Bombay High Court: Arbitrator Did Not Commit Jurisdictional Error in Allowing Consolidated SoC Containing Specific Claims Under Different Contracts

Bombay High Court: Arbitrator Did Not Commit Jurisdictional Error in Allowing Consolidated SoC Containing Specific Claims Under Different Contracts

The Bombay High Court observed while adjudicating a petition filed in the matter of BST Textile Mills Pvt. Ltd. vs. The Cotton Corporation of India Ltd observed, that when specific claims pertaining to each of the nine contracts were placed distinctly in the statement of claim (SoC) 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 petitioner had 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.

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

Subsequently, the respondent before the Arbitral Tribunal 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. However, the Arbitral Tribunal, allowed the single statement of claim filed by the respondent/original claimant and passed an award in favor of the respondent.

Aggrieved by the same, the petitioner challenged the arbitral award by filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Bombay High Court.

The petitioner contended 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 further argued that as per the nine contracts, the respondent 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.

The principal question that arose for consideration was whether the impugned award passed by the learned arbitrator is liable to be set aside on the ground that disputes arising out of nine contracts were consolidated and single statement of claim filed on behalf of the respondent/ original claimant was entertained and allowed in favor of the respondent.

The single judge Justice Manish Pitale at the very outset remarked that arbitration awards cannot be lightly interfered with, as the Court does not exercise appellate jurisdiction. "The Court is prohibited from re-appreciating the evidence and the findings on merits in the arbitral award cannot be gone into. The scope of interference is limited and unless the specific grounds stated in the aforesaid provision are satisfied, the Court in ordinary course cannot interfere with an arbitral award", opined the judge.

Further, the Court noted that the nine contracts in question were executed between the same parties, consisting of identical arbitration clauses and the only difference was regarding the actual figures of sale and purchase. The nature of dispute arising from the nine contracts was identical and accordingly reference to arbitration to the learned sole arbitrator was made in the context of dispute arising from the nine contracts, essentially for the same reasons.

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. To this the Court reiterated 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 further observed, "on the aspect that in the absence of consent on the part of the petitioner, the learned arbitrator could not have conducted the consolidated arbitral proceedings pertaining to the dispute that arose, as regards all the nine contracts. 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 judge also asserted that sufficient grounds were not made out for interfering with the impugned award, either under the head of the award being opposed to public policy of India or it being patently illegal, to exercise limited jurisdiction available under Section 34 of the A&C Act, to interfere with the impugned award.

The Court noted that the other grounds of challenge essentially pertain to appreciation of evidence and challenge to the merits of the award, which this Court cannot go into as the quantity and quality of evidence is within the domain of the learned arbitrator and interpretation placed on terms of contract is also within the domain of the learned arbitrator. Even if any term is erroneously interpreted, it does not give rise to sufficient ground to exercise jurisdiction under Section 34 of the A&C Act.

In view of the above, the Court was of the opinion that no ground for interference with the impugned award was made out and accordingly dismissed the petition.