The main legal point established is that a reference to a document containing an arbitration clause can make the arbitration clause part of the contract, as per Section 7(5) of the Arbitration and Conciliation Act 1996 and the principle established in M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited.

JUDGMENT :

DHANANJAYA Y. CHANDRACHUD, CJI.

1. On 5 August 2011, the petitioner entered into a Leave and License agreement with the respondent for the use and occupation of office premises situated on the 4th Floor of the West Wing at Wockhardt Towers, C-2, Block G, Bandra Kurla Complex, Bandra (East), Mumbai-400051 for a period of five years. On the same day, an Amenities agreement was contemporaneously executed with the Leave and Licence agreement. Upon the expiry of the term of the Leave and License agreement, a fresh Leave and Licence agreement was executed between the petitioner and the respondent on 1 July 2016 for the continued use and occupation of the premises for a period of two years.

2. On 25 August 2016, the petitioner entered into an Amenities agreement with the respondent.

3. On 22 March 2017, the petitioner issued a notice of termination to the respondent stating that the Leave and Licence agreement and the Amenities agreement would stand terminated upon the expiry of the lock-in period, namely, on 1 July 2017.

4. The respondent replied to the termination notice on 30 March 2017. Asserting that the termination was not in accordance with the terms of the Leave and Licence agreement and the Amenities agreement, the respondent declined to refund the security deposits to the petitioner. According to the petitioner, vacant and peaceful possession of the licensed premises was handed over to the respondent on 13 June 2017.

5. On 3 July 2017, the petitioner served a notice of demand for refund of the security deposits together with interest. The claim was denied in a letter dated 13 July 2017. By another letter of 13 July 2017, the respondent served upon the petitioner a notice claiming an amount of Rs. 2,59,85,856 towards the balance license fee and amenities charges for the period between 1 July 2017 and 30 June 2018 and claimed consequential losses amounting to Rs. 69,21,408 together with interest after adjusting the amount of the security deposits under the 2016 agreement.

6. By an Advocate’s letter dated 29 September 2017, the petitioner sought refund of its security deposit in the amount of Rs. 1,68,48,000 (which was deposited under the Leave and Licence agreement) and Rs. 56,16,000 (which was deposited under the Amenities agreement) together with interest at the rate of 15% per annum. The respondent rejected the claim in its response dated 5 October 2017.

7. On 9 October 2017, the petitioner invoked arbitration and proposed the appointment of a sole arbitrator. In its response dated 13 October 2017, the respondent denied the existence of an arbitration agreement.

8. An arbitration petition under Section 11 of the Arbitration and Conciliation Act 1996 was instituted before the High Court of Judicature at Bombay, but it was withdrawn since the arbitration is an international commercial arbitration, the petitioner being a banking company incorporated under the laws of South Korea.

9. We have heard Mr. Abhishek Puri, counsel for the petitioner and Mr. Sanjeev Kumar Kapoor, counsel for the respondent.

10. Two agreements entered into between the parties. The first is a Leave and Licence agreement dated 1 July 2016. The second is an Amenities agreement dated 25 August 2016. The bone of contention is whether there is an arbitration agreement between the parties. The contention of the respondent is that while the Amenities agreement contains an arbitration agreement, the Leave and Licence agreement does not. Hence, it has been submitted that the claim of the petitioner invoking arbitration must be rejected. Moreover, it has been submitted that the respondent has instituted a suit before the High Court of Judicature at Bombay on its Original Side and it would be open to the petitioner to move an application under Section 8 for seeking a reference to arbitration. It has been submitted that the claim of the respondent in the suit for outstanding license fees has been computed after adjusting the security deposit and hence the appropria