Contractual arbitration clause will not override statutory arbitration obligation: Supreme Court

The Supreme Court recently held that a party cannot simultaneously or sequentially pursue multiple arbitral forums for the same dispute under different legal frameworks [Umri Pooph Pratappur Tollways Private Limited v. MP Road Development Corporation and Another]..Such conduct is impermissible in law and squarely hit by the doctrine of election and estoppel, a Bench of Justices JB Pardiwala and R Mahadevan held.Thus, a party cannot abandon the statutory arbitral process and initiate private arbitration for the same dispute, the Court said.An obligation for arbitration under statute will override the contractual arbitration clause, the Bench underlined.The Court was hearing a plea in which Umri Pooph Pratappur Tollways Private (appellant) had filed a reference petition in 2018 before the Madhya Pradesh Arbitration Tribunal constituted under a statutory mechanism for works contract disputes. While that reference was pending, the appellant initiated private arbitration proceedings under clause 44.3.1 of the concession agreement, invoking the Arbitration and Conciliation Act, 1996 and the rules of the International Centre for Alternative Dispute Resolution (ICADR)."This parallel invocation of remedies is impermissible in law and squarely hit by the doctrine of election and estoppel. A party cannot pursue two mutually inconsistent remedies under different legal regimes arising from the same cause of action,” the Court held. The Court slammed the appellant-company for its actions and said it amounted to forum shopping.“The appellant’s conduct in withdrawing the reference petition and simultaneously initiating proceedings under the 1996 Act, constitutes forum shopping. This conduct, aimed at circumventing the statutory mechanism and reviving abandoned claims, is tainted with mala fides and deserves to be deprecated,” the Bench stated..Further, the appellant had withdrawn its statutory reference petition without seeking liberty to file it again. The Court noted that such withdrawal attracted a statutory bar under Rule 53(3)(b) of the applicable regulations and the appellant was precluded from raising the same claims again before any forum.“In terms of the statutory mandate under Rule 53(3)(b), once a reference is withdrawn without obtaining liberty to re-agitate the same, the appellant stands precluded from initiating a fresh reference on the same subject matter. This substantive bar also applies to any attempt to pursue the same claims before alternative fora," the judgment said..The contractual arbitration clause itself could not override the statutory obligation to approach the designated forum under law, the Bench made it clear.“Clause 44.3.1 of the Concession Agreement to the extent it purports to permit private arbitration, is inoperative insofar as it seeks to override the statutory mandate of the 1983 Act. It is trite law that parties cannot contract out of a statutory obligation enacted in furtherance of public interest,” the Court said. .Despite the bar, the Court allowed the appellant a limited opportunity to seek revival of its original reference petition before the statutory tribunal. It directed the appellant to move an application to recall the withdrawal order within two weeks.“Accordingly, we direct the appellant to file an application to recall the withdrawal order dated 08.02.2023 and seek restoration of Reference Petition No.61 of 2018 within two weeks from the date of receipt of a copy of this judgement......Upon such filing, the Madhya Pradesh Arbitration Tribunal shall consider the application on its own merits and pass appropriate orders, within a further period of two weeks," the top court directed..The Court disposed of the appeal while affirming that a party cannot abandon one forum and later attempt to reopen the same dispute before another..Senior Advocate Siddharth Dave assisted by Advocates Sadapurna Mukherjee, Saurabh Kumar, Manvi Sharma and Rajat Mittal appeared for the petitioner.Solicitor General Tushar Mehta along with advocates Bhuvan Kapoor, Rajeshwari Shankar, Ishika Chauhan and Siddharth Sharma appeared for the respondents..[Read Judgment]