Common Arbitrators Must Explain Contradictory Views In Related Disputes: Delhi High Court

The Delhi High Court has held that, in peculiar circumstances involving common arbitrators and identical contractual provisions, an unexplained departure from an earlier view in a related dispute can justify interference with an arbitral award.

“The common members of the Arbitral Tribunal are obliged to justify the different view being taken by them in the subsequently passed impugned Award.”, the bench ruled.

A Division Bench comprising Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora made the observation while upholding the setting aside of an award in a dispute between Ssangyong Engineering and Construction Co. Ltd. and the National Highways Authority of India (NHAI).

“Consistency, certainty and predictability are recognized as the hallmarks of a sound justice delivery system. The intent which ordinarily parties have while selecting common members of Tribunals for adjudicating disputes arising between the same parties, in related disputes, is to ensure that parties receive consistent decisions from the arbitral tribunal.”, the court observed.

The ruling arose from two contract packages in which A.K. Yadav and Ashok Khurana were common members. The parties, contractual terms, and facts were the same or near-identical. Yet, they took contradictory positions without explaining the departure.

The dispute concerned a ₹163.87-crore highway contract awarded by NHAI to Ssangyong on December 30, 2005, for a 54-km stretch of NH-26 in Madhya Pradesh.

The Engineer issued a document dated August 31, 2014, styled as a Final Payment Certificate. NHAI disputed it.

Ssangyong invoked arbitration on November 7, 2016. NHAI disputed the certificate in its defence and counter-claim. Its counter-claim was later amended to ₹2.76 crore.

By an award dated June 26, 2021, the tribunal awarded Ssangyong ₹6.65 crore and USD 251,858. It declined to adjudicate NHAI's challenge to the certificate, holding it had not been formally challenged, and rejected its counterclaim as time-barred.

NHAI challenged the award. The Single Judge set it aside and remanded the matter after finding that NHAI's objections to the Final Statement had not been considered.

The Division Bench found that the correctness of the August 31, 2014, certificate was itself a dispute referred to arbitration. NHAI had expressly disputed it, so the tribunal was required to adjudicate the issue. The tribunal had treated the document as a Final Statement under Sub-Clause 60.11 of COPA.

After more than 50 hearings, the tribunal could not decline to decide the issue on the “thin premise of lack of a formal claim,” the court ruled. Its failure to adjudicate NHAI's defence caused prejudice, violated natural justice, and rendered the award unsustainable.

Two members, Yadav and Khurana, were common to the C-5 and C-6 tribunals.

In C-5, Yadav treated the corresponding certificate as an Interim Payment Certificate capable of revision. In C-6, he treated the August 31, 2014 certificate as a Final Statement, without explaining the opposite view.

The court held that the contradiction was not justified either by the evidence or an alternative interpretation of the contractual terms. It relied on the Supreme Court's decision in National Highway Authority of India v. Progressive-MVR (JV), noting that conflicting interpretations of identical clauses meant the ordinary rule against interfering with a plausible arbitral view could not be mechanically applied.

The High Court held that the unexplained departure “strikes at the elementary requirement of consistency and reasoned adjudication” and was “of such a nature as to shock the conscience of the Court.” The award therefore conflicted with the “most basic notions of justice” under Section 34.

The bench clarified that it had not re-appreciated evidence or substituted its interpretation for that of the tribunal. The correctness of the certificate and merits of the claims and counter-claims were left open.

The Division Bench dismissed Ssangyong's appeal and upheld the remand.

For Appellant (Ssangyong Engineering and Construction Co. Ltd.): Advocates Navin Kumar, Surbhi Agarwal, Rashmeet Kaur, Aarti Mahto.

For Respondent (National Highways Authority of India): Advocates Ankur Mittal, Arpit Sharma.