Arbitration and Conciliation Act, 1996:
s. 7(5) – Arbitration clause – Incorporation by reference – Failure of respondent to appoint an arbitrator as per clause 11.12 of the 2007 Scheme, pursuant to dispute between the parties pertaining to sale orders – Application for appointment of independent arbitrator by the appellant – Rejection by the Single Judge of the High Court stating that the arbitration clause contained in the 2007 Scheme, could not be incorporated by reference in each of the sale orders entered into between the parties – On appeal, held: Arbitration agreement need not be in the form of a clause in the substantive contract itself – It could be an independent agreement; or it could be incorporated by reference either from a parent agreement, or by reference to a standard form contract – On facts, arbitration clause 11.12 in 2007 Scheme stands incorporated in the sale orders issued thereunder – Words “in relation thereto” used in Clause 11.12 indicate that the clause would apply to all transactions which took place under the 2007 Scheme, including the sale transactions – Thus, the view taken by the Single Judge is erroneous, and is set-aside.
Allowing the appeal, the Court
HELD: 1.1 The principle of incorporation by reference of an arbitration clause, from another document or contract is a wellestablished principle in arbitration jurisprudence and has been given statutory recognition in sub-section (5) of Section 7 of the Arbitration and Conciliation Act, 1996 Act. Section 7(5) states that the reference in a contract to a document containing an arbitration clause, constitutes a valid arbitration agreement, if the contract is in writing, and the reference is specifically made to incorporate the arbitration clause as a part of the contract. The arbitration agreement need not necessarily be in the form of a clause in the substantive contract itself. It could be an independent agreement; or it could be incorporated by reference either from a parent agreement, or by reference to a standard form contract. [Paras 4.1-4.3][244-G-H, 245-A-C]
1.2 In the instant case, the Single Judge in the impugned order erroneously took the view that an arbitration clause would not stand incorporated in the individual sale orders entered into by the Respondent No. 2-Coal Company and the appellant. The individual sale orders emanate out of the 2007 Scheme. The sale orders specifically state that they would be governed by the guidelines, circulars, office orders, notices, instructions, relevant law etc. issued from time to time by Coal Company. As a consequence, the arbitration clause (i.e. Clause 11.12) in the 2007 Scheme would stand incorporated in the sale orders issued thereunder. Clause 7 in the sale orders falls under the ‘single contract case’ where the arbitration clause is contained in a standard form document i.e. the 2007 Scheme, to which there is a reference in the individual sale orders issued by Respondent No. 2.[Para 5][252-C-E]
1.3 The words “in relation thereto” used in Clause 11.12 of the 2007 Scheme indicate that the clause would apply to all transactions which took place under the 2007 Scheme. This would include the sale transactions in the instant case. The view taken by the Single Judge is erroneous, and is set-aside. [Paras 5.1, 5.2][253-D]
1.4 The parties consensually agreed to appoint a Retired Judge of the Calcutta High Court as Sole Arbitrator to adjudicate the disputes which have arisen between the Appellant and Respondent No. 2, under the 2007 Scheme. His appointment of would be subject to the disclosure and declaration made, as per the Sixth Schedule to the Arbitration and Conciliation Act, 1996 (as amended by the 2015 Amendment Act). [Para 6][253-E-F] Alimenta SA v. National Agriculture Co-op Marketing Federation of India Ltd.(1987) 1 SCC 615 : [1987] 1 SCR 957; M.R. Engineers & Contractors Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696 : [2009] 10 SCR 373; Inox Wind Ltd. v. Thermocables Ltd. (2018)
2 SCC 519 : [2018] 1 SCR 86; Renusagar Power Co. Ltd. v. General Electric Company and Anr [1985]1 SCR 432; Doypack Systems Pvt. Ltd. v. Union of India and Ors. 1988 (36) ELT 201 (SC) – referred to.
Clements v. Devon Country Insurance Committee, [1918]
1 KB 94; Macleod Ross and Co. Ltd. v. Compagnie d’ Assurances Generales L’Helvetia of St Gall, [1952] 1 All ER 331, 334 : [1952] 1 Lloyd’s Rep 12 (CA); Sea Trade Maritime Corporation v. Hellenic Mutual War Risks Association (Bermuda) Limited, The Athena [2006] EWHC 2530 (Comm); Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal SAL [2010] EWHC 29 (Comm); SEA2011 Inc. v. ICT Ltd. [2018] EWHC 520 (Comm) – referred to.
International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions by Dr. Peter Binder 3rd Edn., 2010, Sweet & Maxwell p 86, para 2-022; Arbitration by Russell 24th Edn. 2015, Sweet & Maxwell pp. 52-54, para 2-049; p. 82, para 2-103 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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