Background
The dispute in the present matter stemmed from a Contract between Bhadra Products (“Respondent/Claimant in Arbitration”) and Indian Farmers Fertiliser Co-operative Limited (“Appellant/Respondent in arbitration”), for the supply of defoamers by the Respondent. While the Respondent delivered the agreed quantity within the supply period, the Respondent issued a legal notice demanding payment from the Appellant only after a substantial delay of around four years from the lapse of the supply period. The Appellant denied any liability, leading to the invocation and commencement of arbitration proceedings.
After framing of the issues, the sole arbitrator took up the issue of limitation first, since it was to be decided on the basis of documentary evidence only, and ruled in favour of the Respondent, holding that the claim was not time-barred under the law of limitation (“Award”). The Appellant challenged this award under Section 34 of the Arbitration and Conciliation Act (“A&C Act, 1996”), styling it as the ‘First Partial Award’.
The District Court, however, held that this award was not an ‘interim award’ and thus, the Court had no jurisdiction to proceed with the challenge under Section 34 of the A&C Act, 1996. The appeal to the Orissa High Court was also dismissed, echoing the same reasoning as that of the District Court. Thereafter, the Appellant instituted the present Special Leave Petition before the Hon’ble Supreme Court.
Issues and Decision
Whether an award on the issue of limitation can be said to be an interim award and Whether a decision on limitation would go to jurisdiction and therefore be covered by Section 16 of the A&C Act, 1996.
The Appellant argued that since the award finally decided the issue of limitation, it is to be considered as an ‘interim award’ and be amenable to challenge under Section 34 of the A&C Act, 1996. It relied on the judgment in Siemens Atkeingesellschaft[i] and other judgements, particularly on ‘what constitutes an interim award’.
The Respondent, on the other hand, contended that the present award is merely an order passed under Section 16 of the A&C Act, 1996. Any decision as to the limitation is a ruling on ‘jurisdiction’ and such a finding goes to the root of the case. Thus, the procedure of Section 16 has to be followed, and the arbitral proceedings have to continue, and the challenge has to be postponed after a decision on other issues is made. It was also highlighted that Section 37 allows appeals only from Section 16 orders that accept the plea of lack of jurisdiction but not the ones that reject such a plea, as in the present case.
On the Nature of the Award
The Court held that Section 31(6) of the Act states that an interim arbitral award can be made on ‘any matter’ with respect to which the arbitral tribunal may issue a final award. The term ‘any matter’ is quite wide and includes “any points of dispute” that are to be adjudicated by the Tribunal [¶9]. The Court referred to Section 47 of the English Arbitration Act, 1996, and noted that the said provision does not use the words ‘interim’ or ‘partial’ so as to indicate that any award made would be final determination [¶12]. Reliance was also placed on the judgments inMcDermott International Inc.[ii]and Satwant Singh Sodhi[iii], which lays down principles for when an interim award is final [¶14-15]. Since the award in the present case finally decided upon the issue of limitation, it is an ‘interim award’ as per Section 2(1)(c) and open to challenge under Section 34 of the Act [¶16].
On the meaning of jurisdiction under Section 16
The Court, emphasising upon the use of phrase “own jurisdiction” under Section 16 and drawing parallel from Section 30 of the English Arbitration Act, 1996 held that the ‘jurisdiction’ refers to three aspects – existence of a valid arbitration agreement, proper constitution of the arbitral tribunal, and whether the disputes submitted to arbitration fall within the scope of the arbitration agreement [¶20].
Thus, it was ruled that the award in the present case, dealing with the question of limitation, does not deal with ‘own jurisdiction’ of the Tribunal as envisaged by Section 16 and hence, amenable to challenge under Section 34 of the A&C Act, 1996.
Significance
The Supreme Court’s interpretation of the term “any matter” is significant, as it affirms the wide discretion of the arbitral tribunal to issue interim awards on not only claims or counter-claims but also on issues that bear upon them. However, the judgment also leaves a degree of ambiguity, as it held that the plea of limitation does not come within the narrow ambit of ‘jurisdiction’ under Section 16 of the A&C Act, 1996 and may lead to confusion as to whether parties can still raise the issue of limitation under Section 16. The judgment in Uttarakhand Purv Sainik Kalyan Nigam Limited vs Northern Coal Field Limited[iv], has held that issue of limitation is a jurisdictional issue; hence can be decided under Section 16, by incorrectly applying the IFFCO vs Bhadra Products.
Case Details
Citation Codes: (2018) 2 SCC 534, [2018] 1 S.C.R. 848
Date of Judgement: 23 January 2018
Forum: Supreme Court of India
Bench: Rohinton Fali Nariman and Navin Sinha, JJ.
[i] (2007) 4 SCC 451, (2007) 138 Comp Cas 1, 2007 SCC OnLine SC 302
[ii] (2006) 11 SCC 181
[iii] (1999) 3 SCC 487
[iv] (2020) 2 SCC 455 ¶ 7.13.
Author(s)
Gunjan Jain
Student at RGNUL, Punjab