Arbitration and Conciliation Act, 1996 – s. 7(5) – Incorporation of arbitration clause in contract by reference – If made out – National Highway Authority of India entered into Concession agreement, whereby it awarded a contract to M/s. T.K. (Concessionaire) for maintenance of the Project Highway on Build Operate and Transfer (BOT) basis – Concessionaire vide EPC agreement awarded that work to M/s. UE (EPC Contractor) – EPC Contractor, in turn, executed a Construction agreement with respondent to execute the works as per terms and conditions entailed in that agreement – Respondent sub-contracted the work to the appellant – Some dispute arose between the appellant and respondent in connection with execution of the said work – Appellant invoked arbitration – Respondent contended that there was no arbitration agreement – Appellant contended that the agreement entered into between the parties (appellant and respondent), by implication, incorporated the arbitration agreement contained in the agreement entered into between the EPC Contractor and the respondent – High Court held that there was only a reference to another document with no intention to incorporate the arbitration clause thereof in a contract between the parties – Propriety of – Held: Proper – In instant case, it was not intended to make the arbitration clause as a part of the contract between the appellant and the respondent – When the incorporation clause refers to certain particular terms and conditions, only those terms and conditions are incorporated and not the arbitration clause.
Dismissing the appeal, the Court
HELD: 1. As per sub-section (5) of section 7 of Arbitration and Conciliation Act, 1996, an arbitration clause contained in an independent document can also be imported and engrafted in the contract between the parties, by ref erence to such independent document in the contract, even if there is no specific provision for arbitration. However, such a recourse can be adopted only ‘if the reference is such as to make the arbitration clause in such document, a part of the contract.’ [Para 16] [593E-F]
2. The High Court has correctly held that, in the instant case, it was not intended to make the arbitration clause as a part of the contract between the appellant and the respondent. Clause
2 and clause 9.10 are given correct interpretation by the High Court. By these clauses, only those conditions and sub-conditions of the contract, specification etc. which relate to the works and quality are incorporated. Clause 9.10 only talks of ‘items’ which are not mentioned in the contract and terms and conditions relating to the execution of those items are to be taken from the main contracts. Reference to clause 8.7 is also inconsequential. By this clause only, those terms contained in the main agreement which relate to ‘terms of work’ are incorporated. Procedure relating to ‘termination’ is altogether different from resolution of disputes. Dispute may arise even de hors the termination of the contract and is an altogether different aspect, not necessarily connected with the termination of work. [Para 18] [596-B-D] M.R. Engineers and Contractors Private Limited v. Som Datt Builders Ltd. (2009) 7 SCC 696 : [2009] 10 SCR 373; Groupe Chimique Tunisien SA v. Southern Petrochemicals Industries Corpn. Ltd. (2006) 5 SCC
275 : [2006] 2 Suppl. SCR 954; Larsen & Toubro Limited v. Mohan Lal Harbans Lal Bhayana (2015) 2 SCC 461 : [2014] 3 SCR 162; Sharma and Associates Contractors Private Limited v. Progressive
Constructions Limited (2017) 5 SCC 743 – referred to.
Alimenta S. A. v. National Agricultural Coop. Mktg. Federation of India Ltd. (1987) 1 SCC 615 : [ 1987] 1 SCR 957 – relied on.
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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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