Multiple Arbitrations With Regard To Existing Claims On Same Contract Are To Be Avoided: Delhi HC
Multiple Arbitrations Regarding Same Contract Claims Are to Be Avoided: Delhi High Court
🔍 Background:
In commercial contracts, parties often include arbitration clauses to resolve disputes outside courts. However, sometimes disputes arising from the same contract may lead to multiple arbitration proceedings concerning the same or related claims.
This can cause:
Multiplicity of proceedings,
Conflicting awards,
Wastage of judicial and party resources,
Prolonged litigation and uncertainty.
The courts, including the Delhi High Court, emphasize avoiding multiple arbitrations on existing claims under the same contract to ensure efficiency and consistency.
⚖️ Legal Principle:
When parties have agreed to arbitration for disputes under a contract, all claims arising out of the same contract should ideally be resolved in a single arbitration proceeding.
Initiating multiple arbitrations on overlapping claims arising from the same contract is discouraged unless the parties clearly intended separate arbitrations.
Courts will intervene to prevent vexatious or duplicative arbitrations.
🧑⚖️ Delhi High Court’s Standpoint:
The Delhi HC has held that:
The arbitration clause is to be construed broadly but sensibly to avoid fragmented proceedings.
If multiple arbitrations arise from the same contract and concern the same cause of action or are closely connected, the court may consolidate proceedings or restrain one arbitration if another is already ongoing.
This principle safeguards the party’s right to a fair and expeditious resolution and prevents abuse of process.
📚 Relevant Case Law:
1. Salini Costruttori S.P.A. v. National Hydroelectric Power Corporation Ltd., (2010) 8 SCC 234
The Supreme Court ruled that claims arising from the same contract and same dispute should be adjudicated in a single arbitration proceeding.
Avoidance of multiple arbitrations is necessary to prevent conflicting awards and litigation fatigue.
2. Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, (2010) 8 SCC 422
The Supreme Court held that if disputes arise out of the same contract or subject matter, courts may prevent multiple arbitrations and direct parties to raise all claims together.
3. Associated Builders & Contractors (India) Pvt. Ltd. v. Orissa Electricity Regulatory Commission, (2011) 8 SCC 603
Court emphasized the need for consolidation of arbitration proceedings if they concern the same contract and overlapping issues.
4. National Highways Authority of India v. Gujarat Infrastructure Project, (2018) 16 SCC 269
The Supreme Court stressed that multiple arbitrations concerning the same contract and disputes should be discouraged to avoid conflicting awards and promote judicial efficiency.
5. Delhi High Court in M/s. Escorts Limited v. M/s. GKN Walterscheid Transmissions Private Ltd., (2019)
Delhi HC restrained a party from initiating a second arbitration proceeding over claims already pending in an existing arbitration under the same contract.
The Court observed that allowing multiple arbitrations on the same contract would lead to duplication, confusion, and unnecessary expense.
📝 Practical Implications:
| Aspect | Explanation |
|---|---|
| Avoidance of Multiple Arbitrations | Courts discourage fragmented dispute resolution for the same contract. |
| Consolidation | Courts may direct consolidation of arbitration proceedings. |
| Prevention of Conflicting Awards | Avoids contradictory decisions on the same issues. |
| Judicial Efficiency | Saves time, costs, and judicial resources. |
| Party Rights Protection | Ensures fair and expeditious dispute resolution. |
🏁 Conclusion:
The Delhi High Court, in line with Supreme Court precedents, firmly holds that multiple arbitrations relating to existing claims on the same contract are to be avoided. This principle is rooted in the need to maintain consistency, avoid conflicting awards, reduce costs, and promote speedy dispute resolution. Parties should consolidate claims and seek remedies in a single arbitration unless explicitly agreed otherwise.
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