LexALIMENTA S.A. ETC. versus NATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. AND ANOTHER
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ALIMENTA S.A. ETC. A rtJ7 v. l'<ATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. AND ANOTHER JANUARY 9, 1987 B IRANGANATH MISRA AND MURARI MOHON DUTT, JJ.] Arbitration Act, 1940, s.2-Arbitration Agreement-Construction of-Contract for supply of goods-Whether arbitration clause must -y form part of such contract-Parties entitled to choose other method for c resolving dispute-When incorporation clause refers to certain particu- far terms and conditions pnly those to be incorporated-Not arbitration . ,... clause . The appellant and the respondent entered into two contracts on two different dates for supply of HPS groundnut Kernels jaras. After D the usual terms as to quality, quantity, price etc., the first contract provided in clause II thereof "that 0th.er terms and conditions as per FOSF A-20 contract terms." However, clause 9 of the second contract did not make any mention of FOSFA-20 contract and all that was stated was that all other terms and conditions for supply not specifically shown and covered therein should be as per previous contract signed between the parties for similar supply of HPS'groundnut. Tbe 'FOSFA- E 20 contract' contained an arbitration clause to the effect that any dispute arising out of this contract, including any question of law aris- ing in connection therewith, shall be refered to arbitration and neither - party, hereto, nor any persons claiming under either of them sball \ bring any action or other legal proceedings against the other in respect F of any such dispute until such dispute shall first have been heard and determined by the arbitrators. Disputes and differences arose between the parties. The appellant in Civil Appeal No. I755/I982 alleged that the respondent therein com: milted breach of their obligations under both the contracts and sought G to commence arbitration proceedings. The respondent on the other hand filed a petition in the High Court under s.33 of the Arbitration ~. Act, I 940 alleging that there was no valid arbitration agreement bet- ween the parties and contended that when it agreed in clause I I 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 H 957 958 SUPREME COURT REPORTS [ 1987] I S.C.R. A conditions as would govern the relationship between the parties and the fact that there was an arbitration clause in FOSF A-20 contract came as a complete surprise to the respondent. This petition was opposed by the appellant. A Single Judge of the High Court held that in view of the fact that B the respondent had been nominated the canalising agent for export of UPS groundnut, it would not be unjustified to assume that the respon- dent was well aware of the foreign trade in groundnut and the implica- tions of reference to 'FOSFA-20 contract' when he put his signatures to the contract in question; that the arbitration clause in FOSFA-20 cGn- tracl was incorporated into the first contract by virtue of clause I I C providing 'other terms and conditions as per FOSFA-20 contract terms'. With regard to the second contract it was held that it did not make any mention of FOSFA-20 contract and all that was stated in clause-9 thereof was that all terms and conditions for supply not specifi- cally shown and covered therein should be as the previous contract signed between the parties for similar supply of HPS. D It was accordingly held that there existed no arbitration agree- ment between the parties and, as such, none of them was entitled to seek reference to arbitration; ;llld that a term about . arbitration was not incidental to supply of goods and it was difficult to re .. d from the provisions of clause 9 of the contract that the arbitration clause was . E lifted from there and made a part of the same. The applications under s.33 of the Arbitration Act was allowed in so far as it related to the second contract, and disallowed so far as the first contract was concerned. Both parties filed appeals to this Court. F Dismissing the appeals, HELD: l(i) 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. [962F-G] I (ii) Where the parties are aware of the arbitration clause of an earlier contract, the subject-matter of which is differ
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