Whether disputes arising out of distinct contract for different work can be referred to single arbitral tribunal?
7. Arbitration agreement.--(1).....
(5) The reference in a contract to a document containing an arbitration Clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration Clause part of the contract.
As per Section 7(5) of the Act, even though the contract between the parties does not contain a provision for arbitration, an arbitration Clause contained in an independent document will be imported and engrafted in the contract between the parties, by reference to such independent document in the contract, if the reference is such as to make the arbitration Clause in such document, a part of the contract. Section 7(5) requires a conscious acceptance of the arbitration Clause from another document, as a part of their contract, before such arbitration Clause could be read as a part of the contract between the parties. The question whether or not the arbitration Clause contained in another document, is incorporated in the contract, is always a question of construction of document in reference to intention of the parties. The terms of a contract may have to be ascertained by reference to more than one document.
48. In M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited MANU/SC/1150/2009 : (2009) 7 SCC 696, the Supreme Court held that even though the contract between the parties does not contain a provision for arbitration, an arbitration Clause contained in an independent document will be incorporated into the contract between the parties, by reference, if the reference is such as to make the arbitration Clause in such document, a part of the contract. In M.R. Engineers and Contractors Private Limited (supra), this Court held as under:
13........Having regard to Section 7(5) of the Act, even though the contract between the parties does not contain a provision for arbitration, an arbitration Clause contained in an independent document will be imported and engrafted in the contract between the parties, by reference to such independent document in the contract, if the reference is such as to make the arbitration Clause in such document, a part of the contract.
22. A general reference to another contract will not be sufficient to incorporate the arbitration Clause from the referred contract into the contract under consideration. There should be a special reference indicating a mutual intention to incorporate the arbitration Clause from another document into the contract. The exception to the requirement of special reference is where the referred document is not another contract, but a standard form of terms and conditions of trade associations or regulatory institutions which publish or circulate such standard terms and conditions for the benefit of the members or others who want to adopt the same.
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24. The scope and intent of Section 7(5) of the Act may therefore be summarised thus:
(i) An arbitration Clause in another document, would get incorporated into a contract by reference, if the following conditions are fulfilled:
(1) the contract should contain a clear reference to the documents containing arbitration clause,
(2) the reference to the other document should clearly indicate an intention to incorporate the arbitration Clause into the contract,
(3) the arbitration Clause should be appropriate, that is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract.
(ii) When the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration Clause from the referred document into the contract between the parties. The arbitration Clause from another contract can be incorporated into the contract (where such reference is made), only by a specific reference to arbitration clause.
(iii) Where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration Clause also.
(iv) Where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (as for example the standard terms and conditions of a trade association or architects association) will bind them or apply to the contract, such standard form of terms and conditions including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions.
(v) Where the contract between the parties stipulates that the conditions of contract of one of the parties to the contract shall form a part of their contract (as for example the general conditions of contract of the Government where the Government is a party), the arbitration Clause forming part of such general conditions of contract will apply to the contract between the parties.
49. Considering the MoU, in light of the above ratio, as pointed out earlier, in the MoU, Original Package No. 4 Tender Document is merely referred only to have more clarity on technical and execution related matters and the parties agreed that the works shall be carried out as per the priority of the documents indicated thereon. Mere reference to Original Package No. 4 Tender Document in the sequence of priority of documents (as serial No. 4) indicates that the documents Original Package No. 4 TD containing arbitration Clause was not intended to be incorporated in its entirety but only to have clarity in priority of the documents in execution of the work. Be it noted that Original Package No. 4 TD occurs as Serial No. 4 in sequence, after three other documents viz...,
(i) Annexure 1 to the Letter of Award issued for Package No. 4 Contract; and (ii) Annexure III to the Letter of Award issued for Packages No. 4, 6, 7, 8 and 9 contracts; and (iii) Clarifications/Addendums No. 1 to 4 (in the descending order) issued by the Employer to the Original Package No. 4 Tender Document.
There are a number of contract agreements between the parties-GPL, Duro Felguera and FGI. It is pertinent to note that MoU dated 11.08.2012 itself does not contain an arbitration clause. When reference is made to the priority of documents to have clarity in execution of the work, such general reference to Original Package No. 4 Tender Document will not be sufficient to hold that the arbitration Clause 20.6 in the Original Package No. 4 TD is incorporated in the MoU.
50. The submission of GPL is that since reference to Original Package No. 4 TD is made in MoU, the arbitration Clause is incorporated in the MoU and there has to be a 'composite reference' for settling the disputes under different contracts by constitution of single arbitral tribunal for dealing with the international commercial arbitration. As discussed earlier, as per the amended provision of Sub-section (6A) of Section 11, the power of the court is only to examine the existence of arbitration agreement. When there are five separate contracts each having independent existence with separate arbitration clauses that is New Package No. 4 (with foreign company Duro Felguera) and Packages No. 6, 7, 8 and 9 [with Indian subsidiary (FGI)] based on MoU and Corporate Guarantee, there cannot be a single arbitral tribunal for "International Commercial Arbitration".
IN THE SUPREME COURT OF INDIA
Arbitration Petition Nos. 30, 31 of 2016, T.C. (C) Nos. 25, 26, 27 and 28 of 2017
Decided On: 10.10.2017
Duro Felguera S.A.Vs. Gangavaram Port Limited
Hon'ble Judges/Coram:
Kurian Joseph and R. Banumathi, JJ.
Citation:(2017) 9 SCC 729.
