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M/S. Nortel Networks India Pvt. Ltd., v/s Bharat Sanchar Nigam Limited, Kerala Telecome Circle & Another

    AR. No. 55 of 2020

    Decided On, 13 October 2020

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE A.K. JAYASANKARAN NAMBIAR

    For the Petitioner: Santhosh Mathew, Arun Thomas, Jennis Stephen, Vijay V. Paul, Karthika Maria, Veena Raveendran, Anil Sebastian Pulickel, Divya Sara George, Jaisy Elza Joe, Abi Benny Areeckal, Leah Rachel Ninan, Advocates. For the Respondents: R1, R2, Mathews K Philips, Advocate.



Judgment Text

The petitioner company is stated to be engaged in the business of designing, developing, constructing and erecting equipments for telecommunication, data processing etc. It had responded to Annexure A2 tender notification published by the 2nd respondent calling for bids for planning, engineering, supply, installation, testing and commissioning of GSM based cellular mobile network of capacity for four million lines in circles of Southern Region covering Kerala, Karnataka, Tamil Nadu, Andhra Pradesh Circles and Chennai Telephone District. The petitioner had participated in the tender process and emerged as the successful bidder, as a consequence of which, the 1st respondent placed Annexure A3 purchase order on the petitioner. It is the case of the petitioner that he had duly executed the work in accordance with the purchase order but the 1st respondent withheld an amount of Rs.99,70,93,031/- towards liquidated damages and other deductions/levies. The petitioner, therefore, by Annexure A4 communication dated 13.05.2014 raised a claim for the said amount on the 1st respondent. The 1st respondent by Annexure A5 communication dated 04.08.2014 rejected the claim of the petitioner. Thereafter, by Annexure A6 communication dated 29.04.2020, the petitioner wrote to the 1st respondent invoking the Arbitration Clause in the purchase order, which reads as follows:“20. ARBITRATION20.1 In the event of any question, dispute or difference arising under this agreement or in connection there-with (except as to the matters, the decision to which is specifically provided under this agreement), the same shall be referred to the sole arbitration of the CGM, BSNL, KERALA CIRCLE or in case his designation is changed or his office is abolished, then in such cases to the sole arbitration of the officer for the time being entrusted (whether in addition to his own duties or otherwise) with the functions of the CGM, BSNL, KERALA CIRCLE or by whatever designation such an officer may be called (hereinafter referred to as the said officer), and if the CGM, BSNL, KERALA CIRCLE or the said officer is unable or unwilling to act as such, then to the sole arbitration of some other person appointed by the CGM, BSNL, KERALA CIRCLE or the said officer. The agreement to appoint an arbitrator will be in accordance with the Arbitration and Conciliation Act 1996. There will be no objection to any such appointment on the ground that the arbitrator is a Government Servant or that he has to deal with the matter to which the agreement relates or that in the course of his duties as a Government Servant he has expressed his views on all or any of the matters in dispute. The award of the arbitrator shall be final and binding on both the parties to the agreement. In the event of such an arbitrator to whom the matter is originally referred, being transferred or vacating his office or being unable to act for any reason whatsoever, the CGM, BSNL, KERALA CIRCLE or the said officer shall appoint another person to act as an arbitrator in accordance with terms of the agreement and the person so appointed shall be entitled to proceed from the stage at which it was left out by his predecessors.20.2 The arbitrator may from time to time with the consent of both the parties enlarge the time frame for making and publishing the award. Subject to the aforesaid, Arbitration and Conciliation Act, 1996 and the rules made there under, any modification thereof for the time being in force shall be deemed to apply to the arbitration proceeding under this clause.20.3 The venue of the arbitration proceeding shall be the office of the CGM, BSNL, KERALA CIRCLE or such other places as the arbitrator may decide.”2. To Annexure A6 communication, the 1st respondent responded vide Annexure A7 communication dated 09.06.2020, essentially raising the plea of limitation, and stating that the claims raised by the petitioner were belated and barred by time.3. In the Arbitration Request now filed by the petitioner, it is the contention of the petitioner that the issue of time bar is one that has to be considered by the Arbitrator in view of the Kompetenz-kompetenz principle that is recognized under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”). Relying on the decision of the Supreme Court in Uttarakhand Purv Sainik Kalyan Nigam Ltd V. Northern Coal Field Ltd. [(2020) 2 SCC 455], it is also contended that the role of the High Court, while exercising its jurisdiction under Section 11 of the Act, as amended in 2015, is only to ascertain whether there is a valid arbitration agreement between the parties and nothing more. It is the specific contention, therefore, that while it may be open to the respondents to contend that the claim raised by the petitioner is belated, the said issue is one that has to be considered by the Arbitrator, and not by this Court while considering an application under Section 11 of the Act. Arguing further, the learned counsel for the petitioner would also point out that inasmuch as the Arbitration Clause itself contemplates the appointment of an Arbitrator at the instance of the 1st respondent, the amended provisions of Section 12 of the Act, would mandate that interested parties to a dispute not be appointed as Arbitrators. The decisions of the Supreme Court in TRF Limited v. Energo Engineering Projects Ltd. [(2017) 8 SCC 377] and Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. [AIR 2020 SC 59] are pressed into service to contend that in such situations it would be open for this Court to appoint a sole Arbitrator to resolve the dispute between the parties.4. Through a statement and an additional statement filed on behalf of the respondents on 24.08.2020 and 29.09.2020 respectively, the stand taken is that the Arbitration Request is time barred inasmuch as the request itself is made almost five years after the date of Annexure A5 reply sent by the 1st respondent to Annexure A4 claim raised by the petitioner. The provisions of Section 43 of the Act are read along with Article 54 of the Schedule to the Limitation Act to contend that the period of limitation applicable for raising the arbitration claim is three years from 04.08.2014, the date of Annexure A5 communication. It is contended therefore that inasmuch as Annexure A6 letter, invoking the Arbitration Clause, was dated more than five years later, on 29.04.2020, the Arbitration Request has to be seen as belated. In the additional statement, the aforesaid aspect is further highlighted and emphasises is placed on a supposed distinction that exists between the limitation period applicable for raising a claim against the opposite party, and the limitation period applicable for preferring a request for Arbitration under Section 11 of the Act. It is the contention of the respondents that even in respect of the applications under Section 11, the limitation period of three years would have to be reckoned from the date of Annexure A5 reply given by the 1st respondent to the claim raised by the petitioner.5. Through a reply affidavit filed on behalf of the petitioner, the decision of this Court in Logical Developers Pvt. Ltd. (M/s.) and Another v. M/s.Muthoot Mini Financiers Pvt. Ltd. And Others [2020 2 KHC 581] is relied upon to fortify the earlier contention that the issue of limitation is a jurisdictional issue that has to be considered by the Arbitrator and not by this Court in the present proceedings under Section 11 of the Act. The decisions relied upon by the respondents, to contend that even the application under Section 11 is belated, are distinguished by showing them as rendered in the context of events that occurred prior to the 2015 amendment, and the introduction of Sub Section 6A to Section 11 of the Act. The learned counsel for the petitioner would also point out that although Sub Section 6A of Section 11 has since been omitted from the Act, the legal position that was introduced through the said Sub Section continues to hold good even after the said omission. He relies on the decision in Mayavati Trading Pvt. Ltd v. Pradyuat Deb Burman [ (2019) 8 SCC 714] to support the said contention.6. I have heard the learned counsel for the petitioner and the learned counsel for the respondents.7. On a consideration of the facts and circumstances of the case and the submissions made across the Bar, I find that it is now well settled through the judgments of the Supreme Court, culminating in the judgment in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd [(2020) 2 SCC 455] that the issue of limitation with regard to the claim raised by the petitioner, being a mixed question of law and fact, is one that has to be considered by the Arbitrator under the doctrine of Kompetenz-kompetenz applicable in arbitration proceedings. The distinction sought to be made by the respondents, between the limitation applicable for raising a claim against one of the parties to the dispute, and the limitation applicable for the purposes of maintaining an application under Section 11, clearly does not survive after the amendment to the Act with effect from 2015. After the said date, the limited role of the High Court in proceedings under Section 11 is to ascertain whether there is a valid arbitration agreement entered into between the parties that would necessitate a relegation of the parties to an Arbitration. The aspect of limitation being one that informs the jurisdiction of the Arbitrator, is always one that can be considered by the Arbitrator in the proceedings before him. As regards the issue of limitation vis-a-vis the application under Section 11 of the Act, I find that the starting point of limitation, for proceedings under the said Section, is the expiry of 30 days from the date on which a letter sent by the party invoking the Arbitration Clause is received by the other party to the dispute. In the instant case, that communication having been sent on 29.04.2020 and replied to by the respondents on 09.06.2020, I am of the view that the present Arbitration Request, which is filed barely a month after the date of Annexure A7 reply of the respondents cannot be seen as barred by limitation. In taking this view, I am also supported by the judgments of the Delhi High Court in Prasar Bharati v. Maa Communication, Magna Vision Advertisers [2010 115 DRJ 438] and Golden Chariot Recreations Pvt.Ltd. v. Mukesh Panika and Others [(2018) 253 DLT 2019], both of which take the view that the application under Section 11 has to be preferred within a period of three years from the expiry of 30 days of the receipt of a notice invoking arbitration, by the opposite party.8. As regards the appointment process detailed in the Arbitration Clause, I find that the judgment of the Supreme Court in TRF Limited v. Energo Engineering Projects Ltd. [(2017) 8 SCC 377] as also Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. [AIR 2020 SC 59] makes it abundantly clear that in the light of Section 12(5) A.R.No.55 of 2020 10 of the Act, as amended through the 2015 amendment, interested parties to a dispute cannot be entrusted with the task of appointment of Arbitrators. Subsequent to the 2015 amendment, a court confronted with such a clause has to ignore it and appoint an independen

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t sole Arbitrator for adjudicating upon the disputes that arise between the parties. I therefore deem it appropriate to refer the parties to arbitration for adjudicating the disputes that have arisen between them under Annexure A3 purchase order, with the following conditions:(a) I nominate Justice (Retd.) C.N. Ramachandran Nair, 3B, Bhavani, Kunnumpuram, Kakkanad, Kochi – 682 030, a former Judge of this Court as the sole arbitrator to decide the dispute or differences between the parties arising from Annexure A3 agreement between the parties.(b) A copy of this order shall be communicated to the sole Arbitrator by the Registry within a period of one week from today.(c) The Arbitrator is requested to forward the statement of disclosure under Section 11(8) read with 12(1) of the 2016 Act. The disclosure statement shall be placed before this Court for confirmation of the appointment of the Arbitrator. The Registry shall retain a copy of the original.(d) The Arbitrator's fee shall be governed by the Kerala High Court (Fee Payable to Arbitrators) Rules, A.R.No.55 of 2020 11 2017 and both parties agreed that the arbitration costs and fees shall be shared equally.This Arbitration Request is allowed.Post on 27.10.2020 for the disclosure statement.
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