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TMI Blog2018 (2) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. In Alimenta S.A. v. National Agricultural Coop. Mktg. Federation of India Ltd. [1987 (1) TMI 482 - SUPREME COURT OF INDIA], the question was as to whether the arbitration clause in Fosfa-20 was incorporated in the first contract by way of clause 11 and in the second contract by virtue of clause 9. The Court held that while the arbitration clause was incorporated in the first contract, the same was not incorporated in the second contract. Appeal dismissed - decided against appellant. - Civil Appeal No. 2439 of 2018, (Arising Out of SLP (Civil) No. 29519 of 2015) - - - Dated:- 23-2-2018 - Mr. A.K. Sikri And Mr. Ashok Bhushan JJ. For the Petitioner(s) : Mr. Baij Nath Patel, Adv., Ms. Sweta, Adv., Ms. Romila, Adv., Mr. Sridhar Potaraju, AOR, Mr. Prabhat Kumar, Adv., Ms. Sindoora VNL, Adv., Ms. Ankita Sharma, Adv., Mr. Udai Khanna, Adv. And Mr. Arjun Singh, Adv. For the Respondent(s) : Mr. R. Sathish, AOR JUDGMENT A.K. SIKRI, J. Leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of existence of arbitration agreement. 4) Insofar as the appellant s petition under Section 11 of the Act is concerned, it was contested by the respondent taking the objection to the maintainability of the petition on the ground of absence of any agreement. The High Court has vide impugned orders dated September 18, 2015 dismissed the said petition of the appellant upholding the contention of the respondent that there is no arbitration agreement between the parties and, therefore, remedy under the Act for appointment of arbitrator or constitution of Arbitral Tribunal is not available. 5) It may be clarified at this juncture that Agreement dated July 29, 2009 entered into between the appellant and the respondent does not contain any arbitration clause. There is no independent arbitration agreement between the parties either. However, case set up by the appellant was that this Agreement dated July 29, 2009 entered into between the parties, by implication, incorporates the arbitration agreement that is contained in the Agreement dated March 14, 2008 that was entered into between the EPC Contractor and the respondent. 6) Indubitably, clause 45 of the Agreement dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be applicable.'' 8) It is, thus, argued by the learned counsel for the appellant that as per the aforesaid clause, when the appellant had agreed and undertaken to execute the work as per contract specified in the contract document and the said clause also specifically provided that all the special conditions of the contract, specifications etc. relating to the works and qualities specified in the relevant agreement between the construction contractor and the employer are binding on the respondent, the clause relating to arbitration agreement i.e. 45 entered into between EPC Contractor and the respondent also became applicable by incorporation. It was submitted that the aforesaid clause read with clause 9.10 of Annexure 1 which categorically mentions that in respect of items which are not mentioned in the Agreement clauses, terms and conditions of the Agreement between the Contractor and EPC Concessionaire will be applicable, would also lead to same result. 9) These very arguments were raised before the High Court. The appellant had also referred to certain communications addressed by it to the respondent before invoking legal remedy wherein it has stated that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10) The High Court also drew distinction between the reference to the another document and incorporation of another document in a contract by reference, which has been explained by this Court in M.R. Engineers and Contractors Private Limited v. Som Datt Builders Ltd. (2009) 7 SCC 696 and held that, in the instant case, there was only a reference to another document with no intention to incorporate the arbitration clause thereof in a contract between the parties. 11) Questioning the aforesaid approach of the High Court, learned counsel for the appellant submitted that when the appellant was required to execute the work on the terms and conditions contained in the principal agreement, it was clear intention to incorporate all the terms including clause 45.3. Additionally, he referred to clause 8.7 of the agreement between the parties which stipulates as under: 8.7 Other terms related to Termination of work will be same as Agreement between EPC, Concessionaire and Construction contractor. 12) His submission was that when the terms related to termination of work contained in the Agreement between EPC, Concessionaire and the respondent were to govern their a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the judgments of this Court in Larsen Toubro Limited v. Mohan Lal Harbans Lal Bhayana (2015) 2 SCC 461 and Sharma and Associates Contractors Private Limited v. Progressive Constructions Limited (2017) 5 SCC 743 . 14) After considering the respective submissions, we are inclined to agree with the respondent and, therefore, do not find any fault with the impugned judgment of the High Court. 15) In M.R. Engineers and Contractors Private Limited case, this Court considered the true intent and scope of Section 7 of the Act which deals with arbitration agreement . Relevant portion of Section 7 reads as under: 7. Arbitration agreement.-(1) In this Part, arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. xxx xxx xxx (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. 16) As per sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract. Therefore when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific portions of the said document for application to the contract. 17) After some further discussion on this aspect with reference to the existing case law as well as extracts from Russell on arbitration, the Court summed up the position as under: 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 19) In Alimenta S.A. v. National Agricultural Coop. Mktg. Federation of India Ltd. (1987) 1 SCC 615 , the question was as to whether the arbitration clause in Fosfa-20 was incorporated in the first contract by way of clause 11 and in the second contract by virtue of clause 9. The Court held that while the arbitration clause was incorporated in the first contract, the same was not incorporated in the second contract. How the matter has to be looked into, for determining the same, was discussed in the following manner: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the facts of M.R. Engineers and Contractors Private Limited , the Court held that there was no incorporation of arbitration clause. Following discussion throws light to decide the issue in this case as well: 37. In the present case the wording of the arbitration clause in the main contract between the PW Department and the contractor makes it clear that it cannot be applied to the sub-contract between the contractor and the sub-contractor. The arbitration clause in the main contract states that the disputes which are to be referred to the committee of three arbitrators under Clause 67.3 are disputes in regard to which the decision of the Engineer ( Engineer refers to person appointed by the State of Kerala to act as Engineer for the purpose of the contract between the PW Department and the respondent) has not become final and binding pursuant to Clause 67.1 or disputes in regard to which amicable settlement has not been reached between the State of Kerala and the respondent within the period stated in Clause 67.2. Obviously neither Clause 67.1 nor 67.2 will apply as the question of Engineer issuing any decision in a dispute between the contractor and the sub-contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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