In a recent decision, in BST Textile Mills Pvt. Ltd. v. The Cotton Corporation of India Ltd., Commercial Arbitration Petition No. 563 of 2017, decided on 9-02-2023, the Bombay High Court considered the legality of consolidating claims arising from nine separate contracts into a single statement of claim in a commercial arbitration petition.
The case involved nine contracts for the purchase of cotton bales from the respondent, with each contract having a distinct dispute. The respondent claimed that the petitioner breached the contracts by failing to lift and pay for 25,149 cotton bales. The arbitrator consolidated the claims arising from all nine contracts and allowed a single statement of claim, and awarded in favour of the respondent.
The petitioner challenged the arbitration award on various grounds, including the consolidation of claims. The petitioner argued that the arbitrator had no jurisdiction to consolidate claims arising from multiple contracts without the consent of the parties. The petitioner also contended that the consolidation of claims caused prejudice, as the disputes under each contract were distinct and required separate consideration.
The court examined the extent of its jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, which provides for the setting aside of an arbitration award. The court noted that the amendment of the Act in 2015 restricts the re-appreciation of evidence and findings on merits, and an arbitration award cannot be lightly interfered with unless specific grounds are satisfied.
The court relied on the case of Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, which held that an arbitration award cannot be set aside unless it is opposed to India’s public policy or is patently illegal. The court also distinguished the case of Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729, where a composite reference before a single arbitral tribunal was not allowed due to specific facts.
The court also noted that the petitioner filed a consolidated counter-claim, and specific claims pertaining to each of the nine contracts were placed distinctly in the statement of claim filed on behalf of the respondent. The court further held that the consolidation of claims did not cause prejudice to the petitioner.
In this case, the retired judge was appointed as the sole arbitrator by the Director of the Respondent Corporation. Although the court did not discuss this point in detail, it held that the aspect of unilateral appointment of the arbitrator is not relevant for the present case since the appointment of the arbitrator and initiation of arbitral proceedings occurred prior to the 2015 amendments of the relevant Act.
In conclusion, the Bombay High Court’s decision in this case provides clarity on the consolidation of claims arising from multiple contracts in commercial arbitrations. The court held that such consolidation does not necessarily amount to a jurisdictional error, and it is not a ground for setting aside an arbitration award. The proposition of law laid down by the court is that an arbitration award cannot be set aside lightly, and specific grounds must be satisfied before a court can interfere with it.