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APPLICABILITY OF THE KOMPETENZ PRINCIPLE IN ARBITRATION
In the case M/S. Uttarakhand Purv Sainik vs Northern Coal Field Limited, the Supreme Court held that the issue of limitation is to be decided by the Arbitration Tribunal itself. This decision was based on the doctrine of Kompetenze kompetenze enshrined under section 16 of the Arbitration and Conciliation Act,1996.
FACTUAL BACKGROUND
The parties entered into an agreement on 21.12.210. The agreement stated that if any dispute arises between the parties in connection with the contract the matter has to referred to a sole Arbitrator appointed by the Director (Pers.) of National Coal Field Ltd., hereinafter referred to as the Respondent. The arbitration clause also specified that if the appointed arbitrator dies or resigns, the Director (Pers.) of the Respondent shall have complete authority to appoint another arbitrator in the same manner as the previous arbitrator was appointed. The parties also agreed that the award made by the arbitrator shall be final and binding.
A dispute arose between the parties with respect to payment of amounts under the contract. The Contractor, hereinafter referred to as the Petitioner, issued a legal notice on 29.05.2013, demanding for payment of an amount along with interest by the Respondent. On 09.03.2016 the Petitioner issued another notice demanding for the appointment of an arbitrator and for the commencement of arbitral proceedings. The Respondent did not reply for the same. The Petitioner issued another notice on 30.05.2016 proposing the name of an Additional District Court Judge for the purpose of appointing him as the sole arbitrator. The Respondent did not reply for this notice as well.
Subsequently, the Respondent filed an application before the High Court under section 11 invoking the default authority of the High Court of appointing a sole arbitrator. The High Court held that the claims of the Petitioner were barred by limitation, hence an arbitrator could not be appointed under section 11 of the 1996 Act.
Aggrieved by the decision of the High court, the Petitioner filed a petition before the Supreme Court, questioning;
Whether the High Court has the authority to reject an application under section 11, only on the basis of the issue of limitation?
RULES
- Doctrine of kompetenze kompetenze- The kompetenze principle indicates that an arbitral tribunal has the authority and the competence to decide upon its own jurisdiction, including all jurisdictional issues. The main aim of this principle is to reduce the interference of the judiciary and to empower the arbitrator to decide upon all preliminary issues. This principle is stated under section 16 of the Arbitration and Conciliation Act, 1996.
- Section 11(6A) of the Arbitration and Conciliation Act 1996- The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or 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.
- ITW Signode India Ltd. v. Collector of Central Excise- In this case, it was laid down that the issue of limitation is a jurisdictional issue.
VIEW OF THE SUPREME COURT
The Supreme Court set aside the judgement passed by the High Court. It was held that section 11(6A) requires the Courts to look into only one aspect that is the existence of a valid arbitration agreement. The Courts are required to ensure that the agreement between the parties contains a valid arbitration clause pertaining to the dispute that arose between the parties. It was also stated that all other preliminary or threshold issues relating to arbitration have to be decided by the arbitral tribunal under section 16 that provides for the kompetenze principle. Since the issue of limitation is a jurisdictional issue, the same must be decided by the arbitrator appointed for resolution of disputes. The main aim of this provision is to reduce judicial interference in the pre reference stage of arbitration. Although there is one exception to this doctrine. If the arbitration agreement is procured by fraud or deception, or if the agreement is not valid, the arbitral tribunal cannot assume jurisdiction to adjudicate and resolve the dispute. Once the existence of the arbitration agreement is not disputed, all other preliminary issues are to be decided by the arbitrator.
Thus, the order of the High Court was set aside and a sole arbitrator was appointed for the purpose of adjudicating the dispute of the parties.
- M/S. Uttarakhand Purv Sainik vs Northern Coal Field Limited
- Facts and issues
- View of the Supreme Court
