party which has made the request under Section 11, is a party to the arbitration agreement; and
- whether the party making the motion had approached the appropriate High Court.
Further, it was held that all threshold issues with respect to jurisdiction, the existence of the agreement, whether the claim was a dead one; a timebarred claim sought to be resurrected; or whether the parties had concluded the 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 would be examined by a court while deciding an application seeking appointment of an arbitrator under Section 11.
In allowing the court appointing an arbitrator to decide threshold issues pertaining to jurisdiction, this interpretation by the Supreme Court undermined the effect and importance of the kompetenz-kompetenz principle encapsulated in Section 16 of the Act. Therefore, the law commission in its 246th report had recommended that the scope of judicial intervention under Section 11 must be statutorily restricted to an examination as to the existence of the arbitration agreement alone.2 This recommendation was duly incorporated by insertion of Section 11(6A), by way of the 2015 Amendment.
The doctrine of kompetenz-kompetenz indicates that an 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 an arbitration agreement. The underlying object of this doctrine is to minimize judicial intervention in order to ensure that the arbitral process is not thwarted at the very threshold, merely because a preliminary objection is raised by one of the parties.
Section 11(6A), while overcoming the effect of all preceding judgments to the contrary, effectively clarifies that a court shall restrict itself to the examination of existence of arbitration agreement alone, in deciding an application under Section 11 of the Act. The issue of jurisdiction must therefore be left entirely for determination by the arbitral tribunal. This amended provision, as well as the kompetenz-kompetenz principle were subsequently upheld in Duro Felguera S.A. v. Gangavaram Port Ltd.3
Now we come to the question of limitation, and whether limitation is an issue of jurisdiction. It is well-settled that "jurisdiction" is a word of many hues, and it takes colour depending on the setting in which it is used.4 In light of the same, as far back as in 1996, the Supreme Court in the case of Pandurang Dhoni Chougule v. Maruti Hari Jadhav5 clarified that a plea of limitation is a plea of law which concerns the jurisdiction of the court which tries the proceedings, as a finding on these pleas in favour of the party raising them would oust the jurisdiction of the concerned court. This finding was rightly reiterated by the Supreme Court in the case of Indian Farmers Fertilizer Co-operative Ltd. v. Bhadra Products.6
Therefore, when the question of rejecting an application under Section 11 on the ground that the claim is barred by limitation came up before the Supreme Court recently in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd.,7 no hesitation was shown in setting the record straight. In view of the law set out in Section 11(6A) and Section 16 of the Act, and the legislative policy to restrict judicial intervention at the prereference stage, the Supreme Court held that the issue of limitation would have to be left for determination by the arbitrator.
The Supreme Court further clarified that there are exceptions to the doctrine of komeptenz-kompetenz, and circumstances wherein a court may intervene at the Section 11 stage itself. A court may decline to appoint an arbitrator pursuant to an application under Section 11 of the Act, only if it finds that the arbitration agreement itself has been procured by fraud or deception; if an (arbitration) agreement has not even been concluded between the parties in terms of Section 7 of the Indian Contract Act, 1872; if an arbitration agreement has not been recorded in writing; or if the disputes in question are beyond the scope of the arbitration agreement.
While this reiteration of the kompetenz-kompetenz principle and the intent of Section 11(6A) is much needed and most welcome, one cannot forget that the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment) seeks to remove Section 11(6A) altogether,8 while transferring the power of appointing arbitrators to designated arbitral institutions.9 This could lead to some absurd repercussions. If even this preliminary determination as to existence of an arbitration agreement is not made at the pre-reference stage, parties may be forced to expend valuable resources in unnecessary and avoidable arbitrations. However, it is pertinent to note that it is open to the Arbitration Council of India to choose replicate provisions such as Section 11(6A) in the rules and regulations to be framed by it, which will govern the designated arbitral institutions or panels as well. This question may therefore be revisited, once Section 3 of the 2019 Amendment is notified and new regulations are brought in place by the Arbitration Council of India.
1. (2005) 8 SCC 618.
2. Report No.246, Amendments to the Arbitration and Conciliation Act 1996, Law Commission of India, Government of India, August 2014, at Para 33, Chapter-II, Pg.20.
3. (2017) 9 SCC 729.
4. National Thermal Power Corporation Ltd. v. Siemens Atkeingesellschaft, AIR 2007 SC 1491.
5. AIR 1996 SC 153.
6. AIR 2018 SC 627.
7. Decided on 27 November 2019.
8. Section 3(v), Arbitration and Conciliation (Amendment) Act, 2019.
9. Section 3(ii), Arbitration and Conciliation (Amendment) Act, 2019.
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