Case Note & Summary
The dispute originated from agreements between a banking company incorporated under South Korean laws (petitioner) and the respondent concerning office premises in Mumbai. On 5 August 2011, the parties entered into a Leave and License agreement and an Amenities agreement. Upon expiry, a fresh Leave and Licence agreement was executed on 1 July 2016 for two years, followed by an Amenities agreement on 25 August 2016. The petitioner terminated both agreements on 22 March 2017, with possession handed over on 13 June 2017. Disputes arose over refund of security deposits and claims for outstanding license fees, leading to the petitioner invoking arbitration on 9 October 2017. The respondent denied the existence of an arbitration agreement, prompting the petitioner to file an arbitration petition under Section 11 of the Arbitration and Conciliation Act, 1996 before the Supreme Court after withdrawing from the Bombay High Court due to the arbitration being an international commercial arbitration. The core legal issue was whether an arbitration agreement existed between the parties, specifically whether the arbitration clause in the Amenities agreement was incorporated into the Leave and Licence agreement. The respondent argued that only the Amenities agreement contained an arbitration clause, not the Leave and Licence agreement, and that the petitioner should seek reference under Section 8 in a suit filed by the respondent. The petitioner contended that the Amenities agreement's terms, including the arbitration clause, were incorporated into the Leave and Licence agreement. The court analyzed Clause 1 of the Amenities agreement, which stated that its provisions were an integral part of the Leave and Licence agreement and that all provisions of the Leave and Licence agreement applied mutatis mutandis to the Amenities agreement. Applying Section 7(5) of the Arbitration and Conciliation Act, 1996 and the precedent in M R Engineers and Contractors Private Limited vs Som Datt Builders Limited, the court held that the arbitration clause in the Amenities agreement was incorporated into the Leave and Licence agreement because the agreement intended to make all terms of the Amenities agreement part of the Leave and Licence agreement, not merely referencing it. The court rejected the respondent's argument to relegate the petitioner to Section 8 proceedings, finding no merit. Consequently, the court allowed the arbitration petition, referred the disputes to arbitration, and appointed Dr (Mrs) Shalini Phansalkar-Joshi as the sole arbitrator, directing her to decide fees and modalities.
Headnote
A) Arbitration Law - Arbitration Agreement - Incorporation by Reference - Arbitration and Conciliation Act, 1996, Section 7(5) - Dispute arose regarding existence of arbitration agreement between parties - Court examined whether arbitration clause in Amenities agreement was incorporated into Leave and Licence agreement - Held that Clause 1 of Amenities agreement made all its terms an integral part of Leave and Licence agreement, thus incorporating arbitration clause - Reference to arbitration was necessitated (Paras 15-20). B) Arbitration Law - Appointment of Arbitrator - Section 11 Arbitration and Conciliation Act, 1996 - Petitioner sought appointment of arbitrator after respondent denied existence of arbitration agreement - Court rejected respondent's submission that petitioner should pursue remedy under Section 8 - Held that clear contract terms required reference to arbitration and appointed sole arbitrator (Paras 20-21).
Issue of Consideration
Whether there exists an arbitration agreement between the parties, specifically whether the arbitration clause in the Amenities agreement dated 25 August 2016 was incorporated into the Leave and Licence agreement dated 1 July 2016.
Final Decision
Arbitration Petition allowed. Disputes referred to sole arbitration of Dr (Mrs) Shalini Phansalkar-Joshi. Arbitrator to decide fees and modalities. Registrar (Judicial) to transmit order copy to arbitrator.
Law Points
- Incorporation of arbitration clause by reference under Section 7(5) of Arbitration and Conciliation Act
- 1996
- Interpretation of contract terms
- Distinction between mere reference and incorporation of document
- Principle from M R Engineers and Contractors Private Limited vs Som Datt Builders Limited
