AUTHOR : DEBKRIPA BURMAN
The primary aim of arbitration as an alternative dispute resolution mechanism is to enhance efficiency and provide swift relief to parties, particularly in commercial disputes, by alleviating the burdens of traditional court litigation. However, this intended purpose of arbitration appears to be undermined by various challenges, including high costs, significant delays, and difficulties in enforcement. Additionally, the multiplicity of arbitration proceedings between the same set of parties arising out of the same contract or series of contracts has posed a serious concern in recent years. Given that the governing legislation, the Arbitration and Conciliation Act, 1996 ("the Act"), remains silent on this issue, Indian courts have been compelled to interpret the legality and feasibility of such multiplicity under the Act.
Although the Arbitral Tribunal is not rigidly governed by the Code of Civil Procedure, 1908 ("CPC"), it is well-established that the principle of Res Judicata applies in arbitration proceedings, as affirmed by the Hon'ble Supreme Court of India in K.V. George v. Secretary to Government, Water and Power Department, Trivandrum & Ors.[1] However, the issue of the legal feasibility of subsequent references for arbitration remained unresolved. Considering this issue, the Apex court in Dolphin Drilling Ltd. vs Oil & Natural Gas Corporation Ltd.[2] opined that the invocation of an arbitration clause for a specific dispute does not preclude the availability of arbitration as a remedy for resolving future disputes that may arise under the same agreement. However, the Hon’ble Apex Court also, being mindful of the fact of multiplicity of arbitration proceedings, held that allowing parties to assert claims solely based on their convenience would be fundamentally inconsistent with principles of public policy. Thus, when an arbitration clause is invoked, all existing disputes should be referred together for adjudication, and while subsequent disputes may warrant a second reference, claims not raised at the time of invocation should only be permitted later if legally justifiable grounds exist.
The issue at hand came up for consideration before the Hon’ble High Court of Delhi in the case of Gammon India Ltd. vs. National Highways Authority of India[3] wherein an appeal was filed against one of the awards rendered by one of the three Arbitral Tribunals constituted to resolve disputes, of which some were overlapping, between the same parties and arising out of the same contract. The Court, while delving into the merits of the case, referred to sections 7(1), 8(3) and 21 of the Act and concluded that reference to Arbitral Tribunals for adjudication of distinct claims throughout the different stages of contractual lifecycle is legally permissible, particularly in cases where the contract spans an extended duration, thus, allowing parties to seek adjudication of specific disputes as and when they arise. However, the Court cautioned that the constitution of multiple Arbitral Tribunals to adjudicate disputes arising out of same contract inevitably leads to confusion, proving to be inherently counterproductive by undermining the core objective of arbitration process which is swift resolution of disputes.
On a similar issue the Division Bench of the Hon’ble Delhi High Court in Hero Wind Energy Private Ltd. Vs. Inox Renewables Limited and Ors.[4] dealt with the issue of interpretation of section 9(3) of the Act i.e. whether the pending adjudication of disputes before the Arbitral Tribunal bars the remedy of approaching the Court u/s 9 of the Act for interim measures in respect of subsequent disputes arising out of the same contract. The Division Bench, while referring to various provisions of the Act, concluded that the Act contemplates constitution of separate Arbitral Tribunals to adjudicate successive disputes arising between the same parties from the same contract, thus allowing for multiple claims and references at various stages. Based on the said rationale, the Division Bench went on to hold that an Arbitral Tribunal established to resolve disputes stemming from a prior cause of action cannot be the same tribunal constituted to address disputes arising from a subsequent cause of action for which interim measures are sought.
The analysis of the abovementioned precedents is clearly suggestive of the proposition that successive references for arbitration constituting more than one Arbitral Tribunal to adjudicate separate claims arising out of same contract or a series of contracts, though legally not impermissible, is certainly undesirable as conflicting arbitral awards lead to great confusion. Although arbitration proceedings are not strictly governed by the CPC, it is desirable to adhere to the principles enshrined therein.
