M/S. INOX WIND LTD. versus M/S. THERMOCABLES LTD. on 5 January 2018

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SUPREME COURT REPORTS[2018] 1 S.C.R. 86

[2018] 1 S.C.R.

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M/S. INOX WIND LTD.

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M/S. THERMOCABLES LTD.

(Civil Appeal No. 19 of 2018)

BJANUARY 05, 2018

[S. A. BOBDE AND L. NAGESWARA RAO, JJ.]

Arbitration and Conciliation Act, 1996 – s.11(6) – Purchaseorders were issued by the Appellant to the Respondent for supply ofcables – Respondent supplied cables to the Appellant – While layingCthe cables, the appellant discovered that the outer sheaths of thecables were cracked – Appellant asked for replacement –Respondent company did not replace the cables – Appellant issuednotice proposing the name of a sole arbitrator in terms of theStandard terms and conditions – In absence of any response,Dappellant filed application before the High Court u/s.11(6) of theAct – High Court dismissed the said application holding that therewas no special reference to the arbitration clause in the standardterms and conditions, so the arbitration clause cannot be said tohave been incorporated into the purchase order – Held: Accordingto Purchase order, the supply was to be according to the termsEmentioned in the order and the Standard terms and conditions thatwere attached thereto – Apart from other conditions, the Standardterms and conditions contained a clause pertaining to disputeresolution – Material on record indicates that the Respondentaccepted all the terms and conditions mentioned in the purchaseForder except the delivery period – Purchase order is a single contractand general reference to the standard form even if it is not by atrade association or a professional body is sufficient forincorporation of the arbitration clause – Therefore, judgment ofthe High Court set aside – Arbitrator appointed to adjudicate thedispute between the parties.G

Allowing the appeal, the Court

HELD: 1. Though a general reference to an earlier contractis not sufficient for incorporation of an arbitration clause in thelater contract, a general reference to a standard form would be H

enough for incorporation of the arbitration clause. In M.R.Engineers case, this Court restricted the exceptions to standardform of contract of trade associations and professional institutions.In view of the development of law after the judgment in M.R.Engineers’ case, this court is of the opinion that a generalreference to a consensual standard form is sufficient forincorporation of an arbitration clause. In other words, generalreference to a standard form of contract of one party will be enoughfor incorporation of arbitration clause. A perusal of the passagefrom Russell on Arbitration 24thEdition (2015) would demonstratethe change in position of law pertaining to incorporation whenread in conjunction with the earlier edition relied upon by thisCourt in M.R. Engineers’ case. This Court is in agreement withthe judgment in M.R. Engineer’s case with a modification that ageneral reference to a standard form of contract of one party alongwith those of trade associations and professional bodies will besufficient to incorporate the arbitration clause. [Para 19][100-F-H; 101-A]

2. In the present case, the purchase order was issued bythe Appellant in which it was categorically mentioned that thesupply would be as per the terms mentioned therein and in theattached standard terms and conditions. The Respondent by hisletter confirmed its acceptance of the terms and conditionsmentioned in the purchase order except delivery period. Thedispute arose after the delivery of the goods. No doubt, there isnothing forthcoming from the pleadings or the submissions madeby the parties that the standard form attached to the purchaseorder is of a trade association or a professional body. However,the Respondent was aware of the standard terms and conditionswhich were attached to the purchase order. The purchase orderis a single contract and general reference to the standard formeven if it is not by a trade association or a professional body issufficient for incorporation of the arbitration clause. [Para 20][101-B-D]

M. R. Engineers and Contractors Private Limited v. SomDatt Builders Limited(2009) 7 SCC 696 : [2009]10 SCR 373 – relied on.

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Sea Trade Maritime Corporation v. Hellenic Mutual WarRisks Association (Bermuda) Limited, The Athena[2006] EWHC 2530 (Comm);Habas Sinai Ve TibbiGazlar Isthisal Endustri AS v. Sometal SAL[2010]EWHC 29 (Comm);Aughton v. MF Kent Services[1991] 31 Con L.R. 60 – referred to.

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Russell on Arbitration 24[th] Edition (2015) – referred to.

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DCIVIL APPELLATE JURISDICTION: Civil Appeal No. 19 of2018.

From the Judgment and Order dated 20.07.2016 of the High Courtof Judicature at Allahabad in CMAA No. 2 of 2015.

Ms. Vibha Datta Makhija, Sr. Adv., Anup Jain, Pulkit Shrivastava,Ms. Disha Vaish, for the Appellant.

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K. Rajendran, A. T. M. Sampath, S. K. Bandyopadhyay,Surangama Banerjee, Rahul Nagpal, for the Respondent.

The Judgment of the Court was delivered byF

L. NAGESWARA RAO, J. 1.Leave granted.

2. This appeal is directed against the judgment of the High Courtof Judicature at Allahabad dismissing the application filed by the Appellantunder Section 11 (6) of the Arbitration and Conciliation Act, 1996G(hereinafter referred to as ‘the Act’).

3. The Appellant is a manufacturer of wind turbine generators(WTGs). The Respondent is engaged in the business of manufacture ofwind power cables and other types of cables. Two purchase ordersdated 13.12.2012 and 02.02.2013 were issued by the Appellant to the H

Respondent for supply of cables for their WTGs. According to thePurchase Order, the supply was to be according to the terms mentionedin the order and the Standard Terms and Conditions that were attachedthereto. Apart from the other conditions, the Standard Terms andConditions contain a clause pertaining to dispute resolution. The saidclause provides for a dispute to be resolved by a sole arbitrator inaccordance with the provisions of the Arbitration and Conciliation Act,1996. The material on record indicates that the Respondent accepted allthe terms and conditions mentioned in the Purchase Order except thedelivery period as is evident from a letter dated 15.12.2012.

4. The Respondent, pursuant to the Purchase Order, supplied windpower cables to the Appellant. While laying the cables supplied by theRespondent-company, the Appellant discovered that the outer sheathsof the cables of 150 sq. mm. were cracked. This forced them to stop theWTGs so as to avert damage to expensive equipment. According to theAppellant, the Respondent-company did not replace the cables. TheAppellant, therefore, was constrained to issue a notice dated 30.10.2014proposing the name of a sole arbitrator in terms of the Standard Termsand Conditions. In the absence of any response, the Appellant movedthe High Court of Judicature at Allahabad by filing an application underSection 11 (6) of the Act.

5. The High Court dismissed the said application by holding thatan arbitrator cannot be appointed as the Appellant did not prove theexistence of an arbitration agreement. The High Court relied upon thejudgment of this Court in M.R. Engineers and Contractors PrivateLimited v. Som Datt Builders Limited, (2009) 7 SCC 696 to holdthat there is no special reference to the arbitration clause in the standardterms and conditions, so the arbitration clause cannot be said to havebeen incorporated into the purchase order.

6. We have heard the counsel for the Appellant and Respondent.The judgment of this Court in M.R. Engineers’ case (supra) was reliedupon by both the parties. Before proceeding further, it would be necessaryto appreciate the ratio of the said judgment. A few facts necessary tounderstand the dispute in the said case are that the Appellant thereinwas a sub-contractor of the Respondent. The Appellant was entrusteda part of the work by the Respondent-contractor which pertained to‘construction of project directorate building’. It was mentioned in the AB

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Asub-contract that it shall be carried out as per the terms and conditionsapplicable to the main contract. A dispute arose between the partieswhich made the Appellant therein to approach the High Court forappointment of an arbitrator under Section 11 (6) of the Arbitration andConciliation Act, 1996. The High Court of Kerala rejected the applicationon the ground that the arbitration clause in the main contract was notBincorporated by reference in the contract between the Appellant andRespondent therein. In the appeal before this Court, the Appellantsubmitted that his case was squarely covered by Section 7 (5) of the Actand that the arbitration clause from the main contract was incorporatedby reference in the sub contract between him and the Respondent.

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7. This Court considered the scope of Section 7 (5) of the Act andheld that a conscious acceptance of the arbitration clause found in anotherdocument is necessary for the purpose of incorporating it into the contract.It was further held that general rules of construction of contracts wouldhave to be followed as there were no guidelines in Section 7(5) regardingDthe conditions that need to be fulfilled before construing a reference to aportion of a contract as a reference incorporating the whole of it alongwith the arbitration clause contained in it. While distinguishing ‘reference’to another document from ‘incorporation’, this Court observed that therelevant factor was the intention of the parties either to adopt the documentin its entirety or to borrow specific portions of the said document. InEthis connection, the Court held as follows: (M.R. Engineers’ case,para 17-19)

“17. We will give a few instances of incorporation and merereference to explain the position (illustrative and not exhaustive).If a contract refers to a document and provides that the saidFdocument shall form part and parcel of the contract, or that allterms and conditions of the said document shall be read or treatedas a part of the contract, or that the contract will be governed bythe provisions of the said document, or that the terms and conditionsof the said document shall be incorporated into the contract, theGterms and conditions of the document in entirety will get bodilylifted and incorporated into the contract. When there is suchincorporation of the terms and conditions of a document, everyterm of such document (except to the extent it is inconsistent withany specific provision in the contract) will apply to the contract. Ifthe document so incorporated contains a provision for settlementH

of disputes by arbitration, the said arbitration clause also will applyto the contract.

18. On the other hand, where there is only a reference to adocument in a contract in a particular context, the document willnot get incorporated in entirety into the contract. For example, if acontract provides that the specifications of the supplies will be asprovided in an earlier contract or another purchase order, then itwill be necessary to look to that document only for the limitedpurpose of ascertainment of specifications of the goods to besupplied. The referred document cannot be looked into for anyother purpose, say price or payment of price. Similarly, if a contractbetween X and Y provides that the terms of payment to Y will beas in the contract between X and Z, then only the terms of paymentfrom the contract between X and Z, will be read as part of thecontract between X and Y. The other terms, say relating to quantityor delivery cannot be looked into.

19. Sub-section (5) of Section 7 merely reiterates these well-settled principles of construction of contracts. It makes it clearthat where there is a reference to a document in a contract, andthe reference shows that the document was not intended to beincorporated in entirety, then the reference will not make thearbitration clause in the document, a part of the contract, unlessthere is a special reference to the arbitration clause so as to makeit applicable.”

8. Relevant passages from Russell on Arbitration 23rd Edition(2007)whichwere relied upon by this Court for interpretation of Section7 (5) of the Arbitration and Conciliation Act, 1996 are as under: (M.R.Engineers’ case, para 20-21)

“20. The following passages from Russell on Arbitration throwconsiderable light on the position while dealing with Section 6(2)of the (English) Arbitration Act, 1996 corresponding to Section7(5) of the Indian Act. (See pp. 52-55, 23rd Edn.):

“Reference to another document.—The terms of a contractmay have to be ascertained by reference to more than onedocument. Ascertaining which documents constitute thecontractual documents and in what, if any, order of prioritythey should be read is a problem encountered in many AB

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92SUPREME COURT REPORTS

Acommercial transactions, particularly those involving shippingand construction. This issue has to be determined by applyingthe usual principles of construction and attempting to infer theparties’ intentions by means of an objective assessment of theevidence. This may make questions of incorporation irrelevant,if for example it is clear that the contractual documents inBquestion are entirely separate and no intention to incorporatethe terms of one in the other can be established. However, thecontractual document defining and imposing the performanceobligations may be found to incorporate another documentwhich contains an arbitration agreement. If there is a disputeCabout the performance obligations, that dispute may need tobe decided according to the arbitration provisions of that otherdocument. This very commonly occurs when the principalcontractual document refers to standard form terms containingan arbitration agreement. However the standard form wordingmay not be apt for the contract in which the parties seek toDincorporate it, or the reference may be to another contractbetween parties at least one of whom is different. In thesecircumstances it may be possible to argue that the purportedincorporation of the arbitration agreement is ineffective. Thedraftsmen of the Arbitration Act, 1996 were asked to provideEspecific guidance on the issue, but they preferred to leave it tothe court to decide whether there had been a valid incorporationby reference. (Para 2.044)

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Subject to drawing a distinction between incorporation ofFan arbitration agreement contained in a document setting outstandard form terms and one contained in some other contractbetween different parties, judicial thinking seems to have favouredthe approach of Sir John Megaw in Aughton, namely, that generalwords of incorporation are not sufficient. Rather, particularGreference to the arbitration clause needs to be made to comply withSection 6 of the Arbitration Act, 1996, unless special circumstancesexist. (Para 2.047)

Reference to standard form terms.— If the document soughtto be incorporated is a standard form set of terms and conditionsthe courts are more likely to accept that general words of H

incorporation will suffice. This is because the parties can beexpected to be more familiar with those standard terms includingthe arbitration clause.” (Para 2.048)

21. After referring to the view of Sir John Megaw in AughtonLtd. v. M.F. Kent Services Ltd. [(1991) 57 BLR 1] that specificwords were necessary to incorporate an arbitration clause andthat the reference in a sub-contract to another contract’s termsand conditions would not suffice to incorporate the arbitrationclause into the sub-contract, followed in Barrett & Son(Brickwork) Ltd. v. Henry Boot Management Ltd.[1995 CILL1026] , Trygg Hansa Insurance Co. Ltd. v. Equitas Ltd. [(1998)2 Lloyds’ Rep 439] and AIG Europe (UK) Ltd. v. Ethniki [(2000)2 All ER 566 (CA)] and Sea Trade Maritime Corpn. v. HellenicMutual War Risks Assn. (Bermuda) Ltd. No. 2 [2006 EWHC2530] , Russell concludes:

“The current position therefore seems to be that if the arbitrationagreement is incorporated from a standard form a generalreference to those terms is sufficient, but at least in the caseof reference to a non-standard form contract in the context ofconstruction and reinsurance contracts and bills of lading aspecific reference to the arbitration agreement is necessary.”

9. This Court also discussed the scope of Section 7 (5) of the Actand summarised as follows: (M.R. Engineers’ case, para 24)

“24. The scope and intent of Section 7(5) of the Act may thereforebe summarised thus:

(i) An arbitration clause in another document, would getincorporated into a contract by reference, if the followingconditions are fulfilled:

(1) the contract should contain a clear reference to the documentscontaining arbitration clause,

(2) the reference to the other document should clearly indicate anintention to incorporate the arbitration clause into the contract,

(3) the arbitration clause should be appropriate, that is capable ofapplication in respect of disputes under the contract and shouldnot be repugnant to any term of the contract.

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(ii) When the parties enter into a contract, making a generalreference to another contract, such general reference would nothave the effect of incorporating the arbitration clause from thereferred document into the contract between the parties. Thearbitration clause from another contract can be incorporated intothe contract (where such reference is made), only by a specificreference to arbitration clause.

(iii) Where a contract between the parties provides that theexecution or performance of that contract shall be in terms ofanother contract (which contains the terms and conditions relatingto performance and a provision for settlement of disputes byarbitration), then, the terms of the referred contract in regard toexecution/performance alone will apply, and not the arbitrationagreement in the referred contract, unless there is specialreference to the arbitration clause also.

(iv) Where the contract provides that the standard form of termsand conditions of an independent trade or professional institution(as for example the standard terms and conditions of a tradeassociation or architects association) will bind them or apply tothe contract, such standard form of terms and conditions includingany provision for arbitration in such standard terms and conditions,shall be deemed to be incorporated by reference. Sometimes thecontract may also say that the parties are familiar with those termsand conditions or that the parties have read and understood thesaid terms and conditions.

(v) Where the contract between the parties stipulates that theconditions of contract of one of the parties to the contract shallform a part of their contract (as for example the general conditionsof contract of the Government where the Government is a party),the arbitration clause forming part of such general conditions ofcontract will apply to the contract between the parties.”

10. It was ultimately found that the intention of the parties wasnot to incorporate the main contract in its entirety into the sub-contract.Further, this Court held that the arbitration clause in the main contractwas inapplicable to the contract between the parties as the main contractwas between the Public Works Department, Government of Kerala andthe contractor in which the arbitration clause contemplated appointment of a committee of three arbitrators, with one each to be appointed by theState of Kerala and the Respondent therein and the third to be nominatedby the Director General Road Development, Ministry of Surface TransportRoads in Government of India. Appointment of a committee of arbitratorswith representatives of State of Kerala and the Government of Indiawas totally irrelevant for the contract between the contractor and thesub-contractor.

11. Section 6 (2) of the Arbitration Act, 1996 which extends toEngland, Wales and Northern Ireland is in pari materia with Section 7(5) of the Arbitration and Conciliation Act, 1996 and it reads as under:- “6. Definition of arbitration agreement.

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(2) The reference in an agreement to a written form of arbitrationclause or to a document containing an arbitration clause constitutesan arbitration agreement if the reference is such as to make thatclause part of the agreement.”

12. It will be useful to understand the interpretation of theincorporation issue in England. The question whether the general wordsof incorporation are sufficient to incorporate an arbitration agreementarose for consideration of the High Court of Justice, Queen’s BenchDivision, Commercial Court in Sea Trade Maritime Corporation v.Hellenic Mutual War Risks Association (Bermuda) Limited, TheAthena [2006] EWHC 2530 (Comm). In the said case the differencebetween incorporation in a single contract case and a two contract casewas recognized. If there is a reference to a secondary document in acontract between two parties and that secondary document is a contractto which at least one party is different from the parties to the contract inquestion, it would be a two contract case. In other words, if the secondarydocument is between other parties or if only one of the parties to thecontract in dispute is party to an earlier contract to which a reference ismade, then it would be a two contract case. In such a contract generalreference to the earlier contract would not be sufficient to incorporatethe arbitration clause. However, if the reference is to standard terms ina contract that would be a case of ‘single contract’ and the use of generalwords to incorporate the arbitration agreement by a reference ispermissible. As the reference in that case was to a standard form ofcontract which was a single contract case, Justice Langley held that the A

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Ageneral words of incorporation were enough to incorporate an arbitrationclause.

13. The question of incorporation of the arbitration clause froman earlier contract by general reference into a later contract came upfor consideration before the Queen’s Bench Division again in HabasBSinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal SAL [2010]EWHC 29 (Comm). The contract in the said case pertained to sale of10,000 metric tons of steel scrap. There were several terms in thecontract under the headings material, quantity, price, shipment, discharge,rate, payment and final weight. Apart from the said terms, the contractcontained a clause which was in the following terms: “All the rest willCbe same as our previous contracts.”

14. The dispute that arose in that case was whether general wordsmentioned above were capable of incorporating an arbitration clause.The difference in approach between cases in which the parties incorporatethe terms of a contract between the other parties or between one ofDthem with a third party on the one hand and those in which they incorporatethe standard terms on the other hand, was noticed. The following broadcategories in which the parties attempt to incorporate an arbitration clausewere recognized by the Court, which are as follows:

“(1) A and B make a contract in which they incorporateEstandard terms. These may be the standard terms of one partyset out on the back of an offer letter or an order, or contained inanother document to which reference is made; or terms embodiedin the rules of an organisation of which A or B or both aremembers; or they may be terms standard in a particular trade orindustry.

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(2) A and B make a contract incorporating terms previouslyagreed between A and B in another contract or contracts towhich they were both parties

(3) A and B make a contract incorporating terms agreedbetween A (or B) and C. Common examples are a bill of ladingGincorporating the terms of a charter to which A is a party;reinsurance contracts incorporating the terms of an underlyinginsurance; excess insurance contracts incorporating the terms ofthe primary layer of insurance; and building or engineering subcontracts incorporating the terms of a main contract or sub-subHcontracts incorporating the terms of a sub contract.

(4) A and B make a contract incorporating terms agreedbetween C and D. Bills of lading, reinsurance and insurancecontracts and building contracts may fall into this category.”

15. In Habas’s case (supra), Justice Christopher Clarke followedthe ratio in the case of ‘the Athena’ (supra) and held that in singlecontract cases (categories 1 and 2), a general reference would besufficient for incorporation of an arbitration clause from a standard formof contract. In cases falling under categories 3 and 4 mentioned abovewhich are two contract cases, it was held that a stricter rule has to befollowed by insisting on a specific reference to the arbitration clausefrom an earlier contract. Reliance placed on the judgment of Sir JohnMegaw in Aughton v MF Kent Services [1991] 31 Con L.R. 60was repelled in the following terms:

“53 I do not regard myself as bound by the decisions of the Courtof Appeal in Aughton v Kent and The Ethniki to reach a differentconclusion. Both were two-contract cases. Further the judgmentsof Sir John Megaw and Lord Justice Ralph Gibson are, in part inconflict so as to preclude either of them being binding authorityeven in a two contract case. The agreement of Evans LJ with SirJohn Megaw’s “ analysis of theauthorities with regard toarbitration clauses and specifically with regard to theincorporation of charterparty arbitration clauses into billsof lading “ was obiter.”

16. The point pertaining to the independent nature of an arbitrationclause being determinative of the dispute pertaining to incorporation wasalso dealt with in the said judgment as follows:

“51 Like Langley J, however, I do not accept that, in a singlecontract case, the independent nature of the arbitration clauseshould determine whether it is to be incorporated. A commerciallawyer would probably understand that an arbitration clause is aseparate contract collateral to another substantive contract andthat the expression “arbitration clause” is, on that account,something of a misnomer for “the arbitrationcontract which isancillary to the primary contract”. But a businessman wouldhave no difficulty in regarding the arbitration clause (as he wouldcall it) as part of a contract and as capable of incorporation, by ABC

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appropriate wording, as any other term of such a contract; and itis, as it seems to me to a businessman’s understanding that thecourt should be disposed to. give effect. A businessman who hadagreed with his counterparty a contract with 10 specific termsunder various headings and then agreed with the same counterpartyterms 1-5 under the same headings as before and, as to the rest,that all the terms of the previous contract should apply, would, Ithink, be surprised to find that “all” should be interpreted so as tomean “all but the arbitration clause”.

17. For a better understanding of the single and two contract casesand reference to standard form terms it is relevant to examine Russellon Arbitration 24thEdition (2015) which is as under: (See pp. 52-54,24rd Edn.)

“Reference to standard form terms, single and two contract cases.If the document sought to be incorporated is a standard form setof terms and conditions the courts are more likely to accept thatgeneral words of incorporation will suffice. This is because theparties can be expected to be more familiar with those standardterms, including the arbitration clause. In Sea Trade MaritimeCorp v. Hellenic Mutual War Risks Association (Bermuda) Ltd,(The “Athena”) No.2 the Court drew a distinction between whatis described as a “two contract case”, that is where the arbitrationclause is contained in a secondary document which is a contractto which at least one party is different from the parties to thecontract in question, and “a single contract case” where thearbitration clause is in standard terms to be found in anotherdocument. Relying on dictum of Bingham LJ in Federal BulkCarries Inc v. C. Itoh & Co Ltd (The “Federal Bulker”), LangleyJ stated that:

“In principle, English law accepts incorporation of standardterms by the use of general words and, I would add, particularlyso when the terms are readily available and the question arisesin the context of dealings between established players in awell-known market. The principle, as the dictum makes clear,does not distinguish between a term which is an arbitrationclause and one which addresses other issues. In contrast, andfor the very reason that it concerns other parties, a “stricter rule” is applied in charterparty/bills of lading cases. The reasongiven is that the other party may have no knowledge nor readymeans of knowledge of the relevant terms. Further, as theauthorities illustrate, the terms of an arbitration clause mayrequire adjustment if they are to be made to apply to the partiesto a different contract.”

The Court therefore reinforced the distinction betweenincorporation by reference of standard form terms and of theterms of a different contract, and concluded that in a singlecontract case general words of incorporation are sufficient,whereas by its nature a two contract case may require specificreference to the other contract, unless the secondary documentis stated to be based on standard form terms containing anarbitration agreement. In that case, presumably specificreference to the arbitration clause would not be needed. Asdiscussed below, this approach has been endorsed in subsequentcases, albeit drawing a slightly different but “material” distinctionbetween incorporation of the terms of a separate contract –standard or otherwise – made between the same parties whichare treated as “single contract” cases, even where there is in factmore than one contract; and those where the terms to beincorporated are contained in a contract between one or moredifferent parties which are treated as the “two contract” cases.(Para 2-049)

Extension of the single contract cases.

Extension of the single contract cases.

Recently, the courts appear to have extended the “single contract”principle applicable to standard form contracts, where generalwords of incorporation will suffice, to other types of contract wherethe same rationale can be said to apply. Thus, if the documentsought to be incorporated is a bespoke contract between the sameparties, the courts have accepted this as a “single contract” casewhere general words of incorporation will suffice, even thoughthe other contract is not on standard terms and constitutes anentirely separate agreement. The rationale for this approach isthat the parties have already contracted on the terms said to beincorporated and are therefore even more likely to be familiarwith the term relied on than a party resisting incorporation of astandard term. Put another way, if general words of incorporation AB

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Aare sufficient for the latter, they should be even more so for theformer. The courts also appear to have accepted as a “singlecontract” case a situation where the contract referred to isbetween one of the parties to the original contract and a thirdparty, where the contracts as a whole “were entered into in thecontext of a single commercial relationship”.(Para 2-050)B[Emphasis Supplied]

18. This Court in M.R. Engineers’ case, which is discussed indetail supra, held the rule to be that an arbitration clause in an earliercontract cannot be incorporated by a general reference. The exceptionto the rule is a reference to a standard form of contract by a tradeCassociation or a professional institution in which case a general referencewould be sufficient for incorporation of an arbitration clause. Reliancewas placed by this Court on Russell on Arbitration 23rd Edition (2007).The development of law regarding incorporation after the judgment inM.R. Engineers requires careful consideration. It has been held inDHabas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v Sometal SAL[2010] EWHC 29 (Comm) that a standard form of one party is alsorecognized as a ‘single contract’ case. In the said case, it was also heldthat in single contract cases general reference is enough for incorporationof an arbitration clause from a standard form of contract. There is nodistinction that is drawn between standard forms by recognized tradeEassociations or professional institutions on one hand and standard termsof one party on the other. Russell on Arbitration 24thEdition (2015)alsotakes note of the Habas’s case.

19. We are of the opinion that though general reference to anearlier contract is not sufficient for incorporation of an arbitration clauseFin the later contract, a general reference to a standard form would beenough for incorporation of the arbitration clause. In M.R. Engineersthis Court restricted the exceptions to standard form of contract of tradeassociations and professional institutions. In view of the development oflaw after the judgment in M.R. Engineers’ case, we are of the opinionGthat a general reference to a consensual standard form is sufficient forincorporation of an arbitration clause. In other words, general referenceto a standard form of contract of one party will be enough for incorporationof arbitration clause. A perusal of the passage from Russell onArbitration 24thEdition (2015)would demonstrate the change inposition of law pertaining to incorporation when read in conjunction withH

the earlier edition relied upon by this Court in M.R. Engineers’ case.We are in agreement with the judgment in M.R. Engineer’s case witha modification that a general reference to a standard form of contract ofone party along with those of trade associations and professional bodieswill be sufficient to incorporate the arbitration clause.

20. In the present case, the purchase order was issued by theAppellant in which it was categorically mentioned that the supply wouldbe as per the terms mentioned therein and in the attached standard termsand conditions. The Respondent by his letter dated 15.12.2012 confirmedits acceptance of the terms and conditions mentioned in the purchaseorder except delivery period. The dispute arose after the delivery of thegoods. No doubt, there is nothing forthcoming from the pleadings or thesubmissions made by the parties that the standard form attached to thepurchase order is of a trade association or a professional body. However,the Respondent was aware of the standard terms and conditions whichwere attached to the purchase order. The purchase order is a singlecontract and general reference to the standard form even if it is not by atrade association or a professional body is sufficient for incorporation ofthe arbitration clause.

21. For the aforementioned reasons, the appeal is allowed and thejudgment of the High Court is set aside. Justice Sushil Harkauli isappointed as the Arbitrator to adjudicate the dispute between the parties.

Ankit Gyan

Appeal allowed.

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