Case Note & Summary
The appellant, JHS Svendgaard Laboratories Ltd, challenged an order passed by a learned Single Judge under Section 9 of the Arbitration and Conciliation Act, 1996, which directed the appellant to hand over assets specified in Exhibit 'N' to the respondent, Gillettee India Ltd. The dispute arose out of an Asset Agreement between the parties. The Asset Agreement did not contain an arbitration clause, but the respondent argued that the arbitration clause from a separate Toothpaste Agreement could be read into the Asset Agreement because the Asset Agreement referred to the Toothpaste Agreement. The Single Judge accepted this argument and granted interim relief. On appeal, the appellant contended that there was no arbitration agreement between the parties, and therefore the Section 9 petition was not maintainable. The Division Bench of the Bombay High Court examined the agreements and found that the Asset Agreement did not contain an arbitration clause, and the reference to the Toothpaste Agreement was not sufficient to incorporate the arbitration clause. The court relied on the Supreme Court judgment in M.R. Engineers and Contractors Private Limited vs Somdatt Builders Limited (2009) 7 SCC 696, which held that for an arbitration clause to be incorporated by reference, the reference must be clear and specific. The court allowed the appeal, set aside the impugned order, and dismissed the Section 9 petition.
Headnote
A) Arbitration Law - Incorporation of Arbitration Clause - Section 7, Arbitration and Conciliation Act, 1996 - The court considered whether an arbitration clause from a Toothpaste Agreement could be read into an Asset Agreement that did not contain an arbitration clause. The Asset Agreement referred to the Toothpaste Agreement but did not specifically incorporate the arbitration clause. The court held that for an arbitration clause to be incorporated by reference, the reference must be such as to make the arbitration clause part of the contract. Mere reference to another agreement is insufficient. The court set aside the interim order under Section 9 as there was no arbitration agreement between the parties. (Paras 2-5)
Issue of Consideration
Whether an arbitration clause contained in a separate agreement (Toothpaste Agreement) can be read into an Asset Agreement which does not contain an arbitration clause, merely by referring to the main agreement.
Final Decision
The appeal is allowed. The impugned order dated 14 December 2015 is set aside. The Arbitration Petition No.609 of 2015 is dismissed. No order as to costs.
Law Points
- Arbitration clause cannot be read into an agreement by incorporation unless the reference is clear and specific
- Section 7 of the Arbitration and Conciliation Act
- 1996 requires an arbitration agreement to be in writing and signed
- Section 9 petition is maintainable only if there is an arbitration agreement
Case Details
2016 LawText (BOM) (02) 50
APPEAL (L) NO.33 OF 2016 in ARBITRATION PETITION NO.609 OF 2015
Anoop V. Mohta, G.S. Kulkarni
Mr. S.K. Maniktala a/w Mr. P. Ranjan i/b Halai & Co for Appellant, Mr. Mustafa Safiyuddin a/w Mr. Ashutosh Sampat a/w Mr. Abhishek Adke, Mr. Jaideep Singh Khattar, Mr. Hassan Saiiyuddin i/b M/s Legasis Partners for Respondent
JHS Svendgaard Laboratories Ltd
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Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against an order granting interim relief under Section 9 of the Act.
Remedy Sought
The appellant sought to set aside the order dated 14 December 2015 passed by the learned Single Judge directing the appellant to hand over assets to the respondent.
Filing Reason
The appellant challenged the maintainability of the Section 9 petition on the ground that there was no arbitration agreement between the parties.
Previous Decisions
The learned Single Judge had granted ad interim relief in terms of prayer clauses (a) and (d) of the Section 9 petition, directing the appellant to hand over assets within six weeks.
Issues
Whether an arbitration clause from a separate agreement can be read into an agreement that does not contain an arbitration clause by mere reference.
Whether the Section 9 petition was maintainable in the absence of an arbitration agreement.
Submissions/Arguments
The appellant argued that there was no arbitration clause in the Asset Agreement and therefore the Section 9 petition was not maintainable.
The respondent argued that the arbitration clause in the Toothpaste Agreement could be read into the Asset Agreement because the Asset Agreement referred to the Toothpaste Agreement.
Ratio Decidendi
For an arbitration clause to be incorporated by reference into another agreement, the reference must be clear and specific to make the arbitration clause part of the contract. Mere reference to another agreement is insufficient. In the absence of an arbitration agreement, a petition under Section 9 of the Arbitration and Conciliation Act, 1996 is not maintainable.
Judgment Excerpts
The Appellant under section 37 of the Arbitration and Conciliation Act, 1996 has challenged the order passed by the learned Single Judge dated 14 December 2015 on an application filed by the PetitionersRespondents under section 9 of the Act whereby reliefs in terms of prayer clauses (a) and (d) are granted.
Learned counsel appearing for the Appellants has raised a basic submission that there is no arbitration clause and therefore there was no question of invoking section 9 Petition that resulted into passing of the impugned order and directions to return the goods/machineries in question.
Procedural History
The respondent filed Arbitration Petition No.609 of 2015 under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief. The learned Single Judge passed an order on 14 December 2015 granting ad interim relief. The appellant filed an appeal under Section 37 of the Act against that order. The appeal was heard and disposed of by the Division Bench on 15 February 2016.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 7, Section 9, Section 37
