The Calcutta High Court, through Justice Shampa Sarkar, has held that when an offer is accepted at a consolidated price for works at different locations, it indicates that the parties treated the transactions as one. Therefore, a composite reference of all work orders to arbitration is legally permissible.
The case arose from an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, filed by Johnson Controls Hitachi Air Conditioning India Ltd. against M/S. Shapoorji Pallonji And Company Pvt Ltd. The petitioner sought appointment of an arbitrator for ten work orders that included dispute resolution clauses. By a single Letter of Intent (LOI) dated November 16, 2015, the petitioner was awarded the contract for the design, supply, installation, testing, and commissioning of HVAC systems at five hospitals in West Bengal. The total composite value for all works was Rs. 12,35,00,000/-, which the respondent accepted.
Although ten separate work orders were subsequently issued, the petitioner contended that these arose from a single LOI, forming a unified business transaction. Disputes over payments and delays later emerged, and negotiations regarding consolidated payments were recorded through various email exchanges. The petitioner argued that the nature of dealings between the parties made a composite reference necessary as further amicable settlement was unlikely.
The respondent opposed the request, arguing that separate references should be made since different work orders were involved, each with its own arbitration clause. The respondent also claimed that many of the petitioner’s remaining claims were inadmissible and expressed the intention to appoint separate arbitrators for each work order as per the terms.
Referring to established principles, the court highlighted that unilateral appointment of an arbitrator is not permissible in law. Justice Sarkar cited Supreme Court rulings in Perkins Eastman Architects DPC vs. HSCC (India) Ltd. and Central Organisation for Railway Electrification vs. ECI SPIC SMO MCML (JV) to emphasize that equal participation of parties at the stage of appointment of arbitrators ensures an independent and impartial arbitral process.
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The court carefully reviewed the LOI and noted that the final offer submitted by the petitioner was through a single letter dated November 5, 2015, for all five locations. The LOI accepted the offer at a consolidated price and instructed the petitioner to begin preliminary activities.
Quoting the judgment, Justice Sarkar stated, "It is clear from the said 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." The work orders that followed were linked to the LOI and made specific references to it. The court further observed that the emails submitted demonstrated that "consolidated payments were made despite separate bills being raised for each location," and no objection was raised by the respondent during negotiations on outstanding dues across all five projects.
Justice Sarkar also referred to a prior Calcutta High Court decision in M/s. Sauryajyoti Renewables Pvt. Ltd. vs. VSL RE Power Pvt. Ltd., where composite reference was allowed after considering the parties' communications.
Ultimately, the court concluded, "The very acceptance of the offer of the petitioner at the consolidated price in respect of the works to be executed at five different locations clearly indicates that the parties, by conduct, had treated the offer of work as part of the single transaction." As a result, a composite reference was deemed appropriate.
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The court appointed Mr. Shashwat Nayak, Advocate, as the sole arbitrator, subject to compliance with Section 12 of the Arbitration and Conciliation Act, 1996. The arbitrator’s remuneration will be fixed according to the Act’s schedule.
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: 23rd April 2025
