Court’s Decision
The Calcutta High Court appointed Mr. Jayanta Sengupta as Arbitrator to adjudicate disputes between the parties under three work orders related to the Bangalore Metro Rail Project, Phase-2. The Court allowed a composite reference for two work orders dated 1 June 2018 and 7 September 2018, finding them connected to the same project, and directed a separate reference for the third work order dated 30 April 2021, which was unrelated to the earlier two work orders. The appointment was made under Section 11 of the Arbitration and Conciliation Act, 1996, ensuring compliance with Section 12 disclosures and leaving all issues of arbitrability, admissibility, and factual disputes to be decided by the Arbitrator.
Facts
The petitioner engaged in fabrication and related work under the Bangalore Metro Rail Project, Phase-2, received a Letter of Intent in February 2018 followed by two work orders on 1 June 2018 and 7 September 2018 for the construction of viaducts and metro stations under the project. A third work order was issued on 30 April 2021 concerning elevated structures in Bangalore under a different project scope. Disputes arose over non-payment, with the petitioner claiming invoices were raised and payments made in a composite manner. After failed attempts at amicable resolution, the petitioner invoked arbitration seeking a composite reference of disputes under all three work orders.
Issues
- Whether disputes under the three work orders could be referred to arbitration in a single composite reference.
- Whether the three work orders formed part of the same transaction under the Bangalore Metro Rail Project, Phase-2, justifying composite reference.
- Whether a separate reference was necessary for the work order dated 30 April 2021 due to lack of connection with earlier work orders.
Petitioner’s Arguments
The petitioner argued:
- The work orders dated 1 June 2018 and 7 September 2018 related to the same Bangalore Metro Rail Project, Phase-2, and should be referred together to avoid multiplicity and reduce costs.
- Payments for these work orders were made and invoices raised in a composite manner without specifying allocations, evidencing a composite transaction.
- All work orders contained arbitration clauses with Kolkata as the venue.
- Thus, a composite reference for all three work orders should be permitted.
Respondent’s Arguments
The respondent argued:
- Each work order was separate and distinct, with its own arbitration clause.
- Composite invocation was impermissible in law without clear interconnection between the contracts.
- The petitioner failed to indicate exact amounts due under each work order, and the invoices did not align with claims.
- The third work order dated 30 April 2021 was unrelated to the earlier two, necessitating a separate arbitration reference.
Analysis of the Law
The Court examined:
1. The arbitration clauses in the three work orders and the connection between them.
2. The principles under the Arbitration and Conciliation Act, 1996 regarding reference to arbitration, appointment of arbitrators, and the scope of judicial intervention under Section 11.
3. The need to avoid multiplicity of proceedings while ensuring disputes are appropriately segregated if unrelated.
Precedent Analysis
While no specific precedents were cited in the order, the Court aligned with established principles under:
- Section 11(6) of the Arbitration and Conciliation Act, 1996: Empowering courts to appoint arbitrators where parties fail to agree.
- Section 16 of the Act: Leaving arbitrability and jurisdictional challenges to the Arbitrator (Kompetenz-Kompetenz principle).
- The general principle that connected contracts can be referred jointly to arbitration to avoid multiplicity, but only when there is clear factual and legal linkage.
Court’s Reasoning
The Court found:
- The first two work orders (dated 1 June 2018 and 7 September 2018) were connected to the same Bangalore Metro Rail Project and therefore warranted a composite arbitration reference to prevent duplication and reduce costs.
- The third work order dated 30 April 2021 pertained to different construction work and did not appear connected to the earlier two, thus necessitating a separate arbitration reference.
- Questions of arbitrability, admissibility of claims, and the merits of factual disputes were to be decided by the Arbitrator during the proceedings.
- The Court, as the referral court, satisfied itself regarding the existence of valid arbitration clauses and the invocation of arbitration.
Conclusion
- Composite arbitration reference allowed for disputes under work orders dated 1 June 2018 and 7 September 2018.
- Separate arbitration reference ordered for the work order dated 30 April 2021.
- Mr. Jayanta Sengupta appointed as Arbitrator to adjudicate disputes under all three work orders.
- The Arbitrator to determine arbitrability, claim admissibility, and evidence issues, and fix remuneration as per the Act.
Implications
- Reinforces the High Court’s proactive stance in reducing multiplicity in arbitration while respecting the need for separate references when contracts are unconnected.
- Affirms the principle of party autonomy under arbitration agreements while balancing efficiency and procedural fairness.
- Demonstrates that courts will facilitate arbitration appointments swiftly while leaving the substantive disputes to the Arbitral Tribunal.
FAQs
- Can disputes under multiple related contracts be referred to arbitration in a single reference?
Yes, the Court held that if contracts are connected in scope and subject matter, a composite reference to arbitration is permissible to avoid multiplicity.
- Why did the Court order separate arbitration for the third work order?
The third work order was unrelated to the earlier two and did not arise from the same project, necessitating a separate arbitration for clarity and procedural propriety.
- Who decides arbitrability and admissibility of claims in arbitration proceedings?
The Arbitrator, once appointed, will decide all questions of arbitrability, admissibility, and merits of factual disputes, consistent with the Arbitration and Conciliation Act.
