Lakshmi Sai Constructions Company v. IJM Corporation
2015-08-17
A.SHANKAR NARAYANA, R.SUBHASH REDDY
body2015
DigiLaw.ai
ORDER A. Shankar Narayana, J. 1. Assailing the order, dated 13-02-2015, in I.A. No. 660 of 2014 in O.S. No. 1265 of 2013, passed by the learned III Additional District Judge, Ranga Reddy District at L.B. Nagar, the instant appeal is preferred by the revision petitioners. 2. By the aforesaid order, the Court below dismissed I.A. No. 660 of 2014 filed by the revision petitioners herein in O.S. No. 1265 of 2013 under Section 8 of the Arbitration and Conciliation Act, 1996 (for brevity the Act, 1996) refusing to refer the dispute to the arbitration. 3. The respondent herein is the plaintiff M/s. IJM Corporation, Berhadin O.S. No. 1265 of 2013, while the revision petitioners herein are the defendants M/s. Lakshmi Sai Construction Company, Hyderabad and its proprietor Gunturu Venkata Bhaskara Raju. 4. The respondent instituted the above suit for recovery of Rs. 94,22,889/- from the revision petitioners consisting of Rs. 79,85,499/- towards excess payment made to the defendants and Rs. 14,37,390/- towards interest calculated at 24% per annum from 19-12-2012 to 19-09-2013 concerning the sub-contracts given to the revision petitioners. 5. The relevant facts, for adjudication of the instant revision, are as under: "i) The respondent has been engaged in the business of infrastructure and property development. National Highways Authority of India (hereinafter referred to as NHAI) had awarded contract relating to Rehabilitation and Up-gradation to Four Laning of Jhansi Lakhnadon Section from Km 132 - 187.8 (up to start of Sagar Bypass) on National Highway - 26 in the State of Madhya Pradesh, under contract package ADB-II/C-4 by entering into contract agreement on 19-04-2006. a) Clause 4.1 of the General Conditions of Contract empowers the respondent herein to sub-contract any portion of the awarded works. The revision petitioners approached the respondent expressing its incling in executing the said work. After due deliberations and negotiations, the respondent agreed to sub-contract certain portions of the work, i.e., awarding three separate contracts to construct Culverts, Bridges and Underpasses from chainage 132.28 to 160, package I including construction of Open Cross-Drains. The respondent herein elaborated the details in Table -A incorporated in paragraph No. 4 of the plaint.
After due deliberations and negotiations, the respondent agreed to sub-contract certain portions of the work, i.e., awarding three separate contracts to construct Culverts, Bridges and Underpasses from chainage 132.28 to 160, package I including construction of Open Cross-Drains. The respondent herein elaborated the details in Table -A incorporated in paragraph No. 4 of the plaint. To resolve site related issues, an amendment was introduced to the Letter of Award (for brevity LOA) relating to the first two items, being construction of bridges and underpasses and for construction of culverts, which details have been mentioned in Table B in paragraph No. 5 of the plaint. Further amendment was made pursuant to the instructions/requirements of NHAI to the LOAs, dated 02-11-2007, which details have been mentioned in Table-C in paragraph No. 6 of the plaint pertaining to construction of bridges, underpasses and culverts covered by LOAs. Certain other details have been mentioned in Table-D pertaining to supply of material, such as cement, reinforcement steel etc. b) The respondent herein has also referred to relevant clauses, which are clause - 2 relating to scope of subcontract work; clause - 5 relating to construction of culverts covered by LOAs. Finally, the respondent incorporated the material supplied by it to the revision petitioners as per the sub-contract agreement in table-G, the cost of which is also shown. Likewise, certain other details have been mentioned in Table -H showing various amounts relating to the material supplied by the respondent towards other recoveries. The respondent then incorporated the materials procured by the revision petitioners and the amounts reimbursed by it in Table-I. The gist of the entire transactions and the payments details between the parties have been shown in Table-J and, thus, claimed the aforesaid amount from the revision petitioners. ii) Since it appears at that stage there was no necessity for the respondent to refer to the dispute resolution mechanism between them, the relevant clauses touching the sub-contract agreement were not projected in the plaint. Only, when the revision petitioners made their appearance and filed I.A. No. 660 of 2014, the respondent has come up with pertinent clauses touching the dispute resolution mechanism between them. iii) The revision petitioners admit accepting and execution of sub-contracts relating to the works entrusted to it by the respondent covered by LOAs. 1, 2 and 3.
Only, when the revision petitioners made their appearance and filed I.A. No. 660 of 2014, the respondent has come up with pertinent clauses touching the dispute resolution mechanism between them. iii) The revision petitioners admit accepting and execution of sub-contracts relating to the works entrusted to it by the respondent covered by LOAs. 1, 2 and 3. But, according to it, the suit is liable to be dismissed in limini, as there has been a valid and subsisting arbitration agreement between them which applies to the subject matter of the present suit and the respondent has given a go-by to it and instituted the instant suit. a) According to the revision petitioners, when certain disputes have arisen, both the parties had personal discussions in the office of the respondent at Kuala Lumpur on 27-09-2012 to settle the claims refused by the respondent and, therefore, addressed a detailed letter, dated 18-10-2012, enlisting all their pending claims with the respondent under the subject sub-contracts and requested for early settlement. The respondent, asked through its letter dated 31-10-2012, requiring the revision petitioners to submit certain documents, which were duly furnished through their letter, dated 07-11-2012. Subsequently, as per the desire of the respondent expressed through the letter, dated 23-11-2012, requiring the presence of the revision petitioners on 27-11-2012 for valuation of the work, the officials of the respondent and the revision petitioners sat in a meeting and the officials of the respondent required the revision petitioners to sign on a set of papers agreeing to the quantities and the rates indicated therein promising to settle their claims as notified on 18-10-2012. The Officials of the revision petitioners signed therein without prejudice to their claim. It is, according to the revision petitioners, that later, the respondent strangely has come up with the theory of excess payments said to have made to it to a tune of Rs. 79,85,499/-. b) It is also according to the revision petitioners that they have addressed a letter of final claim, dated 24-06-2013, reiterating earlier claims referred to in the letter, dated 18-10-2012, and thereby contends that in their letters, dated 18-10-2012 and 24-06-2013, they asserted that there has been an arbitration agreement in the subject sub-contracts which were not denied by the respondent.
c) The revision petitioner also state that as per clause 6 of the LOA, dated 02-11-2007, the terms and conditions of the main contract of the respondent with NHAI, will apply even to the sub-contracts in so far as they are applicable. The revision petitioners further state that clause 17 of the subject sub-contracts also deals with a dispute resolution mechanism, to resolve the dispute and differences sought to be referred to the heads of the contracting parties for mutual settlement. The revision petitioners even state that clause 67.3 of the Conditions of Particular Application (for brevity COPA) as contained in the main agreement deals with amicable settlement, and clause 67.4 thereof provides for arbitration contemplating that the disputes on which there is no mutual settlement shall be settled by arbitration of three arbitrators, one each to be appointed by each of the contracted parties and the third, presiding arbitrator to be appointed by the two arbitrators. d) It is the case of the revision petitioners that in terms of clause 67.4 of COPA read with Clauses 6 and 17 of the sub- contracts, it has invoked the arbitration vide their letter, dated 05-04-2014 and appointed a former Judge of this Court as their nominee-arbitrator and called upon the respondent to appoint their nominee - arbitrator. Thus, according to the revision petitioners, a conjoint reading of clauses 6 and 17 of the subject LOA, dated 02-11-2007 read with clause 17 thereof and sub-clauses 67.3 and 67.4 of the main agreement would explicitly reveal that there is a binding arbitration agreement between the parties, and more so, the conduct of the respondent in not denying when the existence of the said arbitration agreement was asserted by them in their letters dated 18-10-2012 and 24-06-2013. Therefore, a request was made to refer the respondent to arbitration for its suit claim under Section 8 of the Act, 1996. iv) Respondent- Plaintiff has strongly resisted the request.
Therefore, a request was made to refer the respondent to arbitration for its suit claim under Section 8 of the Act, 1996. iv) Respondent- Plaintiff has strongly resisted the request. Having referred to the details relating to the sub-contracts and the relevant clauses touching the terms and conditions of the subcontracts between the parties, which, we have afore-referred to in brief, comes up with the stand that clause 17 of the contract/work orders/LOAs entered into between them provide that any dispute or differences which shall arise either during the progress or on the completion of the sub-contract work shall be referred to the respective Chief Executive Officer/Managing Director of the parties to the contract/work orders/LOAs to mutually agree and resolve the dispute or differences, and except the said clause, there is no other clause which deals with resolution of dispute that would arise between the parties. a) It is according to the respondent, as per the said dispute resolution mechanism, its C.E.O. and, the C.E.O. of the revision petitioners met on 27-09-2012 in Malaysia and discussed the issue at length, but the same proved abortive and, thereafter, it has got issued demand notice to the revision petitioners on 19-12-2012 demanding to pay Rs. 79,85,449/- which was not obliged by the revision petitioners. Having left with no other option except to seek redressal, the instant suit was instituted. b) Touching invocation of arbitration clause, it is according to the respondent that the reliance placed by the revision petitioners on clause 6 of the contract/work order is totally misconceived, in view of the fact that clause 6 refers to full knowledge of the terms and conditions stipulated in the main contract and they shall apply to the present contract/work orders in so far as it is applicable indicating that it relates to quality and quantity of the work to be executed and that cannot be stretched beyond the same. It is also according to the respondent that the emphasis laid on clause 67 of the main contract by the revision petitioners is totally misconceived for the reason that the said mechanism is exclusive to NHAI and cannot be substituted anywhere else.
It is also according to the respondent that the emphasis laid on clause 67 of the main contract by the revision petitioners is totally misconceived for the reason that the said mechanism is exclusive to NHAI and cannot be substituted anywhere else. The respondent has extracted sub-clause 67.1 dealing with disputes adjudication board; sub-clause 67.2 dealing with procedure for obtaining the boards decision; sub-clause 67.3 dealing with amicable settlement; sub-clause 67.4 dealing with arbitration; sub-clause 67.5 dealing with failure to comply with the boards decision; and sub-clause 67.6 which provides expiry of the boards appointment and contends that alternative dispute resolution mechanism provided in clause 67 is exclusive to NHAI and cannot be relied on by the revision petitioners, more particularly, when it is not a signatory to the said contract, and even if it is to be accepted that clause 67 of the main contract can be operated upon by the revision petitioners, still, the same cannot be done in a piecemeal manner and has to be operated in its entirety, and unless sub-clauses 1 to 3 of clause 67 are invoked or exhausted, sub-clause 67.4 cannot be operated upon as the same is not independent of sub-clauses 1 to 3 of clause 67 and, therefore, reliance on clause 67.4 is misconceived. c) Concerning the notice, dated 05-04-2014, got issued by the revision petitioners seeking to invoke the arbitration clause and to appoint an arbitrator, the respondent states that it has given reply dated 25-04-2014, emphasizing the absence of arbitration agreement between them as contemplated under the Act, 1996 and, as such, the question of appointing arbitrator for adjudication/resolving the purported dispute cannot be countenanced. Therefore, it sought to reject the request." 6. The Court below observing that sub-contract agreement between the respondent and the revision petitioners does not contain an arbitration clause and placing reliance on the decision relied on by both parties in M.R. Engineers & Contractors Pvt. Ltd., v. Som Datt Builders Ltd. 2009 (3) Arb. L.R. 1 (SC), holding that the main agreement between the respondent and NHAI is not applicable to the sub-contract agreement between the parties herein and does not bind them, rejected the request and dismissed the application. 7.
L.R. 1 (SC), holding that the main agreement between the respondent and NHAI is not applicable to the sub-contract agreement between the parties herein and does not bind them, rejected the request and dismissed the application. 7. It is the aforesaid order which drove the defendants -revision petitioners to approach this Court requesting to set aside the order under challenge contending that in the process of settlement of dispute amicably, which ultimately proved abortive, the respondent herein has not denied when the revision petitioners notified reference to arbitration through its letter, dated 18-10-2012 and reiterated in the letter, dated 24-06-2013, for resolving the dispute in terms of the contract conditions, which, inter alia, includes the arbitration agreement. "i) It is also stated that clause 6 of the LOAs in question, since provides that the terms and conditions of the parent contract shall apply to the revision petitioners in so far as it is applicable, the arbitration clause as contained in sub clause 67.4 shall also apply to the disputes arising out of the subject matter of the LOAs, which the Court below has, somehow, side-lined. ii) It is also stated that the Hon'ble Supreme Court in M.R. Engineers Case (Supra), held that where contract refers to a document and it has been agreed that the contract is governed by the provisions of the said document, then the terms and conditions of the said document in entirety will get bodily lifted and incorporated into the contract and, therefore, the order under challenge suffers from the vice of non-application of mind and liable to be set aside. iii) It is stated that the Court below, somehow, went wrong in applying the last paragraph of the judgment in M.R. Engineers Case (Supra), in as much as it has failed to apply the well-settled legal principle that a judgment is only an authority for what it decides and not what can be logically deduced there from. iv) Lastly, it is stated that while the main agreement contemplates resolution of disputes by Dispute Board, the terms of the Letter of Award provides for a separate mechanism through mutual discussions, but that itself would not make the arbitration agreement in sub-clause 67.4 inapplicable between the parties herein, especially when clause 6 of the LOAs uses the expression in so far as applicable which the Court below has completely overlooked.
Thus, the revision petitioners sought to set aside the impugned order." 8. Heard Sri S. Rajan, learned counsel for the revision petitioners, and Sri N.V. Sumanth of M/s. Indus Law Firm, learned counsel for the respondent. 9. Learned counsel for the revision petitioners would submit that sub-clause 67.4 of the General Conditions of Contract (for brevity GCC) entered into between the respondent and NHAI gets incorporated in the contract between the parties herein in view of sub-clause 6 of the LOA and, hence, the same constitutes an arbitration agreement as defined under section 7 of the Act, 1996 and, therefore, rejection of request by the Court below amounts to improper exercise of jurisdiction requiring the revision of the order under challenge. "i) He would further submit that non-denial by the respondent herein when the petitioner asserts arbitration agreement through its letters, dated 18-10-2012 and 24-06-2013, would suffice to cull out acceptance of arbitration agreement between the parties by virtue of the main contract between the principal employer and the respondent. ii) He would further submit that the law laid down by the Hon'ble Supreme Court in M.R. Engineers Case (Supra) that where a contract refers to a document and it has been agreed that the contract is governed by the provisions of the said document, then the terms and conditions of the said document in its entirety will get bodily lifted and incorporated into the contract and, therefore, the order under challenge is unsustainable. Hence, requests to set aside the order under challenge and refer the respondent to arbitration for the suit claim." 10. Learned counsel for the respondent would submit that clause 6 of the LOAs, since refers to the full knowledge of the terms and conditions stipulated in the main contract, they shall apply to the sub-contract in so far as it is applicable indicating that the terms stipulated in the main contract between the principal employer and the contractor in so far as it relates to quality and quantity of the work to be executed and cannot be stretched beyond the same. "i) He would further submit that the dispute resolution mechanism contained in clause 67 of the main contract is exclusive to NHAI and cannot be a substitute any-where else.
"i) He would further submit that the dispute resolution mechanism contained in clause 67 of the main contract is exclusive to NHAI and cannot be a substitute any-where else. He would further submit that mere non-denial of reference to arbitration alleged to have made in the letters, dated 18-10-2012 and 24-06-2013, cannot be brought within the purview of clause 7(4)(c) of the Act, 1996, since there has been an independent contract in existence between the revision petitioners and the respondent herein. ii) He would further submit that the fact-situation occurring in the instant case, and the fact-situation occurring in M.R. Engineers Case (Supra), are identical and, therefore, the law laid down therein would not render any assistance to the revision petitioners." 11. In the light of the pleas put-forth by the respective parties and the arguments advanced by their respective counsel, the question that arises for consideration is: "Whether the provision of arbitration contained in the main agreement between the respondent and the NHAI, was incorporated by reference in the subcontract agreement between the respondent and the revision petitioners?" 12. For proper appreciation of matter in controversy between the parties, it would be apt to refer to the relevant clauses of Section 7 of the Act, 1996, which read thus: 7. Arbitration Agreement: (1) In this Part, arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) xxxx (3) xxxx (4) An arbitration agreement is in writing if it is contained in,- (a) xxxx (b) xxxx (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) 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." 13. To examine whether the sub-contract agreement between the parties herein can be brought within the ambit of sub-section 5 of section 7 of the Act, 1996, it is indispensable to refer to clauses 6 and 17 of the sub-contract and sub-clauses 67.1 to 67.4 of the main contract between the principal employer and the contractor.
To examine whether the sub-contract agreement between the parties herein can be brought within the ambit of sub-section 5 of section 7 of the Act, 1996, it is indispensable to refer to clauses 6 and 17 of the sub-contract and sub-clauses 67.1 to 67.4 of the main contract between the principal employer and the contractor. All the three LOAs are replica to one another, by which, the respondent entrusted the work to the revision petitioners for execution. Clause 6, on which the revision petitioners mainly resting, deals with main contract between the parties. It reads thus: "6. Main Contract You are deemed to have full knowledge of the terms and conditions stipulated in the Main Contract between the Employer and us and such terms and conditions shall apply to you in so far as it is applicable. Clause 17 thereof which deals with Dispute Resolution, is thus: 17. Dispute Resolution If any dispute or difference shall arise between you and us, either during the progress or after the completion or abandonment of the Subcontract Works, then either party may forthwith give to the other party a notice in writing of such dispute or difference and such dispute or difference shall be referred to the respective chief executive officer/managing director of the parties for them to mutually agree and resolve the dispute or difference. Sub-clause 67.1 of GCC deals with disputes adjudication board and relevant sub-clauses are thus: Sub-clause 67.1: Disputes Adjudication Board Delete the text of Clause 67 and substitute with the following: If a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with or arising out of the contract or the execution of the Works, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the dispute shall initially be referred in writing to the Disputes Adjudication Board (the Board) for its decision. Such reference shall state that it is made under this Sub-clause, unless the member or members of the Board have been previously mutually agreed upon by the parties and named in the Contract, the parties shall within 90 days of the Commencement Date, jointly ensure the appointment of the Board. The Board shall comprise suitably qualified persons as members, the number of members being one or three, as stated in the Appendix to Bid.
The Board shall comprise suitably qualified persons as members, the number of members being one or three, as stated in the Appendix to Bid. If the Board is to comprise three members, each party shall nominate one member for the approval of the other party and the parties shall mutually agree upon and appoint the third member (who shall act as Chairman). The terms of appointment of the Board shall: a) xxxx b) xxxx c) x xxx d) x xxx 67.2 x xxx 67.3 Amicable Settlement Where notice of dissatisfaction has been given under Sub-clause 67.2, the parties shall attempt to settle such dispute amicably before the commencement of arbitration. Provided that unless the parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of dissatisfaction was given, even if no attempt at amicable settlement has been made. Sub-clause 67.4 deals with Arbitration, which is thus: Sub-clause 67.4: Arbitration Any dispute in respect of which: (a) the decision, if any, of the Board has not become final and binding pursuant to Sub-Clause 67.2, and (b) Amicable settlement has not been reached: shall be finally settled as set forth below: (i) (1) In the case of dispute arising between the Employer and a domestic Contractor or between the Employer and a foreign Contractor who opts for the application of the Indian Arbitration and Conciliation Act, 1996 related to any matter arising out of or connected with this Contract, such dispute shall be referred to the Arbitral Tribunal consisting of 3 (three) arbitrators, one each to be appointed by the Employer and Contractor, the third arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of failure of the two arbitrators, appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrators subsequently appointed then upon the request of either or both parties, the Presiding arbitrator shall be appointed by the President, Indian Road Congress. The Indian Arbitration and Conciliation Act, 1996 the rules there under and any statutory modification of re-enactment thereof, shall apply to these arbitration proceedings." 14.
The Indian Arbitration and Conciliation Act, 1996 the rules there under and any statutory modification of re-enactment thereof, shall apply to these arbitration proceedings." 14. Now, turning to the submissions of the learned counsel for the revision petitioners that the conjoint reading of clauses 6 and 17 of the LOAs read with clause 17 and sub-clauses 67.3 and 67.4 of the main agreement would indicate in definite terms that there is a binding arbitration agreement between the parties, and that the law laid down by the Hon'ble Supreme Court in M.R. Engineers Case (Supra), that where a contract refers to a document and it has been agreed that the contract is governed by the provisions of the said document, the terms and conditions thereof in entirety will get bodily lifted and incorporated into the contract, in our considered view, it is difficult to agree with the said submission, for the reasons hereinafter we indicate. 15. What was agreed between the parties herein under clause 6 of the contract is that the revision petitioners deemed to have full knowledge of the terms and conditions stipulated in the main contract between the employer and the contractor - respondent and, such terms and conditions shall apply to the revision petitioners in so far as it is applicable. In the case of M.R. Engineers (Supra), somewhat, similar terms were mentioned in the sub-contract stating that the said subcontract would be carried out on the terms and conditions as applicable to main contract, unless otherwise mentioned in the work order letter. The learned counsel for the revision petitioners relying on sub-section 5 of Section 7 of the Act, 1996, drawn our attention to the observations of the Hon'ble Supreme Court contained in paragraph No. 9 in M.R. Engineers Case (Supra), to fortify his submission that sub-clause 67.4 contained in the main agreement between the employer and the respondent herein binds the parties herein and with such intention, clause 6 of the sub-contract has been incorporated. The learned counsel for the respondent, on the other hand, placed reliance on the observations of the Hon'ble Supreme Court contained in paragraph Nos. 8, 13 and 16 of the very same decision. We have extracted sub-section 5 of section 7 of the Act, 1996, in the above. The observations of the Hon'ble Supreme Court in M.R. Engineers Case (Supra) contained in paragraph No. 9 are thus: "9.
8, 13 and 16 of the very same decision. We have extracted sub-section 5 of section 7 of the Act, 1996, in the above. The observations of the Hon'ble Supreme Court in M.R. Engineers Case (Supra) contained in paragraph No. 9 are thus: "9. If a contract refers to a document and provides that the said document shall form part and parcel of the contract, or that all terms and conditions of the said document shall be read or treated as a part of the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract. When there is such incorporation of the terms and conditions of a document, every term of such document (except to the extent it is inconsistent with any specific provision in the contract) will apply to the contract. If the document so incorporated contains a provision for settlement of disputes by arbitration, the said arbitration clause also will apply to the contract. The Hon'ble Supreme Court while explaining the difference between the reference to another document in a contract and incorporation of another document in a contract by reference held in paragraph No. 8 thus: 8. There is a difference between reference to another document in a contract and incorporation of another document in a contract, by reference. 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. We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive). The scope and intent of sub-section 5 of Section 7 of the Act, 1996 was summarized by the Hon'ble Supreme Court in sub-paragraph Nos. (iv) and (v) of paragraph No. 13.
We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive). The scope and intent of sub-section 5 of Section 7 of the Act, 1996 was summarized by the Hon'ble Supreme Court in sub-paragraph Nos. (iv) and (v) of paragraph No. 13. We are inclined to extract sub paragraph Nos. (iv) and (v) of paragraph No. 13, which are thus: (iv) Where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (as for example the standard terms and conditions of a trade association or architects association) will bind them or apply to the contract, such standard form of terms and conditions including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions. (v) Where the contract between the parties stipulates that the conditions of contract of one of the parties to the contract shall form a part of their contract (as for example the general conditions of contract of the government where government is a party), the arbitration clause forming part of such general conditions of contract will apply to the contract between the parties. While culling out the intention of the parties from the use of the words this sub-contract shall be carried out on the terms and conditions as applicable to main contract in relation to sub-contract therein, the Hon'ble Supreme Court in paragraph No. 15 held that the work order therein would indicate the intention that only the terms and conditions in the main contract relating to the execution of the work were adopted as a part of sub-contract between respondent and appellant, and not the parts of the main contract which did not relate to execution of the work. The Hon'ble Supreme Court held in paragraph No. 16 relied on by the learned counsel for the respondent thus: 16. Even assuming that the arbitration clause from the main contract had been incorporated into the subcontract by reference, we are of the view that the appellant could not have claimed the benefit of the arbitration clause.
The Hon'ble Supreme Court held in paragraph No. 16 relied on by the learned counsel for the respondent thus: 16. Even assuming that the arbitration clause from the main contract had been incorporated into the subcontract by reference, we are of the view that the appellant could not have claimed the benefit of the arbitration clause. This is in view of the principle that if the document to which a general reference is made, contains an arbitration clause whose provisions are clearly inapt or inapplicable with reference to the contract between the parties, it would be assumed or inferred that there was no intention to incorporate the arbitration clause from the referred document. In this case the wording of the arbitration clause in the main contract between the PW Department and contractor makes it clear that it cannot be applied to the subcontract between the contractor and the subcontractor. The arbitration clause in the main contract states that the disputes which are to be referred to the committee of three arbitrators under Clause 67.3 are disputes in regard to which the decision of the Engineer (Engineer refers to person appointed by State of Kerala to act as Engineer for the purpose of the contract between PW Department and the respondent) has not become final and binding pursuant to sub-clause 67.1 or disputes in regard to which amicable settlement has not been reached between the State of Kerala and the respondent within the period stated in sub-clause 67.2. Obviously, neither sub-clause 67.1 nor sub-clause 67.2 will apply as the question of Engineer issuing any decision in a dispute between the contractor and sub-contractor, or any negotiations being held with the Engineer in regard to the disputes between the contractor and sub-contractor does not arise. The position would have been quite different if the arbitration clause had used the words all disputes arising between the parties or all disputes arising under this contract. Secondly, the arbitration clause contemplates a committee of three arbitrators, one each to be appointed by the State of Kerala and the respondent and the third (Chairman) to be nominated by the Director-General (Road Development), Ministry of Surface Transport, Roads Wing, Government of India. There is no question of such nomination in the case of a dispute between the contractor and sub-contractor.
There is no question of such nomination in the case of a dispute between the contractor and sub-contractor. It is thus seen that the entire arbitration agreement contained in the main contract between the employer and the contractor was tailor-made to meet the requirements of the contract between the employer and the contractor and is wholly inapt and inapplicable in the context of a dispute between the contractor and the subcontractor. This makes it clear that the arbitration clause contained in the main contract would not apply to the disputes arising with reference to the subcontract." 16. Keeping in view, the guiding factor emphasized in paragraph No. 8 by the Hon'ble Supreme Court, when there is 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, we would like to infer the intention of the parties in incorporating the words you are deemed to have full knowledge of the terms and conditions stipulated in the main contract between the employer and us and such terms and conditions, shall apply to you in so far as it is applicable occurring in clause 6 of the sub-contract between the parties. 17. Admittedly, dispute resolution mechanism has been separately incorporated by the parties in clause 17 of the sub-contract. Even a dispute resolution mechanism is provided in the main contract between the employer and the contractor in sub clauses 1 to 4 of clause 67, as extracted in the above. The very fact that a distinct dispute resolution mechanism has been incorporated by the parties in clause 17 of the sub-contract reflects the intention of the parties that they never inclined to adopt the dispute resolution mechanism contained in clause 67 of GCC. When viewed in that perspective, certainly, the words mentioned in clause 6 of the sub-contract afore extracted, in our view, definitely indicate the intention of the parties that only the terms and conditions of the main contract relating to execution of the work were adopted as part of the sub-contract between the parties herein and not the contract in its entirety.
Thus, clause 17 of the sub-contract would completely exclude the invocation of arbitration clause contained in sub clause 4 of clause 67 of the main contract between the employer and the respondent. Thus, the principle enunciated by the Hon'ble Supreme Court in M.R. Engineers Case (Supra), would not render any assistance to the revision petitioners to interpret clause 6 of the sub-contract in the manner in which it intends to, while rendering complete assistance to the stand taken by the respondent. 18. Adverting to clause (c) of sub-section 4 of Section 7 of the Act, 1996, in relation to the submission of the learned counsel for the revision petitioners that the respondent did not deny the specific reference made to arbitration agreement contained in the main contract in the letters, dated 18-10-2012 and 24-06-2013, we are of the considered view, that the said circumstance does not improve the case of the revision petitioners for the reason that there has been distinct sub-contract between the revision petitioners and the respondent, more particularly, incorporation of clause 17 in relation to a distinct dispute resolution mechanism. Therefore, we are not convinced with the argument of the learned counsel for the revision petitioners in that regard. 19. In view of the foregoing discussion, we find no merit in the instant revision petition, and the same stands dismissed. We make no order as to costs. 20. As a sequel thereto, miscellaneous petitions, if any, pending in the revision, stand disposed of.