Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Cal) 214

IN THE HIGH COURT AT CALCUTTA
Debangsu Basak, Shabbar Rashidi, JJ.
Asian Tea And Exports Limited – Appellant
Versus
Priyanka Gupta And Ors . – Respondents
APOT/213 of 2025 IA No. GA/1 of 2025
Delivered On : 17-12-2025

Advocates Appeared:
For the Appellant : Mr. Zeeshan Haque, Adv., Mr. Aishwarya Kr. Awasthi, Adv.
For the Respondent: Ms. Sulagna Mukherjee, Adv., Mr. Yash Vardhan Deora, Adv., Ms. Bhawna Tekriwal, Adv.

An arbitration clause can be incorporated by reference from a related agreement, and disputes must be resolved through arbitration as outlined in the share transfer and escrow agreements.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Reference to Arbitration - Share Purchase Agreement and Escrow Agreement dated September 12, 2014 - Refusal to refer disputes to arbitration challenged - The court held that an arbitration clause was incorporated by reference from the share purchase agreement through the escrow agreement, as mandated by the principles established in prior case law (Paras 6-21).

(B) Court's authority - Court defines its role in determining the applicability of arbitration clauses and emphasized that disputes related to the share purchase agreement, including the escrow provision, should compel arbitration (Paras 24-25).

Facts of the case:
The appellant contested the refusal of the lower court to send disputes related to share transactions to arbitration, arguing for the inseparability of the share purchase and escrow agreements containing arbitration provisions.

Findings of Court:
The arbitration clause in the share purchase agreement extends to the escrow agreement as they are interconnected.

Issues: Whether the disputes stemming from the share purchase agreement are subject to arbitration, given the apparent interrelation with the escrow agreement.

Ratio Decidendi: The court articulated that both agreements functioned together, meeting the statutory requirements for an arbitration clause's incorporation by reference and underscoring the necessity of arbitration for resolving disputes under the share purchase agreement.

Result: Appeal granted; parties referred to arbitration.

Table of Content
1. notice of appeal filed against judgment refusal for arbitration. (Para 1 , 2 , 3)
2. importance of arbitration clauses in contracts. (Para 4 , 6 , 7)
3. escrow agreement mechanisms for dispute settlements. (Para 5 , 8 , 10 , 11)
4. claim by plaintiffs over escrow amount referenced in agreements. (Para 15 , 16)
5. referencing previous cases on arbitration agreements. (Para 17 , 18 , 19)
6. integration of arbitration clauses in related agreements. (Para 20 , 21 , 22 , 23)
7. judicial error in failing to refer parties to arbitration. (Para 24 , 25)
8. conclusion to refer all parties to arbitration. (Para 26 , 27 , 28)

JUDGMENT :

DEBANGSU BASAK, J.

1. Appeal is by defendant no.3 in Old CS/153/2020 (New CS/89/2024).

2. Appeal is directed against the judgment and order dated April 23, 2025.

3. The appellant is aggrieved by refusal of the learned Single Judge in referring the disputes in the plaint, to arbitration.

4. Learned advocate appearing for the appellant draws the attention of the Court to the plaint filed by the respondent nos.1 to 4 in the appeal. He submits that, there was a share purchase agreement dated September 12, 2014 entered into between the parties to the suit. In terms of the share purchase agreement, a sum of Rs.30 lakhs was to be kept in escrow as contingent security for events enumerated. He draws the attention of the Court to the share transfer agreement dated September 12, 2014, and in particular, clause 6.10 containing arbitration clause. He also draws the attention of the Court to clause 6.4.3 of the share transfer agreement dated September 12, 2014. He further submits that, clauses 6.4.3 to 6.4.7 of the share transfer agreement dated September 12, 2014 contemplated an escrow, though it also contemplated that an escrow agreement be executed.

5. Pursuant to and in terms of the share transfer agreement dated September 12, 2014, parties to such share transfer agreement entered into an escrow agreement which was also executed on September 12, 2014. He draws the attention of the Court to clause 6 of the escrow agreement and contends that, the same also contained mechanism for settlement of the disputes between the parties.

6. Learned advocate appearing for the appellant relies upon (2018) 15 SCC 678 (Ameet Lalchand Shah And Others -vs- Rishabh Enterprises And Another) for the proposition that, an arbitration agreement can be incorporated by reference. According to him, in the facts and circumstances of the present case, both the share transfer agreement and the escrow agreement are inseparable and intrinsically intertwined.

7. Learned advocate appearing for the appellant relies upon (2024) 7 SCC 174 (NBCC (India) Limited -vs- Zillion Infraprojects Pvt. Ltd.) and contends that, incorporation of arbitration agreement from another document is permissible. Again, he contends that the same was done in the facts and circumstances of the present case.

8. Learned advocate appearing for the respondent nos.5 and 6 adopts the argument advanced on behalf of the appellant. She submits that there is an arbitration agreement between the parties and that, the parties to the suit should be referred to arbitration.

9. None appears for the respondent nos. 1 to 4 in the appeal in the second call.

10. Genesis of the disputes involved in the civil suit filed by the respondent nos. 1 to 4 is the share transfer agreement dated September 12, 2014. Such share transfer agreement contemplated and provided a mechanism for the respondent nos. 1 to 4 to sell their shares that they held of and in the defendant no.5 at an agreed consideration. The share transfer agreement also contemplated and provided for eventualities and the manner in which such eventualities enumerated would be compensated. In order to provide adequate security for parties to discharge their reciprocal obligations under the share transfer agreement dated September 12, 2014, the parties thereto agreed to escrow.

11. Relevant provision for escrow was made in the share transfer