The High Court · 2011

ABCDEFGH707Case Law Reference(2009) 7 SCC 696referred toPara 13CIVIL ORIGINAL JURISDICTION : Arbitration Petition (Civil)No.1 of 2019.Arbitration Petition Under Section 11(6) read with Section 11(12)(a)of the Arbitration and Conciliation Act, 1996.Abhishek Puri, Ms. Surabhi Gupta, Manish Dhingra, Mrs. ReetaPuri, P. N. Puri, Advs. for the Petitioner.Sanjeev Kumar Kapoor, M/s. Khaitan & Co., Advs. for theRespondent.The Judgment of the Court was delivered byDR. DHANANJAYA Y CHANDRACHUD, CJI1. On 5 August 2011, the petitioner entered into a Leave andLicense agreement with the respondent for the use and occupation ofoffice premises situated on the 4th Floor of the West Wing at WockhardtTowers, C-2, Block G, Bandra Kurla Complex, Bandra (East), Mumbai400051 for a period of five years. On the same day, an Amenitiesagreement was contemporaneously executed with the Leave and Licenceagreement. Upon the expiry of the term of the Leave and Licenseagreement, a fresh Leave and Licence agreement was executed betweenthe petitioner and the respondent on 1 July 2016 for the continued useand occupation of the premises for a period of two years.2. On 25 August 2016, the petitioner entered into an Amenitiesagreement with the respondent.3. On 22 March 2017, the petitioner issued a notice of terminationto the respondent stating that the Leave and Licence agreement and theAmenities agreement would stand terminated upon the expiry of thelock-in period, namely, on 1 July 2017.4. The respondent replied to the termination notice on 30 March2017. Asserting that the termination was not in accordance with theterms of the Leave and Licence agreement and the Amenities agreement,the respondent declined to refund the security deposits to the petitioner.According to the petitioner, vacant and peaceful possession of the licensedpremises was handed over to the respondent on 13 June 2017.SHINHAN BANK v. CAROL INFO SERVICES LIMITED ABCDEFGH708SUPREME COURT REPORTS[2023] 5 S.C.R.5. On 3 July 2017, the petitioner served a notice of demand forrefund of the security deposits together with interest. The claim wasdenied in a letter dated 13 July 2017. By another letter of 13 July 2017,the respondent served upon the petitioner a notice claiming an amountof Rs 2,59,85,856 towards the balance license fee and amenities chargesfor the period between 1 July 2017 and 30 June 2018 and claimedconsequential losses amounting to Rs 69,21,408 together with interestafter adjusting the amount of the security deposits under the 2016agreement.6. By an Advocate’s letter dated 29 September 2017, the petitionersought refund of its security deposit in the amount of Rs 1,68,48,000(which was deposited under the Leave and Licence agreement) and Rs56,16,000 (which was deposited under the Amenities agreement) togetherwith interest at the rate of 15% per annum. The respondent rejected theclaim in its response dated 5 October 2017.7. On 9 October 2017, the petitioner invoked arbitration andproposed the appointment of a sole arbitrator. In its response dated 13October 2017, the respondent denied the existence of an arbitrationagreement.8. An arbitration petition under Section 11 of the Arbitration andConciliation Act 1996 was instituted before the High Court of Judicatureat Bombay, but it was withdrawn since the arbitration is an internationalcommercial arbitration, the petitioner being a banking companyincorporated under the laws of South Korea.9. We have heard Mr Abhishek Puri, counsel for the petitionerand Mr Sanjeev Kumar Kapoor, counsel for the respondent.10. Two agreements entered into between the parties. The first isa Leave and Licence agreement dated 1 July 2016. The second is anAmenities agreement dated 25 August 2016. The bone of contention iswhether there is an arbitration agreement between the parties. Thecontention of the respondent is that while the Amenities agreementcontains an arbitration agreement, the Leave and Licence agreementdoes not. Hence, it has been submitted that the claim of the petitionerinvoking arbitration must be rejected. Moreover, it has been submittedthat the respondent has instituted a suit before the High Court of Judicatureat Bombay on its Original Side and it would be open to the petitioner tomove an application under Section 8 for seeking a reference to arbitration. ABCDEFGH709It has been submitted that the claim of the respondent in the suit foroutstanding license fees has been computed after adjusting the securitydeposit and hence the appropriate course of action for the petitionerwould be to pursue its remedies under Section 8.11. The Amenities agreement which was entered into betweenthe parties on 25 August 2016, inter alia, contains the following provision:“This Agreement is executed contemporaneously with the saidLeave and License Agreement and shall be read and construedaccordingly. The provision of this Agreement shall be deemed tobe and shall constitute an integral part of the said Leave andLicense Agreement in respect of the License of the LicensedPremise granted by the Licensors to the Licensee. All provisionsof the said Leave and License Agreement shall, mutatis mutandis;apply to this Amenities Agreement”12. The Amenities agreement contains a provision to resolvedisputes through arbitration. Clause 17 is in the following terms:“17. All disputes, controversies or claims arising out of or relatingto this Agreement: including existence or interpretation of anyclause hereof, shall be referred to arbitration by a sole arbitratorduly appointed by mutual consent of both the Parties in writing,failing which under the provisions of the Arbitration and ConciliationAct, 1966. The cost of theArbitration shall be borne equally. Theplace of arbitration shall be Mumbai and the arbitration shall begoverned by the Arbitration & Conciliation Act, 1966 as amendedfrom time to time. The language of the arbitration proceedingsshall be English. The Award shall be final and conclusive. TheCourts in Mumbai shall have exclusive jurisdiction to try andentertain matters arising herefrom.”13. The submission which has been urged on behalf of therespondent is that in terms of Section 7(5), a mere reference to a documentwould not have the effect of making an arbitration clause from thatdocument a part of the contract. The submission is based on the decisionof this Court in M R Engineers and Contractors Private Limited vsSom Datt Builders Limited1.14. Clause (1) of the Amenities agreement which has beenextracted above indicates that (i) the provisions of the Amenities1 (2009) 7 SCC 696SHINHAN BANK v. CAROL INFO SERVICES LIMITED[DR. DHANANJAYA Y CHANDRACHUD, CJI] ABCDEFGH710SUPREME COURT REPORTS[2023] 5 S.C.R.agreement shall be deemed to be and shall constitute an integral part ofthe Leave and Licence Agreement in respect of the license granted bythe petitioner to the respondent; and (ii) all the provisions of the Leaveand Licence agreement shall mutatis mutandis apply to the Amenitiesagreement. Clause 17 of the Amenities agreement contains an agreementto refer disputes to arbitration.15. The plain consequence of clause (1) of the Amenitiesagreement is that all the terms of that agreement constitute an integralpart of the Leave and Licence agreement. The Amenities agreementdoes not merely contain a reference to the Leave and Licence agreement.It incorporates all the terms of the Amenities agreement as an integralpart of the Leave and Licence agreement. By doing so, the parties haveintended to make the arbitration clause in the Amenities agreement anintegral part of the Leave and Licence agreement.16. Section 7(5) of the Arbitration and Conciliation Act 1996stipulates that the reference in a contract to a document containing anarbitration clause constitutes an arbitration agreement if the contract isin writing and the reference is such as to make that arbitration clausepart of the contract. Clause (1) of the Amenities agreement is intendedto make the arbitration clause which is embodied in the Amenitiesagreement (Clause 17) an integral part of the Leave and Licenceagreement.17. In M R Engineers and Contractors Private Limited vs SomDatt Builders Limited (supra), this Court held thus:“We will give a few instances of incorporation and mere referenceto explain the position (illustrative and not exhaustive). If a contractrefers to a document and provides that the said document shallform part and parcel of the contract, or that all terms and conditionsof the said document shall be read or treated as a part of thecontract, or that the contract will be governed by the provisions ofthe said document, or that the terms and conditions of the saiddocument shall be incorporated into the contract, the terms andconditions of the document in entirety will get bodily lifted andincorporated into the contract. When there is such incorporationof the terms and conditions of a document, every term of suchdocument (except to the extent it is inconsistent with any specificprovision in the contract) will apply to the contract. If the document ABCDEFGH711so incorporated contains a provision for settlement of disputes byarbitration, the said arbitration clause also will apply to thecontract.”18. The principle which emerges from the provisions of Section7(5) is elucidated in paragraph 19 of the judgment, which is extractedbelow:“Sub-section (5) of Section 7 merely reiterates these well- settledprinciples of construction of contracts. It makes it clear that wherethere is a reference to a document in a contract, and the referenceshows that the document was not intended to be incorporated inentirety, then the reference will not make the arbitration clause inthe document, a part of the contract, unless there is a specialreference to the arbitration clause so as to make it applicable.”19. The arbitration agreement which is embodied in clause 17 ofthe Amenities agreement was intended by the parties for all intents andpurposes to be a part of the Leave and Licence agreement.20. There is no merit in the submission that the petitioner shouldbe now relegated to pursuing the remedy under Section 8. In view of theclear terms of the contract between the parties, a reference to arbitrationwould be necessitated.21. The sole Arbitrator who was nominated by the petitioner hassince assumed the position of Lokayukta of the State of Maharashtra.Hence, we direct that the disputes and differences between the partiesarising out of claim of the petitioner shall be referred to the sole arbitrationof Dr (Mrs) Shalini Phansalkar-Joshi, a former Judge of the High Courtof Judicature at Bombay. The Arbitrator shall decide upon the fees inconsultation with the parties and the modalities of arbitration.22. The Registrar (Judicial) shall transmit a copy of this order tothe sole Arbitrator.23. The Arbitration Petition is accordingly disposed of.24. Pending applications, if any, stand disposed of.Nidhi JainArbitration petition disposed of.(Assisted by : Tamana, LCRA)SHINHAN BANK v. CAROL INFO SERVICES LIMITED[DR. DHANANJAYA Y CHANDRACHUD, CJI]