The case of NBCC (India) Limited vs. Zillion Infraprojects Pvt. Ltd. involves a contract dispute leading to arbitration proceedings. The High Court appointed a Sole Arbitrator to resolve the disputes between the parties. The case highlights the importance of explicit incorporation of arbitration clauses in contracts. Follow for more updates on this significant legal battle.
Facts
- The appellant, NBCC (India) Limited, issued an invitation for tender for the construction of a Weir with Allied Structures across river Damodar at DVC, CTPS, Chandrapura, Jharkhand.
- The respondent, M/s Zillion Infraprojects Pvt. Ltd., submitted their bid and was awarded the contract for a total value of Rs. 19,08,46,612/-.
- Disputes arose between the parties, leading to the respondent invoking arbitration through a notice dated 6 March 2020.
- The High Court allowed the application under Section 11(6) of the Arbitration Act and appointed a Sole Arbitrator to adjudicate the dispute.
- The appellant challenged the High Court’s orders through the present appeals.
- The High Court confirmed the proposed appointment of the former Judge of the Delhi High Court as the Sole Arbitrator.
- The former Judge of the Delhi High Court will act as the Sole Arbitrator in the arbitration proceedings.
- This appointment was made as per the agreement between the parties involved in the dispute.
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Arguments
- Shri Gopal Sankaranarayanan argues that the High Court erred in invoking Section 11(6) of the Arbitration Act.
- There is a disagreement regarding the applicability of Clause 3.34 of the Additional Terms & Conditions of Contract due to modifications in the Letter of Intent (L.O.I.).
- Reference to terms and conditions in the L.O.I. does not automatically subject the dispute to arbitration proceedings without explicit incorporation of the arbitration clause.
- Counsel references the case of M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited to support the need for specific incorporation of the arbitration clause in the L.O.I.
- The respondent’s counsel, Shri Sumit Kumar, contends that Clause 2.0 of the L.O.I. refers to terms and conditions from the tender issued by DVC to NBCC, with a jurisdiction modification.
- The L.O.I. makes it clear that modifications made by NBCC to the terms and conditions shall prevail, indicating intent through various clauses in the document.
- The L.O.I. specifies that dispute resolution will be through civil courts in Delhi, emphasizing Indian law as applicable to the contract between the parties.
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Analysis
- The scope and intent of Section 7(5) of the Act were summarized.
- An arbitration clause can be incorporated into a contract by reference under certain conditions.
- Conditions for incorporation include a clear reference to the document with the arbitration clause, indicating an intention to incorporate it, and ensuring the clause is appropriate and not conflicting with any terms of the contract.
- A general reference to another contract in a contract does not automatically incorporate the arbitration clause from the referred document.
- In the case of Inox Wind Limited, the Court agreed with the judgment in M.R. Engineers and Contractors Private Limited.
- General reference to a standard form of contract of one party along with trade associations and professional bodies is sufficient to incorporate the arbitration clause.
- The case before the Court was identified as a single-contract case, and the arbitration clause mentioned in the terms and conditions was deemed applicable.
- Contracts that state the parties are familiar with or have read and understood the terms and conditions can be considered binding.
- Incorporation of an arbitration clause through a general reference to a standard form is upheld by the Court.
- The law established in M.R. Engineers and Contractors Private Limited has been followed in subsequent cases.
- The Court distinguished the law from M.R. Engineers and Contractors Private Limited in the case of Inox Wind Limited vs Thermocables Limited.
- Provisions of sub-section (5) of Section 7 of the Arbitration Act were considered in the case of M.R. Engineers and Contractors Private Limited.
- Where a contract refers to the standard form of terms and conditions of an independent trade or professional institution, including provisions for arbitration, these terms are deemed incorporated by reference.
- If a contract stipulates that execution or performance will be in terms of another contract with arbitration provisions, the arbitration agreement does not automatically apply unless specifically referenced.
- The clause in the Letter of Intent (L.O.I.) specifies that dispute resolution must only be through civil courts in Delhi.
- For an arbitration clause from another document to be applicable to a contract, there must be a specific reference to it.
- The intention between the parties is clear that disputes should be resolved in Delhi civil courts based on Clause 7.0 of the L.O.I.
- Acceptance of terms and conditions, including the arbitration clause, must be explicit and specific in the contract.
- General references to other contracts do not automatically incorporate arbitration clauses into the current contract.
- Clause 10.0 further solidifies that the L.O.I. is part of the agreement but does not incorporate the arbitration clause by mere reference.
- The present case is a case of ‘reference’ rather than ‘incorporation’.
- A general reference does not incorporate the arbitration clause.
- Clause 7.0 of the L.O.I. states that disputes must be resolved through civil courts in Delhi only.
- The single judge of the Delhi High Court erred in allowing the respondent’s application.
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Decision
- Appeals allowed
- No order as to costs
- Impugned orders quashed and set aside
- Pending applications disposed of
Case Title: NBCC (INDIA) LIMITED Vs. ZILLION INFRAPROJECTS PVT. LTD. (2024 INSC 218)
Case Number: C.A. No.-004417-004418 / 2024
