Between The Lines | Supreme Court: There cannot be two proceedings with respect to the same contract/transaction August 23, 2022
Published in: Between The Lines
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The Hon’ble Supreme Court (“SC”) in M/s. Tantia Constructions Limited v. Union of India [Petition for Special Leave to Appeal (C) No. 10722/2022] (“SLP”) observed that it is of the “firm opinion that there cannot be two arbitration proceedings with respect to the same contract/transaction”. The SC stated that when a dispute has earlier been referred to arbitration and an award was passed on the claims made and a fresh arbitration proceeding is sought to be initiated with respect to some further claims, then it is “rightful” to refuse reference to arbitration, in exercise of Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Act”).
M/s. Tantia Constructions Limited (“Petitioner”) filed an application, A.P. No. 92 of 2016 before the Calcutta High Court (“CHC”) during the currency of execution of the project due to a dispute regarding price escalation and prayed for appointment of an arbitrator. The arbitral tribunal was constituted and the dispute was disposed of on September 16, 2016. Thereafter, Petitioner filed an application before the CHC, A.P. No. 353/2020, under Section 11 of the Act for appointment of an arbitrator for resolution of disputes between the parties.
The Petitioner had entered into a contract dated March 6, 2013 (“Contract”) with the Eastern Railway (“Respondent”) to carry out the work involving earthwork, cutting, blanketing, construction of minor bridges, platform walls/flooring, drains, station buildings, etc. and other ancillary works in Bandel (including yard) and Talandu (including yard up to 51 km) in connection with the construction of the third line between Bandel and Bainchi. The terms and conditions of the work were provided in the Contract along with General and Special Conditions of Contract (“GCC”), framed by the Respondent.
According to Clause 64(3)(a)(ii) of the GCC, all disputes arising between the parties to the Contract would be decided by an arbitral tribunal which was to be constituted by the General Manager of the Respondent (“GM”). According to the Petitioner, with the introduction of Section 12(5) of the Act as well as the Seventh Schedule to the Act with effect from October 23, 2015, the GM became ineligible to be involved in the process of constitution of the arbitral tribunal and, as such, an independent person was to be appointed as the sole arbitrator to adjudicate the disputes arising between the parties to the Contract. Therefore, by a letter dated July 29, 2017, the Petitioner invoked the arbitration clause and sought such disputes and differences being adjudicated through an advocate suggested by it as the sole arbitrator. By a letter dated December 20, 2017 (“Letter”), the GM forwarded a panel of four persons, who had retired from the service of the railways, to enable the Petitioner to suggest at least two names out of the panel as their nominees and appoint one of them as their nominee arbitrator. The Petitioner by its letter dated January 2, 2018, informed the GM that in view of the provisions of the Act, the persons named in the Letter are ineligible to be appointed as the arbitrator and requested him to take steps in the matter in accordance with law. However, it evoked no response from the Respondent.
The CHC, by its order dated September 16, 2021 (“Impugned Order”), dismissed the Application of the Petitioner on the ground that appointment of an arbitrator is sought for resolution of the dispute which in fact has already been adjudicated upon in the earlier claim petition filed by the Petitioner. The CHC relied on the Hon’ble SC’s judgment in Bharat Sanchar Nigam Limited and Another v. M/s Nortel Networks India Private Limited, [Civil Appeal Nos. 843-844 of 2021], (“Bharat Sanchar Case”) wherein it had been opined that at the referral stage, a court can interfere when it is found that the claim is time barred or there is no subsisting dispute. The dispute in the application was adjudicated upon.
The SLP was filed against the Impugned Order.
Whether there can be two arbitration proceedings with respect to the same contract/transaction.
Contentions raised by the Petitioner:
The Petitioner had submitted in their Application A.P. No. 92 of 2016 that during the execution of the project, there was dispute regarding price escalation and the Petitioner prayed for appointment of an arbitrator by filing an arbitration petition before the CHC. The petition was disposed of directing the appointing authority to ensure the constitution of an arbitral tribunal. The Petitioner stated that the tribunal considered the claim and the Contract was concluded on March 22, 2016, the final bill was prepared and submitted on December 16, 2016, and that as certain claims were rejected, fresh application was filed by the Petitioner for appointment of arbitrator on August 21, 2017. At this stage, it was prayed to the Court to direct a fresh appointment of an arbitrator.
Contentions raised by the Respondent:
The Respondent submitted that at the interim stage, the Petitioner, by raising certain disputes, sought appointment of an arbitrator, and that in terms of the direction issued by the CHC by its order dated September 16, 2016 in A.P. No. 92 of 2016, arbitral tribunal was appointed and claims were adjudicated upon. The Respondent contended that the claim for which the arbitral tribunal was now sought to be appointed again were part of the claim petition filed by the Petitioner and have already been adjudicated upon by the tribunal, that in fact, the Petitioner raised the same issues which it had raised in the earlier arbitration proceedings and has already been dealt with and partly rejected; that once the claims made by the Petitioner have already been adjudicated upon by the arbitrator, no question arises for appointment of fresh arbitrator.
Observation of the Supreme Court
The SC observed that they are of the firm opinion that there cannot be two arbitration proceedings with respect to the same contract/transaction. The SC also observed that it is not in dispute that in the present case, earlier the dispute was referred to arbitration and the arbitrator passed an award on whatever claims were made. Thereafter, a fresh arbitration proceeding was sought to be initiated with respect to some further claims. The SC observed that it is right to refuse the reference of the dispute to arbitration in exercise of Section 11(6) of the Act.
Decision of the Supreme Court
In view of the above-mentioned observation, the SC dismissed the SLP and upheld the Impugned Order of the CHC.
The SC has rightly observed that there cannot be two arbitration proceedings with respect to the same contract/transaction. Where a dispute was referred to arbitration and an award was passed in respect of the claims, in exercise of Section 11(6) of the Act, it is rightful to refuse the reference of a dispute to arbitration. An already settled dispute cannot be raised again to request appointment of an arbitrator afresh. The Arbitral Tribunal in respect of the dispute first raised by the Petitioner was constituted on September 16, 2016. The Impugned Order of the CHC indicated that the Demand Notice in respect of the fresh claims was issued by the Petitioner on August 21, 2017 whereas the Arbitral Award was passed on December 11, 2020 which clearly shows that when the fresh demands were raised, the Arbitral Tribunal was clearly seized of the matter. Thus, the Honorable SC has rightly dismissed the SLP filed by the Petitioner.
The SC has upheld the view of the CHC in the Impugned Order. The CHC had held that “…Considering the aforesaid enunciation of law and the fact that the appointment of an arbitrator is sought for resolution of the dispute which in fact has already been adjudicated upon in the earlier claim petition filed by the applicant, I do not find any case is made out for appointment of an arbitrator afresh.”
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