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Composite Reference To Arbitration Can Be Made For Acceptance Of Offer At Consolidated Price Across Different Locations: Calcutta HC
Mohd Malik Chauhan
28 April 2025 11:30 AM IST
The Calcutta High Court bench of Justice Shampa Sarkar has held that the very acceptance of an offer at a consolidated price for works to be executed at different locations proves that the work orders issued were treated as part of a single transaction by the parties through their conduct therefore under such circumstances a composite reference of all work orders can be...
The Calcutta High Court bench of Justice Shampa Sarkar has held that the very acceptance of an offer at a consolidated price for works to be executed at different locations proves that the work orders issued were treated as part of a single transaction by the parties through their conduct therefore under such circumstances a composite reference of all work orders can be made to arbitration.
Brief Facts:
This application has been filed under section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) seeking appointment of an arbitrator by way a composite reference in respect of ten work orders, each of which contains a dispute resolution clause.
By a single Letter of Intent (LOI), Johnson Controls Hitachi Air Conditioning India Ltd. (Petitioner) was awarded the work for the design, supply, installation, testing, and commissioning of HVAC systems for five hospitals in West Bengal, namely Jalpaiguri, Gopiballavpur, Egra, Panskura, and Ghatal.
The composite value for all the works, amounting to Rs. 12,35,00,000/-, was accepted by the M/S. Shapoorji Pallonji And Company Pvt Ltd. (Respondent). Although the LOI was followed by ten separate work orders, the conduct of the parties indicates that the works arose from a single LOI and formed one business transaction. Subsequently, disputes arose regarding payments and delays.
The petitioner has produced emails exchanged with the respondent's representatives, indicating that negotiations regarding composite payments were ongoing and that part payments were made. The petitioner submits that in the present circumstances, further amicable settlement is unlikely. A composite notice invoking arbitration was issued by the petitioner and duly received by the respondent.
The respondent objected to the prayer for a composite reference on the ground that ten separate work orders were issued, each containing a distinct dispute resolution clause. It was further submitted that the works were to be executed at different sites. In such circumstances, the respondent contended that separate references should be made.
Observations:
The court at the outset discussed the impermissibility of unilateral appointment of arbitrator an noted that the Supreme Court in Perkins Eastman Architects DPC and Another vs. HSCC (India) Ltd. 2019 held that whatever advantage a party may derive by nominating an arbitrator of its choice is counter-balanced by the equal power vested in the other party. However, where only one party has the right to appoint a sole arbitrator, its choice carries an element of exclusivity in determining the course of dispute resolution.
The Apex Court further held that naturally, a person who has an interest in the outcome of the dispute must not have the power to appoint a sole arbitrator. This principle forms the essence of the amendments introduced by the Arbitration Amendment Act, 2015 which was recognised by the Supreme Court in TRF Ltd. v. Energo Engg. Projects Ltd., (2017).
The court further noted that it is not in dispute that a single Letter of Intent (LOI) was issued on November 16, 2015, by which the final offer of the petitioner for the execution of the work mentioned therein was accepted. The LOI records that the petitioner had submitted its final offer through a single offer letter dated November 5, 2015.
It further added that a composite offer of ₹12,35,00,000/-, inclusive of materials, labour, taxes, duties, provident fund, freight, transit insurance, handling charges, cess, levies, and other incidental charges (except VAT and Service Tax), was made by the petitioner for the projects. By the said LOI, the petitioner was also instructed by the Project Director of the respondent to commence preliminary activities.
It further observed that it is clear from the LOI that, at the very initial stage, a composite price was offered by the petitioner, acting as the sub-contractor, and the said composite price was accepted by the respondent. Based on the LOI, which was issued for all five projects, preliminary activities were commenced by the petitioner.
Based on the above, it opined that from the stage of issuance of the LOI, it is evident that the respondent treated the projects at the five different locations as part of a single business transaction between the parties. The work orders that followed the LOI specified the terms and conditions of execution and made specific reference to the LOI.
It also noted that the emails annexed to the application further indicate that consolidated payments were made in respect of multiple projects, despite separate bills being raised for each location.
The court concluded that the very acceptance of the petitioner's offer at a consolidated price for the works to be executed at five different locations clearly indicates that the parties, by their conduct, treated the offer of work as part of a single transaction. The subsequent negotiations also demonstrate that discussions were ongoing for the consolidated payment of the total sum due.
Case Title: Johnson Controls Hitachi Air Conditioning India Ltd. Vs M/S. Shapoorji Pallonji And Company Pvt Ltd.
Case Number:AP-COM/315/2025
Judgment Date: 23/04/2025
Mr. Amit Kr. Ghosh, Adv. Mr. A. Mukherjee, Adv. …for petitioner.
Ms. Setu Das Roy, Adv. Ms. Suranjana Nandi, Adv. …for respondent.