Legal Review and Analysis of Offshore Infrastructures Limited vs Ms Bharat Petroleum Corporation Limited 2025 INSC 1196

1. Heading of the Judgment

Offshore Infrastructures Limited vs M/s Bharat Petroleum Corporation Limited, Civil Appeal Nos. ______ of 2025 (Arising out of SLP (C) No. 22105-22106 of 2024), Supreme Court of India, decided on October 07, 2025.

Citation: 2025 INSC 1196

2. Related Laws and Sections

This judgment primarily interprets and applies the following legal provisions:

• Arbitration and Conciliation Act, 1996 (the 1996 Act):
  Section 11(6): Power of the court to appoint an arbitrator upon the failure of the agreed procedure.
  Section 12(5) read with the Seventh Schedule: Renders persons in specified relationships ineligible to act as an arbitrator.

• The Limitation Act, 1963:
  Article 137: Provides a three-year limitation period for applications for which no period of limitation is prescribed elsewhere.
  Section 19: Provides for a fresh period of limitation from the date of an acknowledgment in writing.

3. Basic Judgment Details

• Parties: Appellant - Offshore Infrastructures Limited (a contractor). Respondent - M/s Bharat Petroleum Corporation Limited (the principal).

• Origin: Appeals before the Supreme Court against the Judgment and Order dated 10.04.2024 (dismissing a review petition) and the Judgment and Order dated 19.12.2023 (dismissing an application under Section 11(6) of the 1996 Act) of the High Court of Madhya Pradesh at Jabalpur.

• Subject Matter: The High Court had refused to appoint an arbitrator, holding that the application under Section 11(6) was time-barred. The Supreme Court appeal challenges this finding.

4. Core Legal Principles and Judicial Analysis

The Central Issues:
The Supreme Court framed and answered two primary questions:

1. Whether the court has the power to appoint an arbitrator when the contractual arbitration clause names an authority who has become ineligible to act as an arbitrator due to statutory amendments?

2. Whether the application under Section 11(6) of the 1996 Act filed by the Appellant was within the period of limitation?

A. Validity of the Arbitration Clause and the Court's Power to Appoint
The Respondent argued that the arbitration clause (Clause 8.6 of the General Conditions of Contract), which named the Managing Director of the Respondent or his nominee as the sole arbitrator, had become "otiose and inoperative" post the 2015 Amendment to the 1996 Act. They contended that since the named appointing authority was now statutorily ineligible, the entire arbitration mechanism stood "effaced."
The Supreme Court categorically rejected this argument. The Court's reasoning was as follows:

• Separation of Agreement from Procedure: The Court drew a distinction between the core of the arbitration agreement (the pact to refer disputes to arbitration) and the procedure for appointing the arbitrator.

• Purposive Interpretation: The Court held that an arbitration agreement must be interpreted in a "purposive manner" to uphold the parties' intent to resolve disputes through arbitration. A literal interpretation that would destroy the entire arbitration mechanism was rejected.

• Precedent on Ineligibility: Relying on its earlier decisions in Perkins Eastman Architects DPC vs HSCC (India) Limited, (2020) 20 SCC 760 and TRF Limited vs Energo Engineering Projects Limited, (2017) 8 SCC 377, the Court reiterated that the ineligibility of the named arbitrator (the Managing Director) also extends to his power of nomination.

• Court's Power is Not Ousted: The Court held that the jurisdiction of the court under Section 11(6) is not ousted merely because the procedure in the clause has become inoperative. If the agreed procedure fails or results in an ex facie invalid appointment, the power to appoint a neutral arbitrator shifts to the court.

B. Computation of Limitation for Appointing an Arbitrator
The High Court had held that the limitation period of three years (under Article 137 of the Limitation Act) started from the date of the "No Claim Certificate" issued by the Appellant on 03.10.2018. Since the application was filed on 15.03.2022, it was held to be time-barred.
The Supreme Court conducted a detailed analysis:

• When does the cause of action arise? The Court, relying on the three-judge bench decision in Geo Miller and Company Private Limited vs Chairman, Rajasthan Vidyut Utpadan Nigam Limited, (2020) 14 SCC 643, held that the cause of action for invoking arbitration arises when the final bill becomes due. In this case, the final bill was raised on 20.03.2018 and became due on 21.04.2018. The three-year limitation period would, therefore, normally expire on 21.04.2021.

• Application of COVID-19 Limitation Extension: The Court then applied the landmark order passed in In Re: Cognizance for Extension of Limitation, (2022) 3 SCC 117. This order directed that the period from 15.03.2020 to 28.02.2022 shall stand excluded for the computation of limitation for all judicial and quasi-judicial proceedings.

• Calculation with Excluded Period: The Court recalculated the limitation period by excluding the period from 15.03.2020 to 28.02.2022. Since the application was filed on 15.03.2022 (within days of the exclusion period ending on 28.02.2022), it was held to be within the prescribed limitation period.

5. Final Outcome and Directions

The Supreme Court allowed the appeals and set aside the impugned judgments of the High Court. The operative part of the judgment states:

1. The Judgments and Orders of the High Court dated 10.04.2024 and 19.12.2023 are set aside.

2. The matter is referred to the Delhi International Arbitration Centre (DIAC).

3. The DIAC is directed to appoint a sole arbitrator who shall decide the disputes between the parties in accordance with the law.

6. MCQs Based on the Judgment

Question 1: In Offshore Infrastructures vs Bharat Petroleum, the Supreme Court held that an arbitration clause naming an ineligible authority?
(a) Becomes void and unenforceable, forcing parties to litigate.
(b) Renders the entire contract, including the arbitration agreement, null and void.
(c) Remains valid for the core agreement to arbitrate, and the court can appoint a neutral arbitrator under Section 11(6).
(d) Can only be enforced if both parties provide a fresh, written consent.

(c) Remains valid for the core agreement to arbitrate, and the court can appoint a neutral arbitrator under Section 11(6).

Question 2: The Supreme Court calculated the limitation period for the application under Section 11(6) by?
(a) Starting the period from the date of the 'No Claim Certificate' and excluding the COVID-19 period.
(b) Starting the period from the date the final bill became due and excluding the period from 15.03.2020 to 28.02.2022 as per the Court's order in In Re: Cognizance for Extension of Limitation.
(c) Holding that the period of limitation for arbitration applications is always five years.
(d) Ruling that the respondent's part payment indefinitely extended the limitation period under Section 19 of the Limitation Act.

(b) Starting the period from the date the final bill became due and excluding the period from 15.03.2020 to 28.02.2022 as per the Court's order in In Re: Cognizance for Extension of Limitation.