TMI Blog2019 (2) TMI 1913X X X X Extracts X X X X X X X X Extracts X X X X ..... al allowed. - CIVIL APPEAL NO. 1695 OF 2019 (Arising out of SLP (Civil) No. 28693 of 2018) - - - Dated:- 15-2-2019 - UDAY UMESH LALIT AND INDU MALHOTRA, JJ. For the Petitioner : Mr. Kedar Nath Tripathy, AOR For the Respondent : Mr. Anupam Lal Das, AOR ORDER INDU MALHOTRA, J. Leave granted. 1. The present Civil Appeal arises out of an Order dated 21/18.05.2018 passed by a learned Single Judge of the Jharkhand High Court at Ranchi, in Arbitration Application No. 11 of 2016. The Appellant filed an Application u/S. 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 1996 Act ) for appointment of an independent arbitrator to adjudicate the disputes that had arisen between the Petitioner and Respondent No. 2. 2. The factual matrix of the present case, briefly stated, is as under: 2.1. Respondent No. 1 issued the 2007 Scheme, whereby coal distribution would be conducted through eAuction, with a view to provide access to coal for buyers, who were not able to source coal through the available institutional mechanism. This system would provide an equal opportunity to purchase coal through a single window service to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the arbitration Clause 11.12 under the 2007 Scheme. The Respondents failed to appoint an arbitrator as per Clause 11.12 of the 2007 Scheme. 2.7. The Appellant was therefore constrained to file an Application u/S. 11 before the Jharkhand High Court at Ranchi, for appointment of an independent arbitrator. 2.8. The learned Single Judge vide impugned Order dated 21/18.05.2018 rejected the Application on the ground that the disputes relate to different transactions entered into between the parties, under the 2007 Scheme. The sale orders did not contain an arbitration clause. It was held that even though the 2007 Scheme contains an arbitration clause, none of the individual sale orders make reference to the applicability of terms and conditions of the 2007 Scheme to the sale orders. Hence, the arbitration clause could not be incorporated by reference. 3. Aggrieved by the aforesaid Order, the Appellant has filed the present Appeal. We have heard learned Counsels Dr. Kedar Nath Tripathy, Mr. B. B. Pradhan, Mr. Susanta Kr. Muduti, and Mr. M. A. Aleem Majid for the Appellants and Mr. Anupam Lal Das, Mr. Anirudh Singh and Mr. Krishanu Barua for the Respondents and perused t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract. of the UNCITRAL Model Law as it stood prior to the 2006 amendment. Dr Peter Binder in his Commentary titled International Commercial Arbitration and Conciliation in UCITRAL Model Law Jurisdictions Dr. Peter Binder, International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, (3rd Edn., 2010, Sweet Maxwell) pg. 86, para 2022 has interpreted Article 7(2) to incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nization of which A or B or both are members; or they may be terms standard in a particular trade or industry. (2) A and B make a contract incorporating terms previously agreed between A and B in another contract or contracts to which they were both parties (3) A and B make a contract incorporating terms agreed between A (or B) and C. Common examples are a bill of lading incorporating the terms of a charter to which A is a party; reinsurance contracts incorporating the terms of an underlying insurance; excess insurance contracts incorporating the terms of the primary layer of insurance; and building or engineering sub contracts incorporating the terms of a main contract or subsub contracts incorporating the terms of a sub contract. (4) A and B make a contract incorporating terms agreed between C and D. Bills of lading, reinsurance and insurance contracts and building contracts may fall into this category. In Habas (supra) a distinction was made between a single contract case and a twocontract case . A single contract case is one where the arbitration clause is contained in a standard form contract to which there is a general reference in the contract between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party/bills of lading cases. The reason given is that the other party may have no knowledge nor ready means of knowledge of the relevant terms. Further, as the authorities illustrate, the terms of an arbitration Clause may require adjustment if they are to be made to apply to the parties to a different contract. The Court therefore reinforced the distinction between incorporation by reference of standard form terms and of the terms of a different contract, and concluded that in a single contract case general words of incorporation are sufficient, whereas by its nature a two contract case may require specific reference to the other contract, unless the secondary document is stated to be based on standard form terms containing an arbitration agreement. In that case, presumably specific reference to the arbitration Clause would not be needed. As discussed below, this approach has been endorsed in subsequent cases, albeit drawing a slightly different but material distinction between incorporation of the terms of a separate contract standard or otherwise made between the same parties which are treated as single contract cases, even where there is in fact more than one contract; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 : 2009 (3) Arb LR 1 (SC) : 2009 (9) SCALE 298 this Court held that even though a contract between the parties did not contain a provision for arbitration, an arbitration clause contained in an independent document would be incorporated into the contract by reference, if the reference is such as to make the arbitration clause a part of the contract. The court explained the doctrine of incorporation in the following words 24. The scope and intent of Section 7(5) may therefore be summarised thus: (i) An arbitration clause in another document, would get incorporated into a contract by reference, if the following conditions are fulfilled : (1) The contract should contain a clear reference to the documents containing arbitration clause, (2) the reference to the other document should clearly indicate an intention to incorporate the arbitration clause into the contract, (3) The arbitration clause should be appropriate, that is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract. (ii) When the parties enter into a contract, making a general reference to another contract, such general reference would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with those of trade associations, and professional bodies would be sufficient to incorporate the arbitration clause. 5. In the instant case, the learned Single Judge in the impugned Order has erroneously taken the view that an arbitration clause would not stand incorporated in the individual sale orders entered into by the Respondent No. 2 Coal Company and the Appellant. The individual sale orders emanate out of the 2007 Scheme. The sale orders specifically state that they would be governed by the guidelines, circulars, office orders, notices, instructions, relevant law etc. issued from time to time by Coal India Limited or Bharat Coking Coal Limited etc. As a consequence, the arbitration clause (i.e. Clause 11.12) in the 2007 Scheme would stand incorporated in the sale orders issued thereunder. Clause 7 in the sale orders falls under the single contract case where the arbitration clause is contained in a standard form document i.e. the 2007 Scheme, to which there is a reference in the individual sale orders issued by Respondent No. 2 the Coal Company. 5.1. The arbitration clause in the 2007 Scheme clearly states that : All disputes arising out of this scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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