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High Court of Judicature at Calcutta
I.P. MUKERJI, J.
Central Business Services Limited
Versus
India Infoline Limited & Another
A.P. No. 712 of 2011
Decided on: 28-02-2014
ARBITRATION - Incorporation of Arbitration Clause - Lease Agreement and Service Agreement - Arbitration Clause in Lease Agreement - Service Agreement Deemed Incorporated in Lease Agreement - Arbitration Clause Applicable to Both Agreements - S. 7(5) of Arbitration & Conciliation Act, 1996.
Fact of the Case:
Central Business Services Limited (petitioner) filed an application under Section 11 of the Arbitration & Conciliation Act, 1996, seeking the appointment of an arbitrator to adjudicate disputes arising from a lease agreement and a service agreement.
Finding of the Court:
The court held that the service agreement, though not containing an arbitration clause, was deemed incorporated into the lease agreement through specific clauses in both agreements, making the arbitration clause in the lease agreement applicable to both agreements. The court also rejected the objection that the petitioner had no locus to sue on the service agreement.
Issues: 1. Whether the arbitration clause in the lease agreement could be incorporated into the service agreement. 2. Whether the petitioner had locus to sue on the service agreement.
Ratio Decidendi: 1. The court relied on S. 7(5) of the Arbitration & Conciliation Act, 1996, which provides that a reference 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. 2. The court also considered the doctrine of incorporation, as explained by the Supreme Court in M.R. Engineers And Contractors Private Limited Vs. Som Datt Builders Limited, and held that the specific clauses in both agreements referring to each other's terms and conditions effectively incorporated the service agreement into the lease agreement, including the arbitration clause.
Final Decision: The court allowed the application and appointed an arbitrator to adjudicate the disputes arising from both the lease agreement and the service agreement.
I.P. Mukerji, J.
1. This application under Section 11 of the Arbitration & Conciliation Act, 1996 is very interesting. It is made by Central Business Services Limited. The other parties are India Infoline Limited, the first respondent and Jain Industrial & Commercial Services Private Limited, described as the proforma respondent. The petitioner wants appointment of an arbitrator by this Court, to adjudicate upon the disputes between the above parties which are said to have arisen from the lease agreement dated 14th January, 2008.
2. Now, this lease agreement was between Central Business Services Limited and India Infoline Limited only. The former was the lessor and whereas the latter, the lessee. The lease was of an office space on the 4th Floor of premises no. 1, Shakespeare Sarani, Kolkata – 1. It contained a super built up area of 22350 sq. ft. The lease is for 9 years commencing from 1st January, 2008 till 31st December, 2016. A monthly rent of Rs.9,38,700/- is payable.
3. Clause 6 of the lease is very important. It states as follows:
“6. This Deed of Lease shall be coextensive with the Service Agreement of even date in respect of the said office whose terms and conditions are incorporated herein by this reference and breach of the said Service Agreement shall constitute and/or be deemed to constitute a breach hereof and vice versa.”
4. Now, this lease also contains an Arbitration Clause which is Clause 25.1. It is set out hereunder:
“25.1 All disputes and difference between the parties hereto at any time hereafter and of any nature whatsoever arising out of or in respect of or in relation to this Deed shall be referred to arbitration in accordance with the provisions of the Arbitration And Conciliation Act, 1996 or any statutory enactment or modification from time to time. However, it is expressly agreed between the parties herein that until adjudication of any dispute by the Arbitrator, the LESSEE shall be liable to make payment of all charges in conformity with the bills that may be raised by the LESSOR and in the event of any sums becoming payable to the LESSEE in terms of Arbitration Award, the same shall be refunded within 15 days from the date of receipt of such Award.”
5. There was a second agreement between the proforma respondent, Jain Industrial & Commercial Services Private Limited and the lessee executed on the same day . In this agreement Jain Industrial & Commercial Services Private Limited was described as the service provider. The proforma respondent was required to provide certain services to the lessee. These services are mentioned in the second schedule to this agreement. They are as follows -
“1. Watch and ward only of the said office.
2. General maintenance only of the said office.”
6. Now, in this agreement the petitioner lessor is not a party. Secondly, this agreement did not contain an arbitration clause.
7. This service agreement also contains the following clause making certain terms deemed to be incorporated in the lease deed. It is Clause 5 and reads as follows:
“5. This Agreement shall be coextensive and co-terminable with the Lease Deed of even date made between Central Business Services Ltd. and the User and a breach hereof shall be considered a breach thereof and vice versa. The terms of this Agreement are deemed to have been incorporated in the Lease Deed by their reference.”
8. The first respondent has taken mainly two objections. The dispute arises out of this service agreement. This agreement was made on 14th January, 2008 between the proforma respondent described as the service provider and the first respondent. The agreement did not contain an arbitration clause. Even Clause 5 of the Service Agreement which stated that the agreement would be co-extensive and co-terminable with the lease deed and that the terms of that agreement would be incorporated in the lease deed, by reference, did not incorporate the arbitration clause. Neither did Clause 6 of the lease agreement, set out
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