Calcutta High Court: In a case involving two Arbitration petitions filed under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act) seeking an injunction against disposal of assets under a Master Facility Agreement and a Settlement Agreement, a single-judge bench comprising of Moushumi Bhattacharya,* J., held that due to the absence of an unambiguous intention to incorporate the arbitration clause under Section 7(5) of the Act and the lack of a contractual relationship between the parties, the petitioner’s application for interim relief is dismissed.
In the instant matter, the petitioner sought an injunction against respondent 1 from dealing with assets under the Master Facility Agreement executed between SREI Equipment Finance Ltd. (SREI) and respondent 1, and a subsequent Settlement Agreement executed between SREI and the petitioner. The Master Facility Agreement was assigned to the petitioner by SREI in satisfaction of dues. Since the facts were identical and relied upon the same legal propositions, both petitions were being addressed together.
The petitioner contended that the petitioner has the right to the Master Facility Agreement’s arbitration clause due to its assignment from SREI and that the respondent no. 1 was bound by the Settlement Agreement’s arbitration clause.
On the other hand, respondent 1 argued that there was no privity of contract between the petitioner and themselves, and thus, no valid arbitration agreement. It was contended that a general reference to the Master Facility Agreement was insufficient for incorporating the arbitration clause and specific incorporation of the arbitration clause is necessary.
1. Whether there exists an arbitration agreement between the petitioner and respondent 1 that justifies a Section 9 application.
2. Whether a composite reference can be made for two separate arbitration agreements.
The Court analyzed the issue of incorporating an arbitration clause by reference under Section 7(5) of the Arbitration and Conciliation Act, 1996. It held that the statutory position did not support the petitioner’s argument, as there was no unambiguous intention expressed by the parties to incorporate the arbitration clause from one agreement to the other. The Court emphasized that incorporation by reference must be clear and in harmony with the contract’s terms, and this was not the case in the present situation.
“…the reference to the contract is clear and reflects the intention of the parties to be bound by the arbitration clause which is to be incorporated into the contract. The incorporation of the arbitration clause into the contract (which does not contain the arbitration clause) would also have to be appropriate to the disputes under the contract to which the arbitration clause is incorporated and not result in repugnancy to the terms of the contract.”
The Court rejects the petitioner’s claim that the arbitration clause from one agreement should be incorporated into the other, as there is no mutual intention expressed between the parties for such incorporation.
The Court also highlighted that an application for interim relief under Section 9(1) of the Act was available only to a “party” to an arbitration agreement. Since there was no clear arbitration agreement between the petitioner and respondent 1, and SREI was the common link between the agreements but not a party to the proceedings, the Court could not find a basis for granting interim relief.
The Court dismissed both the Arbitration Petitions without any order as to costs.
[Kobelco Construction Equipment India (P) Ltd. v. Lara Mining, 2023 SCC OnLine Cal 2327, order dated 11-08-2023]
*Judgment by Justice Moushumi Bhattacharya
Advocates who appeared in this case :
Mr. Swatatrup Banerjee, Mr. Sariful Haque, Mr. Hareram Singh, Ms. Shilpa Das, Counsel for the Petitioner;
Mr. Anirban Ray, Mr. Varun Kothari, Ms. Anshumala Bansal, Counsel for the Respondents.