Arbitration Act Judicial Pronouncement Update
Arbitration Act Judicial Pronouncement Update
Reference in one contract to the terms and conditions of the other contract would not ipso facto make the arbitration clause applicable unless there is a specific mention/reference thereto.
Case Law: 19.03.2024 NBCC (India) Limited versus Zillion Infra Projects Pvt. Ltd. Supreme Court
Facts:
The appellant, NBCC (India) Limited is a Government of India undertaking, engaged in construction of power plants and other infrastructure projects. The respondent, M/s Zillion Infraprojects Pvt. Ltd. is engaged in the construction and infrastructure sector. The appellant issued an Invitation to tender majorly for Construction of the Weir. The Respondent submitted the bid and appellant awarded the contract for Construction of the Weir to the respondent. A dispute arose and the respondent issued a notice invoking arbitration and further seeking consent for the appointment of a former Judge of a High Court, as Sole Arbitrator. The appellant did not respond so the respondent filed an application at the High Court under Section 11(6) of the Arbitration Act. The High Court confirmed the proposed appointment of the former Judge ofthe Delhi High Court, as theSole Arbitrator. Aggrieved by the orders, the appellant filed the appeals before Supreme Court.
Issue:
Learned Senior Counsel inter alia submitted before the Supreme Court that a mere reference to the terms and conditions without there being an incorporation in the L.O.I. would not make the lis between the parties amenable to the arbitration proceedings. Relying on the judgment of Supreme Court in the case of M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited, he submitted that unless the L.O.I. specifically provides for incorporation of the arbitration clause, a reference to the arbitration proceedings would not be permitted in view of the provisions of sub-section (5) of Section 7 of the Arbitration Act.
Decision:
The Hon’ble Supreme Court held that: “when there is a reference in the second contract to the terms and conditions of the first contract, the arbitration clause would not ipso facto be applicable to the second contract unless there is a specific mention/reference thereto.
We are of the considered view that the present case is not a case of ‘incorporation’ but a case of ‘reference’. As such, a general reference would not have the effect of incorporating the arbitration clause. In any case, Clause 7.0 of the L.O.I., which is also a part of the agreement, makes it amply clear that the redressal of the dispute between the NBCC and the respondent has to be only through civil courts having jurisdiction of Delhi alone.”
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