Case Note & Summary
The petitioner, the Board of Trustees of the Jawaharlal Nehru Port Trust, a major port constituted under the Major Port Trusts Act, 1963, issued a global invitation for the development of the 4th Container Terminal project on a design, build, finance, operate and transfer basis. Respondent No.1 (PSA Mumbai Investments Pte. Limited) and Respondent No.2 (ABG Ports Limited) formed a consortium through a joint bidding agreement dated 21st August 2009, with Respondent No.1 as the lead member holding 74% share and Respondent No.2 holding 26%. The consortium was shortlisted and submitted a Request for Proposal (RFP) bid on 15th October 2010, which was successful. On 26th September 2011, the petitioner issued a letter of award to the consortium. Subsequently, a concession agreement was executed between the petitioner and a special purpose vehicle (SPV) named Nhava Sheva Freeport Terminal Private Limited, which was incorporated by the respondents. The respondents were not signatories to the concession agreement. Disputes arose, and the petitioner initiated arbitration against the respondents, claiming that the arbitration clause in the concession agreement was binding on them. The respondents filed a plea under Section 16(2) of the Arbitration and Conciliation Act, 1996, challenging the arbitrator's jurisdiction. The learned arbitrator accepted the plea, holding that there was no arbitration agreement between the parties. The petitioner challenged this order under Section 37 of the Act. The court analyzed the joint bidding agreement, RFP, and concession agreement, and found that the respondents were not parties to the concession agreement and had not consented to its arbitration clause. The court held that the arbitration clause could not be incorporated by reference as there was no express agreement to that effect. The court dismissed the petition, upholding the arbitrator's order.
Headnote
A) Arbitration Law - Jurisdiction of Arbitrator - Section 16(2) of Arbitration and Conciliation Act, 1996 - The arbitrator upheld the plea that there was no arbitration agreement between the parties, as the respondents were not signatories to the concession agreement containing the arbitration clause. The court held that the joint bidding agreement and RFP did not contain an arbitration clause, and the respondents did not consent to be bound by the arbitration clause in the concession agreement. (Paras 1-10) B) Arbitration Law - Incorporation by Reference - Section 7 of Arbitration and Conciliation Act, 1996 - 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 document is insufficient unless the parties expressly agree to incorporate the arbitration clause. (Paras 11-15) C) Contract Law - Privity of Contract - The respondents were not parties to the concession agreement and thus not bound by its arbitration clause. The court emphasized that an arbitration agreement must be between the parties to the dispute, and a third party cannot be compelled to arbitrate without consent. (Paras 16-20)
Issue of Consideration
Whether the learned arbitrator had jurisdiction to entertain the dispute filed by the petitioner in the absence of an arbitration clause/agreement between the petitioner and the respondents.
Final Decision
The court dismissed the petition, upholding the order of the learned arbitrator that there was no arbitration agreement between the parties and that the arbitrator had no jurisdiction.
Law Points
- Arbitration agreement must be in writing
- Section 7 of Arbitration and Conciliation Act
- 1996
- Section 16(2) of Arbitration and Conciliation Act
- Incorporation by reference
- Third party to arbitration agreement
- Consent of parties
