Whether Question of Limitation can be Decided by Arbitral Tribunal [JUDGMENT]

The Arbitration and Conciliation Act, 1996 - Section 34(1) - The question of limitation is an issue that can be considered and decided by the arbitral tribunal.

IN THE HIGH COURT OF KERALA AT ERNAKULAM

V.CHITAMBARESH & R.NARAYANA PISHARADI, JJ.

Arb.Appeal No.22 of 2011

Dated this the 12th day of February, 2019

AGAINST THE ORDER DATED 12-11-2010 IN OP ARB 3/2008 of DISTRICT COURT, PALAKKAD

APPELLANT / FIRST RESPONDENT:

KOTAK SECURITIES LTD.

BY ADV. SRI.M.AJAY

RESPONDENTS/PETITIONER AND SECOND RESPONDENT:

1 ALICE FRANCIS

2. P.M. VENKATA SUBRAMANIAM, REGIONAL ARBITRATION CENTRE, NATIONAL STOCK EXCHANGE OF, INDIA LTD.,2ND FLOOR,ISPAHANI CENTRE, DOOR NO.123-124, NUMGAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI -, 600 034. (FORMERLY AT 7TH FLOOR, ARIHANT NITCO PARK, 90 DR.RADHAKRISHNA SALAI, MYLAPUR, CHENNAI – 600004.

BY ADV. SRI.RAJESH SIVARAMANKUTTY FOR R1

J U D G M E N T

R. Narayana Pisharadi, J

The appellant company is a trading member with the National Stock Exchange and the Bombay Stock Exchange. The first respondent is a stock trader who conducted transactions through the appellant company in the National Stock Exchange and the Bombay Stock Exchange.

2. The dispute that arose between the first respondent and the appellant was referred to arbitration. On 13.09.2007, the arbitrator passed an award finding that the application for arbitration made by the first respondent was barred by limitation. The arbitrator did not consider the other issues relating to the dispute.

3. The first respondent filed application under Section 34(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') in the District Court, Palakkad challenging the award passed by the arbitrator.

4. The District Court made the following findings:

(1) When a dispute is referred to arbitration, the arbitral tribunal is bound to adjudicate and pass a final award.

(2) The question of limitation can be decided only by the Court and the arbitrator is not empowered under law to decide the question of limitation.

(3) Even when the arbitrator decides the question of limitation without any authority or power, and makes a finding thereon against the party who has initiated the arbitral proceedings, the arbitrator is bound to adjudicate the other issues on facts and pass a final award.

5. On the basis of the aforesaid findings, the District Court set aside the award passed by the arbitrator and directed the National Stock Exchange to initiate fresh arbitration proceedings and appoint another arbitrator to adjudicate the dispute between the parties. The aforesaid order is challenged in this appeal.

6. We have heard the learned counsel for the appellant and also the first respondent.

7. Section 2(c) of the Act states that arbitral award includes an interim award. Section 31(6) of the Act provides that the arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. Section 32(1) of the Act provides that the arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).

8. The language of Section 31(6) of the Act is wide in nature. The arbitral tribunal has the authority to pass an interim award on any matter with regard to which it may make a final award. Arbitral proceedings would be terminated only on passing the final award and not on passing the interim award. At the same time, it is desirable that the arbitrator shall refrain from passing interim award except in case of necessity. Before passing an interim award, the arbitral tribunal should consider whether there is any real advantage in delivering an interim award. Passing piecemeal awards will cause delay and it will put the parties to additional expenses which could be avoided.

9. An interim award or partial award is a final award on the matters covered therein but made at an intermediate stage of the arbitral proceedings. Award passed by an arbitrator on the issue of limitation only is an interim award. It can be challenged independently under Section 34 of the Act. When issue of limitation is decided by the arbitrator against the party who has initiated the arbitration proceedings or who put forward the claim, it is not necessary for the arbitrator to consider and decide the other issues involved in the dispute.

10. The principles mentioned above have been laid down by the Apex Court in M/s Indian Farmers Fertilizer Cooperative Limited v. M/s Bhadra Products : AIR 2018 SC 627.

11. The finding made by the District Court that the arbitrator has no authority to decide the question of limitation is also not correct. The question of limitation is an issue that can be considered and decided by the arbitral tribunal. (See Groupe Chemique Tunisien SA v. Southern Petrochemicals Industries Corporation Limited : (2006) 5 SCC 275)

12. In view of its finding that the award passed by the arbitrator is only an interim award which the arbitrator had no authority to pass, the District Court did not consider the question of limitation on merits. Learned counsel for the parties have made elaborate submissions before this Court on the question of limitation involved in the instant case. The question of limitation in the present case requires consideration of mixed questions of facts and law. Since the District Court has not entered a finding on the question of limitation on merits, it is not proper for this Court to adjudicate that question now. We find it appropriate to remand the case to the District Court to consider the aforesaid question on merits and dispose of the case afresh.

13. Accordingly, the appeal is allowed and the impugned order is set aside. The case O.P.(Arb) No.03/2008 of the District Court, Palakkad is remanded to that court for fresh consideration and disposal in accordance with law. The parties shall appear before that court on 12.03.2019. The District Court, Palakkad shall dispose of the case afresh within a period of three months from that date. The Registry shall send back the lower court records forthwith. No costs in the appeal.