Madhya Pradesh High Court
M/S Kailash Chand Sharma Through ... vs Bharat Sanchar Nigam Limited on 30 April, 2025
Author: Milind Ramesh Phadke
Bench: Milind Ramesh Phadke
NEUTRAL CITATION NO. 2025:MPHC-GWL:9544
1 AC-74-2023
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE
ARBITRATION CASE No. 74 of 2023
M/S KAILASH CHAND SHARMA THROUGH PROPRIETOR KAILASH
CHAND SHARMA
Versus
BHARAT SANCHAR NIGAM LIMITED AND OTHERS
Appearance:
Shri Akshat Kumar Jain - Advocate for the petitioner.
Shri Rajendra Bhargava, Advocate for the respondent [R-1].
Reserved on : 30.4.2025
Pronounced on : 17/6/2025
ORDER
The present application under section 11 (6) of the Arbitration and Conciliation (Amendment) Act, 2015 and Madhya Pradesh Arbitration Rules, 1997 for appointment of substituted Arbitrator has been filed seeking a relief of appointment of Independent Arbitrator in light of Clause 17 of the agreement dated 11.2.2009 entered into between the applicant and respondent-Bharat Sanchar Nigam.
(2) A solitary issue had arisen for consideration of this Court as to whether for any claim barred by limitation, this Court while exercising jurisdiction under section 11 (6) of the Arbitration and Conciliation Act can appoint arbitrator or the application is required to be thrown out at its threshold being made for adjudicating stale claim which is barred by limitation ?
(3) At the outset learned counsel for the respondents while placing Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27 NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 2 AC-74-2023 reliance in the matter of M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited Vs. Northern Coal Field Limited, reported in 2020 (2) SCC 455 has argued that 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 issues, and the existence or validity of the arbitration agreement as the said 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. While referring to para 9.9 of the aforesaid judgement, it is submitted that 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.
(4) Further while referring to para 9.11 it was submitted that in view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre-reference stage, the issue of limitation would require to be decided by the arbitrator and not by the High Court under section 11 of the Act and once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections are to be decided by the arbitrator and as the arbitration clause is not disputed by the other side, the issue of limitation raised by the respondents can be governed into by the Arbitrator. Thus, it was submitted that the application be allowed and arbitrator be appointed.
(5) On the other hand learned counsel for the respondents by placing Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27 NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 3 AC-74-2023 reliance in the matter of M/s B AND TAG Vs. Ministry of Defence passed in Arbitration Petition (C) No.13 of 2023 dated 18.5.2023 has argued that when the claim as raised by the party in wake of certain clauses of the agreement which contains the arbitration clause is beyond the period of limitation as prescribed under the law then this Court should refrain from exercising its power under section 11 (6) of the Arbitration and Conciliation Act and appointed an Arbitrator. Learned counsel has further submitted that in similar set of facts the Apex Court has rejected the application under section 11 (6) of the Act holding it to be based upon hopelessly barred claim. Thus, argued that this arbitration case be also dismissed as the very claim raised by the petitioner is time barred.
(6) Heard the counsel for the parties and perused the record. (7) In the matter of M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited (supra) the issue which had arisen for consideration before the Apex Court was whether the High Court was justified in rejecting the application filed under section 11 of the Act for reference to the Arbitration on the ground that it was barred by limitation and in that context discussion was had in para 9 of the said judgement which is quoted hereinbelow:
"9. We have heard learned Counsel for the parties and perused the pleadings.
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.Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27
NEUTRAL CITATION NO. 2025:MPHC-GWL:9544
4 AC-74-2023 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. 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.
9.5 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 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 Polyfab, (2005) 8 SCC 618, Master Construction, and other decisions.
9.6. The Law Commission in the 246 th Report 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). 9.7. 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 Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27 NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 5 AC-74-2023 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) 9.8 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. 9.9 Reliance is placed on the judgment in Duro Felguera S.A. v. Gangavaram Port Limited,5 wherein this Court held that :
"48... 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 aspect the 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) 9.10. 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. 9.11 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 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 unqualified. 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 if the arbitration agreement is not in Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27 NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 6 AC-74-2023 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'.
9.12. 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.
9.13 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, "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.
9.14. 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. The 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 Schaft, 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 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.
(8) In para 9.9 the doctrine of "KompetenzKompetenz", was discussed Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27 NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 7 AC-74-2023 and it was observed that the aforesaid doctrine 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 so as 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 and later-on in para 9.11 the Apex Court has observed that in view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre-reference stage, the issue of limitation would require to be decided by the arbitrator and not by the High Court at the prereference stage under Section 11 of the Act. It has further observed that once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections are to be decided by the arbitrator. In para 9.12 while referring to decision of the NTPC v. Siemens Atkein Gesell Schaft, reported 2007 (4) SCC 451, wherein it was held that the arbitral tribunal would deal with limitation under Section 16 of the 1996 Act, it was held that 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 case. Further referring to the matter of M/s. Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products, 2018 (2) SCC 534, wherein it was held that issue of limitation being a jurisdictional issue, the same has 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 the Arbitrator was appointed and accordingly it was held that the issue of arbitration would be decided by the Arbitral Tribunal.
Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 8 AC-74-2023 (9) The judgement which has been cited by the learned counsel for the respondents though pertains to the appointment of the Arbitrator under an application under section 11 (6) of the Act and has been dismissed by holding that since the claim which was to be adjudicated by the Arbitrator was hopelessly barred and the application was rejected, but the facts of the said case were different. In para 59 of the said order the facts were briefly stated which reads as under:
59. We once again go back to the facts of the present case. Even according to the petitioner, the disputes arose between the parties in relation to the wrongful encashment of bank guarantee vide letter dated 16.02.2016 for Euro 201,793.75 ("BG") and for wrongful imposition of liquidated damages to the tune of Euro 399,0240.10. We are at one with the learned ASG that this was the "Breaking Point". What is more important is the fact that the respondent on 26.09.2016, deducted the amount towards recovery of the liquidated damages. The requisite amount was credited into the Government account in accordance with the instructions contained in the letter dated 11.08.2016. This was the end of the matter. To say that even thereafter, the petitioner kept negotiating with the respondent in anticipation of some amicable settlement would not save the period of limitation.
(10) Therein the matter has come to an end in the year 2016 itself, but even thereafter the petitioner there was negotiating with the respondents for some amicable settlement and in that context it was held that it would not save the period of limitation. Herein case the earlier application under section 11 (6) of the Arbitration and Conciliation Act was rejected, though on earlier occasion the petitioner has preferred a Writ Petition for claiming the bills which are subject matter of the present petition though was dismissed, but in Writ Appeal the matter was again referred back to the respondents with a direction to take decision on the committee report dated 15.11.2019. Though, this Court finds that the aforesaid decisions of the Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27 NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 9 AC-74-2023 writ petition as well as of writ appeal are of no consequence so far as the present application under section 11 (6) of the Arbitration and Conciliation Act is concerned as the issue of appointment of Arbitrator was not discussed therein nor was under consideration or was raised by any of the parties, thus, the issue of appointment of the Arbitrator, can be said to be still open in the light of the aforesaid discussion. This Court keeping in consonance with the judgement of the Apex Court in the matter of M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited (supra) deems it fit to allow the present application and appoint Arbitrator. Since the person who is named in the Arbitration Agreement is a retired employee, therefore, in the wake of expressed bar under section 12 (5) of the Arbitration and Conciliation Act, this Court deems it fit to appoint an Independent Arbitrator.
(11). Thus, this Court while allowing the application, directs that Shri Justice N.K. Mody, Former Judge be appointed as an Arbitrator in the case, subject to the declarations made under Section 12 of the Arbitration and Conciliation Act, 1996 (as amended) with respect to the independence or impartiality of the Arbitrator, and the ability to devote sufficient time to complete the arbitration in the period specified in Section 29-A of the 1996 Act.
(12). The Arbitrator is at liberty to conduct the proceedings at a convenient venue as per his convenience and the parties if so required. The arbitrator will be paid the fees in accordance with the IVth Schedule of 1996 Act. Both the parties shall bear the cost of the arbitration equally.
Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27NEUTRAL CITATION NO. 2025:MPHC-GWL:9544 10 AC-74-2023 (13). Registry is directed to dispatch a copy of this order to Shri Justice N.K. Mody Former Judge for seeking consent at the following address Parakh Ji ka Bada, Lashkar, Gwalior.
(14). List the case for consent of the arbitrator in the week commencing 7th of July, 2025.
(MILIND RAMESH PHADKE) JUDGE (aspr) Signature Not Verified Signed by: ASHISH PAWAR Signing time: 17-06-2025 17:44:27