M/S. ELITE ENGINEERING AND CONSTRUCTION (HYD.) PRIVATE LIMITED REP. BY ITS MANAGING DIRECTOR versus M/S. TEACHTRANS CONSTRUCTION INDIA PRIVATE LIMITED REP. BY ITS MANAGING DIRECTOR

Citation: [2018] 4 S.C.R. 585 · Decided: 23-02-2018 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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585
M/S. ELITE ENGINEERING AND CONSTRUCTION (HYD.)
PRIVATE LIMITED REP. BY ITS MANAGING DIRECTOR
v.
M/S. TEACHTRANS CONSTRUCTION INDIA PRIVATE
LIMITED REP. BY ITS MANAGING DIRECTOR
(Civil Appeal No. 2439 of 2018)
FEBRUARY 23, 2018
[A.K. SIKRI AND ASHOK BHUSHAN, JJ.]
Arbitration and Conciliation Act, 1996 – s. 7(5) –
Incorporation of arbitration clause in contract by reference – If
made out – National Highway Authority of India entered into
Concession agreement, whereby it awarded a contract to M/s. T.K.
(Concessionaire) for maintenance of the Project Highway on Build
Operate and Transfer (BOT) basis – Concessionaire vide EPC
agreement awarded that work to M/s. UE (EPC Contractor) – EPC
Contractor, in turn, executed a Construction agreement with
respondent to execute the works as per terms and conditions entailed
in that agreement – Respondent sub-contracted the work to the
appellant – Some dispute arose between the appellant and
respondent in connection with execution of the said work – Appellant
invoked arbitration – Respondent contended that there was no
arbitration agreement – Appellant contended that the agreement
entered into between the parties (appellant and respondent), by
implication, incorporated the arbitration agreement contained in
the agreement entered into between the EPC Contractor and the
respondent – High Court held that there was only a reference to
another document with no intention to incorporate the arbitration
clause thereof in a contract between the parties – Propriety of –
Held: Proper – In instant case, it was not intended to make the
arbitration clause as a part of the contract between the appellant
and the respondent – When the incorporation clause refers to certain
particular terms and conditions, only those terms and conditions
are incorporated and not the arbitration clause.
Dismissing the appeal, the Court
HELD: 1. As per sub-section (5) of section 7 of Arbitration
and Conciliation Act, 1996, an arbitration clause contained in an
[2018] 4  S.C.R. 585
                                                   585
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SUPREME COURT REPORTS
[2018]  4 S.C.R.
independent document can also be imported and engrafted in
the contract between the parties, by reference to such
independent document in the contract, even if there is no specific
provision for arbitration.  However, such a recourse can be
adopted only ‘if the reference is such as to make the arbitration
clause in such document, a part of the contract.’ [Para 16] [593-
E-F]
2. The High Court has correctly held that, in the instant
case, it was not intended to make the arbitration clause as a part
of the contract between the appellant and the respondent.  Clause
2 and clause 9.10 are given correct interpretation by the High
Court.  By these clauses, only those conditions and sub-conditions
of the contract, specification etc. which relate to the works and
quality are incorporated.  Clause 9.10 only talks of ‘items’ which
are not mentioned in the contract and terms and conditions
relating to the execution of those items are to be taken from the
main contracts.  Reference to clause 8.7 is also inconsequential.
By this clause only, those terms contained in the main agreement
which relate to ‘terms of work’ are incorporated. Procedure
relating to ‘termination’ is altogether different from resolution of
disputes.  Dispute may arise even de hors the termination of the
contract and is an altogether different aspect, not necessarily
connected with the termination of work.  [Para 18] [596-B-D]
M.R. Engineers and Contractors Private Limited v. Som
Datt Builders Ltd. (2009) 7 SCC 696 : [2009] 10
SCR 373; Groupe Chimique Tunisien SA v. Southern
Petrochemicals Industries Corpn. Ltd. (2006) 5 SCC
275 : [2006] 2 Suppl. SCR 954; Larsen & Toubro
Limited v. Mohan Lal Harbans Lal Bhayana (2015) 2
SCC 461 : [2014] 3 SCR 162; Sharma and Associates
Contractors 
Private 
Limited 
v. 
Progressive
Constructions Limited (2017) 5 SCC 743 – referred
to.
Alimenta S. A. v. National Agricultural Coop. Mktg.
Federation of India Ltd. (1987) 1 SCC 615 : [ 1987] 1
 SCR 957 – relied on.
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Case Law Reference
[2009] 10 SCR 373
referred to
Para 10
[2006] 2 Suppl. SCR 954
referred to
Para 12
[2014] 3 SCR 162
referred to
Para 13
(2017) 5 SCC 743
referred to
Para 13
[1987] 1 SCR 957
relied on
Para 19
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2439
of 2018.
From the Judgment and Order dated 18.09.2015 by the High Court
of Judicature 

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