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2018 (2) TMI 1500

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....basis on the National Highway 67 connecting Coimbatore and Nagapattinam. The Concessionaire vide EPC agreement (Engineering, Procurement and Construction Agreement) dated January 31, 2008 awarded the said work on a fixed lump sum turnkey basis to M/s. Utility Energytech and Engineers Private Limited (hereinafter referred to as the 'EPC Contractor'). EPC Contractor, in turn, executed a Construction Agreement dated March 14, 2008 with the respondent herein (M/s. Techtrans Construction India Pvt. Ltd.) to execute the works as per terms and conditions entailed in that agreement. Clause 8 of that agreement permitted the respondent to sub-contract the structural work. Pursuant thereto, the respondent floated a tender for sub-contracting their work in which the appellant also submitted its bid and was ultimately awarded the said work by the respondent vide agreement dated July 29, 2009. 3) Some disputes arose between the appellant and the respondent in connection with the execution of the said work and the appellant vide its letter dated March 25, 2013 raised certain claims against the respondent. The appellant also filed Original Petition under Section 9 of the Arbitration and Conciliat....

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....re: Subject to the provisions of Article 45.1 and 45.2, any dispute, which is not resolved by amicable resolution between the parties or by a reference to mediation, shall be finally settled by binding arbitration under the Arbitration and Conciliation Act, 1996. The arbitration shall be by a panel of three arbitrators, one to be appointed by each Party and the third to be appointed by the two arbitrators appointed by the Parties. The Party requiring arbitration shall appoint an arbitrator in writing, inform the other party about such appointment and call upon the other party to appoint its arbitrator. If within 15 days of receipt of such intimation the other party fails to appoint its arbitrator, the Party seeking appointment of arbitrator may take further steps in accordance with Arbitration Act. 45.4. Place of Arbitration: The place of arbitration shall be Mumbai for all Disputes." 7) According to the appellant, this clause gets incorporated in the Agreement dated July 29, 2009 that was entered into between the respondent and the appellant, by virtue of following clauses in the said agreement: "'2.Subcontractor hereby agrees, undertakes to execute the said value of ....

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....nly, it could not be said that parties had agreed for arbitration and, in fact, the appellant in his petition filed under Section 9 of the Act had professed ignorance of the agreement between the respondent and the employer. As it had gone to the extent of making an averment to the effect that 'the petitioner is totally kept in dark about the terms and conditions of the agreement till now'. The High Court thereafter construed clauses 2 and 9.10 of the Agreement that was entered into between the appellant and the respondent and came to the conclusion that those clauses never meant to incorporate arbitration agreement into the Agreement dated July 29, 2009 executed between the parties. On this aspect, discussion goes as follows: "18. On a careful perusal of the pleadings and documents as also submissions of the learned counsel for the parties, more specifically the reading of the clauses, this court is of the view that part of clause-2 of the agreement dated 29.07.2009 extracted aforesaid refers to only ''works and quality specified in the relevant agreement between the construction contractor and the employer''. All the conditions and the sub-conditions of contrac....

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....respondent who said so on account of mistaken understanding of law. Para 9 reads as under: "9. It is true that the petitioner had contended before the Jordanian court that there was no arbitration agreement between the parties. But the said contention was not accepted and the suit filed by the petitioner has been dismissed on the ground of want of jurisdiction. Thereafter, on reconsidering the matter and taking legal advice, with reference to the contentions of the respondent, the petitioner has now proceeded on the basis that an arbitration agreement exists between the parties. If, on account of mistake or wrong understanding of law, a party takes a particular stand (that is, there is no arbitration agreement), he is not barred from changing his stand subsequently or estopped from seeking arbitration. [See U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd. [(1996) 2 SCC 667] where the contention based on estoppel was negatived while considering a reserve (sic reverse) situation [Ed.: Para 12] .]" 13) Mr. Ganguli, the learned senior counsel appearing for the respondent, on the other hand, submitted that clause 2 of the Agreement entered into between the appellant and the respon....

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....lear that a mere reference to a document would not have the effect of making an arbitration clause from that document, a part of the contract. The reference to the document in the contract should be such that shows the intention to incorporate the arbitration clause contained in the document, into the contract. If the legislative intent was to import an arbitration clause from another document, merely on reference to such document in the contract, sub-section (5) would not contain the significant later part which reads: "and the reference is such as to make that arbitration clause part of the contract", but would have stopped with the first part which reads: "7. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing...." 15. Section 7(5) therefore requires a conscious acceptance of the arbitration clause from another document, by the parties, as a part of their contract, before such arbitration clause could be read as a part of the contract between the parties. But the Act does not contain any indication or guidelines as to the conditions to be fulfilled before a reference to a document i....

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....rms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration clause also. (iv) Where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (as for example the standard terms and conditions of a trade association or architects association) will bind them or apply to the contract, such standard form of terms and conditions including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions. (v) Where the contract between the parties stipulates that the conditions of contract of one of the parties to the contract shall form a part of their contract (as for example the general conditions of contract of the Government where the Government is a ....

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....ant that the High Court was wrong in its view that a term about arbitration is not a term of supply of goods. We do not think that the contention is sound. It has been rightly pointed out by the High Court that the normal incidents of terms and conditions of supply are those which are connected with supply, such as, its mode and process, time factor, inspection and approval, if any, reliability for transit, incidental expenses, etc. We are unable to accept the contention of the appellant that an arbitration clause is a term of supply. There is no proposition of law that when a contract is entered into for supply of goods, the arbitration clause must form part of such a contract. The parties may choose some other method for the purpose of resolving any dispute that may arise between them. But in such a contract the incidents of supply generally form part of the terms and conditions of the contract. The first contract includes the terms and conditions of supply and as Clause 9 refers to these terms and conditions of supply, it is difficult to hold that the arbitration clause is also referred to and, as such, incorporated into the second contract. When the incorporation clause refers ....