The High Court of Delhi (“DHC”) has in its judgment dated January 17, 2022 (“Judgement”), in the matter of Panipat Jalandhar NH 1 Tollway Private Limited v. National Highways Authority Of India [ARB.P. 820/2021], held that multiple arbitrations can exist if the cause of action continues or arises after the constitution of a tribunal.

Facts

The petition had been filed by Panipat Jalandhar NH-1 Tollway Private Limited (formerly known as M S Soma Isolux NH 1 Tollway Private Limited) (“Petitioner”) under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Act”) to seek (i) appointment of a nominee arbitrator of the National Highways Authority Of India (“Respondent”/ “NHAI”) for adjudication of disputes with regard to concession agreement dated May 09, 2008 entered into for a duration of 15 years commencing from May 11, 2009 till May 11, 2024 (“Concession Agreement”) and (ii) to declare that the purported appointment of Justice (Retd.) G.P. Mathur, former Judge, Supreme Court, was non est and bad in the eyes of law.

The Petitioner had entered into the Concession Agreement with NHAI for development of the six-lanes of Panipat-Jalandhar Section of NH-1 having a total length of 291.10 km in the State of Haryana and Punjab. Subsequently, certain disputes arose between the parties in the year 2013 and these were pending adjudication before an independent arbitral tribunal. Therein, the Petitioner had claimed that out of the total 291.10 km, work on 269 km had been completed when the Respondent took a decision to delink 22.1 km out of the total length, on the ground of delay and failure on the part of the Respondent to hand over the stretch. Consequently, due to this delinking, the Petitioner suffered severe loss to the tune of more than INR 2,000 crores. Accordingly, the Petitioner had sent a notice of dispute dated October 25, 2019 (“Notice of Dispute”) to the Respondent. Since the parties failed to resolve the disputes, the Petitioner invoked arbitration under Clause 44.3 of the Concession Agreement and issued a notice dated February 7, 2020 calling upon the Respondent to confer a set of arbitrators. However, on December 4, 2020 the Respondent suspended the Concession Agreement against which the Petitioner preferred a petition under Section 9 of the Act. During pendency of the aforesaid petition, the Respondent terminated the Concession Agreement on March 5, 2021, which was also challenged by the Petitioner.

According to the Petitioner, the disputes with regard to aforesaid suspension and termination of Concession Agreement were pending adjudication before the second arbitral tribunal comprising of (i) Justice (Retd.) M.K. Sharma, Presiding Arbitrator; (ii) Justice (Retd.) A.K. Sikri (the “Petitioner’s Nominee Arbitrator”); and (iii) Justice (Retd.) G.P. Mathur as proposed by the Respondent and appointed by order dated May 4, 2021 (“Appointment Order”) of the DHC (the “Respondent’s Nominee Arbitrator”), hereinafter referred to as the “Arbitral Tribunal”. A declaration was given on May 25, 2021 by Respondent’s Nominee Arbitrator that he had been appointed arbitrator in three other matters by the Respondent in last three years and his fourth appointment was by virtue of the Appointment Order on the second Arbitral Tribunal (“Declaration 1”). Therefore, if nomination of Respondent’s Nominee Arbitrator in response to the Petitioner’s Invocation Notice (defined below) was accepted, this would be his fifth appointment on behalf of the Respondent.

Further, since the parties failed to resolve their disputes mentioned in the dispute notice, the Petitioner issued a notice dated June 4, 2021 to the Respondent invoking arbitration, appointed Mr. V.K. Tyagi as its nominee arbitrator and called upon the Respondent to appoint its nominee arbitrator within 30 days (“Invocation Notice”). However, to avoid multiplicity of the proceedings, instead of appointing an alternate arbitrator, the Respondent had requested to consolidate the second and third arbitrations. Further, the Respondent appointed Justice (Retd.) G.P. Mathur as its nominee arbitrator and intimated the Petitioner as well as the Petitioner’s Nominee Arbitrator. The aforesaid requests were objected by the Petitioner by its letter dated July 6, 2021, explaining that the disputes raised in proposed third and the second arbitration were completely different and independent even though they arose out of the same Concession Agreement. Further that, if these disputes were consolidated then it would result in delaying the outcome of second arbitration, as pleadings therein were complete. Further, the Petitioner objected to the appointment of Respondent’s Nominee Arbitrator since he had already been appointed by the Respondent in four matters, including the second arbitration between the same parties.

Issue

• Whether multiple arbitrations can exist if the cause of action continues or arises after the constitution of an arbitral tribunal.

Arguments

Contentions raised by the Petitioner:

It was submitted that the Respondent had failed to appoint its nominee arbitrator within 30 days of receiving the Invocation Notice. The Petitioner drew attention of the DHC to the twin pre-conditions to the appointment of Respondent’s Nominee Arbitrator, (i) that by filing petition under Section 11 of the Act, the Respondent had in fact forfeited its right to appoint an arbitrator in view of Supreme Court’s (“SC”) decision in Datar Switch gears Limited v. Tata Finance Limited [(2000) 8 SCC 151]; and (ii) All arbitrators had to comply with the requirements of the relevant Schedules of the Act. The Petitioner raised doubts on the independence and impartiality of the Respondent’s Nominee Arbitrator. The Petitioner elaborated that the appointment and the Declaration 1 of Respondent’s Nominee Arbitrator was in contravention of Entry No. 22 of the Fifth Schedule of the Act. The Petitioner submitted, the interpretation that, the Respondent’s Nominee Arbitrator considered his appointment in the present matter as an appointment by the DHC and not by the Respondent, is in contravention of Entry No. 22 of the Fifth Schedule of the Act.

Further, even the subsequent declaration dated August 5, 2021 by Respondent’s Nominee Arbitrator (“Declaration 2”) was not in accordance with Sixth Schedule of the Act. The Declaration 1 and Declaration 2 (“Declarations”) were bereft of all material particulars as required under the Act. It was submitted that, the Declarations did not provide information of the total ongoing arbitrations and whether other three arbitrations wherein Respondent’s Nominee Arbitrator was appointed as arbitrator were pending or not. The Petitioner submitted that Section 11(8)(b) of the Act required the DHC to have due regard to the ‘contents of the disclosure and other considerations to secure impartial and independent arbitrator’.

Contentions raised by the Respondent:

The Respondent submitted that the present petition was not only ill-conceived and motivated but also filed with mala fide intention to create confusion. The Respondent submitted that it had been in regular touch with the Petitioner over appointment of its nominee arbitrator and thereby, the Petitioner could not claim that the Respondent had failed to take steps to nominate its arbitrator within 30 days of the Invocation Notice. The Respondent submitted that appointment of the Respondent’s Nominee Arbitrator was in compliance with the Act and disputes should be referred to the second Arbitral Tribunal. Therefore, when an arbitrator had been appointed by a party and intimation thereof has been conveyed to the other, an application for appointment of an arbitrator under Section 11 of the Act was not maintainable. The present petition under the provisions of Section 11(6) of the Act deserved to be rejected as it had been filed on the false pretext that the Respondent had failed to appoint its nominee arbitrator within 30 days.

With regard to the plea of the Petitioner that the Respondent’s Nominee Arbitrator had made insufficient Declarations, the Respondent submitted that the learned arbitrator had specifically stated that he had been nominated by the Respondent in three other matters out of which one nomination was made way back on June 1, 2018, that is, more than three years ago. It was also submitted that the fourth nomination was by the DHC by virtue of the Appointment Order.

The Respondent further submitted that by filing this petition, the Petitioner was seeking appointment of third arbitral tribunal for adjudication of disputes relating to a project for which second Arbitral Tribunal had already been constituted. This would lead to multiplicity of proceedings which is wholly unwarranted and unsustainable. It was also submitted that appointment of the Respondent’s Nominee Arbitrator in the second Arbitral Tribunal was with the consent of the Petitioner and, therefore, the Petitioner could not raise objection with regard to his impartiality. It was submitted that, it would be a wholesome approach while deciding all the disputes which might be interlinked, if all the disputes between the parties for the same project arising out of common Concession Agreement were referred to the same Arbitral Tribunal. Since the disputes sought to be resolved in the present petition pertain to the same project between the parties, the Petitioner’s objection to refer it to the second Arbitral Tribunal could not sustain.

Observations of the Delhi High Court

The DHC observed that the jurisdiction of the court under Section 11 of the Act is primarily to find out whether there exists a written agreement between the parties for resolution of disputes through arbitration and whether the aggrieved party has made out a prima facie arbitrable case. In Vidya Drolia and Others v. Durga Trading Corporation [Special Leave Petition (Civil) Nos. 5605-5606 of 2019], the SC had clarified that, with a view to prevent wastage of public and private resources, court may conduct ‘prima facie review‘ beyond the bare existence of an arbitration clause, at the stage of reference to weed out any frivolous or vexatious claims. Such a review, is not intended to usurp the jurisdiction of the arbitral tribunal but is aimed at streamlining the process of arbitration. The DHC noted that, the Invocation Notice was replied to by the Respondent on June 17, 2021 stating that with respect to the Concession Agreement, the Arbitral Tribunal was constituted in May, 2021 and, therefore, these disputes should have been referred to the same Arbitral Tribunal. Further, the Respondent appointed the Respondent’s Nominee Arbitrator, hence, it could not be said that the Respondent had failed to respond to the Invocation Notice. The Invocation Notice records that “all claims raised by the Concessionaire in its Notice of Dispute is being referred to Arbitral Tribunal to be formed in accordance with Clause 44.3 of the Concession Agreement …”. The DHC further observed that, during the course of the hearing, the Petitioner time and again reiterated that no question had been raised to the integrity and fairness of Respondent’s Nominee Arbitrator but the only objection raised is that he had been appointed as an arbitrator on more than three previous occasions.

The DHC noted that, in Gammon India Limited and another v. National Highways Authority of India [AIR 2020 Delhi 132] while dealing on the aspect of multiplicity-multiple invocations, multiple references, multiple arbitral tribunals, multiple awards and multiple challenges, between the same parties, in respect of the same contract or the same series of contracts, the court therein had observed that, filing of different claims at different stages of a contract or a project is permissible in law, inasmuch as the contract can be of a long duration and the parties may wish to seek adjudication of certain disputes, as and when they arise. Further, the endeavour of courts in the domain of civil litigation is always to ensure that claims of parties are adjudicated together, or if they involve overlapping issues, the subsequent suit is stayed until the decision in the first suit. The DHC observed that it is with the intention of avoiding multiplicity that the principle of res judicata is a part of the Code of Civil Procedure, 1908. It was also observed by the DHC that, multiple arbitrations before different arbitral tribunals in respect of the same contract is bound to lead to enormous confusion and refute the purpose of arbitration being speedy resolution of disputes. It was also observed by the DHC that a previously appointed tribunal was already seized of the disputes between the parties under the same contract and the constitution of three different tribunals was unwarranted and inexplicable. The DHC further noted that, there was no justification for the Petitioner having invoked third arbitration by virtue of the Invocation Notice within less than a month of constitution of second Arbitral Tribunal in respect of the Concession Agreement and Notice of Dispute.

The Fifth Schedule of the Act provided that, the following grounds give rise to justifiable doubts as to the independence or impartiality of arbitrators: (Arbitrator’s relationship with the parties or counsel) – “…The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.” Further, on the aspect of applicability of Entry No. 22 of the Fifth Schedule of the Act, the SC in HRD Corporation v. GAIL (India) Limited [(2018) 12 SCC 471], had observed as follows, “The disqualification contained in Items 22 and 24 is not absolute, as an arbitrator who has, within the past three years, been appointed as arbitrator on two or more occasions by one of the parties or an affiliate, may yet not be disqualified on his showing that he was independent and impartial on the earlier two occasions…” . The DHC noted that, the fact that an arbitrator had already rendered an award in a previous arbitration between the parties would not, by itself, on the ground of reasonable likelihood of bias, render him ineligible to be an arbitrator in a subsequent arbitration.

The DHC noted that a perusal of the Declarations made it manifestly clear that all necessary disclosures under the relevant provisions of the Act had been made. The Declarations clarified that the Respondent’s Nominee Arbitrator or any of his family members had no relationship with the Respondent. The DHC observed that, the stand of the Respondent while nominating name of Mr. Justice (Retd.) G.P. Mathur was clearly with the intent to refer the disputes to the second Arbitral Tribunal, of which he was a member. Further, the decision in HRD Corporation (supra) made it clear that there was no bar in appointment of an arbitrator in multiple cases, if so warranted. In the light of afore-noted discussions, the DHC found that objections raised by the Petitioner with regard to nomination and appointment of Respondent’s Nominee Arbitrator were baseless and liable to be rejected.

The DHC was informed that the disputes pertaining to the year 2013 were pending before the first arbitral tribunal. The suspension and termination of the Concession Agreement in question are subject matter of consideration before the second Arbitral Tribunal. In the considered opinion of the DHC, forming another tribunal would lead to multiple observations and findings by two different tribunals, which could not be permitted.

Decision of the Delhi High Court

The DHC was informed that the proceedings before the second Arbitral Tribunal were in progress, however, not yet complete. The DHC noted that , since the members of the second Arbitral Tribunal were well conversant with the facts and disputes raised between the parties, having dealt the same Concession Agreement and Notice of Dispute, it would enable it to expedite the resolution of disputes rather than delaying it. Moreover, there shall be no confusion or complexity in the outcome of the arbitration, having avoided multiple proceedings.

The DHC held that, multiple arbitrations could exist if the cause of action continues or arises after the constitution of a tribunal. Consequently, it was directed that the subject matter of disputes raised in Invocation Notice with regard to the Concession Agreement and the Notice of Dispute shall be dealt by the second Arbitral Tribunal. Therefore, the present petition was accordingly disposed of.

VA View:
The DHC in this Judgement observed that constitution of multiple tribunals is inherently counter-productive. Further, in any agreement or contract, an arbitration clause is inserted with an object of speedy resolution of disputes. Therefore, a situation where multiple arbitral tribunals parallelly adjudicate different claims arising between the same parties under the same contract, especially raising overlapping issues, should be avoided. In cases where the disputes are of larger magnitude and multiple in number, to avoid any confusion or infirmity, the disputes should be referred to the same arbitral tribunal prior to the constitution of a tribunal.

The DHC rightly observed that, there was no doubt that the Act had been brought in force to ensure independence and impartiality of an arbitrator. Further, at the same time, provisions of the Act do not incapacitate the courts in arriving at just decision given the facts of a particular case. However, multiple arbitrations could exist if the cause of action continues or arises after the constitution of a tribunal.

For more information please write to Mr. Bomi Daruwala at [email protected]

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