Introduction
In arbitration proceedings, a composite reference allows disputes arising from multiple, interconnected contracts to be addressed collectively within a single arbitration. This approach becomes particularly relevant when the agreements are so intricately linked that separate arbitration proceedings might lead to conflicting outcomes, duplicate the efforts of both parties and increase procedural complexities, ultimately resulting in unfair disadvantages.
The issue of composite reference was recently discussed in detail by the Calcutta High Court in Smt. Sonia Dhir and Another vs. Prestar Infrastructure Projects Limited.In this case, the Court examined the viability of consolidating disputes under separate yet interconnected agreements within a single arbitration.
Facts of the Case
The application was filed under Section 11 of the Arbitration and Conciliation Act, 1996, arising from a dispute over two separate agreements between the parties. The first agreement, a leave and licence arrangement, was entered into between Petitioner No. 2 and the respondent concerning a particular property. On the same date, July 18, 2023, a second agreement, a service agreement, was signed between the respondent and Petitioner No. 1, who is both the spouse of a former director and a current director of Petitioner No. 2. The petitioners sought a combined arbitration reference covering both agreements.
Analysis of the court’s decision
The respondent argued against a composite reference, claiming each agreement had a distinct purpose. They contended that composite arbitration generally requires a “primary” and “subsidiary” agreement with a shared objective, which was lacking here. However, the petitioner maintained that the agreements were linked, as Clause 4 of the service agreement specified that it was a co-terminus with the leave and licence agreement.
The court observed multiple interrelated provisions in both agreements, connecting the service agreement’s obligations to the licenced property. It also noted that one clause provided for automatic termination of the service agreement if the leave and licence agreement was terminated, highlighting the agreements’ mutual dependency.
The court allowed the composite reference, establishing a broader basis for such decisions. Even without a single unified objective, the “common underlying jural relationship” tied to the property was deemed sufficient to connect the agreements. The court reasoned that separate arbitrations could risk inconsistent awards, disadvantaging both parties.
The recent judgment broadens the criteria for composite references in arbitration, emphasising procedural efficiency and reducing duplication when agreements are clearly linked by a shared legal relationship.
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Author: Hiteashi Rajan Desai, Associate at R&D Law Chambers LLP
Email: info@rdlawchambers.com