Court Holds Inoperative Nomination Clause Does Not Defeat Arbitration, Directs Appointment; COVID Limitation Relief Applied

A bench of Justices Dipankar Datta and Augustine George Masih heard civil appeals by Offshore Infrastructures Limited challenging the High Court of Madhya Pradesh's refusal to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 and the dismissal of the petitioner's review application. The appeals arose from the High Court's orders dated 19.12.2023 and 10.04.2024 which had held the Section 11 petition time-barred.

The Court allowed the appeals, set aside the High Court judgments and held that a contractual clause naming the managing director or an officer as sole appointing authority, rendered inoperative by the 2015 amendment to the Act, did not extinguish the parties' agreement to arbitrate. The Court held that where the agreed appointment procedure became unlawful, the court retained power under Section 11 to appoint an independent arbitrator. The Court, in its reasoning, observed: The Court further applied the three-Judge bench order in In Re: Cognizance for Extension of Limitation and noted that "the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation", thereby holding the Section 11 petition filed in March 2022 to be within time. The matter was directed to be referred to the Delhi International Arbitration Centre for appointment of an arbitrator.

Background

The dispute arose from a contract awarded to Offshore Infrastructures Limited for construction works at Bharat Petroleum’s Bina refinery by letter of acceptance dated 31.12.2016. The contract period expired in May 2017; work completed on 31.01.2018. The petitioner raised the final bill on 20.03.2018, issued a "No Claim Certificate" on 03.10.2018 and received part payment on 11.06.2019. The petitioner sought appointment of an arbitrator by notice dated 14.06.2021 after the respondent declined to entertain claims. The petitioner filed Arbitration Case No. 23 of 2022 under Section 11(6) on 15.03.2022.

The High Court held the Section 11 petition barred by the three-year limitation, treating the cause of action as having accrued on issuance of the "No Claim Certificate" on 03.10.2018 (or from the bill due date), and dismissed the petition and its review. On appeal the Supreme Court considered precedents including Perkins Eastman, TRF, Voestalpine, Geo Miller, Arif Azim and the COVID-era Order in In Re: Cognizance. The Court rejected the respondent's submission that the arbitration mechanism was extinguished because the appointing authority became ineligible after the 2015 amendment; it held the core arbitration agreement survived and the court could appoint an arbitrator. On limitation, the Court held the cause of action arose when the final bill became due (21.04.2018 here) but applied the COVID exclusion (15.03.2020–28.02.2022) and consequent recalculation, concluding the s11 petition filed in March 2022 was within the extended time. The Supreme Court set aside the High Court orders, directed reference to Delhi International Arbitration Centre to appoint an arbitrator to decide the dispute in accordance with law and rules, and allowed the appeals with no order as to costs. Pending applications were to be disposed of.

Case Details: Case No.: 2025 INSC 1196 Case Title: Offshore Infrastructures Limited v. M/s Bharat Petroleum Corporation Limited Appearances: For the Petitioner(s): Not indicated in the judgment For the Respondent(s): Not indicated in the judgment