This case is a part of our Annual Arbitration Review 2020.
Judgement Name: Gammon India Limited v. National Highways Authority of India
Citation: OMP 680/2011 (New No. O.M.P (COMM.) 392/2020)
Court: Delhi High Court
Coram: Pratibha M Singh, J.
Date: 23rd June 2020
Keywords: Res Judicata, Multiplicity of Proceedings, Sections 9, 11 and 34.
At the time of filing of petitions under Section 9, 11 or 34 or any other provision of the Arbitration and Conciliation 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.
A contract was executed between Gammon-Atlanta JV and the National Highways Authority of India (“NHAI”) on 23rd December 2000 to widen and strengthen the existing two-lane carriageway of NH-5 in the State of Orissa. The date of commencement of the project was 15th January 2001, and the total duration of the project was 36 months. However, the project could not be completed within the scheduled completion date, i.e. 14th January 2004, and hence, extensions were granted to the Contractor from time to time. However, disputes arose between the parties and three separate arbitrations were invoked by the Contractor, raising various claims, some of which were also overlapping. The following were the claims :
1. Compensation for losses incurred on account of overhead and expected profit (“Claim 1”);
2. Compensation for reduced productivity of machinery and equipment deployed (“Claim 2”);
3. Revision of rates to cover for the increase in the cost of materials and labor during the extended period over and above the relief available under escalation (price adjustment) provision in the agreement (“Claim 3”).
Consequently, three separate arbitral tribunals were constituted for the purpose of adjudication of disputes between the parties, and subsequently, three separate arbitral awards were passed. While two arbitral awards attained finality after challenge to the same came to an end, the third one was pending for consideration before the Hon’ble Court in the above matter. Accordingly, the Contractor sought to set aside the award in the above matter on the basis of findings of the Arbitral Tribunal arrived at in one of the two awards, which had already attained finality and thus filed the present petition.
Whether it is permissible for the Contractor to jettison the findings in Award No.3 to argue that Award No.2 ought to be set aside and the claims of the Contractor ought to be allowed?
The Court, inter-alia, held that constituting separate tribunals with respect to the same contract and/or wherein there is overlapping of issues should be avoided since it would create a multiplicity of proceedings and would consequently, prove as counter-productive to the basic purpose of arbitration which is to provide speedy resolution of disputes. The Court, while placing reliance on the ratio of Dolphin Drilling Limited. v. ONGC reiterated the position of law that all disputes which are in existence when the arbitration clause is invoked ought to be raised and referred at once. It is pertinent to mention that reliance was paid upon the judgment of Vijay Karia v. Prysmian Cavil E. Systemic SRL passed by Hon’ble Supreme Court of India, held that the Award would have to be tested as on the date when it was pronounced, on its own merits, and not on the basis of findings which had been rendered by another Arbitral Tribunal. The Court, while interpreting Sections 7, 8 and 21 of the Act, reiterated the settled law that if a dispute is arbitrable, a second reference can be made, and the same is legally tenable. It was further held that the commencement of proceedings under Section 21 of the Act would be different qua each of the disputes, and hence, there can be multiple claims, multiple references and multiple arbitrations at different stages of a contract.
Further, the Court held that the principles of res judicata enshrined under the Code of Civil Procedure, 1908 are also applicable to arbitration proceedings and therefore, it would be impermissible to allow claims to be raised at any stage and referred to multiple arbitral tribunals which sometimes results in a multiplicity of proceedings as also contradictory awards. The Hon’ble Court further proceeded to hold that parties while filing an application under Section 9, 11 or an application under Section 34 of the Act, should also disclose pendency of any other petition or application, relating to the same contract, so that all of them could be decided appropriately, preferably together, wherever possible in order to avoid any kind of confusion or legal infirmity.
The principles of res judicata apply to the proceedings related to the Arbitration and Conciliation Act, 1996. Therefore, it is imperative for the parties to mention in their application about any pending petition/ application with respect to the same contract before any competent authority.