Supreme Court of India

M.R. Engineers & Contractors Pvt. Ltd. v Som Datt Builders Ltd.

(2009) 7 SCC 69620092 min read
The case in brief30-second read
Facts
The Kerala PWD awarded highway work to Som Datt Builders under a contract whose General Conditions (clause 67.3) provided for arbitration by a three-member committee. Som Datt sub-contracted construction of the project office building to M.R. Engineers by a work order stating that the sub-contract "shall be carried out on the terms and conditions as applicable to the main contract". When disputes arose, M.R. Engineers applied under S.11 for appointment of an arbitrator, relying on the main contract's arbitration clause. The Chief Justice's designate rejected the application by order dated 31 January 2003, and M.R. Engineers appealed by special leave (Civil Appeal No. 4150 of 2009).
Issue
Whether the general reference in the sub-contract to the terms and conditions of the main contract incorporated the main contract's arbitration clause under S.7(5) of the Arbitration and Conciliation Act, 1996.
Held
An arbitration clause in another document is incorporated by reference only if the contract clearly refers to that document, the reference clearly shows an intention to incorporate the arbitration clause, and the clause is apt for disputes under the contract and not repugnant to its terms.
Principle
Under S.7(5), a general reference to another contract does not incorporate its arbitration clause; a specific reference to the arbitration clause is needed, subject to the exceptions for institutional standard terms and a party's own general conditions.
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Facts

  • The Kerala PWD awarded highway work to Som Datt Builders under a contract whose General Conditions (clause 67.3) provided for arbitration by a three-member committee. Som Datt sub-contracted construction of the project office building to M.R. Engineers by a work order stating that the sub-contract "shall be carried out on the terms and conditions as applicable to the main contract". When disputes arose, M.R. Engineers applied under S.11 for appointment of an arbitrator, relying on the main contract's arbitration clause. The Chief Justice's designate rejected the application by order dated 31 January 2003, and M.R. Engineers appealed by special leave (Civil Appeal No. 4150 of 2009).

Issue

  1. Whether the general reference in the sub-contract to the terms and conditions of the main contract incorporated the main contract's arbitration clause under S.7(5) of the Arbitration and Conciliation Act, 1996.

Held

  • An arbitration clause in another document is incorporated by reference only if the contract clearly refers to that document, the reference clearly shows an intention to incorporate the arbitration clause, and the clause is apt for disputes under the contract and not repugnant to its terms.
  • A general reference to another contract does not incorporate its arbitration clause; only a specific reference to the arbitration clause does.
  • Where a contract says its execution or performance shall be in terms of another contract, only the performance terms are adopted, not the arbitration clause, unless the clause is specially referred to.
  • Standard terms of an independent trade or professional institution, when made applicable, bring in their arbitration clause.
  • Where one party's own conditions of contract (for example the Government's General Conditions of Contract) are made part of the contract, the arbitration clause in them applies.

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Citation

M.R. Engineers & Contractors Pvt. Ltd. v Som Datt Builders Ltd. (2009) 7 SCC 696

Reported: https://api.sci.gov.in/jonew/judis/34983.pdf; https://indiankanoon.org/doc/20317/. This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.