M/S Duro Felguera S.A v. M/S. Gangavaram Port Limited

Arbitration Petition · 2017 INSC 1026Decided 10 Oct 2017
Arbitration Petition No. 31 of 2016 and Transfer Cases No. 25-28 of 2017
Justice R. Banumathi · Justice Kurian Joseph

Background

A Spanish company, Duro Felguera, and its Indian subsidiary had entered into six separate contracts (five works-package agreements plus one corporate guarantee) with an Indian port operator for expanding Gangavaram Port's coal-handling facilities. When disputes arose, both sides filed competing petitions asking the Supreme Court to appoint arbitrators, disagreeing over whether a single combined arbitral tribunal should resolve everything together or whether separate tribunals were needed for the separate agreements.

Decision Breakdown

The Supreme Court held that after the 2015 amendment introducing Section 11(6A), a court asked to appoint an arbitrator may only check whether a valid arbitration agreement exists: it must not go further into the merits, limitation, or other such questions, which are left entirely to the arbitral tribunal itself. Applying this, since there were six distinct contracts each with its own arbitration clause, the Court held that six separate arbitral tribunals had to be constituted (the same individuals could serve as arbitrators across them): two for the international commercial arbitration involving the Spanish parent, and four for the domestic disputes involving the Indian subsidiary. Both arbitration petitions and all the connected transfer cases were allowed/disposed of on this basis.

Lesson Learnt

Since the 2015 amendment, a court's role in appointing an arbitrator is deliberately narrow, limited to confirming an arbitration agreement exists, and where a commercial relationship is spread across several separate contracts, each with its own arbitration clause, parties should expect separate arbitral tribunals for each contract rather than one combined proceeding, even if the disputes are commercially related.

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