[A&C Act, 1996] Single Composite Invocation U/s. 21 Pertaining To Consolidated Claim In Respect Of 3 Purchase Orders Cannot Be Labelled As Invalid: Calcutta HC

While observing that the joinder of the causes of action can only prevent unnecessary multiplicity of proceedings and facilitate quick settlement of the disputes, the Calcutta High Court allowed an application under Section 11 of the Arbitration and Conciliation Act, 1996 in respect of a money claim arising out of three purchase orders between the Petitioner and Respondent companies.

A Single Judge Bench of Justice Sabyasachi Bhattacharyya observed that “the single composite invocation under Section 21 of the 1996 Act vide communication dated August 22, 2022, pertaining to a consolidated claim in respect of three purchase orders, cannot be labelled as invalid or unlawful, sufficient to vitiate the same”.

Advocate Deblina Lahiri appeared for the Petitioner, whereas, Advocate Bodhisatta Biswas appeared for the Respondent.

Going by the background of the case, an invocation under Section 21 of the 1996 Act was made by the Petitioner (Godrej & Boyce) claiming an outstanding amount of money for furniture sold by the Petitioner in terms of the three contracts. The Respondent (SPCL) had raised an objection as to the maintainability of Section 21 invocation as well as the single application under Section 11 on the ground that the dispute arose out of three separate purchase orders having distinct arbitration clauses, although the language of the clauses might be identical.

After considering the submissions, the High Court noted that there were three separate arbitration clauses in three distinct purchase orders of different dates, although the language of the said clauses was identical, and the clauses pertained to the supply of different tranches of furniture to different areas, covering eighteen Super Specialty Hospitals in total.

Finding that some of the commonalities among the agreements were that all three purchase orders were issued by the Respondent to the Petitioner to fulfill the terms of a master (principal) agreement between the Respondent SPCL and the employer, the High Court noticed that both parties referred to a consolidated claim of the Petitioner in their purported communications leading up to the dispute.

The Bench said that the bone of contention was whether a common invocation for the three separate contracts and a single application under Section 11 for reference in respect of all are maintainable in law.

“Technically, of course, the contracts in the form of purchase orders are different, containing separate arbitration clauses. Yet, the language of the same is identical. Moreover, sub-clause (b) of Clause 31, the arbitration clause in each of the purchase orders, leaves ample scope for interlinking disputes arising out of the single Main Contract and the respective Purchase Orders”, observed the Bench while stating that the Respondent could not contend that the claim of the Petitioner and its rebuttal in a consolidated form was segregable.

Referring to the judgment of the Apex Court in NTPC Ltd. Vs. SPML Infra Ltd. the Bench highlighted that “the limited scope of inquiry while deciding an application under Section 11 of the 1996 Act, particularly keeping in view sub-sections (6) and (6A) thereof, cannot be a conclusive adjudication but is only a tentative exploration or a “summary prima facie review”.

Noting that Clause 31(b) of the purchase orders showed the implicit correlatability between the individual Purchase Orders and the performance of the common Main Contract, the Bench said that a notice is not to be construed hyper technically so as to defeat its very purpose, and the invocation notice clearly furnished the particulars of the three purchase orders and narrated the build-up to the consolidated claim, which had been treated in a composite manner even by the Respondent in its e-mails.

Therefore, observing that the most expeditious course of action would be to refer the disputes in respect of the three Purchase Orders to a single Arbitrator who would consolidate the claims and adjudicate on those in a composite manner, the High Court appointed Advocate Debasish Roy as the sole Arbitrator.

Cause Title: Godrej & Boyce Mfg. Co. Ltd. v. Shapoorji Pallonji and Company Pvt. Ltd.

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