General Reference Does Not Incorporate Arbitration Clause: Supreme Court

NBCC (India) Limited Vs Zillion Infraprojects Pvt. Ltd. (Supreme Court of India)

Summary: The Supreme Court considered whether the arbitration clause contained in the tender documents issued by Damodar Valley Corporation to NBCC was incorporated into the Letter of Intent executed between NBCC (India) Limited and Zillion Infraprojects Pvt. Ltd. The respondent had invoked arbitration under Clause 3.34 of the tender documents and obtained appointment of a Sole Arbitrator from the Delhi High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. The Supreme Court examined Section 7(5) and the principles laid down in M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited, Duro Felguera, S.A. v. Gangavaram Port Limited, Elite Engineering and Construction (Hyderabad) Private Limited v. Techtrans Construction India Private Limited and Inox Wind Limited v. Thermocables Limited. It reiterated that a general reference to another contract ordinarily does not incorporate the arbitration clause contained in that contract.

There must be a reference demonstrating the intention to incorporate the arbitration clause, subject to the principles governing standard-form contractual terms. The Court found that the present matter involved two contracts rather than a single contract. Although Clause 2.0 of the Letter of Intent provided that the terms and conditions contained in the DVC tender would apply mutatis mutandis, it expressly permitted modifications by NBCC. More importantly, Clause 7.0 of the Letter of Intent specifically provided that disputes between NBCC and Zillion would be resolved only through civil courts having jurisdiction in Delhi. Clause 10.0 also made the Letter of Intent part of the agreement.