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The Delhi High Court has issued a slew of directions to avoid multiplicity of Arbitral Tribunals arising out the same contract and the subsequent passing of inconsistent and contradictory awards. (Gammon India vs NHAI)
The directions, as passed by a Single Judge Bench of Justice Prathiba M Singh, are as follows:
- In every petition under Section 34, Arbitration and Conciliation Act, 1996, the parties ought to disclose the existence of any other proceedings, pending or adjudicated, in respect of the same contract or series of contracts, alongwith the stage and forum of these proceedings.
- When a Section 34 petition is being heard, parties ought to disclose as to whether any other Section 34 petition in respect of the same contract is pending and if so, seek disposal of the petitions together in order to avoid conflicting findings.
- In petitions for appointment of an Arbitrator, parties ought to disclose the existence of an existing Tribunal for adjudication of the claims of either party arising out of the same contract or the same series of contracts. An endeavor can be made by the arbitral institution or the High Court under Section 11, to refer the matter to the same Tribunal or a single Tribunal in order to avoid conflicting and irreconcilable findings.
- Appointing authorities under contracts consisting of arbitration clauses ought to avoid appointment or constitution of separate Arbitrators/ Arbitral Tribunals for different claims/disputes arising from the same contract, or same series of contracts.
The Court has asked the Registrar General to place the directions before the Chief Justice for considering if any modifications were required to be made in the Rules of the Delhi High Court framed under the Arbitration and Conciliation Act, 1996.
The directions were passed by the Court in a Section 34 petition preferred by Gammon India.
The parties, Gammon India (Petitioner) and NHAI (Respondent) had appointed three Arbitral Tribunals which adjudicated different disputes and claims arising out of a construction contract for NH-5.
Out of the three Awards, two Awards i.e. the first and the third, had attained finality.
The Petition before the Court only pertained to a challenge to the second Award on the basis of the findings in the third Award.
It was contended by Gammon India that finding in the third Award that NHAI was responsible for the delay would bind the present proceedings qua the second Award which had denied it payments/compensation of certain losses.
After considering the factual matrix and the contentions of the parties, the Court opined that although the filing of different claims at different stages of a contract or a project was permissible in arbitration law, multiplicity ought to be avoided in view of the principles of public policy.
The Court noted that for example, in construction contracts, there might be multiple claims but the underlying disputes about breach, delays, termination etc., formed the core of the disputes for almost all claims.
The Court stated that in the present case, when a previously appointed Tribunal was already seized of the disputes between the parties under the contract, the constitution of three different Tribunals was unwarranted and inexplicable.
Relying on the Supreme Court's decision in Dolphin Drilling Ltd. v. ONGC, the Court noted that when an arbitration clause is invoked, all disputes which exist at the time of invocation ought to be referred and adjudicated together.
It added that if a party did not raise claims which existed on the date of invocation, it ought not to be given another chance to raise it subsequently unless there are legally sustainable grounds.
Therefore, to deal with issue of multiplicity in arbitral proceedings, the Court issued the abovementioned directions.
As far as the claim of Gammon India was concerned, the Court concluded that the second Award, on its own, was quite well reasoned and based on the terms of the contract. The Court held that the majority award was clear and succinct and in view of the limited scope of interference, there was no merit in the petition.
The petition was accordingly dismissed.
The Petitioner (Gammon India) was presented by Senior Advocate P C Markanda with Advocates Chirag Shroff, Neihal Dogra.
The Respondent (NHAI) was represented by Advocates Padma Priya, Dhruv Nayar.
Read the order: