Calcutta High Court: In an application filed by the defendant, CLE Private Limited, seeking the dismissal of the suit and the initiation of arbitration citing a forum selection clause and an arbitration provision, Krishna Rao, J., dismissed the defendant’s application, noting that the arbitration clause and forum selection clauses were not applicable to the plaintiff, Dascon Sourav Commercial Private Limited , and that a 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.
Background:
The plaintiff had filed a suit against the defendant, seeking various reliefs including a decree of a specific sum and injunctive relief. The disagreement stemmed from alleged breaches of contract and non-payment issues. In response, the defendant filed the present application seeking the dismissal of the suit and the initiation of arbitration based on clauses within the contractual agreement, including a forum selection clause designating Mumbai courts for jurisdiction and an arbitration provision mandating arbitration for dispute resolution.
Contention of the Parties:
The plaintiff contested, stating that they were not a party to the original contract between the Damodar Valley Corporation and the defendant and that the arbitration clause was not incorporated into the work order involving the plaintiff. The plaintiff further contended that General Conditions of Contract (‘GCC’) and Specific Conditions of Contract (‘SCC’) entered between the Damodar Valley Corporation and CLE Private Limited is a separate and distinct contract from that of the work orders issued by the defendant to the plaintiff and thus, the GCC and SCC does not apply to the work order issued to the plaintiff.
The defendant contended that that the dispute raised by the plaintiff in the suit had arisen out of the contract and as per the General Conditions of Contract (‘GCC’), there is a forum selection clause and as per the said clause, exclusive jurisdiction vested with the Courts of Mumbai for all matters arising under the Contract.
Analysis and Decision:
Upon consideration of the contentions of the parties as well as the relevant provisions of the general conditions of contract (GCC) and special conditions of contract (SCC), the Court referred to Section 7(5) of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’), which requires a clear intention to incorporate an arbitration clause from another document into the contract.
The Court referred to judgment in M.R. Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696 when the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. It has been held that the arbitration clause from another contract can be incorporated into the contract,where such reference is made, only by a specific reference to arbitration clause. It has further been held that where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract which contains the terms 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.
The Court further referred to Inox Wind Ltd. v. Thermocables Ltd. (2018) 2 SCC 519 wherein the Supreme Court held that while a general reference to an earlier contract might not suffice for incorporating an arbitration clause in a later contract, a general reference to a standard form would be adequate for such incorporation,
The Court, while dismissing the present application thus held, the plaintiff herein acted as a subcontractor under the defendant and did not enter into any contracts directly with them, and hence, the arbitration clause was not incorporated into the work order issued by the defendant to the plaintiff.
Consequently, the Court ruled that neither the arbitration clause nor the forum selection clauses were applicable to the plaintiff, and thus, the matter could not be referred to arbitration, further affirming the jurisdiction of the Calcutta High Court in adjudicating the matter.
[Dascon Sourav Commercial Private Limited v. CLE Private Limited, 2024 SCC OnLine Cal 3590, Order dated 10-04-2024]
Advocates who appeared in this case :
Advocate for Plaintiff: Surya Prasad Chattopadhyay, Arjun Samant, Saptarshi Kumar Mal, Ankit Chatterjee
Advocates for Respondent: Rohit Banerjee, Paritosh Sinha, Shrayashee Das, Rohan Kumar Thakur, Mr. Himanshu Bhawsinghka
Buy Arbitration and Conciliation Act, 1996 HERE
