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The Calcutta High Court has recently held that a single arbitral reference cannot be made if contracts entered into the parties had different scope and ambit of work.

While determining whether a single arbitral reference is possible in case of two related assignments, Justice Debangsu Basak observed, “…it cannot be said that the parties had entered into a contract for a single commercial project. The respondent had floated two separate tenders. The parties had entered into two separate contracts. Each of the contracts had been named separately. Each of the contracts entered into between the parties had different scope and ambit of work as the name of the two contracts suggest… In my view, reference to the two contracts in a single letter, does not make the two contracts to be intertwined with each other so as to allow for a composite reference to be made.”

It was the case of the petitioner that since dispute that have arisen between the parties are common in nature, they should be combined and referred to single composite arbitral reference. Counsel submitted that the arbitration clause in both the contracts are identical and hence the differences or claims between the parties could be resolved by a single reference. Reliance was placed on the arbitration clause and the notice dated 02.12.2020 invoking Section 21 of the Arbitration and Conciliation Act, 1996. Cases referred: Ameet Lalchand v. Rishabh Enterprises (2018) 15 SCC 678, Chloro Controls v. Severn Trent Water Purification (2013) 1 SCC 641, Narendra Hirawat v. Sholay Media Entertainment 2020 SCC OnLine Bombay 391.

Referring two separate notices, counsel for the respondent submitted that the parties had entered into two separate contracts. There were two distinct notices inviting tenders, which were not related to each other. Hence, the two contract should ideally not be clubbed together. Cases referred: Ajoy Kumar Saha v. Ashok Leyland Finance, (2005) 1 Cal HC Notes 572, Duro Felguera S.A. v. Gangavaram Port Limited. Another contention was that since the contract has already been terminated on the default of the petitioner, the Court should not interfere with the notice of termination so issued. Vidya Securities v. Comfort Living Hotels, AIR 2003 Delhi 214, Sikaria Divinity Private Limited v. State of WB was relied to substantiate the same.

Pursuant to its decision, Court considered the following cases;

1. Ajoy Kumar Saha case: In this case hirer had entered into hire purchase agreements in respect of 12 vehicles and there were separate agreements for each one of them. The hirer moved one application under section 9 of the Act of 1996 in respect of 12 vehicles. Division Bench of the Calcutta High Court held that there should have been separate application for each of the 12 vehicles in question.
2. Duro Felguera, S.A. v. Gangavaram Port Ltd: The present case exclusively dealt with the issue of Composite Reference in context of International Commercial Arbitration. The dictum laid herein clarifies that, where arbitration agreement is wide enough to bring within its ambit agreements ancillary to the mother agreements, then, the entire dispute arising out of the mother and ancillary agreements can be settled by a composite reference.
3. Ameet Lalchand Shah v. Rishabh Enterprises: Where there was a single commercial project involving several parties and agreements, Court allowed combined reference to arbitration observing that although several parties were involved, it was a single commercial project that was sought to be executed.
4.  Chloro Controls India Private Limited: While answering whether a non-signatory party could be subjected to arbitration, Court said, “A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction.”

When is a composite reference possible?

In light of the precedents cited, Court said, “In order to make a composite reference, various factors have to amalgamate so as to make a composite reference possible. There has to be a mother agreement and ancillary agreements governing the parties. The concerned arbitration agreement or the mother agreement should be comprehensive enough to bring within its fold agreements ancillary to the mother agreement so that, the disputes arising out of or in connection with the mother agreement or the ancillary agreement can be settled by a composite reference. If the parties have entered into several agreements in respect of a single commercial project, then also, the disputes and differences arising out of the various agreements could be resolved by referring the parties to a composite arbitration. Essentially, there has to be a single commercial project under which, there may or may not be several contracts or agreements involving various parties. The arbitration agreement of the single commercial project should be wide enough to encompass the parties to the subsequent agreements. Again if there are two or more contracts and they are so intertwined with each other so as to prejudice the parties should separate arbitrations are held, then a composite reference can be made.”

Evaluating the present facts and circumstances, Court concluded that, the fish marketing complex contract being the second in point of time cannot be said as ancillary to the post-harvest operation and cold chain contract although they were to execute at the Nalban Fisheries Project. Facts do not suggest a single commercial project which can sustain a combined arbitral reference.

Case Title: M/S Ganpati Technology v. State Fisheries Development Corporation, AP No. 13/2021

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