TMI Blog1987 (1) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... s the terms of the earlier contract by reference by using general words, we do not think there would be any bar to such incorporation merely because the subject-matters of the two contracts are different, unless, however, the incorporation of the arbitration clause will be insensible or unintelligible. In the instant case, the arbitration clause in FOSFA-20 contract will fit in the first 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. Appeal dismissed. - C.A. 1755 OF 1982 - - - Dated:- 9-1-1987 - M.M. DUTT AND RANGNATH MISRA, JJ. JUDGMENT 1. These two appeals by special leaveone preferred by the National Agricultural Co-operative Marketing Federation of India Ltd (for short 'NAFFD') and the other by Alimenta S.A. (for short 'Alimenta'), a Swiss Companyare both directed against the judgment of the Delhi High Court dated December 11, 1981 whereby the application of NAFFD under Section 33 of the Arbitration Act, 1940, has been allowed in part. 2. A contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no valid arbitration agreement between the parties. It was contended by NAFED that when it agreed in Clause 11 of the first contract that the parties Would be governed by the terms and conditions of FOSFA-20 contract, it only had in mind such terms and conditions as would govern the relationship between the parties. Further, the fact that there was an arbitration clause in FOSFA-20 contract came as a complete surprise to NAFED. In other words, it was sought to be contended that NAFED was not at all aware of any arbitration clause in FOSFA-20 contract and, accordingly, it could not agree to incorporate any such arbitration clause in the contracts in question. The said petition under Section 33 of the Arbitration Act was opposed by Alimenta. 5. A learned Single Judge of the High Court came to the finding that in view of the fact that NAFED had been nominated as the canalising agent for export of HPS groundnut under the provisions of the Export Control Order by the Central Government, it would not be unjustified to assume that the Senior Manager of NAFED was well aware of the foreign trade in groundnut and the implications of reference to FOSFA-20 contract when he put his si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on clause in FOSFA-20 contract can be said to have been incorporated into the contract. It is now well established that the arbitration clause of an earlier contract can, by reference, be incorporated into a later contract provided, however, it is not repugnant to or inconsistent with the terms of the contract in which it is incorporated. Mr. G. Ramaswamy, learned Additional Solicitor General appearing on behalf of the appellant, has strenuously urged that the High Court was wrong in holding that the arbitration clause in the FOSFA-20 contract was incorporated into the first contract by virtue of the incorporation clause. He has drawn our attention to the second illustration at page 46 of Russell on Arbitration, Twentieth Edition. The illustration refers to the decision of Lord Esher M.R. in Hamilton Co. v. Mackie Sons [1889] 5 TLR 677 (C.A.). We have looked into that decision as much reliance has been placed thereon on behalf of NAFED. In that case a bill of lading contained the words "all other terms and conditions as per charter-party", The charterparty contained an arbitration clause. It was contended on behalf of the ship-owners that the arbitration clause in the charterpa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have no application to the case. This view was also taken by the other learned Judges of the Full Bench. 10. In our opinion, Harries, CJ, had taken a very reasonable and sensible view. It is true, as pointed out by Lord Esher M.R., that the expression "all disputes under this charter", if incorporated into the bill of lading, would be quite insensible. But if, the clause had been "any dispute under this contract", then after incorporation into the bill of lading the words "this contract" would only mean the bill of lading into which it had been incorporated. In the instant case, as has been already noticed, the arbitration clause in the FOSFA-20 contract provides "any dispute arising out of this contract" and, as such, there is no difficulty in the incorporation of the arbitration clause into the first contract, for, the words "this contract" would mean the first contract into which it has been incorporated. Such incorporation would be quite intelligible and not inconsistent with the terms of the first contract. There is, therefore, no substance in the contention made on behalf of the appellant on the basis of the decision in Hamilton Co. v. Mackie Sons, (supra). 11. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charterparty. It was, however, held by Lord Denning M.R. that an arbitration clause was not directly germane to the shipment, carriage and delivery of goods. So, it was not incorporated by general words in the bill of lading. 12. Relying upon the decision in The Annefield, it is submitted on behalf of the appellant that the arbitration clause in FOSFA-20 contract is not germane to the subject-matter of the first contract and, accordingly, it was not incorporated into the first contract. We are unable to accept the contention. It has already been noticed earlier that there has been a long continued practice in England that the arbitration clause is not incorporated into the bill of lading by general words, unless it is explicitly done in clear words either in the bill of lading or in the charterparty. In the instant case, we are not, however, concerned with a charterparty and a bill of lading contract. Even assuming that the subject-matters of FOSFA-20 contract and the f.o.b. contract are different, we do not think that any question as to the germaneness of the arbitration clause to the subject-matter would be relevant. It has been found by the learned Judge of the High Court that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to certain particular terms and conditions, only those terms and conditions are incorporated and not the arbitration clause. In the present case, C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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