NBCC (INDIA) LIMITED versus ZILLION INFRAPROJECTS PVT. LTD.

Citation: [2024] 3 S.C.R. 812 · Decided: 19-03-2024 · Supreme Court of India · Bench: BHUSHAN RAMKRISHNA GAVAI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

* Author
[2024] 3 S.C.R. 812 : 2024 INSC 218
NBCC (India) Limited 
v. 
Zillion Infraprojects Pvt. Ltd.
(Civil Appeal Nos. 4417-4418 of 2024)
19 March 2024
[B.R. Gavai* and Sandeep Mehta, JJ.] 
Issue for Consideration
When there is a general reference in the second contract to the 
terms and conditions of the first contract, whether the arbitration 
clause in the first contract would ipso facto be applicable to the 
second contract.
Headnotes
Arbitration & Conciliation Act, 1996 – The appellant issued 
an invitation for tender – Respondent submitted its techno 
bid- vide L.O.I. appellant awarded the contract to Respondent 
– Respondent approached High Court under Sec. 11(6) – High 
Court appointed sole arbitrator – Order of the High Court set aside 
Held: General reference will not lead to incorporation of the 
arbitration clause – Reference to arbitration clause in another 
contract ought to be specific. [Paras 3 and 21-23]
Arbitration – When will an arbitration clause from a second 
contract be incorporated in the first contract
Held: Conscious acceptance of arbitration clause – Reference and 
incorporation are different – Reference does not ipso fact lead to 
incorporation. [Paras 12-13 and 21-23]
Arbitration & Conciliation Act, 1996 – Sec. 7(5) – Arbitration 
clause will not be incorporated by a general reference – 
Conscious Acceptance – In absence of specific reference, 
only execution/performance terms will apply – If no specific 
reference, arbitration clause will not apply – Reference not 
incorporation in the present case- General reference does not 
lead to incorporation.
The Appellant had issued an invitation for tender for “Construction 
of Weir with Allied Structures across river Damodar at DVC, CTPS, 
Chandrapura, Dist – Bokaro, Jharkhand in response whereto, the 
[2024] 3 S.C.R. 
813
NBCC (India) Limited v. Zillion Infraprojects Pvt. Ltd.
Respondent submitted its Techno Commercial Bid. The contract for 
the construction of weir was awarded to the Respondent whereafter 
due to certain disputes, the Respondent issued a notice in terms 
of Clause 3.34 of Section III Volume II of the Tender Documents 
invoking arbitration and further seeking consent of the appellant 
for the appointment of a former Judge of a High Court, as Sole 
Arbitrator. The Respondent, while invoking the arbitration, had 
taken recourse to Clause 2 of the Letter of Intent (L.O.I.) issued 
by the Appellant while awarding the contract. Clause 2 stated thus: 
“All terms and conditions as contained in the tender issued by 
DVC to NBCC shall apply mutatis mutandis except where these 
have been expressly modified by NBCC.” Since the Appellant did 
not respond to the notice, the Respondent approached the High 
Court under Section 11(6) of the Arbitration and Conciliation Act, 
1996. High Court allowed the petition preferred by the Respondent.
Held: A perusal of sub-section (5) of Section 7 of the Arbitration Act 
itself would reveal that before an arbitration clause could be read 
as a part of the contract, there must be a conscious acceptance of 
the arbitration clause from another document by the parties – It is 
thus clear 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. [Paras 12 and 13]
While setting aside the order of the High Court, the Supreme 
Court held that a general reference to the terms and conditions 
of another contract would not have the effect of incorporating 
the arbitration clause – It is pertinent to note that clause 7.0 of 
the L.O.I. specifically uses the word “Only” before the words “be 
through civil courts having jurisdiction of Delhi alone” – When 
there is a reference in the second contract to the terms and 
conditions of the first contract, the arbitration clause would not 
ipso facto be applicable to the second contract unless there is 
specific mention/reference thereto – The present case is not a 
case of ‘incorporation’ but a case of ‘reference’ – As such, a 
general reference would not have the effect of incorporating the 
arbitration clause – Clause 7.0 of the L.O.I, which is also a part 
of the agreement, makes it amply clear that the redressal of the 
dispute between NBCC and respondent has to be only through 
civil courts having jurisdiction of Delhi alone – Delhi High Court 
has erred in allowing the application of the respondent. [Paras 
21 to 24]
814
[2024] 3 S.C.R.
Digital S

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