Introduction:

The Bombay High Court ("Court") in the recent judgment of BST Textile Mills Pvt. Ltd. v. The Cotton Corporation of India Ltd.1, dismissed the petition which aimed to set aside an arbitral award on the ground that the arbitrator did not have the power to consolidate disputes arising out of several contracts (nine in this case) into a single statement of claim without the consent of the petitioner/ BST Textile Mills Pvt. Ltd. ("BST").

Factual Matrix and Arguments:

BST (original respondent in the arbitration proceedings) had entered into nine contracts for purchasing cotton bales from the respondent/ Cotton Corporation of India Ltd. ("Cotton Corporation") (original petitioner in the arbitration proceedings).

Cotton Corporation had initiated arbitration proceedings against BST for breach of the executed contracts due to non-payment, for which a Sole Arbitrator was appointed for the adjudication of the dispute.

Before the Sole Arbitrator, Cotton Corporation had filed a single claim pertaining to the disputes that arose from all the nine executed contracts, as the terms of these contracts, the format thereto and the mutual obligations recorded therein were identical. The Sole Arbitrator passed an award in favour of Cotton Corporation and directed BST to pay a sum of INR 25,59,88,023 along with other additional costs. Aggrieved by the decision of the Sole Arbitrator, BST challenged the impugned award and filed the present petition primarily on the ground that the "Sole Arbitrator had no power to consolidate distinct disputes arising from separate and independent contracts without its consent". Thus, alleging that the arbitral award was vitiated due to erroneous exercise of jurisdiction on the part of the learned Sole Arbitrator.

Judgement:

The Court dismissed the petition and upheld the impugned arbitral award passed by the Sole Arbitrator in favour of Cotton Corporation. While the Court went on to analyse the grounds of challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act") (especially post the 2015 amendment) as well as the observations of the Supreme Court in the cases of SSangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India2 and P. R. Shah Shares and Stock Brokers Private Limited Vs. B. H. H. Securities Private Limited3, it noted that arbitration awards cannot be lightly interfered with, as the Court does not exercise appellate jurisdiction. The Court refrained from re-appreciating the evidence and the findings on merits in the arbitral award and noted that in the ordinary course, it cannot interfere with an arbitral award.

On the specific ground of whether the Sole Arbitrator had the power to consolidate the statement of claims arising out of the nine distinct and separate contracts, the Court delved into the law established in the case of Duro Felguera, S.A. v. Gangavaram Port Limited4 ("Duro Felguera"), which was the sheet anchor of the contention raised by BST in the present petition. In Duro Felguera, the Supreme Court had observed that there were five separate contracts, which had independent existence. Further, one of the contracts was with a foreign company requiring international commercial arbitration and therefore there could not be a single arbitral tribunal. The Court while appreciating the law established in Duro Felguera, distinguished it by stating:

"25. It is to be understood that in the present case, the facts are distinguishable, for the reason that the nine contracts in question were executed between the same parties, consisting of identical arbitration clauses and the only difference was with regard to the actual figures of sale and purchase. The nature of dispute arising from the nine contracts was identical and accordingly reference to arbitration to the learned sole arbitrator was made in the context of dispute arising from the nine contracts, essentially for the same reasons.

28. The Supreme Court in the case of P. R. Shah Shares and Stock Brokers Private Limited v. B. H. H. Securities Private Limited considered a question as to whether single arbitration could be undertaken in a manner that would not only be convenient, but necessary for avoiding multiplicity of proceedings and possibility of conflicting decisions. Although the said observations were made in a different set of facts, they are relevant for considering the specific contention raised on behalf of the petitioner herein.

29. In this situation, it was sought to be contended on behalf of the petitioner that since objection was specifically raised on behalf of the petitioner, the same learned arbitrator ought to have undertaken nine separate arbitral proceedings for the nine contracts in question, particularly when consent of the petitioner was a sine qua non for consolidating the arbitral proceedings pertaining to all the nine contracts. This Court is of the opinion that when specific claims pertaining to each of the nine contracts were placed distinctly in the statement of claim filed on behalf of the respondent, to which the petitioner had ample opportunity to respond and the fact that the petitioner also chose to file a consolidated counter claim pertaining to all the nine contracts, it cannot be said that the learned arbitrator committed a jurisdictional error in proceeding with the arbitration."

To conclude, it is now well settled that where distinct claims arising out of one or several contracts of similar nature, it is in the interest of justice for an arbitral tribunal to proceed with such consolidated claims and adjudicate upon them accordingly. Further, through this case, the Court has also reaffirmed that it cannot go into the quantity and quality of evidence that have been considered in passing of an arbitral award as this comprises of the domain of the learned arbitrator/ arbitral tribunal.

This decision of the Bombay High Court is certainly helpful for parties facing similar dilemma due to the Hon'ble Supreme Court's decision in the matter of Duro Felguera when the essence of each contract and the parties thereto are the same.

Footnotes

1. Commercial Arbitration Petition No. 563 of 2017 with Interim Application (L) No. 7323 of 2021.

2. (2019) 15 SCC 131.

3. (2012) 1 SCC 594.

4. (2017) 9 SCC 729.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.