The petitioner, Johnson Controls Hitachi, sought the appointment of an arbitrator to resolve disputes arising from ten work orders issued under a single Letter of Intent (LOI). As stated in the LOI dated November 16, 2015, a composite offer of Rs. 12,35,00,000 — inclusive of material, labor, taxes (excluding VAT and service tax), and incidental charges — was accepted by Shapoorji Pallonji. The work orders followed for projects at Jalpaiguri, Gopiballavpur, Egra, Panskura, and Ghatal.
Highlighting the unified nature of the transaction, Justice Shampa Sarkar observed,
"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 a part of the single transaction."
The court was convinced by evidence such as emails and payment negotiations that demonstrated consolidated dealings, despite separate work orders being issued for each hospital site. In particular, Johnson Controls argued that the correspondence showed continuous negotiations for composite payments, with partial payments already received.
In opposition, Shapoorji Pallonji’s counsel argued that separate arbitrations should occur for each work order, emphasizing that different sites and independent dispute resolution clauses necessitated distinct proceedings. They further contended that some claims were inadmissible.
However, referring to the Supreme Court’s landmark rulings in Perkins Eastman Architects DPC vs. HSCC (India) Ltd. and Central Organisation for Railway Electrification vs. ECI SPIC SMO MCML (JV), the High Court reiterated the importance of impartial and independent arbitral proceedings. Justice Sarkar cited the apex court’s view:
"Equal participation of parties at the stage of the appointment of arbitrators can obviate later challenges to arbitrators."
Further emphasizing procedural fairness, the judgment noted:
"The principle of equal treatment of parties applies at all stages of arbitral proceedings, including the stage of appointment of arbitrators."
Given these precedents and the unified nature of the transaction, the court appointed Mr. Shashwat Nayak, Advocate, as the sole arbitrator to adjudicate the dispute. His appointment is subject to compliance with Section 12 of the Arbitration and Conciliation Act, 1996, and he will fix his fees in accordance with the prescribed Schedule.
Justice Sarkar concluded that a composite arbitration would be beneficial for both parties, helping avoid fragmented litigation and ensuring consistency in resolving the underlying commercial issues.
The court also granted liberty to the respondent’s counsel to file a Vakalatnama within ten days.
This ruling strengthens India’s commercial arbitration framework by reinforcing party equality, procedural fairness, and the need for independent dispute resolution — key pillars crucial for maintaining investor confidence in Indian infrastructure projects.
Read The Judgment Here
keywords: Composite arbitration, Calcutta High Court, Rs. 12.35 crore dispute, HVAC project, Shapoorji Pallonji, Johnson Controls Hitachi.
