Arbitration Clause Incorporated Through Amenities Agreement Under Section 7(5): SC

Shinhan Bank Vs Carol Info Services Limited (Supreme Court of India)

Summary: The Supreme Court considered whether an arbitration clause contained in an Amenities agreement could constitute an arbitration agreement for disputes arising under a contemporaneously executed Leave and Licence agreement. The petitioner had entered into a Leave and Licence agreement and an Amenities agreement with the respondent for use and occupation of office premises. Following termination of the agreements, disputes arose concerning refund of security deposits and the respondent’s claim for licence fees and amenities charges.

The petitioner invoked arbitration, but the respondent disputed the existence of an arbitration agreement in the Leave and Licence agreement and contended that the petitioner should pursue a remedy under Section 8 of the Arbitration and Conciliation Act, 1996. The Court examined the incorporation provision in the Amenities agreement, which expressly provided that the Amenities agreement would constitute an integral part of the Leave and Licence agreement and that the provisions of the latter would apply mutatis mutandis to the former. The Court referred to Section 7(5) of the Arbitration and Conciliation Act, 1996 and the principle stated in M.R. Engineers and Contractors Private Limited Vs Som Datt Builders Limited. It held that the Amenities agreement did not merely refer to the Leave and Licence agreement but incorporated its terms as an integral part of that agreement.