[Cites 2, Cited by 0]
Calcutta High Court
Asian Tea And Exports Limited vs Priyanka Gupta And Ors on 17 December, 2025
Author: Debangsu Basak
Bench: Debangsu Basak
2025:CHC-OS:261-DB
O-84
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
AN APPEAL FROM AN ORDER PASSED IN
ITS ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
APOT/213/2025
IA No. GA/1/2025
ASIAN TEA AND EXPORTS LIMITED
-Vs-
PRIYANKA GUPTA AND ORS
BEFORE:
The Hon'ble JUSTICE DEBANGSU BASAK
-AND-
The Hon'ble JUSTICE MD. SHABBAR RASHIDI
For the Appellant : Mr. Zeeshan Haque, Adv.
Mr. Aishwarya Kr. Awasthi, Adv.
For the Respondent Nos. 5 & 6 : Ms. Sulagna Mukherjee, Adv.
Mr. Yash Vardhan Deora, Adv.
For the Respondent Nos. 7 & 8 : Ms. Bhawna Tekriwal, Adv.
HEARD ON : 17.12.2025
DELIVERED ON : 17.12.2025
DEBANGSU BASAK, J.:-
1. Appeal is by defendant no.3 in Old CS/153/2020 (New CS/89/2024).
2. Appeal is directed against the judgment and order dated April 23,
2025.
2025:CHC-OS:261-DB
3. The appellant is aggrieved by refusal of the learned Single Judge in
referring the disputes in the plaint, to arbitration.
4. Learned advocate appearing for the appellant draws the attention of
the Court to the plaint filed by the respondent nos.1 to 4 in the
appeal. He submits that, there was a share purchase agreement dated
September 12, 2014 entered into between the parties to the suit. In
terms of the share purchase agreement, a sum of Rs.30 lakhs was to
be kept in escrow as contingent security for events enumerated. He
draws the attention of the Court to the share transfer agreement dated
September 12, 2014, and in particular, clause 6.10 containing
arbitration clause. He also draws the attention of the Court to clause
6.4.3 of the share transfer agreement dated September 12, 2014. He
further submits that, clauses 6.4.3 to 6.4.7 of the share transfer
agreement dated September 12, 2014 contemplated an escrow, though
it also contemplated that an escrow agreement be executed.
5. Pursuant to and in terms of the share transfer agreement dated
September 12, 2014, parties to such share transfer agreement entered
into an escrow agreement which was also executed on September 12,
2014. He draws the attention of the Court to clause 6 of the escrow
agreement and contends that, the same also contained mechanism for
settlement of the disputes between the parties.
6. Learned advocate appearing for the appellant relies upon (2018) 15
SCC 678 (Ameet Lalchand Shah And Others -vs- Rishabh
Enterprises And Another) for the proposition that, an arbitration
2025:CHC-OS:261-DB
agreement can be incorporated by reference. According to him, in the
facts and circumstances of the present case, both the share transfer
agreement and the escrow agreement are inseparable and intrinsically
intertwined.
7. Learned advocate appearing for the appellant relies upon (2024) 7
SCC 174 (NBCC (India) Limited -vs- Zillion Infraprojects Pvt. Ltd.)
and contends that, incorporation of arbitration agreement from
another document is permissible. Again, he contends that the same
was done in the facts and circumstances of the present case.
8. Learned advocate appearing for the respondent nos.5 and 6 adopts
the argument advanced on behalf of the appellant. She submits that
there is an arbitration agreement between the parties and that, the
parties to the suit should be referred to arbitration.
9. None appears for the respondent nos. 1 to 4 in the appeal in the
second call.
10. Genesis of the disputes involved in the civil suit filed by the
respondent nos. 1 to 4 is the share transfer agreement dated
September 12, 2014. Such share transfer agreement contemplated
and provided a mechanism for the respondent nos. 1 to 4 to sell their
shares that they held of and in the defendant no.5 at an agreed
consideration. The share transfer agreement also contemplated and
provided for eventualities and the manner in which such eventualities
enumerated would be compensated. In order to provide adequate
security for parties to discharge their reciprocal obligations under the
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share transfer agreement dated September 12, 2014, the parties
thereto agreed to escrow.
11. Relevant provision for escrow was made in the share transfer
agreement dated September 12, 2014 in clauses 6.4.3 to 6.4.7 which
are as follows:
"6.4.3 Escrow: In the event of any unclaimed
gratuity liability as per Annexure A hereto is claimed and
further statutory liability is found pertaining to period
prior to 31st March, 2014, the same shall also be borne
and paid out of the sum of Rs.30,00,000/-(Rupees thirty
lac only) that shall be kept by the Buyers in Escrow
simultaneously with the execution of this document, to be
held jointly with Mr. Anil Choudhury, Advocate and Mr.
Sandip Agarwal, Advocate (Escrow Holders). The payment
of Rs.15/- Lac towards unclaimed gratuity liability
pertaining to period prior to 31st March, 2014 will be
made directly to the verified claimant on or before 31st
March, 2016. The balance 15/-Lac can only be utilized
till 30th September, 2016 if needed, for payment of
statutory liabilities pertaining to period prior to 31st
March, 2014.
6.4.4 The Escrow Holders shall keep the above in
escrow and shall release the same in favour of the parties
in the manner hereinafter appearing. The parties shall
enter into an Escrow Agreement with the Escrow Holders
evidencing deposit of the above-mentioned payment to the
Escrow Holders and the terms thereof.
6.4.5 In the event of its transpiring that there is any
other statutory liability of the Company pertaining to the
period up to 31st March, 2014 apart from those disclosed
in Schedule III within a period till 30th September, 2016,
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the Buyers shall approach the escrow holders with the
details thereof, whereupon the escrow holders shall
release payment to the Buyers out of the said escrow
amount on account of such liability.
6.4.6 In the event of such statutory liability
exceeding the escrow amount, in such event the excess of
such statutory liability shall be on account of the Sellers
who shall be solely liable to bear the same and shall to
such extent keep the Buyers saved, indemnified and
harmless thereof.
6.4.7 After expiry of the period of 30th September,
2016, any balance amount remaining in escrow after
payment of genuine verified statutory claims will be
refunded back to the Sellers by the escrow holders."
12. The share transfer agreement dated September 12, 2014 provides an
arbitration clause which is as follows:
"6.10 Arbitration: In the event of any dispute or
difference arising by and between the parties hereto either
concerning or touching upon any of the terms and
conditions of the contract, the same shall be referred to
the Arbitral Tribunal (the "Tribunal"). The Tribunal shall
consist of three arbitrators, Mr. Anil Choudhury, Advocate
to be appointed as an Arbitrator by the Sellers and the
Company on the one hand and Mr. Sandip Agarwal,
Advocate to be appointed as an Arbitrator by the Buyers
on the other. The third Arbitrator shall be appointed by
the said two nominee arbitrators of the parties. The
arbitration proceedings shall be conducted in accordance
with the Arbitration and Conciliation Act, 1996. The
decision of such Tribunal in the matter shall be final and
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binding. The arbitration sittings shall be held at Kolkata
and the Courts at Kolkata alone shall have jurisdiction."
13. The parties to the suit also entered into an escrow agreement dated
September 12, 2014. The recital to the escrow agreement dated
September 12, 2014 is as follows:
"WHEREAS
1. On the even date Gupta Group have sold and
transferred their 100% shareholding in the Company in
favour of Asian Group by the method of spot delivery
contract at or for the consideration mentioned therein
and the fact of such sale or transfer of shares by Gupta
Group in favour of Asian Group along with certain other
terms and conditions has been duly recorded in a
Document made between Gupta Group and Sellers and
the Company, therein also as Company and Asian Group
as Buyers (In short, Document Recording Share
Transfer).
2. The Document Recording Share Transfer provides for
an escrow mechanism and it has been agreed that an
Escrow holders shall be appointed for implementation of
the escrow mechanism.
3. Anil Choudhury, Advocate and Sandip Agarwal,
Advocate have agreed to act as the Escrow holders in
terms of the Document Recording Share Transfer."
14. Escrow agreement dated September 12, 2014 also contains the
following:
"6. In the event of any dispute or difference arising in
implementation of this agreement, the decision of the
Escrow holders shall be final and binding on the parties.
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However, if any dispute is referred to any of the parties to
Arbitration in accordance with the Arbitration Clause
contained in the said Document Recording Share
Transfer, in that event the Escrow holders shall keep the
escrow amount with them till the disposal of the
arbitration proceedings and shall abide by the result or
decision of the arbitration."
15. Apparently, in working out the share transfer agreement dated
September 12, 2014, the issue cropped up as to whether, the sum of
Rs.30 lakhs lying with the escrow agents, should be made over to the
plaintiff in the suit or the defendants other than the escrow agents or
not. According to the plaintiffs, they are entitled to the sum of Rs.30
lakhs, since, contingency enumerated in the share transfer agreement
dated September 12, 2014 did not occur for them to be liable to pay
for the liability of the company to be meted out of the sum of Rs.30
lakhs lying in escrow.
16. In the plaint filed by the respondent nos. 1 to 4, such respondents
adverted to the share transfer agreement dated September 12, 2014
as also various clauses therein including escrow clauses being clauses
6.4.3 to 6.4.7. The respondent nos. 1 to 4 also referred to the escrow
agreement dated September 12, 2014 in the plaint and sought relief
with regard to the sum of Rs.30 lakhs lying with escrow.
17. Ameet Lalchand Shah (Supra) considers the issue as to whether,
parties to four agreements, some of which are not containing any
arbitration clause, can be sent to arbitration or not. It is of the view
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that, where, the agreement are such that it refers to one project and
that there is an arbitration agreement between some of the parties
then, such parties can be referred to arbitration. In the facts of that
case there was a single commercial project and that there were four
different agreements involving in several parties in respect of such
project. In such factual background, the Court was of the view that,
the disputes between the parties should be resolved only by referring
all the parties in the four agreements to arbitration.
18. NBCC (India) Limited (Supra) relies upon an earlier decision of the
Supreme Court reported in (2009) 7 SCC 696 (M. R. Engineers &
Contractors Pvt. Ltd. -vs- Som Datt Builders Ltd.) and notices
further authorities on this subject. It notes the view of the Supreme
Court that, though the general reference to an earlier contract is not
sufficient for incorporation of an arbitration clause, in the later
contract, general reference to standard form would be enough for
incorporation of the arbitration clause. It is of the view that, when
there is a reference in the second contract to the terms and conditions
of the first contract, an arbitration clause would not ipso facto be
applicable to the second contract unless there is a specific mention
which refers thereto. In the facts of that case, it was found that, the
plaint case cannot be referred to arbitration since, there was a
reference to the first agreement, in the second agreement and that, the
first agreement was not incorporated in the second one.
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19. M. R. Engineers & Contractors Pvt. Ltd. (Supra) while considering
the scope and intent of Section 7(5) of the Arbitration and Conciliation
Act, 1996 and the issue as to whether, an arbitration agreement can
be incorporated or not is of the following view:
"24. The scope and intent of section 7(5) of the Act may
therefore be summarized thus:
(i) An arbitration clause in another document, would get
incorporated into a contract by reference, if the following
conditions are fulfilled: (i) The contract should contain a clear
reference to the documents containing arbitration clause, (ii)
the reference to the other document should clearly indicate an
intention to incorporate the arbitration clause into the
contract, (iii) The arbitration clause should be appropriate,
that is capable of application in respect of disputes under the
contract and should not be repugnant to any term of the
contract.
(ii) When the parties enter into a contract, making a
general reference to another contract, such general reference
would not have the effect of incorporating the arbitration
clause from the referred document into the contract between
the parties. The arbitration clause from another contract can
be incorporated into the contract (where such reference is
made), only by a specific reference to arbitration clause.
(iii) Where a contract between the parties provides that
the execution or performance of that contract shall be in
terms of another contract (which contains the terms and
conditions relating to performance and a provision for
settlement of disputes by arbitration), then, the terms of the
referred contract in regard to execution/performance alone
will apply, and not the arbitration agreement in the referred
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contract, unless there is special reference to the arbitration
clause also.
(iv) Where the contract provides that the standard form of
terms and conditions of an independent Trade or Professional
Institution (as for example the Standard Terms & Conditions
of a Trade Association or Architects Association) will bind
them or apply to the contract, such standard form of terms
and conditions including any provision for arbitration in such
standard terms and conditions, shall be deemed to be
incorporated by reference. Sometimes the contract may also
say that the parties are familiar with those terms and
conditions or that the parties have read and understood the
said terms and conditions.
(v) Where the contract between the parties stipulates that
the Conditions of Contract of one of the parties to the contract
shall form a part of their contract (as for example the General
Conditions of Contract of the Government where Government
is a party), the arbitration clause forming part of such
General Conditions of contract will apply to the contract
between the parties."
20. We are, therefore, required to test the share transfer agreement and
the escrow agreement both dated September 12, 2014 on the
touchstone of the authorities noted above, particularly, M. R.
Engineers & Contractors (Supra) . We noted two relevant clauses in
the two agreements hereinabove.
21. We are therefore of the view that, the share transfer agreement
contemplated escrow. The second agreement being the escrow
agreement, is an integral part of the share transfer agreement. Escrow
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agreement was created in order to give effect to the share transfer
agreement. Arbitration agreement undoubtedly exists in the share
transfer agreement and, therefore, in our view, share transfer
agreement and the escrow agreement satisfied the parameters as
enunciated in M. R. Engineers & Contractors (Supra) for us to hold,
the arbitration agreement appearing in the share transfer agreement
was incorporated in the escrow agreement.
22. In any event, suit cannot be held to be premised solely on the escrow
agreement. The share transfer agreement is also involved. Escrow
agreement cannot be seen or read as a separate or stand alone
document dissected from the share transfer agreement.
23. One of the issues in the suit would be whether, the parties acted in
terms of the share purchase agreement or not. In other words,
whether there was any breach of the terms and conditions of the
share purchase agreement or not. Another issue would be whether or
not, the respondent nos. 1 to 4 as the plaintiffs are entitled to refund
of the sum of Rs.30 lakhs kept in escrow in terms of the share
purchase agreement.
24. These issues are covered by the arbitration agreement between the
parties.
25. In such circumstances, in our view, learned Single Judge erred in not
referring the disputes between the parties to arbitration in terms of
the share purchase agreement. Impugned judgment and order is set
aside.
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26. APOT/213/2025 along with connection application is disposed of by
referring the parties in Old CS/153/2020 (New CS/89/2024) to
arbitration in terms of the share transfer agreement dated September
12, 2014. Department will treat Old CS/153/2020 (New CS/89/2024)
along with all pending applications to be disposed of.
27. There will be no order as to costs.
[DEBANGSU BASAK, J.]
28. I agree.
[MD. SHABBAR RASHIDI, J.]
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