Summary
A South Korean bank that had taken office premises in Mumbai under a leave and licence agreement, with a contemporaneous amenities agreement, terminated both, vacated, and sought refund of its security deposits; the licensor refused, denied that any arbitration agreement existed since only the amenities agreement contained an arbitration clause, and sued in the Bombay High Court. In the bank's petition under Section 11 for an international commercial arbitration, the Supreme Court appointed a sole arbitrator: the amenities agreement declared its provisions an integral part of the leave and licence agreement, which under Section 7(5) and M.R. Engineers amounts to incorporation rather than mere reference, so the arbitration clause governs disputes under both agreements and the bank need not be relegated to a Section 8 application in the suit.
Issues
- Whether an arbitration clause contained in an amenities agreement, which declares itself an integral part of a contemporaneous leave and licence agreement, constitutes an arbitration agreement covering disputes under the leave and licence agreement within Section 7(5) of the Arbitration and Conciliation Act, 1996.
Provisions considered
- Section 7(5), Arbitration and Conciliation Act, 1996A reference in a written contract to a document containing an arbitration clause constitutes an arbitration agreement if the reference makes that clause part of the contract; following M.R. Engineers, where a document is declared to form part and parcel of the contract its terms, including the arbitration clause, are bodily incorporated, as distinct from a mere reference. (¶¶ 13, 15, 16, 17, 18, 19)
- Sections 11(6) and 11(12)(a), Arbitration and Conciliation Act, 1996The petitioner being a banking company incorporated in South Korea, the arbitration is an international commercial arbitration and the Supreme Court appointed the sole arbitrator after the nominee had become Lokayukta of Maharashtra. (¶¶ 8, 21)
Held
- Clause 1 of the amenities agreement provides that its provisions constitute an integral part of the leave and licence agreement and that all provisions of the latter apply mutatis mutandis to it; the plain consequence is that the parties intended the arbitration clause in the amenities agreement to be an integral part of the leave and licence agreement, and the licensor's objection that this was a mere reference under Section 7(5) fails. There is no merit in relegating the bank to a Section 8 application in the licensor's suit, as the clear terms of the contract necessitate a reference to arbitration. (¶¶ 11, 12, 14, 15, 19, 20)
Result
Arbitration petition disposed of; disputes arising out of the petitioner's claim referred to the sole arbitration of Dr (Mrs) Shalini Phansalkar-Joshi, former Judge of the Bombay High Court, who will fix fees and modalities in consultation with the parties; pending applications disposed of.