On November 27, 2019, the Supreme Court passed an order in the matter of M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited (Special Leave Petition (C) No. 11476 of 2018), wherein the issue was whether the High Court was justified in rejecting an application filed under section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) for reference to arbitration, on the ground that it was barred by limitation. 

In light of the amendments to the Act in 2015, which inserted clause (6A) to section 11 of the Act, the Supreme Court held that the scope of examination of an application filed under section 11 of the Act is now confined only to the existence of an arbitration agreement, and nothing more. It was further held that all other preliminary or threshold issues are left to be decided by the arbitrator under section 16 of the Act, which enshrines the Kompetenz - Kompetenz principle. The aforesaid principle 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. However, the aforesaid principle would not apply where the arbitration agreement itself is impeached as being procured by fraud or deception, or where the parties have only entered into a draft arbitration agreement as an antecedent step prior to executing the final contract.

In view of the above and the legislative policy to restrict judicial intervention at the pre-reference stage, it was held that the issue of limitation would be required to be decided by the arbitrator.

It may be noted that the said clause (6A) is sought to be omitted by the Arbitration and Conciliation (Amendment) Act, 2019.

This update has been contributed by Aastha (Partner) and Shradha Rakhecha (Associate).