Parties’ Intention To Enter Into Arbitration Agreement Is To Be Deduced From Terms Of Agreement & Not Its Form: Calcutta HC

The Calcutta High Court has stated that the intention of the parties to enter into an arbitration agreement is to be deduced from the terms of the agreement and not its form.

The Court was hearing an arbitration petition under Section 11 (Appointment of arbitrators) of the Arbitration and Conciliation Act, 1996.

The Single judge Bench of Justice Ravi Krishnan Kapur observed: "The contractual document defining and imposing the obligations of the parties may have to be found to incorporate another document which contains an arbitration clause. The intention of the parties to enter into an arbitration agreement is to be deduced from the terms of the agreement and not its form.”

Senior Advocates Dhruba Ghosh and Altamas Alim appeared for the petitioner and Advocate Sarvapriya Mukherjee appeared for the respondents.

This case involved two interconnected and interlinked commercial documents, with only the older one containing an arbitration clause.

On the occurrence of such situations, the Court observed, “With the passage of time, inter-connected documents come into existence. One or more of the documents may contain an arbitration clause and others may not. The question is always one of construction. The exercise has to be conducted by reading the documents together and ascertaining as to what the parties must as commercial men have intended.”

With regard to reference to an arbitration clause, Section 7(5) of the Arbitration And Conciliation Act declares: The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

This means that even if a contract between parties does not have a specific provision for arbitration, an arbitration clause contained in an independent but related document could be imported and incorporated in the contract between the parties by reference to such document in the contract if the reference is such as to make all clauses of such document including the arbitration clause in such document part of the contract, the High Court explained.

However, a distinction was drawn by the Supreme Court in M.R Engineers and Contractors Private Ltd v. Som Datt Builders Limited (2009) between reference to another document in a contract and incorporation of another document in a contract by reference. In this regard, the Court said, “In the first case, the parties intend to adopt only specific portions or part of the referred document for the purposes of the contract. In the second case, the parties intend to incorporate the referred document in entirety, into the contract. Therefore when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific portions of the said document for application to the contract.”

In the present case, the High Court concluded that the express words in one document specifically incorporate the other document, and confirmed the applicability of the arbitration clause. The Court allowed the Arbitration Petition and appointed former Supreme Court Justice Indira Banerjee as a Nominee Arbitrator, subject to her consent.

Cause Title: Tata Communications Limited v. Rudrapriya Constructions LLP and Anr. [AP/77/2024]

Appearance:

Petitioner: Senior Advocates Dhruba Ghosh and Altamas Alim and Advocate A. Goyal

Respondent: Advocates Sarvapriya Mukherjee, Rachit Lakhmani, L. R. Mondal

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