The recent judgement given by the Hon'ble Supreme Court in the matter of Bharat
Sanchar Nigam Limited vs M/s Nortel Networks India Pvt. Ltd
. has ruled on the
applicability of Article 137 of the Limitation Act, 1963 (hereinafter referred
to as Limitation Act
) on a Section 11 application under the Arbitration Act,
1996 (hereinafter referred to as Arbitration Act
). Through this judgement the
Supreme Court has paved the way for speedy and expeditious resolution of
The Appellant, Bharat Sanchar Nigam Limited (“BSNL”) issued a tender to invite
bids for planning, engineering, supply, insulation, testing and commissioning of
GSM based cellular mobile network in the southern region. The Respondent was
awarded the tender and a purchase order was issued in favour of the Respondent.
Upon the completion of the work under the Purchase Order by the Respondent, the
Appellant on account of damages, withheld a certain amount due to the
||Sequence of Events
|13 May, 2014
||Respondent sent a letter to the Appellant
claiming the withheld amount.
|4 August, 2014
||The Appellant, in response, rejected the
claim raised by the Respondent
|29 April, 2020
||The Respondent invoked the arbitration
clause and requested the appointment of an independent arbitrator and
contending that the said dispute would fall within the ambit of
|9 June, 2020
||The Appellant replied to the abovementioned
notice and argued that the case had already been closed on 4 August,
2014 when the claim was rejected by the Appellant and as per S. 46 of
the Arbitration Act, the notice invoking arbitration was time barred.
Subsequently, an application under S.11 of the Arbitration Act was filed by the
Respondent before the High Court of Kerala.
High Court Decision
The High Court of Kerala referring to the reasoning used by the High Courts
regarding the same matter held that the Section 11 application under the
Arbitration Act has to be preferred within a period of three years from the
expiry of 30 days of the receipt of the notice invoking arbitration an order was
passed by the High Court referring the matter to arbitration.
It was held that
the present request is not barred by limitation since the application for S.11
was filed barely a month after the Respondent received a letter from the
Appellant dated 9 June, 2020. The Court referred the parties to Arbitration. A
review petition was filed by the Appellant challenging the said order which was
duly dismissed by the High Court of Kerala.
Supreme Court Decision
The Appellant aggrieved by the decision of the High Court of Kerala filed an
appeal before the Supreme Court.
The following two issues were framed by the Supreme Court:
What is the period of limitation for filing an application under S.11 of the
Arbitration Act, 1996.
Where the claims are ex facie time barred, can the court refuse to make an
appointment under S. 11 of the Arbitration Act, 1996?
Judgement on the First issue
The Supreme Court while applying the same rationale applied in the previous
decisions of the High Courts held that Article 137 of the Limitation Act would
apply to a Section 11 application under the Arbitration Act, 1996. The reasoning
for the same was that the application under section 11 of the Arbitration Act,
1996 is filed in a court of law and since no provision of the Limitation Act
applies to the said application, the residual article 137 of the Limitation Act
would apply, which provides for a period of three years from the date when the
right to apply accrues and the period of limitation will begin from the date
when there is a failure to appoint the arbitrator. It was held that Respondent
filed the S.11 application under the Arbitration Act within the prescribed
period under Article 137 of the Limitation Act.
The Court while deciding on the said issue also called upon the Parliament to
effect an amendment to fill this vacuum in the law and provide for a specific
period of limitation for filing a section 11 application under the Arbitration
Judgement on the Second issue
The Court while relying on the judgement given in the case of Vidya Drolia
v. Durga Trading Corporation
, held that in rare and exceptional cases and
in order to cut off the dead wood claims, the Court can interfere at the
referral stage of the application only when it is “manifest” that the claim is
ex facie time barred. Although the Court did clarify that this rule would be
applicable only where there is not a single doubt of the case being prima facie
time barred or non arbitrable.
However, if there is even the slightest doubt arises, the rule would be to refer
the case to arbitration. In the present case, it was held that the Respondent's
claim is ex facie time barred since it failed to take any action when its claim
was rejected by the Appellant on 4th August, 2014. Once the claim was rejected
the Respondent should have sent the arbitration notice within the period of
three years from the date of rejection of the claim.
The Supreme Court has through this judgement upheld the fundamental principles
of arbitral proceedings which are speedy disposal of the dispute and minimal
judicial interference. The applicability of Article 137 of the Limitation Act
would ensure that parties would not sleep on their rights and claims as the law
is not entitled to provide reliefs to those who sleep over their claims. One of
the main objectives of the Arbitration Act, as stated under the preamble of the
act, is to minimise the supervisory role of Courts in the arbitral process.
This objective was overlooked when the judgment of SBP & Co. v. Patel
 was passed by the Supreme Court. Fortunately, this judgement
was later overruled by Duro Felguera SA v. Gangavaram Port Limited
wherein the Supreme Court recognized the legislative intent behind passing the
Arbitration Act and minimized the judicial intervention at the referral stage.
This judgement has further affirmed the rule laid down in Duro Felguera (supra)
and applied restrictions on the Court's power to interfere in arbitral
proceedings at the referral stage. This would certainly help to streamline the
process of arbitration and to project India as an arbitration friendly nation.
- (2021) 2 SCC 1
- (2005) 8 SCC 618
- (2017) 9 SCC 729