Recently, the Hon’ble High Court of Delhi (“Court”) in Gammon India Ltd. and Anr. v. National Highways Authority of India, had the occasion to opine on the scourge of multiplicity of arbitral proceedings while dealing with a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) wherein the objections raised were primarily based on the findings of a subsequent award. In dealing with the issues before it, the Court revisited various judicial precedents while setting out the principles to be considered when referring multiple disputes arising out of the same agreement to arbitration.
A contract was entered into between Gammon Atlanta JV, a Joint Venture of Gammon India Limited and Atlanta Limited (“Contractor”) and National Highway Authority of India (“NHAI”) on December 23, 2000 for certain works to be carried out with respect to widening of a certain portion of a national highway. The project was to be completed by January 14, 2004. Various disputes inter alia with respect to delay in execution of the project and encumbrances on the land arose between the parties under the contract during execution of the project. Each of these disputes were referred to three different Arbitral Tribunals (“Tribunal 1”, “Tribunal 2” and “Tribunal 3”) in 2005, 2007 and 2008 respectively, leading to three separate awards.
The 3 Awards
Tribunal 1, appointed in 2005, when the Contractor first referred disputes to arbitration under the contract, had to consider the following claims before it:
- Compensation for losses incurred on account of overhead and expected profit (“Claim 1”);
- Compensation for reduced productivity of machinery and equipment deployed (“Claim 2”); and
- Revision of rates to cover for increase in the cost of materials and labour during extended period over and above the relief available under escalation (price adjustment) provision in the agreement (“Claim 3”).
While allowing Claims 1 and 2, the Tribunal 1 in its award (“Award 1”) rejected Claim 3 since it had not been raised in the invocation letter and, therefore, held it to be outside the terms of reference. Award 1 was challenged by both the parties in separate proceedings. The Contractor, however, withdrew its objections with respect to the rejection of Claim 3 and sought liberty to raise the same before a separate tribunal. In due course, Award 1 was upheld with respect to Claim 1 and Claim 2 and the same attained finality.
In 2007, the Contractor, once again invoked arbitration inter alia with respect to disputes related to alleged delay in fulfilment of contractual obligations by NHAI. Accordingly, Tribunal 2 came to be constituted before which the Contractor also included its Claim 3 having obtained leave of the Court to do so. Tribunal 2, in its award (“Award 2”), by a 2:1 majority, rejected the claim for compensation in lieu of delay in fulfilment of NHAI’s contractual obligations as well as Claim 3. The minority award therein granted both the claims of the Contractor.
In 2008, NHAI imposed liquidated damages on the Contractor for delay in completion of work. The Contractor, dissatisfied by the imposition of liquidated damages, invoked arbitration for a third time and accordingly, Tribunal 3 came to be constituted. Tribunal 3, in its award (“Award 3”) allowed the Contractor’s claim for recovery of amounts paid as liquidated damages. Additionally, it was observed therein that NHAI could not impose liquidated damages on the Contractor when it had itself failed to provide encumbrance free land to the Contractor and that it was NHAI who was responsible for the delay in completion of the work. Award 3 was subsequently upheld by the Court and attained finality.
While Award 1 and Award 3 had attained finality, it was the challenge to Award 2 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 to argue that it was NHAI who was responsible for the delay in completion of the project work and that Tribunal 2 had, therefore, erred in holding otherwise in Award 2. It also argued that the findings of Tribunal 3 would be binding on the present proceedings. Additionally, the Contractor relied upon the minority award rendered by Tribunal 2 to argue that Claim 3 ought not to have been rejected in Award 2. The Contractor, thus, based its main grounds of objection to Award 2 on the findings in Award 3.
Judgment & Analysis
On Multiplicity of Arbitral Proceedings
The Court discussed various provisions of the Act which envisages that disputes can be raised at different stages and that there can be multiple arbitrations in respect of a single contract. In doing so, the Court noted that where such disputes deal with overlapping issues, multiplicity should be avoided. The Court further opined that multiple arbitrations in relation to similar disputes arising under the same contract before separate Tribunals is inherently counter-productive and defeats the purpose of arbitration which is speedy resolution of disputes.
While discussing various forms of multiplicity of proceedings, the Court relied upon a series of judgments. Placing reliance on Dolphin Drilling Ltd. v. ONGC , the Court reaffirmed that all disputes that are in existence when the arbitration clause is invoked, ought to be raised and referred at once. The Court further opined that although there is no doubt that multiple arbitrations are permissible, it would be completely contrary to public policy to permit parties to raise claims as per their own convenience. It observed that, certainty in arbitral proceedings is critical and that the remedy of arbitration ought not to be misused by parties by constituting separate arbitral tribunals.
Taking into consideration Order II Rule 2 of the Code of Civil Procedure, 1908 (“CPC”) and also Section 10 and Section 11 of the CPC, the Court held that the principles of res judicata also apply to arbitral proceedings and, therefore, it would be impermissible to allow claims to be raised at any stage and referred to multiple arbitral tribunals, sometimes resulting in multiplicity of proceedings and also contradictory awards.
Thus, the Court concluded that in respect of a particular contract or a series of contracts that bind the parties in a legal relationship, the endeavour always ought to be to make reference to a single arbitral tribunal.
On using findings in a subsequent award to challenge a previous award
After hearing contentions of both sides which included reference to all the 3 Awards, the Court took note of the timeline of the disputes and the fact that some proceedings were invoked even while others were pendente lite.
The Court observed that the 3 Awards were independent in nature and any attempt to merge the same would lead to extremely unpredictable consequences. It held that since the core issue across all three proceedings was of delay, one tribunal ought to have dealt with all the claims. Accordingly, the Court upheld the findings in Award 1 and stated that Claim No. 3 before the Tribunal 1 was rightly rejected as the same was not included in the initial reference.
The Court further opined that while hearing a petition under Section 34 of the Act, it would be incongruous to hold that a finding in a subsequent award would render the previous award illegal or contrary to law. The award would have to be tested independently and separately as on the date when it was pronounced, on its own merits, and not on the basis of subsequent findings which may have been rendered by a latter Tribunal. Accordingly, the Court held that the findings in Award 3 cannot be jettisoned or incorporated into the present petition to rule in favour of the Contractor qua Award 2 for awarding compensation/escalation.
Additionally, the Court laid down basic principles with respect to multiplicity of proceedings inter alia stating that at the time of filing of petitions under Section 11 or Section 34 or any other provision of the Act, specific disclosures ought to be made by parties as to the number of arbitration references, arbitral tribunals or court proceedings, pending or adjudicated, in respect of the same contract, and if so, the stage of the said proceedings.
The Court, through this judgment, has provided much needed clarity on the issue of multiplicity in arbitral proceedings while reaffirming that the basic purpose of arbitration is that of being a cost effective and efficient means of alternate dispute resolution. The Court emphasises the importance of adhering to a bona fide discipline in the use of arbitral processes. Parties ought to bear in mind that even though the Act may permit invocation of multiple arbitrations under the same agreement, any misuse of such an allowance may not be looked at kindly by the courts. To the extent possible, parties ought to refer disputes having similar issues to a single arbitral tribunal for effective and efficient adjudication.
Judgment dated June 23, 2020 in OMP 680/2011 (New No. O.M.P (COMM.) 392/2020) & I.A 11671/2018
 AIR 2010 SC 1296