In AP NO.140 OF 2023-CAL HC- Single composite invocation u/s 21 of Arbitration & Conciliation Act pertaining to consolidated claim in respect of 3 purchase orders, cannot be labelled as invalid: Calcutta HC
Justice Sabyasachi Bhattacharyya [12-05-2023]

Read Order: Godrej & Boyce Mfg. Co. Ltd v. Shapoorji Pallonji and Company Pvt. Ltd 

Tulip Kanth

Kolkata, May 13, 2023:  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 has allowed an application u/s 11 of the Arbitration and Conciliation Act, 1996 in respect of a money claim arising out of three Purchase Orders between the companies Godrej & Boyce Mfg. Ltd. & Shapoorji Pallonji.

The Single-Judge Bench of Justice Sabyasachi Bhattacharyya reiterated that a notice is not to be construed hypertechnically so as to defeat its very purpose. 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.

 An invocation under Section 21 was made by the petitioner-Godrej claiming an outstanding amount of money for furniture sold by the petitioner in terms of the said three contracts.The respondent (SPCL) had raised an objection as to maintainability of the single 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.

The Bench noted that there were three separate arbitration clauses in three distinct purchase orders of different dates, although the language of the said clauses were identical. The clauses pertained to supply of different tranches of furniture to different areas, covering eighteen Super Specialty Hospitals in total.

Some of the commonalities among the agreements were that all the 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. Both parties referred to a consolidated claim of the petitioner in their purported communications leading up to the dispute. Clause 31 of each of the purchase orders being the respective arbitration clauses were exactly identical.

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”, the Bench stated while observing that the respondent couldn’t contend that the claim of the petitioner and its rebuttal in a consolidated form was segregable.

Reference was also made to the judgment of the Top Court in  NTPC Ltd. Vs. SPML Infra Ltd., & Vidya Drolia vs. Durga Trading Corporation.

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, “Hence, 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.”

The Bench further noted,“ In the first case, the reference is specific and clear, whereas in the second case, as the present one [by virtue of Clause 31 (b) of the Purchase Orders and the single consolidated claim for all], the reference may be incidental, falling in the category of “may arise” as envisaged in Section 7 (1) of the 1996 Act.”

Thus, 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 Bench appointed Advocate Debasish Roy as the sole Arbitrator.