Multiple Arbitration Before Different Arbitral Tribunals Is Counterproductive And Should Be Avoided: Delhi High Court

The bench held that it is incumbent on the parties to disclose such information to the court when approaching for appointment of arbitrator under Section 11(6) of the Arbitration & Conciliation Act, 1996.

Brief Facts:

A tender was floated on 31st January 2014 by the Respondent, Bharat Sanchar Nigam Limited (BSNL), resulting in the award of the tender to the Petitioner through an Advance Purchase Order. The scope of work assigned to the Petitioner involved establishing an advanced electronic infrastructure network for communication within the Indian Navy, encompassing the supply of equipment, testing, delivery, installation, commissioning, and the construction of civil infrastructure at the designated site.

The Petitioner contended that it fulfilled its obligations by supplying all equipment under the Purchase Order by October 2019. However, the Petitioner alleged a delay on the part of the Respondent, BSNL, which purportedly led to the project not being completed within the agreed-upon timeframe.

Moreover, the Petitioner claimed that due to the delay caused by BSNL, it incurred additional costs related to providing a three-year warranty from the date of actual commissioning. In pursuit of compensation for these additional expenses, the Petitioner formally requested payment through a letter, citing an approximate amount of 230 crores. Thereafter, the Petitioner approached the Delhi High Court (“High Court”) and filed petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”), seeking the appointment of a sole arbitrator as per Clause 22 of the Purchase Order.

The Petitioner contended that an ongoing arbitration related to the same purchase order was currently pending before a Sole Arbitrator. This arbitrator was appointed by High Court order dated 23rd January 2024.

Observations by the High Court:

The High Court referred to the case of Gammon India Ltd. & Anr. v. NHAI, 2020:DHC:2144, and noted that it an important to avert the potential pitfalls associated with multiple arbitrations before distinct Arbitral Tribunals concerning the same contract. The High Court emphasized the counterproductivity of such a scenario and stressed the importance of avoiding conflicting and irreconcilable findings.

Quoting a pertinent excerpt from the judgment, the High Court highlighted that there is an obligation on parties, in petitions seeking the appointment of an arbitrator or the constitution of an arbitral tribunal, to disclose the existence of any tribunal already constituted for adjudicating the claims arising from the same contract or a series of contracts. It acknowledged the possibility of referring the matter to the same tribunal or a single tribunal to prevent conflicting outcomes.

Therefore, the High Court appointed Dr. Justice S. Muralidhar (Retired) as the sole arbitrator.

Case Title: Sterlite Technologies Ltd. Vs Bharat Sanchar Nigam Limited

Citation: 2024 LiveLaw (Del) 260

Case Number: ARB.P. 264/2024 & I.A. No. 4624/2024.

Advocate for the Petitioner: Mr. Abhinav Mukerji, Sr. Adv. with Ms. Pratishtha Vij & Mr. Raghav Bhatia, Advs.

Advocate for the Respondent: Mr. Dinesh Agnani, Sr. Adv. Alongwith Ms. Leena Tuteja and Ms. Ishita Kadyan, Advs.

Click Here To Read/Download Order