MULTIPLICITY OF ARBITRAL PROCEEDINGS IN INDIA

It is common knowledge that if arbitration is the panacea for the woes of litigation, then multiple references and arbitral proceedings achieve the complete opposite. The issues relating to multiple references, multiple tribunals, multiple findings at variance, multiple awards, and challenges thereto, are all inherent in multiple arbitral proceedings in respect of the same contract. That having been said, the Arbitration and Conciliation Act, 1996 ["Act"] does not prohibit the parties from raising their respective claims in multiple proceedings, as long as the claims are legally sustainable. Subsequent references are usually required when there arises more than one dispute between the parties at different stages.¹ Recent judicial rulings by the Delhi High Court delve into the scenarios as to when a court can refuse to entertain a subsequent reference.

Filing of different claims at different stages of a contract is permissible in law

Disputes can be raised by multiple references at different stages and there can be multiple arbitrations in respect of a single contract. Section 7 of the Act provides that an arbitration agreement means agreement by the parties to submit to arbitration all or certain disputes. Section 21 of the Act also refers to the commencement of arbitral proceedings in respect of a particular dispute and does not mention all pending disputes.

Parties ought to avoid constitution of separate arbitral tribunals for separate claims in respect of same contract

In Gammon India², the Delhi High Court, noting the statutory permissibility, nonetheless, emphasized on a bona fide disciplined use of arbitral processes by directing, inter alia, avoiding appointment or constitution of separate Arbitrators/Arbitral Tribunals for different claims/disputes arising from the same contract, or same series of contracts. Though the arbitration clause was not set out to examine as to whether the parties could opt for a piecemeal reference, it was nevertheless observed that "Multiple arbitrations before different Arbitral Tribunals in respect of the same contract is bound to lead to enormous confusion."

The parties therein had invoked the arbitration clause thrice during the execution of the contract and constituted three separate tribunals, which rendered three separate awards on the interconnected issues of delay and breach, and claims viz. overhead losses, expected profit, reduced productivity of machinery and equipment, escalation of costs, etc. This was condemned by the court noting that "if a party does not raise claims which exist on the date of invocation, it ought not to be given another chance to raise it subsequently unless there are legally sustainable grounds... The constitution of separate arbitral tribunals is a mischief which ought to be avoided".

The Court also revisited the judgment of Dolphin Drilling³ wherein it was held that the words, "all disputes"⁴, appearing in the agreement therein can only mean "all disputes" that might be in existence when the arbitration clause is invoked. Such a clause cannot be said to be a one-time measure and it cannot be held that once the arbitration clause is invoked, the remedy of arbitration is no longer available in regard to other disputes that might arise in future.

The Court also placed reliance on K.V. George⁵ to hold that the principle of res judicata, which bars claims that have been already adjudicated, is applicable to arbitral proceedings as well. In fact, the Delhi High Court explained that reasoning in Dolphin Drilling (supra) also clearly show that principles akin to Order II Rule 2 CPC also apply to arbitral proceedings.

Order II Rule 2 of the CPC prescribes that every suit must include the whole claim that a party is entitled to and when a part of a claim is relinquished, the same cannot be sued for thereafter. As per the reasoning in Sam India Built Well⁶, the issue as to whether any claims are barred under Order II Rule 2 CPC or whether any claim is barred by res judicata is to be adjudicated by the arbitral tribunal and not by the Court.

The proposition laid in Gammon India has been followed in the case of Panipat Jalandhar⁷ laying that the guiding factors in Gammon India should be followed to avoid constitution of separate arbitral tribunals for separate claims in respect of same contract.

Initial invocation of arbitration may not require reference of all existing disputes if the arbitration clause does not require it

Recently, the Delhi High Court in Airone Charters⁸ has distinguished the Gammon India case to hold that its application is limited to contracts where invocation of the arbitration agreement required embracing of all existing claims. In this case, the Petitioner/Counterclaimant had initially sought to agitate the counterclaims before the Arbitral Tribunal and on its failing to do so within the time granted by the Tribunal, the counterclaims were struck off the record. The Court held that this cannot be a ground to deny the Petitioner the right to arbitration, as there was no embargo on referring its claims to arbitration at a later stage provided the claims were within time. The reference, by one party to the contract, of its disputes to arbitration, cannot bind the other party to refer its disputes simultaneously, or even proximately, also to arbitration, whether as claims or counterclaims. Finally, the court allowed the Section 11 petition vis-à-vis appointment of new arbitrators while also giving an option of having the Petitioner's claims decided by the existing Arbitral Tribunal.

Practical implications of the aforenoted decisions

As long as the parties are able to justify the stage at which the reference is sought, nothing can leave such a party remediless, in the face of an existing arbitration clause and prima facie arbitrable nature of its claims. If a party invoking the subsequent reference is able to establish that the particular dispute had not arisen at the time of earlier reference, the same may be allowed considering the qualifying principle of res judicata under Order II Rule 2, CPC, 1908.

A blanket refusal of a reference would be in violation of the doctrine of ubi jus ibi remedium and the right to legal redressal.

Naturally, constituting multiple tribunals in respect of the same contract, would set the arbitration process at naught. A serious consideration may be given to the solution provided by Alam, J. in Dolphin Drilling, that is, by recasting the arbitration clause to state that recourse may be taken only once at the conclusion of the work under the agreement or at its termination/cancelation, while expressly saving any disputes/claims from becoming stale or time-barred etc., and for that reason alone being rendered non-arbitrable.

Furthermore, where there is a likelihood of multiple arbitral tribunals conducting parallel proceedings and consequently rendering contradictory findings on overlapping issues, it may be advisable for parties to refer the disputes before the same tribunal.⁹

Needless to say, where parties have not agreed to an arbitration clause which allows multiplicity, there may be legitimate objections, against introduction of further claims, relating to cost and time. Likewise, in the absence of an express provision or agreement for doing so, it will not usually be possible to consolidate different disputes in the same arbitration proceedings, as that would amount to enlarging the scope of reference.¹⁰ Therefore, in continuing with the pro-arbitration trend and principles of party autonomy, legally justifiable claims may be allowed to be arbitrated before the same tribunal or a new tribunal as per the choice of the parties.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.