Case Note & Summary
The present civil appeal arose from an order of the Jharkhand High Court rejecting an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an independent arbitrator. The appellant, Giriraj Garg, was a registered buyer under the 2007 Scheme issued by Coal India Ltd. for e-auction of coal. He participated in e-auctions from 2012 to 2015 and was declared successful for various coal orders. He deposited earnest money and coal value as per the scheme. However, he was unable to lift the booked quantity within the stipulated 45 days, leading to forfeiture of his earnest money by the respondents. Disputes arose, and the appellant invoked the arbitration clause contained in Clause 11.12 of the 2007 Scheme. The respondents failed to appoint an arbitrator, prompting the appellant to file an application under Section 11 before the High Court. The High Court rejected the application on the ground that the sale orders did not contain an arbitration clause and did not specifically refer to the 2007 Scheme, so the arbitration clause could not be incorporated by reference. The Supreme Court examined the sale order, which contained Standard Terms and Conditions, including Clause 7 stating that the sale order would be governed by guidelines, circulars, notices, instructions issued by Coal India Ltd. and others. The Court held that this constituted a general reference to the 2007 Scheme, which contained an arbitration clause. Relying on Section 7(5) of the 1996 Act and international jurisprudence, the Court held that a general reference to a document containing an arbitration clause is sufficient to incorporate the clause into the contract, especially in a single contract case where the document is a standard form contract. The Court set aside the High Court order and appointed a former Judge of the Supreme Court as the sole arbitrator to adjudicate the disputes.
Headnote
A) Arbitration Law - Incorporation by Reference - Section 7(5) Arbitration and Conciliation Act, 1996 - General reference to a document containing an arbitration clause is sufficient to incorporate the clause into the contract - The Court held that Clause 7 of the sale order, which stated that the sale order would be governed by guidelines, circulars, notices, instructions issued by Coal India Ltd., etc., constituted a general reference to the 2007 Scheme, which contained an arbitration clause. Therefore, the arbitration clause was incorporated by reference into the sale orders. (Paras 4-7) B) Arbitration Law - Appointment of Arbitrator - Section 11(6) Arbitration and Conciliation Act, 1996 - Where the arbitration clause provides for appointment by a party, and that party fails to appoint, the court may appoint an independent arbitrator - The Court set aside the High Court order and appointed a former Judge of the Supreme Court as the sole arbitrator to adjudicate the disputes between the parties. (Paras 8-9)
Issue of Consideration
Whether the arbitration clause contained in the 2007 Scheme for coal distribution through e-auction stands incorporated by reference in each of the sale orders issued to the appellant.
Final Decision
Appeal allowed. Impugned order set aside. Justice A.K. Patnaik, former Judge of Supreme Court, appointed as sole arbitrator to adjudicate disputes between parties. Arbitration to be conducted at Kolkata as per Clause 11.12.
Law Points
- Incorporation by reference
- Arbitration agreement
- Section 7(5) Arbitration and Conciliation Act 1996
- General reference sufficient for standard form contracts
