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Bharat Sanchar Nigam Limited & Anr. v. M/s Nortel Networks India Pvt. Ltd.

Civil Appeal · 2021 INSC 175Decided 10 Mar 2021
Civil Appeal Nos. 843-844 of 2021
Justice Indu Malhotra · Justice Ajay Rastogi

Background

BSNL had withheld over Rs 99.7 crore from Nortel Networks as liquidated damages after a tender for a mobile network project. Nortel's claim for the withheld amount was rejected by BSNL in August 2014. Nortel took no action for over five and a half years, and only in April 2020 invoked the arbitration clause and sought appointment of an arbitrator. BSNL opposed this as time-barred. The Kerala High Court nevertheless referred the dispute to arbitration, holding that limitation was a matter for the arbitrator to decide.

Decision Breakdown

The Supreme Court held that while there is no specific limitation period in the Arbitration Act for filing a Section 11 application, the residual three-year period under Article 137 of the Limitation Act applies, running from when the other party fails to appoint an arbitrator. However, the Court clarified that this is separate from whether the underlying claim itself is "ex facie" (manifestly, on the face of it) time-barred. Relying on the three-judge bench decision in Vidya Drolia, the Court held that in rare cases where a claim is manifestly and hopelessly time-barred with no live/subsisting dispute, a court can refuse to refer the matter to arbitration at the threshold stage itself rather than leaving it for the arbitrator. Since Nortel's claim was over five and a half years old with no explanation for the delay, the Court set aside the High Court's orders and dismissed the Section 11 application.

Lesson Learnt

A dispute cannot be kept alive indefinitely merely by invoking an arbitration clause: if a claim is clearly and hopelessly time-barred on its face, with no genuine live dispute, a court can refuse to send it to arbitration at all, rather than letting the arbitrator decide a dead claim.

Official source (sci.gov.in)View Judgment (PDF)

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