No Jurisdictional Error By Arbitrator In Allowing Consolidated SoC Containing Specific Claims Under Different Contracts: Bombay High Court

While dismissing the challenge to the arbitral award on the ground that the arbitrator had no power and jurisdiction to consolidate the disputes, the bench of Justice Manish Pitale observed that the nine contracts were executed between the same parties, consisting of identical arbitration clauses, and the nature of the dispute arising from the said contracts was also identical.

The petitioner, BST Textile Mills Pvt Ltd, entered into nine contracts, each containing an arbitration clause, for purchasing certain goods from the respondent, the Cotton Corporation of India Ltd, a Government of India undertaking.

Alleging that the petitioner had committed breach of the said contracts, the respondent- Corporation issued a notice to the petitioner invoking the arbitration clause and the dispute was referred for arbitration.

Before the Arbitral Tribunal, the respondent-Corporation filed a single statement of claim pertaining to the disputes that arose from all the nine contracts executed between the parties. The petitioner, BST Textile Mills, apart from disputing the claims on merit, raised an objecting against the consolidation of the claims.

The Arbitral Tribunal, however, allowed the single statement of claim filed by the respondent-Corporation/ claimant, and an arbitral award was passed in favour of the respondent.

Challenging the arbitral award, the petitioner, BST Textile Mills, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Bombay High Court.

The petitioner, BST Textile Mills, submitted before the Court that the arbitrator had no power and jurisdiction to consolidate the disputes arising out of the independent and distinct nine contracts. In the absence of such power to consolidate, particularly when the petitioner had not consented to such consolidation, the arbitral award was vitiated and opposed to the fundamental policy of Indian Law, it argued.

BST Textile Mills added that under the nine contracts, the respondent-Corporation was supposed to supply cotton bales from three different branches. As the causes of action were separate and distinct, pertaining to each independent contract, the claims pertaining to each such dispute or cause of action ought to have been separate and distinct, it claimed.

The respondent/ claimant, Cotton Corporation of India, averred that the terms of the contract, the format and the mutual obligations recorded in all the nine contracts, were identical.

Referring to the facts of the case, the Court observed that the nine contracts were executed between the same parties, consisting of identical arbitration clauses and the only difference in the contract was with regard to the actual figures of sale and purchase.

Further, it took note that the petitioner also filed a single counter claim in respect of the reliefs claimed by the respondent/ claimant under all the nine contracts.

Noting that the nature of the dispute arising from the nine contracts was identical, the bench further reckoned that the Arbitrator, while dismissing the petitioner’s objection, cannot be said to have erred in observing that the petitioner had also raised a composite counter claim.

“This Court is of the opinion that when specific claims pertaining to each of the nine contracts were placed distinctly in the statement of claim filed on behalf of the respondent, to which the petitioner had ample opportunity to respond and the fact that the petitioner also chose to file a consolidated counter claim pertaining to all the nine contracts, it cannot be said that the learned arbitrator committed a jurisdictional error in proceeding with the arbitration,” the Court said.

The petitioner, BST Textile Mills, submitted before the Court that prejudice was caused to it when the arbitrator chose to proceed with a consolidated statement of claims since separate and distinct, alleged acts of breach of contracts, were not taken into consideration.

Rejecting the arguments of the petitioner, the bench remarked, “This Court is not impressed with the said contention, primarily for the reason that in the facts and circumstances of the present case, distinct claims arising out of all the nine separate contracts were set out by the respondent. Evidence was specifically led in respect thereof, in the context of which, the petitioner had ample opportunity to cross examine the witnesses and to lead its own evidence. The counter claims were also raised in a consolidated manner by the petitioner, thereby indicating that it was in the interest of justice that the learned arbitrator chose to proceed in the said manner. Therefore, the principal contention raised on behalf of the petitioner is found to be without any substance.”

The bench further held that in proceedings under Section 34 of the A&C Act, the Court cannot reappreciate evidence since the quantity and quality of evidence is within the domain of the arbitrator. Holding that the interpretation placed on the terms of a contract is also within the domain of the arbitrator, the Court said that even if any term is erroneously interpreted by the arbitrator, it does not give rise to a sufficient ground to exercise jurisdiction under Section 34.

The Court thus dismissed the petition.

Case Title: BST Textile Mills Pvt Ltd versus The Cotton Corporation of India Ltd

Citation: 2023 LiveLaw (Bom) 105

Dated: 09.02.2023

Counsel for the Petitioner: Mr. Gaurav Joshi, Senior Counsel a/w. Mr. Kazan Shroff, Mr. Amit Jajoo, Mr. Darpan Bhatia and Mr. Siddhant Trivedi i/b. Indus Law

Counsel for the Respondent: Mr. Simil Purohit, Mr. Vikrant Shetty, Ms. Tanjul Sharma i/b. Dhruve Liladhar & Co.

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