This article is written by Sunil Pujari, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.com.
The multiplicity of arbitration means multiple arbitration taking place in a single contract or multiple contracts between different parties in the same project. In big complex projects involving multiple contracts and contractors, the number of arbitration cases can be very high. Consequently, a party may find itself participating in one or several cases covering nearly the same set of facts and the same legal relationship. It may be efficient and cost-effective if the arbitration cases are allowed to be consolidated.
The Hon’ble High Court of Delhi (“court”) in Gammon India Ltd. vs. National Highways Authority of India, had dealt with the question of the multiplicity of arbitral proceedings. The Delhi High Court with a bench headed by Justice Pratibha M. Singh while dealing with the case provided some solutions to deal with the multiple disputes arising out of the same agreement to arbitration.
Purpose of the topic
The purpose of this article is to analyse the recent ruling of the High Court of Delhi (court) in the Gammon vs. National Highways Authority of India judgment dated 23 June 2020.
- We will analyse the issue of ‘multiplicity’ of arbitral proceedings, i.e., multiple arbitration invocation, multiple references to arbitrations, the constitution of multiple tribunals, multiple awards, multiple challenges to the arbitration awards.
- What is the solution to mitigate the multiplicity of the arbitration cases?
Facts of the case
- Gammon- Atlanta JV, a Joint Venture of Gammon India Ltd. and Atlanta Ltd.(hereinafter “Contractor”) and National Highways Authority of India (hereinafter “NHAI”) entered into an agreement on 23rd December 2000, for the work of widening to 4/6 lanes and strengthening of existing 2 lane carriageway of NH-5 in the State of Orissa (hereinafter “Project”). The contract value is Rs.118.9 crores and the commencement date is 15th January 2001, to be completed within 36 months i.e., by 14th January 2004.
- The 3 awards: Number of disputes between the contractor and NHAI arose during the course of execution of the project. Initially, the disputes were referred to the Dispute Resolution Board ( DRB) which was constituted after the reference of the dispute by the contractor. However, the DRB expressed its inability to resolve the dispute pertaining to the period prior to its constitution. Hence, the contractor invoked the arbitration provision as provided under the contract. During the course of the project, the contractor invoked the arbitration provision three times and they were subsequently challenged in the civil courts against the arbitration decision. Following are the details of the 3 arbitration invoked by the contractor and the subsequent actions taken by the contractor,
A. 1st Arbitral Tribunal
- The First Arbitral Tribunal, consisting of Mr. P.B. Vijay, Mr. C.C Bhattacharya and Mr. R.T. Atre was appointed in 2005, the contractor referred following disputes to arbitration under the contract:
- Claim No 1 – Compensation for losses incurred on account of overhead and expected profit.
- Claim No 2 – Compensation for reduced productivity of machinery and equipment deployed.
- Claim No 3 – Compensation for the increase in the cost of materials and labour during extended periods.
2. After hearing both the parties the Arbitral Tribunal awarded Claims No 1 and No 2 and rejected Claim No 3 as the third claim was not part of the initial Statement of Claim (SOC). This award of the tribunal shall be hereinafter referred to as – Award 1.
3. Both the parties challenged the award in separate proceedings in the civil court. The contractor later withdrew its objections with respect to the rejection of Claim No 3 and sought the court’s approval to raise the same before a separate tribunal. Award 1 by the Arbitral Tribunal was upheld by the court with respect to Claim 1 and Claim 2.
B. 2nd Arbitral Tribunal
The contractor once again invoked arbitration regarding the disputes related to NHAI’s failure in fulfillment of contractual obligations, in the year 2007. Accordingly, the Second Arbitral Tribunal was constituted consisting of Mr. Swarup Singh, Mr. C.C Bhattacharya, and Justice E. Padmanabhan (Retd). The contractor also included its Claim No 3 from the first arbitration for which he had taken permission from the court.
The Second Arbitral Tribunal rejected the contractor’s claim including the claim for compensation for NHAI’s delay in fulfilling contractual obligations and also Claim No 3. However, the minority award therein granted both the claims of the Contractor. This award of the second Arbitral Tribunal shall hereinafter be referred to as – Award 2.
C. 3rd Arbitral Tribunal
The contractor again invoked the third arbitration for the third time against NHAI’s decision to levy liquidated damages on the contractor for the delay in completion of work in the year 2008. The contractor disputed the imposition of liquidated damages and referred the disputes to the DRB in the year 2008. However, dissatisfied with the DRB’s recommendation invoked third arbitration and accordingly, Third Arbitral Tribunal was constituted consisting of Mr. RH Tadvi, Mr. V. Velayutham, and Mr. V.S. Karandikar:
The third Arbitral Tribunal accepted the contractor’s claim and awarded to the contractor recovery of amounts deducted as liquidated damages from the contractor’s due payment. Tribunal observed that NHAI had committed several breaches of contract and had failed to provide encumbrance-free land to the contractor. Due to the breaches by NHAI the contractors work suffered and consequently the delay in completion of the work occurred. NHAI cannot levy liquidated damages for the delays caused by itself. This Tribunals Award was subsequently upheld by the court and attained finality. The third Arbitral tribunal award is hereinafter shall be referred as – Award 3.
Award 1 and Award 3 had attained finality; However, the contractor had challenged Award 2 in the Delhi High Court which remained pending and was finally decided by the court leading to this present judgment.
The contractor, in its challenge to Award 2, relied on the findings in Award 3 that NHAI who was responsible for the delay in completion of the project work and therefore the Second Arbitral Tribunal had erred in analysing the facts of the case while issuing Award 2.
The contractor requested the Delhi High Court to consider the findings of the Third Arbitral Tribunal to set aside Award 2. Further, the contractor gave reference to the minority award rendered by Tribunal 2 to strengthen its case.
The court’s judgment and analysis
The Delhi High Court dismissed the contractors’ claim to set aside Award 2 stating that each award is to be dealt on its own merit and cannot be compared with any other awards by other tribunals.
The court highlighted that according to the Arbitration and Conciliation Act 1996 (ACA) disputes can be raised at any stage of the project, and there is a possibility of multiple arbitrations in respect of a single contract.
The principles of res judicata and provisions of the CPC clearly indicate the legislative intent to avoid multiplicity of proceedings. Though the arbitration is not strictly governed by the CPC, a multiplicity of proceedings should be avoided as a matter of public principle. The Delhi High Court noted that multiplicity of arbitral proceedings involves parallel adjudication of overlapping issues resulting in enormous confusion. The following situation was observed by the Delhi High Court, regarding the multiplicity of arbitral proceedings:
- Arbitrations and proceedings between the same parties under the same contract.
- Arbitrations and proceedings between the same parties arising from a multiple set of contracts, which bind them in a single legal relationship.
- Arising out of identical or similar agreements between one set of entities, wherein the other entity is common.
The court made certain suggestions for reducing the multiplicity of arbitral proceedings.
- In case of any particular contract or a series of contracts, where parties are in a legal relationship, the endeavour always ought to be to make one reference to one Arbitral Tribunal.
- If there are different disputes arising at different times, the disputes should be referred to the same Arbitral Tribunal and separate awards can be pronounced by the same Tribunal.
- The parties should bring to the notice of the court any prior challenges pending in respect to the awards out of the same contract so that all the challenges can be adjudicated in one go.
The issue of multiplicity in arbitral proceedings is very common in arbitrations nowadays and the court and has provided much-needed clarity on how to deal with such issues. The court emphasised the importance of parties to the dispute to maintain discipline while invoking arbitration and subsequent challenges and not go on forum hunting to redress the issue. Parties should bear in mind that any misuse of the dispute resolution process by the parties shall not be looked at kindly by the courts. This will not only help in the administration of justice but also prevent contradictory awards and orders.
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