Multiple Arbitrations With Regard To Existing Claims On Same Contract Are To Be Avoided: Delhi High Court

The Single Bench of Justice Suresh Kumar Kait held that permitting the parties to have multiple arbitrations for the adjudication of the existing disputes related to the same contract would entail multiple observations.

The Court further held that there is no absolute bar in terms of Entry 22 to the Vth Schedule against the appointment of the same person as the arbitrator in more than two arbitrations within a period of three years.

Facts

The parties entered into a Concession Agreement (agreement) dated 09.05.2008 wherein the petitioner was to carry out certain construction works for the respondent. Clause 44 of the agreement provided for the resolution of disputes by way of arbitration.

A dispute arose between the parties which were referred to the first arbitral tribunal. Consequently, another dispute arose between the parties due to the decision of the respondent to delink a stretch of 22.1 Km out of the total length of the road. Aggrieved by the decision of the respondent, the petitioner issued a Notice of Dispute dated 25.10.2019. On 04.12.2020, the respondent suspended the agreement and later terminated the agreement.

The petitioner filed an application under Section 9 of the A&C Act against the suspension and termination of the agreement. In the meantime, the petitioner preferred an application under Section 11 of the A&C Act for the appointment of an arbitrator to decide on the issue of the suspension and termination of the agreement. The Court allowed the petition and the second arbitral tribunal was constituted on 24.05.2021.

Thereafter, the petitioner invoked the arbitration clause vide a letter dated 04.06.2021 and requested the respondent to nominate its arbitrator for adjudication of the dispute raised in the notice of dispute dated 25.10.2019. The respondent replied to the said notice on 12.07.2021 and nominated its arbitrator, however, it informed the petitioner that the arbitral tribunal is already in place, therefore, the parties should refer the dispute to the second tribunal.

The petitioner replied to the said communication and stated that the present dispute is different from the one pending consideration before the second tribunal. It also objected to its nominee arbitrator on the ground that he has previously acted as an arbitrator for the respondent in more than three matters in the past three years. The petitioner also resisted the appointment of the respondent's nominee arbitrator on the ground that his declaration was not in terms of the VI and VII Schedule. A round of communication took place, however, both the parties reiterated their contentions.

Accordingly, the petitioner filed the application for the appointment of the arbitrator.

The Contention Of The Parties

The petitioner sought appointment of the arbitrator on the following grounds:

• The present petition is qua the disputes mentioned under the notice of dispute dated 25.10.2019 and the second tribunal is constituted for adjudication of disputes regarding the illegal suspension and termination of the agreement, therefore, both are distinct and the claims cannot be consolidated.
• The respondent has failed to appoint its arbitrator within 30 days from the notice of arbitration. Consequently, the petitioner has filed the petition for the appointment of the arbitrator, therefore, the respondent has forfeited its right to appoint the arbitrator.
• The person that was nominated by the respondent had previously acted as an arbitrator for the respondent on four occasions in the past three years.
• The person nominated by the respondent cannot be appointed as the arbitrator as his appointment would be contrary to the mandate of Entry 22 to the Vth Schedule which prohibits a person from being appointed as an arbitrator if he/she has previously acted as arbitrator for the party in three or more arbitrations.
• Moreover, the declaration filed by the respondent's nominee arbitrator is also not in accordance with the Sixth Schedule.

The respondent objected to the maintainability of the petition on the following grounds:

• The petition is not maintainable as it had nominated its arbitrator within 30 days.
• A petition under Section 11 is not maintainable after the other party has intimated its nomination to the petitioner.
• The petition is also not maintainable as the second arbitral tribunal is already in place, therefore, the present dispute shall be referred to the same tribunal to avoid multiple arbitrations and the chance of conflicting decisions on overlapping issues.
• There is no bar on the appointment of a person who has acted as arbitrator in three or more arbitrations for the party in past three years.
• Moreover, the appointment in one arbitration is before 3 years and the appointment in the second arbitration is with the consent of the arbitrator, therefore, Entry 22 of Vth Schedule is not attracted.
• The petition is also not maintainable as the appointment of an arbitrator cannot be challenged under Section 11 of the A&C Act and the only remedy available to the petitioner is to challenge the nomination under Section 13 of the Act.

Analysis By The Court

The Court observed that the respondent had nominated its arbitrator within 30 days from the notice of arbitration. However, since the petitioner objected to the said appointment, the issue required determination by the Court.

The Court held that the petitioner was not justified in invoking third arbitration by virtue of the notice dated 04.06.2021 within less than a month of the constitution of the second arbitral tribunal under the same contract.

The Court held that although it is permissible for the parties to have multiple arbitrations as long as the cause of action continues or arises after the constitution of a tribunal, however, all the existing disputes that arises out of the same contract should be decided in the same arbitration.

The Court held that permitting the parties to have multiple arbitrations for the adjudication of the existing disputes related to the same contract would entail multiple observations.

The Court further held that the petitioner has not been able to establish that the disputes, resolution of which is sought under the proposed third arbitral tribunal, cause of action thereof arose post suspension and termination of Concession Agreement.

The Court further rejected the argument of the petitioner that a person who has previously been appointed as an arbitrator on three or more occasions in the last three years would be ineligible to be appointed as an arbitrator. The Court held that Entry 22 of the Vth Schedule is not an absolute bar to the appointment of the same person as an arbitrator in multiple arbitration provided that the arbitrator was independent and impartial on the previous occasions.

The Court further rejected the argument that the declaration given by the arbitrator is not in accordance with the provisions of the VI and VII Schedule. The Court perused the declaration to hold that the arbitrator had disclosed all the material facts required under the provisions of the Act.

Accordingly, the Court dismissed the arbitration petition with a direction to the petitioner to file its claim before the second tribunal already in place.

Case Title: Panipat Jalandhar National Highway 1 Tollway Pvt. Ltd. v. NHAI

Citation: 2022 LiveLaw (Del) 521

Date: 17.01.2022

Counsel for the Petitioner: Ms. Meenakshi Arora Senior Advocate with Mr. Omar Ahmad, Mr.Arun Siwach, Mr.Ishan Gaur, Mr.Vikram Shah, Ms.Simran Khorana & Mr.Tuhin Dey, Advocates

Counsel for the Respondent: Mr.Parag P. Tripathi, Senior Advocate with Ms. Madhu Sweta, Mr. Srinivasan Ramaswamy & Ms. Shivangi Khanna, Advocates

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