M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITEDversusNORTHERN COAL FIELD LIMITED

                         [2019] 14 S.C.R. 999                             999


              M/S. UTTARAKHAND PURV SAINIK                                A
                   KALYAN NIGAM LIMITED
                                v.
              NORTHERN COAL FIELD LIMITED
           (Special Leave Petition (C) No. 11476 of 2018)                 B
                        NOVEMBER 27, 2019
       [INDU MALHOTRA AND AJAY RASTOGI, JJ.]
       Arbitration and Conciliation Act, 1996: s.11 – Whether the
High Court was justified in rejecting the application filed under
                                                                          C
s.11 for reference to arbitration, on the ground that it was barred
by limitation – Arbitration agreement between the parties – Dispute
arose between them – Petitioner sent notices calling upon the
Respondent to nominate a Sole Arbitrator in terms of the
arbitration clause – Respondent did not respond to the notices –
Petitioner filed application under s.11 invoking the default power        D
of the High Court to make the appointment of a sole arbitrator –
High Court held that the claims of the Petitioner were barred by
limitation, and therefore an arbitrator could not be appointed
under s.11 of the Act – Hence the instant special leave appeal –
Held: Notice of Arbitration was issued on 09.03.2016 – Since the
                                                                          E
invocation took place after s.11 was amended by the 2015
Amendment Act, which came into force on 23.10.2015, the amended
provision is applicable to the instant case – In view of the
legislative mandate contained in s.11(6A), the Court is required only
to examine the existence of the arbitration agreement – All other
preliminary or threshold issues were left to be decided by the            F
arbitrator under s.16, which enshrines the Kompetenz-Kompetenz
principle – 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
                                                                          G
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 – In view of the provisions of s.16, and the legislative policy
                                                                          H
                                 999
1000            SUPREME COURT REPORTS                       [2019] 14 S.C.R.


 A     to restrict judicial intervention at the pre-reference stage, the issue
       of limitation would require to be decided by the arbitrator –
       Thus, the issue of limitation is a jurisdictional issue, which would
       be required to be decided by the arbitrator under s.16, and not the
       High Court at the pre-reference stage under s.11 of the Act – In the
       instant case, the issue of limitation was raised by the Respondent-
 B
       company to oppose the appointment of the arbitrator under s.11
       before the High Court – The issue of limitation being a
       jurisdictional issue, the same has to be decided by the tribunal
       under s.16, which is based on Article 16 of the UNCITRAL Model
       Law which enshrines the Kompetenze principle – The order of High
 C     Court is, therefore, set aside – Retired judge of Supreme Court
       appointed as the Sole Arbitrator – Parties directed to appear
       before the Arbitrator on 02.12.2019 – Matter disposed of –
       Doctrine of kompetenz-kompetenz.
             Doctrines/Principles: Doctrine of kompetenz-kompetenz –
 D     Applicability of, exception – Held: The doctrine is 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
 E     proposal to arbitrate, and not an unequivocal acceptance of the
       terms of the agreement – s.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
 F     – 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 – Article V(1)(a) of the New York
       Convention also 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
 G     thereon, under the law of the country where the award was made’ –
       Arbitration law – Contract Act, 1872 – s.7.
             ITW Signode India Ltd. v. Collector of Central Excise
             (2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751; NTPC v.

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M/S.UTTARAKHAND PURV SAINIK KALYAN NIGAM LTD. v. 1001
           NORTHERN COAL FIELD LTD.

      Siemens Atkein Gesell Schaft (2007) 4 SCC 451 : [2007]          A
      3 SCR 399 ; M/s. Indian Farmers Fertilizers
      Cooperative Ltd. v. Bhadra Products (2018) 2 SCC
      534 : [2018] 1 SCR 848 – relied on.
      SBP & Co. v. Patel Engineering Ltd. (2005) 8 SCC
      618 : [2005] 4 Suppl. SCR 688 ; National Insurance              B
      Co. v. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267 :
      [2008] 13 SCR 638 ; Union of India & Ors. v. Master
      Construction Co., (2011) 12 SCC 349 : [2011] 5 SCR
      853 ; Duro Felguera S.A. v. Gangavaram Port Limited
      (2017) 9 SCC 729 : [2017] 10 SCR 285; Dresser Rand
      SA v. Bindal Agro-Chem Ltd. (2006) 1 SCC 751 :                  C
      [2006] 1 SCR 308 – referred to.
                       Case Law Reference
[2005] 4 Suppl. SCR 688         referred to           Para 9.4
[2008] 13 SCR 638               referred to           Para 9.4        D
[2011] 5 SCR 853                referred to           Para 9.4
[2017] 10 SCR 285               referred to           Para 9.7
[2006] 1 SCR 308                referred to           Para 9.9
[2003] 5 Suppl. SCR 751         relied on             Para 9.12       E

[2007] 3 SCR 399                relied on             Para 9.12
[2018] 1 SCR 848                relied on             Para 9.12

                                                                      F
       CIVIL APPELLATE JURISDICTION: Special Leave Petition
(Civil) No. 11476 of 2018
     From the Judgment and Order dated 11.01.2018 of the High Court
of Madhya Pradesh, Jabalpur in Arbitration Case No.56 of 2016
        Kailash Pandey, Ranjeet Singh, Ms. Jyoti Kumar Mishra,        G
Ms. Sushmita Mishra (for Gaichangpou Gangmei), Advs. for the
Petitioner.
      Ashwani Kumar Dubey, Pankaj Sharma, Chandra Shekhar Mishra,
Advs. for the Respondent.
                                                                      H
1002            SUPREME COURT REPORTS                         [2019] 14 S.C.R.


 A           The Order of the Court was passed by
             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 limi-
 B     tation.
              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 Respondent –
       Company around the clock on need basis, as per the agreed contractual
 C     rates.
             The Agreement contained an arbitration clause which reads as
       follows :
             “13. Arbitration :
 D           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 there-under contained or
                   arising there-under or as to rights, liabilities or duties
 E
                   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
 F                 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
 G                 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


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M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LTD.v. 1003
  NORTHERN COAL FIELD LTD. [INDU MALHOTRA, J.]

             entitled to proceed with the reference from the stage at       A
             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.                                               B
      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.
      13.5 It is term of this contract that the parties invoking the        C
            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         D
            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         E
            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
                                                                            F
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
29.05.2013demanding payment of amounts to the tune of Rs. 1,43,69,309/
- alongwith interest from the Respondent – Company.
                                                                            G
      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.

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1004               SUPREME COURT REPORTS                      [2019] 14 S.C.R.


 A           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.
 B              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.
 C
              7. The High Court vide the impugned Order held that the claims
       of the Petitioner – Contractor were barred by limitation, and thereforean
       arbitrator could not be appointed under Section 11 of the 1996 Act.
              8. Aggrieved by the impugned Order dated 11.01.2018, the
 D     Petitioner has filed the present Special Leave Petition before this Court.
             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
 E                  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
 F                  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
 G                   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


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M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LTD.v. 1005
  NORTHERN COAL FIELD LTD. [INDU MALHOTRA, J.]

              under sub-section (6A) of Section 11 was confined to the         A
              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         B
              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 :                               C
         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              D
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 time-barred claim sought to be
resurrected; or whether the parties had concluded the transaction by
                                                                               E
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 2 , Master Construction 3 , and other
                                                                               F
decisions.
         9.5 The Law Commission in the246th Report4 recommended that:
         “the Commission has recommended amendments to sections 8
         and 11 of the Arbitration and Conciliation Act, 1996. The
                                                                               G
1
    (2005) 8 SCC 618.
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.
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1006            SUPREME COURT REPORTS                       [2019] 14 S.C.R.


 A           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
 B
             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.
 C           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)
 D         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 judg-
                ments rendered on the scope of power by a non obstante clause,
                and to reinforce the kompetenz-kompetenz principle enshrined
 E              in Section 16 of the 1996 Act.
             The 2015 Amendment Act inserted sub-section (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
 F           sub-section (5) or sub-section (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
 G
       11(6A),previous judgments rendered in Patel Engineering (supra) and
       Boghara Polyfab (supra), were legislatively over-ruled. The scope of
       examination is now confined only to the existence of the arbitration
       agreement at the Section 11 stage, and nothing more.

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M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LTD.v. 1007
  NORTHERN COAL FIELD LTD. [INDU MALHOTRA, J.]

     9.7 Reliance is placed on the judgment in Duro Felguera S.A. v.              A
        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 aspect-the existence of an arbitration
       agreement. What are the factors for deciding as to whether                 B
       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.”
                                                                                  C
                                                            (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,        D
         which enshrines the Kompetenz-Kompetenz principle.
    9.9. 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,                  E
         including determining all jurisdictional issues, and the exist-
         ence 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.
                                                                                  F
      The doctrine of kompetenz-kompetenz is, however, subject to
the exceptioni.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
                                                                                  G
5
 (2017) 9 SCC 729.
Refer to T.R.F. Ltd. v. Energo Engineering Projects Ltd. (2017) 8 SCC 377.




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1008             SUPREME COURT REPORTS                             [2019] 14 S.C.R.


 A     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 non-existent, the arbitral tribunal cannot assume
       jurisdiction to adjudicate upon the disputes. Appointment of an arbitrator
 B
       may be refused 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
 C     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,
 D                 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 pre-reference stage,
                   the issue of limitation would require to be decided by the
 E                 arbitrator.
               Sub-section (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
 F     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.
 G           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.
       6
         Dresser Rand SA v. Bindal Agro-Chem 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
 H     Nehru Port Trust & Anr. (2018) 10 SCC 525.
M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LTD.v. 1009
  NORTHERN COAL FIELD LTD. [INDU MALHOTRA, J.]

       Limitation is a mixed question of fact and law. In ITW Signode          A
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 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.
                                                                               B
       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 sub-section (5) of Section 16, the tribunal has     C
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 sub-section (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           D
Products 9 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.
       10. In view of the aforesaid discussion, we set aside the impugned      E
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         F
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 beat      G
Singrauli, Madhya Pradesh. Consequently, the seat of arbitration is at
Singrauli, subject to any modification that may be made by consent of

7
  (2004) 3 SCC 48
8
  (2007) 4 SCC 451
9
  (2018) 2 SCC 534.                                                            H
1010              SUPREME COURT REPORTS                      [2019] 14 S.C.R.


 A     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.
              The Arbitrator will be paid fees in accordance with the Fourth
       Schedule of the 1996 Act. Both parties will share the costs of the
 B     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,
 C             Former Judge, Supreme Court of India,
               C-203, Second Floor
               Sarvodaya Enclave
               New Delhi – 110017
               Tel No.: 011-40254823
               Mob. No.: 7042955488"
 D

             The parties are directed to appear before the learned Arbitrator
       on 02.12.2019 at 2 p.m.
              The matter is disposed of accordingly.
 E

       Devika Gujral                                            Matter disposed of.




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