Godrej & Boyce Mfg. Co. Ltd vs Shapoorji Pallonji And Company ...
2023 Latest Caselaw 1178 Cal/2

                        In The High Court at Calcutta
                          Original Civil Jurisdiction
                                Original Side

The Hon'ble Justice Sabyasachi Bhattacharyya


                               AP NO.140 OF 2023
                        Godrej & Boyce Mfg. Co. Ltd.
                                       VS.
                   Shapoorji Pallonji and Company Pvt. Ltd.



For the petitioner        :      Ms. Deblina Lahiri, Adv.,
                                 Mr. M. Chatterjee, Adv.

For the respondent         :     Mr. Bodhisatta Biswas, Adv.

Hearing concluded on      :      08.05.2023

Judgment on               :      12.05.2023

The Court:

1. The present application under Section 11 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") seeks

a reference to arbitration in respect of a money claim arising out of

three Purchase Orders between the parties.

2. An invocation under Section 21 of the 1996 Act was made by the

petitioner on August 22, 2022, claiming an outstanding amount of

money for furniture sold by the petitioner in terms of the said three

contracts.

3. The respondent (SPCL) has raised an objection as to maintainability of

the single Section 21 invocation as well as the single application under

Section 11 of the 1996 Act on the ground that the dispute arises out

of three separate purchase orders having distinct arbitration clauses,

although the language of the clauses may be identical.

4. Learned counsel for the respondent argues that the dates of all three

purchase orders were not the same, that each of them pertained to

different zones and were independent contracts in their own right. As

such, it is contended that the petitioner was required to take out three

separate applications for reference under Section 11 of the 1996 Act,

preceded by three separate invocations on each of the arbitration

clauses in the separate contracts.

5. Learned counsel for the petitioner relies on the identical language of

the three arbitration clauses and submits that all the purchase orders

emanated from a single parent contract between the respondent SPCL

and its employer, the West Bengal Medical Services Corporation Ltd.

The purchase orders, it is argued, are inextricably interlinked.

6. Learned counsel for the petitioner places reliance on the demands

made prior to the invocation and the purported e-mail replies thereto

by the respondent, which allegedly relate to payment of a consolidated

sum of money. It is argued that furniture was supplied by the

petitioner under the purchase orders for eighteen Super Specialty

Hospitals in West Bengal, under the contract entered into between the

respondent and the employer.

7. Furthermore, it is contended, the payments were released in favour of

the petitioner in a consolidated manner and even the respondent

treated the outstanding dues as a consolidated claim in its

communications.

8. Learned counsel for the petitioner places reliance on Duro Felguera,

S.A. Vs. Gangavaram Port Limited, reported at (2017) 9 SCC 729, in

which separate arbitrators were appointed for six separate arbitrable

agreements, two for international commercial arbitration and four for

domestic. However, the Supreme Court had observed that the

arbitrators can be the same for the matters.

9. Learned counsel for the respondent, while relying on the same report,

contends that separate arbitrators were directed to be constituted for

each agreement.

10. The petitioner‟s counsel also cites NTPC Ltd. Vs. SPML Infra Ltd.,

reported at 2023 SCC OnLine SC 389, for the proposition that the

primary inquiry under Section 11 (6) of the 1996 Act is about the

existence and validity of an arbitration agreement and also in respect

to the non-arbitrability of the dispute.

11. The Supreme Court also stressed the need for quicker and efficient

resolution of disputes.

12. However, learned counsel for the respondents seeks to distinguish the

said decision, by arguing that the propositions laid down therein do

not help the petitioner in the present case.

13. There are, thus, two fulcrums of the present inquiry - the arbitration

clause(s) and the nature of the dispute.

14. From the perspective of the first, we find that there are three separate

arbitration clauses in three distinct purchase orders of different dates,

although the language of the said clauses are identical. The clauses

pertain to supply of different tranches of furniture to different areas,

covering eighteen Super Specialty Hospitals in total.

15. If we search for commonalities among the agreements, we find 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.

16. Another common factor is that both parties refer to a consolidated

claim of the petitioner in their purported communications leading up

to the dispute. In some of the e-mails annexed to the affidavit-in-reply

of the petitioner, it is seen that both parties, on occasions, refer to the

dispute as "the issue" and mention a consolidated amount of claim,

such as the emails dated December 1 and December 30, 2021 sent

from the end of the respondent.

17. Although the respondent argues that this court, under Section 11 of

the 1996 Act, is only to look into the arbitration clauses and joint

arbitrability, even for deciding such questions on a tentative footing,

there is no reason as to why the materials annexed to the application,

opposition and reply cannot even be prima facie looked into.

18. Clause 31 of each of the purchase orders, which are exactly identical,

are the respective arbitration clauses.

19. Sub-clause (a) of Clause 31 contemplates that if a dispute of any kind

whatsoever arises between the respondent and the petitioner in

connection with, or arising out of the Purchase order, whether during

the performance or after their completion and whether before or after

repudiation or other termination of the order, then either of the parties

may give a notice of such dispute to the other party.

20. The parties agree on the question as to the present dispute being

arbitrable and being covered by the said clause. The bone of

contention is 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.

21. Although the employer of the respondent SPCL is not a party to any of

the agreements, sub-clause (b) of Clause 31 of the Purchase Orders

refer to disputes between the respondent and its employer. It provides

for arbitration in case of a dispute of any kind whatsoever arising

between the employer and the present respondent in connection with,

or arising out of the Main Contract, whether during the execution of

the Main Works or after their completion and whether before or after

repudiation or other termination of the Main Contract, including any

dispute as to any opinion, instruction, determination, certificate or

valuation of the employer‟s representative.

22. Sub-clause (b) further provides that if the respondent SPCL is of the

opinion that such dispute touches or concerns the vendor‟s (read,

petitioner‟s) purchase order and arbitration of such dispute under the

Main Contract commences, the respondent may by notice require that

the petitioner provides such information and attend such meetings in

connection therewith as the respondent may reasonably request: such

information supply and attendances being at the petitioner‟s cost, or

as directed at the sole discretion of the respondent.

23. The existence of Clause 31 (b) in each of the purchase orders

empowers the respondent, even in connection with arbitral disputes

relating to the Main Contract between the respondent and its

employer, to require the petitioner not only to provide information but

to attend meetings in connection with such disputes. The occasion for

such requirement is entirely the perception and opinion of the

respondent/SPCL that such dispute touches or concerns the purchase

orders of the petitioner.

24. Hence, the purchase orders, although separate and pertaining to

different bulks of furniture for different areas in West Bengal, share a

common underlying bond with the Main Contract between the

respondent and its employer. Importantly, such interplay between the

performance of the Main Contract and the purchase orders is

„observer-dependent‟ on the perception of the respondent.

25. That apart, we cannot turn a blind eye to the communications

between the parties preceding the reference, in which both parties

refer to "the issue" (denoting singular) of a single, total, consolidated

claim amount.

26. All the purchase orders, though issued at different times for different

zones, are a sub-set of the respondent‟s performance of a single Main

Contract with the employer, which view is completely endorsed by

Clause 31 (b) of the purchase orders. Notably, although the employer

is not a party to the purchase orders-in-question, a link of such

purchase orders has been established with the Main Contract between

the respondent and its employer, by drawing a correlation between

disputes relating to the Main Contract and the purchase orders.

27. Although the charter of sub-clause (b) of Clause 31 is apparently

restricted to the petitioner supplying necessary information and

attendance at the meetings between the respondent and the

principal/employer, the same undeniably establishes a link between

the liabilities arising out of the purchase orders and the Main

Contract.

28. The underlying scheme of the 1996 Act, as discussed in NTPC Ltd.

(supra) while quoting Vidya Drolia's case, is quicker and efficient

resolution of disputes, for which the court, under Section 11 of the

1996 Act, may embark upon an intense yet summary prima facie

review.

29. Thus, although the contours laid down in the cited judgments cannot

be lost sight of, being an examination of the existence and validity of

the arbitration clause and the arbitrability of the dispute, for the

purpose of deciding such core issues, the scope of inquiry can

definitely touch the two pivots - the arbitration clause and the nature

of the dispute.

30. 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. Stress must be laid here on the

fact that the said sub-clause leaves it entirely to the discretion of the

respondent/SPCL to embroil the petitioner, through the purchase

orders, in the parent dispute pertaining to the Main Contract as well.

Hence, it does not lie in the mouth of the respondent to contend that

the claim of the petitioner and its rebuttal in a consolidated form is

segregable.

31. The invocation under Section 21 of the 1996 Act is merely a

culmination of the communications leading up to the dispute, which

club the claims in respect of all the purchase orders as a consolidated

amount.

32. Section 7 of the 1996 Act contemplates arbitrable "disputes" to be

"certain disputes which have arisen or which may arise" between the

parties in respect of a defined legal relationship.

33. The expression "may arise" is wide enough to encompass not only the

specific disputes spelt out in the invocation but also disputes which

may reasonably arise out of those. A close scrutiny of Clause 31(b) of

the purchase orders leaves no manner of doubt as to the implicit

correlatability between the individual Purchase Orders and the

performance of the common Main Contract.

34. 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.

35. Moreover, it is well-settled that a notice is not to be construed hyper-

technically so as to defeat its very purpose. The present invocation

notice clearly furnishes the particulars of the three purchase orders

and narrates the build-up to the consolidated claim, which has been

treated in a composite manner even by the respondent in its e-mails.

Hence, the same clearly conveys the petitioner‟s intention to refer the

dispute to arbitration and specifies such dispute amply. Thus, the

invocation is valid in law.

36. Insofar as the application under Section 11 is concerned, the reference

sought would pertain to different contracts, but the crux of the

dispute does not pertain to the nitty-gritties of performance defects or

difficulties but is the liability of the respondent to pay the entire

amount, primarily based on GST calculations.

37. Even if we borrow the spirit of Order II of the Code of Civil Procedure

(of course, with the caveat that the same is not applicable in terms to

arbitration), joinder of the causes of action in the present case can

only prevent unnecessary multiplicity of proceedings and facilitate

quick and efficient settlement of the disputes.

38. The hyper-technical objection as to non-maintainability, if upheld,

would only militate against the scheme of the 1996 Act.

39. An arguable sticking-point for the petitioner here might have been the

decision in Duro Felguera (supra), where a composite reference was

tested on the anvil of Section 7 of the 1996 Act. There, the context was

whether an arbitration clause in another document would get

incorporated into a contract by reference and, if so, under what

circumstances.

40. However, 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" as

termed by the Supreme Court in NTPC Ltd. (supra), endorsing the first

Vidya Drolia‟s case.

41. Such summary review leaves scope for ascertaining the nature of the

dispute vis-à-vis the arbitration clause, to find out whether the

dispute falls within the wide range between a Section 7-scenario,

where the arbitration clause in one contract gets unambiguously

incorporated into another by reference, and the other end of the

spectrum, where the arbitration clauses are placed in different

contracts but are relatable to a single Main Contract indirectly

through reference, though not going so far as to be „incorporated‟ into

each other.

42. 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.

43. Hence, in the facts of the instant case, instead of relegating the parties

to a fresh invocation and necessitating a de novo application under

Section 11, the most expeditious and prudent course of action would

be to entertain the present application by turning down the objection

as to maintainability and to refer the disputes raised by the petitioner

against the respondent in respect of the three Purchase Orders to a

single Arbitrator who would consolidate the claim(s) and adjudicate on

those in a composite manner.

44. In such view of the matter, A.P. No. 140 of 2023 is allowed, thereby

appointing Mr. Debasish Roy (Mobile No.9831173923), an Advocate

practising in this court and a member of the Bar Association (Room

No. 2), as the sole Arbitrator to resolve the dispute between the

parties, arising out of the three Purchase Orders-in-dispute, in a

consolidated manner, subject to obtaining his consent/declaration

under Section 12 of the Arbitration and Conciliation Act, 1996.

( Sabyasachi Bhattacharyya, J. )