Case Note & Summary
The Supreme Court allowed appeals against a Bombay High Court order that had dismissed applications under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator. The appellant, a proprietary concern in real estate, had entered into a Development Agreement on 20.12.2011 with Respondents, which contained an arbitration clause (Clause 36). Subsequently, the appellant entered into separate Permanent Alternate Accommodation Agreements with the society and its members, including the five respondents. These later agreements contained Clause 14, which stated that all terms and conditions of the Development Agreement shall be construed to form part of the later agreements and all clauses thereof shall be binding on the parties. When disputes arose, the appellant invoked the arbitration clause, but the respondents refused, leading to Section 11 applications before the High Court. The High Court held that there was no arbitration agreement between the appellant and the respondent members, as the arbitration clause was only in the Development Agreement and not in the later agreements, and mere reference was insufficient under Section 7(5) of the Arbitration Act. The Supreme Court reversed this decision, holding that Clause 14 clearly indicated an intention to incorporate the entire Development Agreement, including the arbitration clause, into the later agreements. The court relied on the precedent in M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited, which distinguished between mere reference and incorporation. The court found that the language in Clause 14 was not a mere reference but an express incorporation of all terms and conditions of the Development Agreement. Consequently, the Supreme Court set aside the High Court's order, allowed the appeals, and appointed Mr. Vishal Kanade as the sole arbitrator to resolve the disputes between the appellant and the respondent members, directing him to make a declaration under Section 12 of the Arbitration Act within fifteen days.
Headnote
A) Arbitration Law - Incorporation of Arbitration Clause by Reference - Section 7(5) Arbitration and Conciliation Act, 1996 - The court examined whether a clause in later agreements stating that all terms and conditions of an earlier Development Agreement shall form part of the later agreements and be binding on the parties is sufficient to incorporate the arbitration clause from the earlier agreement. Held that such clear language indicates an intention to incorporate the entire earlier document, including the arbitration clause, into the later agreements (Paras 8-12). B) Arbitration Law - Distinction Between Mere Reference and Incorporation - Section 7(5) Arbitration and Conciliation Act, 1996 - The court distinguished between a mere reference to another document and an incorporation of that document in entirety. Relying on M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited, the court held that where the later contract states that all terms and conditions of the earlier document shall form part of the contract, the arbitration clause in the earlier document gets incorporated (Paras 9-11). C) Arbitration Law - Appointment of Arbitrator - Section 11 Arbitration and Conciliation Act, 1996 - The court set aside the High Court's order dismissing Section 11 applications and appointed a sole arbitrator to resolve disputes between the appellant and respondent members, holding that an arbitration agreement existed by incorporation (Paras 13).
Issue of Consideration
Whether an arbitration clause contained in a Development Agreement is incorporated into subsequent Permanent Alternate Accommodation Agreements by virtue of a clause stating that all terms and conditions of the Development Agreement shall form part of the later agreements.
Final Decision
The Supreme Court allowed the appeals, set aside the High Court's common order dated 26.06.2025, and appointed Mr. Vishal Kanade as the Sole Arbitrator to resolve disputes between the appellant and the respondent members. The learned Arbitrator shall make his declaration under Section 12 of the Arbitration Act within fifteen days from receipt of a copy of the order and shall be entitled to fees as per the Fourth Schedule.
Law Points
- Incorporation of arbitration clause by reference
- Section 7(5) Arbitration and Conciliation Act
- 1996
- Clear intention to incorporate entire document
- Distinction between mere reference and incorporation
