Gammon India v. NHAI: The Delhi High Court Paves the Way to Curb Multiplicity of Arbitration Proceedings

Kajal Singh and Nikunj Maheshwari*

Abstract

Arbitration practice in India has in recent times seen a paradigm shift to become at par with international practices. However, it still suffers from some major infirmities. One of such infirmity is the multiplicity of proceedings. This article attempts to highlight this issue and critically analyse Delhi High Court judgement in Gammon India Ltd. v. NHAI, which has laid down guidelines to ensure that multiplicity of arbitration can be curbed. In an attempt to analyse this issue, the article delves into multiple Indian and Foreign judicial precedents and rules framed by international arbitration institutions and finally concludes with a remark that the legislature needs to introduce detailed guidelines in this respect.

Introduction

In India, arbitration practice suffers from a dreadful defect of the multiplicity of arbitration proceedings. The multiplicity of proceedings arises when parties to a contract or a series of contracts, forming a single transaction, refer disputes to different arbitral tribunals or courts at various stages of the execution of the contract. What ensues is a delay in proceedings, recurring challenges to arbitral awards, addition of cost and waste of energy.

In this regard, it is pertinent to lay emphasis on the recent judgment of Delhi High Court in the case of Gammon India Ltd. v. National Highway Authority of India. The following judgement laid down a set of guidelines, addressing the issue at hand. This article tries to critically analyse this judgement and highlight as to how the decision serves as a welcome authority on the issues of the multiplicity of arbitration proceedings.

Judgement

In the present case, a contract was entered into between the parties for the construction project. During various stages of construction, multiple disputes arose. Pursuant to the arbitration clause in the contract, the disputes were referred to different arbitral tribunals (ATs). The Court expressed its displeasure for the constitution of different ATs and went on to lay down ‘six-point’ solution for the parties to ensure that multiplicity of arbitration proceedings is curbed. The broad framework of the solution proposed is as follows :-

1. The  arbitration clauses must be drafted in a manner that ensures that claims are referred in one go and none of the claims are barred by limitation.

2. If the arbitration clause has to be invoked at different stages, parties ought to raise all claims arising till invocation of the arbitration clause. It would not be permissible to refer only some disputes that have arisen and not all. 

3. All disputes arising in respect of the same contract or the series of the same contract ought to be referred to the same tribunal.

4. In cases where common/overlapping issues arise between different parties involved in the contract, endeavour could be made to refer the matter to the same tribunal. However, if it is not feasible, at least challenges to the awards could be heard together, if they are pending in the same Court.

5. At the time of filing of petitions under section 11 and 34 of the Act, specific disclosure ought to be made by parties regarding pending proceedings, arbitration references or the stage at which the case is pending.

6. Bring to the notice of the Court adjudicating a particular challenge to the arbitral award about the pendency of multiple challenges in respect of awards arising out of the same contract.

Analysis

The Delhi HC’s primary focus while addressing the issue revolves around three points. First, to avoid the constitution of different ATs; Second, Disclosures of completed or ongoing proceedings ; and Third, consolidation of disputes arising from the same transaction. 

I. Avoid constituting multiple ATs

Constituting different ATs to refer various disputes emanating from the contract or series of contracts leads to a multiplicity of proceedings. These proceedings can culminate into various conflicting and contradictory awards because of varied tribunals. This, as a sequitur, can lead to further legal or arbitration proceedings. To avoid this vicious circle, the Court noted that parties must avoid forming multiple ATs for adjudication of disputes arising from the same contract or series of contracts. 

This observation of the Court stands in consonance with UK’s House of Lords decision in the case of Fiona Trusts v. Primalov. In this case, it was held that the Court while analysing an arbitration clause, it may presume that the parties always intend to refer a dispute arising out of their commercial relationship to be decided by the same tribunal.

The Delhi High Court, by laying down guidelines in this regard, has attempted to ensure that parties are deterred from practising a time consuming and counterproductive practice of constituting different ATs for different disputes. Accordingly, these guidelines will ensure that parties do not get trapped in an unwarranted practice and delay in proceedings.

II. Disclosures of completed or ongoing proceedings

In case of P.R. Shah v. M/s B.H.H. Securities p. ltd. the Supreme Court observed that in multi-party arbitration, some parties are signatories to the arbitration clause and some are not. Further, in a more complex situation, some parties are signatories to a subsidiary contract having no arbitration clause, and others are non-signatory to the main agreement having such clause. This leads to a multiplicity of proceedings as some parties approach court while others approach arbitral tribunal for the same dispute with the same set of issues and facts. To address this issue, the Court opined that parties must be consolidated into a single arbitration proceeding. 

The consolidation of parties is a widely accepted principle by various international arbitration institutions. For instance, article 28.1(c) of the Hong Kong International Arbitration Rules, 2018 states that with the consent of the parties, pending arbitration proceedings may be consolidated, if it involves a common question of law or facts, or the rights or relief claimed are in respect of or arising out of the same transaction or series of transaction. Article 8 of SIAC rules and Article 10 of ICC rules among others also contemplate consolidation of parties. The Delhi HC, by asking parties to file disclosures pertaining to any ongoing or completed legal and arbitral proceedings, has not only acknowledged the aforementioned principles but has also advanced them by taking a pro-arbitration stance. The filing of disclosures by parties will ensure that unnecessary judicial interventions in the matters can be reduced and Court would be called to respond only in urgent and vital matters. 

III. Consolidation of disputes arising from the same transaction

Execution of a contract, specifically those involving multi-phases, can lead to a dispute at various stages. The Delhi High Court observed that though the Act does not bar any person from raising multiple disputes, parties use it as a delay tactic to not refer all disputes in one go, but raise some and leave other disputes purposefully for future arbitrations, leading to multiplicity. Thus, the Court opined that the parties ought to raise all disputes arising till the date of invocation of the arbitration clause in one go. If they fail to do so, they will relinquish their right to raise those earlier disputes in future arbitrations, unless permitted to be raised by the arbitral tribunal for any legally justifiable/sustainable reason.

The Court, here, placed reliance on the case of Dolphin Drilling v. ONGC,. In this case, the SC while interpreting the phrase ‘all disputes’ appearing in a contract , noted that it includes all disputes that arose till the invocation of the arbitration clause. The Court, while interpreting this observation of SC, concluded that it is not appropriate for parties to invoke arbitration clause at their convenience as it eventually defeats the purpose of the law. This position of the Court is a welcome step to clamp down delay tactics employed by parties to delay the performance of contractual duties. 

Concluding Remarks

Multiplicity of arbitration proceedings leads to inevitable procedural inefficiencies and duplication of efforts. However, arbitration is based on consent and in the absence of consent of the parties, any referral for the consolidation of disputes will be against the core tenet of the Act. 

This leads to a debate of striking a balance between autonomy of parties and efficiency of the process. This debate was partially answered by the UK’s Court of Appeal in the case of Trust Risk Group v. AmTrust Europewherein the Court observed that if “parties deliberately and on a rational basis decided to refer disputes to separate tribunals it must be upheld”. However, the aforesaid proposition should not be the guiding force in deciding cases wherein the constitution of multiple AT’s is nothing but a dilatory tactic and defeats the purpose of the Act. Rather, a more objective view must be taken wherein interpretation must be done on a case to case basis by the AT itself.

Albeit, the judgement of the Delhi HC has not just brought to the fore the menace of multiplicity of arbitration proceddings but has provided a solution to curb the same. The onus is now on the legislature to codify a comprehensive set of guidelines or rules that aim at curbing the menace. Pertinently, a framework that carves out a set of cases wherein the parties are obligated to refer disputes to one AT alongwith defining relevant terms like “related disputes”, inter-related claims etc. will streamline the process. Notably, if a detailed set of guidelines is introduced, it will bring much needed uniformity in the proceedings and will help forge a comprehensive and reliable regime that significantly minimises the possibility of multiplicity of arbitration proceedings.


Kajal Singh and Nikunj Maheshwari are students at Institute of Law, Nirma University. They can be reached via their LinkedIn.


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