Composite Reference Of Disputes From Distinct Purchase Orders To Arbitration Is Valid When Parties' Conduct Indicates Single Transaction: Calcutta HC

Brief Facts:

The petitioner was engaged as an agent-cum-sub-contractor by the respondent, for procurement, setting-up, erection, commissioning and maintenance of solar power installations for projects, at various designated sites. Several purchase orders and service orders were issued by the respondent.

Each of these purchase orders and service orders were accompanied by general terms and conditions for purchase. The said terms and conditions provided for resolution of dispute by arbitration in accordance with the Arbitration and Conciliation Act, 1996 (Arbitration Act).

Contentions:

The Petitioner submitted that the majority of the supply work was complete. The petitioner had always provided the updates with regard to the completion of the projects to the respondent. However, the respondent failed to make payment of the dues.

It was also argued that the respondent failed and neglected to pay the legitimate demand of the petitioner and illegally terminated the purchase and service orders, which gave rise to a dispute between the parties.

It was also argued that although the projects were separate and distinct, the conduct of the parties displayed that the parties had all along treated the transactions arising therefrom to be interconnected and interlinked.

Lastly, it was submitted that disputes with regard to works contracts, which included procurement of machines, installations and commissioning thereof, could not be decided under the provisions of the Micro, Small and Medium Enterprises Act, 2006 (MSME Act). Thus, the dispute must be referred to arbitration.

Per contra, the Respondent submitted that composite reference was not permissible in law. The petitioner was forum shopping, by once approaching the MSME Facilitation Council and then approaching the High Court. The purchase orders and service orders were distinct and separate. The question of clubbing the issues and disputes arising therefrom by a composite notice invoking arbitration was contrary to law.

Lastly, it was submitted that the projects were left incomplete. The quality of materials were inferior. The delay was caused by the petitioner and the demands of the petitioner were totally baseless and unfounded.

Observations:

The court noted that it is well settled that the arbitral tribunal can rule on its own jurisdiction. It found prima facie that the petitioner often raised composite bills and issued composite payment notices. The parties also agreed to a joint inspection and disputes were addressed collectively through communications exchanged between the parties. Ultimately, the respondent terminated all purchase and service orders via a single notice issued on June 14, 2024.

Based on the above, the court held that a composite arbitration will be beneficial for both the parties as the issues are interlinked and interconnected. Parties have treated the same as such. A composite reference will also prevent wastage of time, save multiplicity of proceedings and will also be cost effective.

The court further observed that a composite invocation under 21 of the Arbitration Act for the consolidated claim of the petitioner regarding purchase and service orders as well as the challenge to their termination by the respondent was valid. The invocation clearly outlines the details of the orders and the nature of disputes. Email communications further show that both parties consistently treated the purchase and service orders as part of the same business relationship.

Accordingly, the present petition was allowed and the Arbitrator was appointed.

Case Title: M/S. Sauryajyoti Renewables Pvt.Ltd. Vs VSL Re Power Private Limited

Case Number: AP/COM- 63 Of 2025

Order Date: 27/03/2025

For the petitioner: Mr. Soumya Ray, Adv. Mr. Aditya Sen, Adv. Ms. Anwesha Saha, Adv. :

For the respondent : Mr. Arif Ali, Adv. Mr. Prabhat Kr. Srivastava, Adv.

Click Here To Read/Download The Order