Successive References Under One Arbitration Agreement: Possible Or Not?

“25. Under Sec. 7 the agreement to arbitrate could be for 'all or certain disputes which have arisen or which may arise'. Under Sec. 8 if a particular proceeding is pending in court and there is a lis as whether a particular dispute is arbitrable, for other disputes, arbitration can be commenced or continued and even the award can be made. This means that, if the court, thereafter comes to the conclusion that the dispute is arbitrable, after the first reference is either pending or concluded, a second reference can be made. The commencement of proceedings under Section 21 is to be construed in respect of a particular dispute. Thus, if there are multiple disputes which have been raised at different times, the commencement of proceedings would be different qua each of the disputes. All these provisions show that there can be multiple claims and multiple references at multiple stages.”

(Emphasis Supplied)

As rightly observed in Gammon India (Supra)¸disputes may arise at different stages of one single contract. Further disputes may arise during the pendency of arbitration proceedings relating to earlier disputes or after conclusion of such proceedings. Often times the very nature of the contract is such that parties are not required to run through the entire contract before referring all their disputes; the contract permits them to refer their disputes, as and when they arise, during the pendency of the contract. This circumstance brings about successive references.

While these successive references may be appealing to the parties involved, such proceedings are bound to, lead to multiplicity of arbitration proceedings before multiple tribunals, with the resultant possibility of conflicting findings, which would have their own peculiar issues, which have been briefly addressed by the Hon'ble Calcutta High Court (“Calcutta High Court”) and Hon'ble Delhi High Court (“Delhi High Court”) in various judgments.

Seth Kerorimali v Union of India, 1964 SCC OnLine Cal 17, Calcutta High Court

The Calcutta High Court preliminarily observed in the present case that, whether a court or tribunal can entertain successive references would depend primarily on the connotation and denotation in the contract. Further, it noted that successive references were permissible in the arbitration landscape of India and observed that there were numerous instances where under particular arbitration agreements, the same agreement has given rise to interim awards, supplemental awards and even successive awards.

In the present case, the Petitioner was a contractor who had executed certain construction works for South Eastern Railway basis a contract. Within the contract, running bills were raised which culminated into a final bill. The items in the final bill were challenged and the contractor by way of letter invoked arbitration. Chief Engineer, D.B.K. Railway was appointed to act as an arbitrator. The Respondent before the arbitrator raised a counter claim for an amount of INR 56,761/- (Indian Rupees Fifty-Six Thousand Seven Hundred Sixty-One only) but did not mention the same in its counter state of facts. The arbitrator held that it did not have the authority to adjudicate the dispute as the same was not referred to it. In a subsequent reference, the contractor claimed that the dispute ought not to be referred to arbitration as the same had been decided by the arbitrator and accordingly rejected. The Calcutta High Court on the other hand noted that the successive reference would stand because the arbitrator had previously rejected to consider the same due to it not being referred. Hence, the Calcutta High Court recorded its final finding stating that, same dispute once referred and embodied in the award cannot be the subject matter of a fresh reference and to that extent, the rules of res judicata would apply to arbitration proceedings; but the Calcutta High Court did not hold that disputes which could have been raised prior to the invocation of arbitration, could not be raised before a new tribunal on the principles of constructive res judicata.

The said construct went through a sea change as a result of the judgment of the Delhi High Court in Gammon India (Supra).

Gammon India Ltd. & Anr. v National Highway Authority of India, 2020 SCC OnLine Del 659, Delhi High Court

The Delhi High Court differed from the Calcutta High Court in one aspect. It held that all disputes that were in existence when the arbitration clause is invoked, ought to be raised and referred in one go. While the Delhi High Court agreed that multiple arbitrations were permissible, it held that, it would be entirely against public policy to permit parties to raise claims as and when they please. Relying on the judgment of the Hon'ble Supreme Court in Dolphin Drilling Ltd. v ONGC^[1], the Delhi High Court concluded that if subsequent events arise after the invocation of an arbitration, these may be referred and be part of a successive reference but the disputes which arose prior to arbitration being invoked may not be referred in successive references as the same is bound to cause uncertainty in award of one tribunal over the other.

The Delhi High Court was also quick to observe that constitution of multiple tribunals is bound to be counterproductive to the very legislative intent of arbitration which is speedy resolution of disputes. Having noticed the uncertainty and confusion successive references lead to, the Delhi High Court provided certain steps which if followed would allow for successive references and ensure certainty at the same time:

Primarily to avoid the confusion with respect to successive references, the Delhi High Court recommended contract draftsman to categorically have a clause which requires parties to raise all disputes whether present or bound to arise in the future at the end / completion of the contract. The said clause would also need to save all disputes from being time barred which could be one of the defenses to render the dispute non-arbitrable.

Having advocated for a single reference, the Delhi High Court also mentioned that in contracts as agreed between parties, successive references may be permissible. In such a scenario, the Delhi High Court recommended for all arbitrations / disputes to be referred to the same tribunal. While the awards for particular disputes may be rendered separately, the advantage of a single tribunal hearing all disputes would be that contradictory and irreconciled findings would be avoided.

Lastly, from a judicial perspective when the matter came before any High Court under Section 11, 34 or 37, the Delhi High Court directed for parties to disclose the pending arbitral proceedings / references so as to enable the court to adjudicate all challenges, if possible, comprehensively. This would avoid a situation as could be seen in this case where, two awards had attained finality while the challenge to one award was still pending.

Hence, as on today, successive references under the arbitration landscape of India are permissible but the Indian courts have fairly laid down that all disputes which existed prior to the invocation of the arbitration cannot be subsequently referred to the arbitration in the successive reference if not referred to previously. Further, the courts have categorically laid down, borrowing the principle of res judicata that, there cannot be two arbitration proceedings with respect to the same transaction.

Views are personal.

[1] (2010) 3 SCC 267