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SUPREME COURT OF INDIA
B.R. GAVAI, SANDEEP MEHTA, JJ.
NBCC (India) Limited – Appellant
Versus
Zillion Infraprojects Pvt. Ltd. – Respondent
Civil Appeal No. 4417-4418 of 2024, Arising Out of Special Leave Petition (Civil) Nos. 7573-7574 of 2021
Decided On : 19-03-2024
Arbitration and Conciliation Act 1996 – Section 11(6) – Appointment of Sole Arbitrator – Reference to document in the contract should be such that shows intention to incorporate arbitration clause contained in the document into the contract – When parties enter into a contract, making a general reference to another contract, such general reference would not have effect of incorporating arbitration clause from referred document into contract between parties – When there is a reference in second contract to terms and conditions of first contract, arbitration clause would not ipso facto be applicable to second contract unless there is a specific mention/reference thereto – Present case is not a case of incorporation but a case of reference – As such, a general reference would not have effect of incorporating arbitration clause – Redressal of dispute between NBCC and respondent has to be only through Civil Courts having jurisdiction of Delhi alone – Impugned orders quashed and set aside. (Paras 10, 13, 22, 23, 24 and 25)
Facts of the case:
Present appeals challenge interim order dated 12th March 2021 and final judgment & order dated 9th April 2021, passed by Single Judge of High Court of Delhi, in Arbitration Petition whereby High Court allowed application under Section 11(6) of the Arbitration & Conciliation Act 1996 and appointed the Sole Arbitrator to adjudicate the dispute between the parties.
Findings of Court:
Single Judge of Delhi High Court has erred in allowing the application of the respondent. Impugned orders are quashed and set aside. There shall be no order as to costs.
Result : Appeals allowed.
JUDGMENT :
B.R. GAVAI, J.
1. Leave granted.
2. The present appeals challenge the interim order dated 12th March 2021 and final judgment & order dated 9th April 2021, passed by the learned Single Judge of the High Court of Delhi (hereinafter, “High Court”), in Arbitration Petition (Arb. Pet.) No. 44 of 2021, whereby the High Court allowed the application under Section 11(6) of the Arbitration & Conciliation Act 1996 (hereinafter referred to as, “the Arbitration Act”) and appointed the Sole Arbitrator to adjudicate the dispute between the parties to the present lis, arising from the Letter of Intent dated 4th December 2006.
3. Facts, in brief, giving rise to the present appeals are as follows:
3.2 The respondent, M/s Zillion Infraprojects Pvt. Ltd. (Formerly known as Durha Constructions Pvt. Ltd.), is a Private Limited Company, engaged in the construction and infrastructure sector.
3.3 The appellant issued an invitation for tender, being NIT No. 01-WEIR/06 dated 3rd November 2006, for “Construction of Weir with Allied Structures across river Damodar at DVC, CTPS, Chandrapura, Dist – Bokaro, Jharkhand - Package “A” (hereinafter referred to as, “Construction of the Weir”), containing inter-alia, the General Conditions of Contract, Special Conditions of Contract, Bill of Quantity, etc. (collectively referred to as, “Tender Documents”).
3.4 In response to the aforementioned tender, the Respondent submitted its Techno Commercial Bid on 16th November 2006.
3.5 On fulfilment of the tender criteria, vide Letter of Intent No. AGM/RAN/CTPS-AWARD/06/1660 dated 4th December 2006, the appellant awarded the contract for Construction of the Weir to the respondent for a total value of Rs. 19,08,46,612/-.
3.6 With the passage of time, certain disputes arose between the parties to the present lis & as a result, the respondent issued a notice dated 6th March 2020, in terms of Clause 3.34 of Section III Volume II of the Tender Documents (GCC), thereby invoking arbitration and further seeking consent of the appellant for the appointment of a former Judge of a High Court, as Sole Arbitrator.
3.7 The appellant did not respond to the aforementioned notice invoking arbitration, so the respondent filed an application at the High Court under Section 11(6) of the Arbitration Act.
3.8 Vide interim order dated 12th March 2021, the High Court allowed the Arbitration Petition and proposed the appointment of a former Judge of the High Court, as the Sole Arbitrator, to adjudicate the dispute between the parties.
3.9 Vide final judgment & order dated 9th April 2021, the High Court confirmed the proposed appointment of the former Judge of the Delhi High Court, as the Sole Arbitrator.
3.10 Aggrieved by the orders of the learned single judge of the High Court, the appellant filed the present appeals thereby challenging both the interim order and the final judgment and order.
3.11 This Court vide order dated 23rd July, 2021, issued notice and stay of further proceedings of the arbitration was granted.
4. We have heard Shri Gopal Sankaranarayanan, learned Senior Counsel appearing on behalf of the appellant and Shri Sumit Kumar, learned counsel appearing on behalf of the respondent.
5. Shri Gopal Sankaranarayanan, learned Senior Counsel appearing for the appellant submits that the High Court has grossly erred in invoking its power under Section 11(6) of the Arbitration Act. It is submitted that Clause 2.0 of the Letter of Intent dated 4th December 2006 (“L.O.I.” for short) though states that all terms and conditions as contained in the tender issued by the Damodar Valley Corporation (“DVC” for short) to the NBCC shall apply mutatis mutandis, it also makes it clear that where the terms and conditions have been express
Appointment of Sole Arbitrator – When there is a reference in second contract to terms and conditions of first contract, arbitration clause would not ipso facto be applicable to second contract unles....
The existence of an arbitration agreement under Section 11 requires clear indication of a binding contract, which was absent in this case; the Letter of Intent was merely a precursor to an actual con....
The main legal point established in the judgment is that for the incorporation of an arbitration clause from another document, there must be a clear intention of the parties to incorporate the clause....
The Court's jurisdiction under Section 11(6) of the 1996 Act is limited to examining the existence and validity of an arbitration agreement, and the Court may reject claims that are manifestly non-ar....
(1) Arbitration – Parties to arbitration agreement have autonomy to decide not only on procedural law to be followed but also substantive law – A party cannot claim anything more than what is covered....
The Court's decision emphasizes the need to examine each agreement independently for the existence of an arbitration agreement, and the importance of demonstrating the intention of the parties regard....
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