ARBITRATION AND CONCILIATION ACT, 1996 – S. 7(5) – Arbitration agreement by incorporation – Reference to earlier agreement – Distinction between “mere reference” and “incorporation by reference” – Development Agreement containing arbitration clause – Permanent Alternate Accommodation Agreements subsequently executed – Clause providing that all terms and conditions of earlier Development Agreement shall form part of later agreements and all clauses shall be binding – Whether arbitration clause incorporated – Scope. Developer entered into Development Agreement with Co-operative Housing Society containing arbitration clause under Clause 36 – Subsequently entered into Permanent Alternate Accommodation Agreements with individual society members – Later agreements contained Clause 14 providing that all terms and conditions of Development Agreement shall be construed to form part of said agreements and all clauses thereof shall be binding on parties – Members instituted proceedings before Consumer Commission – Developer invoked arbitration clause and sought appointment of arbitrator under Section 11 of Arbitration Act – High Court dismissed applications holding that arbitration clause in Development Agreement was not specifically incorporated into later agreements and that mere reference to earlier agreement was insufficient under Section 7(5) – Sustainability.

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ARBITRATION AND CONCILIATION ACT, 1996 – S. 7(5) – Arbitration agreement by incorporation – Reference to earlier agreement – Distinction between “mere reference” and “incorporation by reference” – Development Agreement containing arbitration clause – Permanent Alternate Accommodation Agreements subsequently executed – Clause providing that all terms and conditions of earlier Development Agreement shall form part of later agreements and all clauses shall be binding – Whether arbitration clause incorporated – Scope.

Developer entered into Development Agreement with Co-operative Housing Society containing arbitration clause under Clause 36 – Subsequently entered into Permanent Alternate Accommodation Agreements with individual society members – Later agreements contained Clause 14 providing that all terms and conditions of Development Agreement shall be construed to form part of said agreements and all clauses thereof shall be binding on parties – Members instituted proceedings before Consumer Commission – Developer invoked arbitration clause and sought appointment of arbitrator under Section 11 of Arbitration Act – High Court dismissed applications holding that arbitration clause in Development Agreement was not specifically incorporated into later agreements and that mere reference to earlier agreement was insufficient under Section 7(5) – Sustainability.

Held : Section 7(5) of Arbitration and Conciliation Act recognises arbitration agreement by incorporation where contract in writing refers to another document containing arbitration clause and such reference demonstrates intention to make arbitration clause part of contract. Distinction exists between “mere reference” to another document and “incorporation by reference”. Where parties merely refer to another document for limited purpose, arbitration clause therein does not automatically become part of later contract. However, where later agreement expressly stipulates that all terms and conditions of earlier agreement shall form part of later agreement and all clauses thereof shall bind parties, intention to bodily import entire earlier agreement, including arbitration clause, stands unequivocally established.

Clause 14 of Permanent Alternate Accommodation Agreements clearly manifested intention of parties to incorporate Development Agreement “body and soul” into later agreements. This was not limited or contextual reference but complete assimilation of earlier agreement into subsequent contracts. Consequently, arbitration clause contained in Clause 36 of Development Agreement stood validly incorporated into later agreements by operation of Section 7(5).

High Court erred in holding that specific reiteration of arbitration clause in subsequent agreements was necessary. Once parties consciously agreed that all clauses of earlier agreement would bind them, arbitration clause automatically became enforceable against society members who were parties to later agreements.

M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. and NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd., followed.

(Paras 8 to 13)

HELD

Section 7(5) contemplates incorporation of arbitration clause from one document into another where written contract clearly demonstrates intention to adopt terms of earlier document as part of later agreement. (Paras 8 and 9)

Distinction must be maintained between mere reference to another document and incorporation by reference. In case of incorporation, terms and conditions of referred document stand bodily lifted into later contract including arbitration clause, unless inconsistent. (Para 9)

Where later agreements expressly provided that all terms and conditions of Development Agreement shall form part of subsequent agreements and all clauses thereof shall bind parties, arbitration clause in Development Agreement stood incorporated into subsequent agreements. (Paras 11 and 12)

High Court committed error in treating Clause 14 as mere general reference and in holding that separate arbitration clause was necessary in Permanent Alternate Accommodation Agreements. (Para 13)

RESULT

Appeals allowed. Impugned order of High Court set aside. Sole Arbitrator appointed under Section 11 of Arbitration and Conciliation Act, 1996 to adjudicate disputes between parties.