Delhi High Court
Intec Capital Ltd vs Mr Shekhar Chand Jain & Anr on 4 September, 2025
Author: Jasmeet Singh
Bench: Jasmeet Singh
$~J
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 18.07.2025
Judgment pronounced on: 04.09.2025
+ ARB. A. (COMM.) 25/2024 & I.A. 10158/2024
INTEC CAPITAL LIMITED .....Appellant
Through: Mr. Pranav Goyal, Ms. Pooja
Chaudhary, Ms. Mreeganka
Goyal, Mr. Vishant Singh,
Advs.
versus
MR SHEKHAR CHAND JAIN & ANOTHER .....Respondents
Through: Mr. Mohit Sharma, Adv.
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
JUDGMENT
1. This is an appeal filed under Section 37(2)(a) of the Arbitration and
Conciliation Act, 1996 (for brevity "the Act") against the impugned order
dated 20.04.2024 passed by the learned arbitrator in an arbitration matter,
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being Case Ref. No. DIAC/6864B/09-23 titled as "M/s Intec Capital Ltd. v.
M/s Shikhir Plast India Pvt. Ltd. & Others".
FACTUAL BACKGROUND
2. The description of the parties is that M/s Intec Capital Ltd. (hereinafter
referred to as "the appellant") is a Non-Banking Financial Company
incorporated under the provisions of the Companies Act, 1956. Mr. Shekhar
Chand Jain (hereinafter referred to as "the respondent No. 1") is the
proprietor of M/s Ganesh Polymers (hereinafter referred to as "the
respondent No. 2").
3. The appellant has preferred the present appeal against the order dated
20.04.2024 passed by the learned arbitrator in the arbitration proceedings,
whereby the application filed by the respondents was allowed and the
respondents were deleted from the array of parties.
4. The brief facts of the case as per the appellant are that in the year 2012, Ms.
Poonam Jain (hereinafter referred to as "the principal borrower No. 1"), the
proprietor of M/s Shri Digamber Polymers (hereinafter referred to as "the
principal borrower No. 2"), approached the appellant seeking a loan facility.
Amongst other securities, the respondents agreed to stand as personal
guarantors for the said facility and executed separate Deeds of Guarantee on
the same date as the Loan Agreement.
5. Relying upon the representations of the respondents, the appellant
sanctioned a loan of Rs. 68,18,000/- to the principal borrower No. 2, with
the principal borrower No. 1 as the authorised signatory. The loan was
granted vide Loan Agreement dated 21.12.2012 and the respondents
executed personal Deeds of Guarantee in support thereof.
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6. The principal borrowers repeatedly defaulted in repayment. Consequently,
the appellant was constrained to invoke the arbitration agreement contained
in the Loan Agreement on 11.07.2015, being Clause 32 of the Loan
Agreement, which is reproduced as under:
"32. ARBITRATION
32.1 Any conflict, difference, controversies, or disputes arising
between the parties shall be resolved amicably at the first
instance. Unresolved disputes, if any, shall be submitted /
referred to arbitration of the Sole Arbitrator. The Sole Arbitrator
shall be either the Director or Head Commercial Business of
INTEC CAPITAL LIMITED or any other person nominated by
him/them. The Arbitration shall be conducted in accordance with
the provisions of the Arbitration and Conciliation Act, 1996,
Rules thereunder, any amendments thereto and the language of
the Arbitration shall be in English. The decision/award of the
Arbitrator shall be final/conclusive and binding on the parties.
The seat of Arbitration shall be Delhi."
7. Thereafter, Mr. Ashish Kumar, Advocate, was appointed as the Sole
Arbitrator and arbitration proceedings were commenced. The respondents
duly participated in these proceedings. However, on 10.07.2023, the learned
arbitrator recused himself from the matter.
8. Thereafter, this Court, vide the order dated 15.09.2023, allowed the
application of the appellant seeking substitution of the arbitrator and
appointed Mr. S.K. Sharma, Advocate, as the Sole Arbitrator to resolve the
disputes between the parties. It is pertinent to note that no objection as to the
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existence of an arbitration agreement was raised before this Court at that
stage.
9. Subsequently, on 18.01.2024, the respondents filed an application under
Section 151 of the Code of Civil Procedure, 1908, seeking their discharge
from arbitration proceedings by relying on certain judicial precedents.
10. The appellant filed detailed written submissions dated 27.02.2024 opposing
the application of the respondents. Further, upon additional research, learned
counsel of the appellants also came across a judgment of the Hon'ble
Supreme Court relevant to the issue and the same was duly forwarded to the
learned arbitrator by email dated 10.04.2024. However, the same was not
considered while passing the impugned order.
11. After considering the pleadings, the learned arbitrator, vide the impugned
order dated 20.04.2024, allowed the application filed by the respondents and
held that there does not exist a valid arbitration agreement between the
appellant and the respondents, placing reliance upon the judgment of the
Hon'ble Supreme Court in M.R. Engineers & Contractors Pvt. Ltd. v. Som
Datt Builders Ltd., (2009) 7 SCC 696.
12. Aggrieved by the impugned order dated 20.04.2024 passed by the learned
arbitrator, the appellant has filed the present appeal.
SUBMISSIONS OF THE APPELLANT
13. Learned counsel for the appellant submits that the central issue for
determination before this Court is whether the respondents, who executed
separate Deeds of Guarantee, can be held bound by the arbitration agreement
contained in the Loan Agreement dated 21.12.2012.
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14. It is submitted at the outset that the principal borrowers are undisputedly
bound by the arbitration agreement, both having executed the Loan
Agreement dated 21.12.2012 which expressly contains an arbitration clause.
This position is admitted and remains unchallenged on record. However, the
learned arbitrator discharged the respondents from the reference on the
ground that no arbitration agreement exists between the appellant and the
respondents.
15. Insofar as the respondents are concerned, they executed separate Deeds of
Guarantee on the same date, i.e., 21.12.2012, in respect of the said Loan
Agreement. The Deeds of Guarantee, being standard form agreements
prepared by the appellant, expressly incorporate and make reference to the
Loan Agreement. The material clauses are as follows:
A. Clause 2 records that the Guarantor acknowledges the Loan was
disbursed at his/her request;
B. Clause 3 records the undertaking of the Guarantor to guarantee
repayment of the Loan and ensure due observance by the Borrower;
and
C. Clause 4 expressly states that the Guarantor has read and understood
all terms and conditions of the Loan Agreement, agrees to be bound
by the same and accepts that the Guarantee shall form an integral part
of the Loan Agreement.
These clauses, read together, establish that the Guarantee and the Loan
Agreement form part of a single composite transaction executed
contemporaneously. The remaining clauses of the Deeds of Guarantee are
complementary in nature and reinforce this position. Hence, by virtue of
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Section 7(5) of the Act, the arbitration clause contained in the Loan
Agreement thus stands incorporated into the Deeds of Guarantee.
16. It is submitted that the impugned order is unsustainable as the learned
arbitrator has erred in law by misinterpreting the judgment of the Hon'ble
Supreme Court in M.R. Engineers & Contractors Pvt. Ltd. (supra). In
paragraphs 8 and 9 of the said judgment, the Court drew a clear distinction
between "incorporation by reference" and "incorporation in entirety".
However, the learned arbitrator wrongly proceeded on the footing that the
Deeds of Guarantee contained only a reference to the Loan Agreement,
whereas Clause 4 makes it clear that the Loan Agreement stands
incorporated in entirety, including its arbitration clause. The impugned
order, having been passed in contradiction to the record and in disregard of
binding precedent, suffers from patent illegality.
17. Further reliance is placed upon the judgment of the Hon'ble Supreme Court
in Shinhan Bank v. Carol Info Services Ltd., (2023) 20 SCC 388, which
categorically held that where the amenities agreement records that it forms
part of the leave and license agreement, all terms of the amenities
agreement, including the arbitration clause, stand incorporated. Applying
this ratio, the present case goes beyond mere reference and falls squarely
within the principle of incorporation.
18. It is pertinent to note that the Loan Agreement and the Deeds of Guarantee
were executed as part of one composite transaction. The principle laid down
in Punjab National Bank Ltd. v. Bikram Cotton Mills & Anr., AIR 1970
SC 1973, therefore applies. The Hon'ble Supreme Court in that case
recognized that where agreements are executed contemporaneously as part
of a single transaction, they must be read together to give full effect to the
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intention of the parties. The intention here was clearly that the Loan
Agreement and the Deeds of Guarantee operate together, binding both the
Borrower and the Guarantors.
19. In arguendo, it is submitted that if the case is treated as one of "reference"
rather than "incorporation", the position would still not aid the respondents.
Both the Loan Agreement and the Deeds of Guarantee are standard form
contracts drafted by the appellant. In such circumstances, the law laid down
in M/s Inox Wind Ltd. v. M/s Thermocables Ltd., (2018) 2 SCC 519,
becomes applicable. In the said judgment, the Hon'ble Supreme Court,
relying on the dictum of Bingham LJ in Federal Bulk Carriers Inc. v. C.
Itoh & Co. Ltd., (1989) 1 Lloyd's Rep 103 (CA), held that where
agreements are standard form contracts, even a general reference is
sufficient to incorporate an arbitration clause, including in "two-contract"
situations. Thus, whether tested on the basis of incorporation or reference,
the arbitration clause contained in the Loan Agreement stands attracted to
the Deeds of Guarantee.
20. Further reliance is placed upon the judgment of this Court in RBCL Piletech
Infra v. Bholasingh Jaiprakash Construction Ltd. & Ors.,
2024:DHC:5415, where this Hon'ble Court held that in composite
transactions, guarantors who acknowledge liability as directors / partners /
group entities of the borrower and at whose instance the loan is disbursed,
are bound by the arbitration clause.
21. For the aforementioned reasons, the Deeds of Guarantee must be read as an
integral part of the Loan Agreement and the respondents cannot escape the
scope of the arbitration agreement. The impugned order dated 20.04.2024,
by which the learned arbitrator discharged them from the arbitration
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proceedings, suffers from legal infirmity and is liable to be set aside.
Accordingly, the present appeal deserves to be allowed.
SUBMISSIONS OF THE RESPONDENTS
22. Learned counsel for the respondents submits that the respondents have not
signed the Loan-cum-Facility Agreement, which alone contains the
arbitration clause. Neither the Deeds of Guarantee executed by them contain
any specific reference to the arbitration clause, nor is the clause itself
reproduced therein. Hence, the respondents cannot be subjected to arbitral
proceedings in the present matter.
23. The respondents executed separate Deeds of Guarantee to secure the loan
availed by the principal borrowers. These Deeds of Guarantee are
independent contracts, devoid of any arbitration clause or provision binding
the respondents to the terms of the Loan Agreement.
24. It is submitted that while there are two distinct agreements: (i) the Loan
Agreement containing the arbitration clause (to which the respondents are
not signatories), and (ii) the Deeds of Guarantee (to which the respondents
are signatories), the latter contains no arbitration clause. Being separate
instruments, the Deeds of Guarantee cannot be merged with or treated as
part of the Loan Agreement.
25. Clause 32.1 of the Loan Agreement uses the expression "parties", which
evidently refers only to the signatories of that agreement. Neither the
language of the Loan Agreement nor the Deeds of Guarantee suggest that
the terms of the Loan Agreement, including the arbitration clause, were
incorporated or made applicable to the Guarantors.
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26. The present case involves two separate and distinct agreements entered into
by different sets of parties. The respondents were never made aware of the
terms of the Loan Agreement and undertook liability solely to the extent of
guaranteeing repayment of the loan upon default. The respondents never
agreed to be bound by procedural terms such as arbitration. Thus, the
essential elements of informed consent and mutual understanding, which are
the foundation of contractual obligations, were absent.
27. It is a settled principle of contract law that an arbitration clause contained in
one agreement cannot be enforced against a non-signatory unless there is a
clear and specific incorporation of such clause by reference. In the present
matter, such incorporation is conspicuously absent.
28. The Deeds of Guarantee do not contain any clause that could even remotely
be construed as incorporating or adopting the arbitration clause of the Loan
Agreement. Hence, it cannot be presumed or implied that the respondents
agreed to submit disputes to arbitration.
29. In M.R. Engineers & Contractors Pvt. Ltd. (supra), the Hon'ble Supreme
Court held that the arbitration clause contained in the main contract would
not apply to disputes arising under a subcontract unless specifically
incorporated. Therefore, the ratio of this case directly supports the
contention of the respondents that they cannot be compelled to arbitrate.
30. Reliance is placed on the judgment of the Hon'ble Supreme Court in NBCC
(India) Ltd. v. Zillion Infraprojects Pvt. Ltd., (2024) 7 SCC 174, wherein
the Court reiterated that a mere general reference in one contract to another
contract does not result in incorporation of the arbitration clause of the latter.
Similarly, in S.N. Prasad, Hitek Industries (Bihar) Ltd. v. Monnet Finance
Ltd. & Ors., (2011) 1 SCC 320, the Hon'ble Supreme Court held that
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arbitration under the Act can only take place between parties to the
arbitration agreement. If disputes involve both signatories and non-
signatories, arbitration may proceed only as between signatories, but cannot
bind non-signatories.
31. Further reliance is placed upon the judgments of the Hon'ble Supreme Court
in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 and N.N.
Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379,
both of which reaffirm that the existence of a valid arbitration agreement is a
sine qua non for reference to arbitration.
32. Similarly, this Court in STCI Finance Ltd. v. Shreyas Kirti Lal Doshi &
Anr., 2020 SCC OnLine Del 100, held that in the absence of a binding
arbitration agreement, guarantors cannot be forced into arbitration
proceedings.
33. It is further submitted that the reliance of the appellant on Inox Wind Ltd.
(supra), Shinhan Bank (supra) and RBCL Piletech Infra (supra) are
misplaced. In Inox Wind Ltd. (supra), the arbitration clause formed part of a
standard form contract mutually signed by both parties. By contrast, in the
present matter, the respondents never signed or consented to the Loan
Agreement or its arbitration clause. In Shinhan Bank (supra), both
agreements were executed by the same parties, which is not the case here. In
RBCL Piletech Infra (supra), the facts involved composite commercial
transactions unlike the present matter where the Deeds of Guarantee are
independent contracts.
34. Therefore, it is submitted that the arbitration clause being part of a separate
contract to which the respondents were not parties cannot bind them in the
absence of express incorporation or consent. Hence, compelling the
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respondents to arbitrate would amount to enforcing upon them a contract to
which they never agreed, something impermissible in law.
35. For the aforementioned reasons, the learned arbitrator has correctly allowed
the application filed by the respondents and thereby the respondents were
deleted from the array of parties on the ground that no arbitration agreement
exists between the appellant and the respondents. Thus, the present appeal is
liable to be dismissed.
ANALYSIS AND FINDINGS
36. I have heard learned counsels of the parties and perused the material
available on record.
37. The learned arbitrator held as under:
"27. Due to the aforesaid circumstances and reasons stated
above, the Application of Respondents 3 & 4 is hereby allowed.
Respondents 3 & 4 are not party to the Loan Agreement and
cannot be bound by the arbitration clause contained therein.
Therefore, Respondents 3 & 4 are discharged from the present
proceedings."
38. The core issue requiring determination is whether the arbitration clause
contained in the Loan Agreement dated 21.12.2012 binds the respondents,
who executed contemporaneous Deeds of Guarantee securing the said loan.
39. At the outset, it is undisputed that the Loan Agreement, executed between
the appellant and the principal borrowers, contains an arbitration clause,
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being Clause 32. It is also not in dispute that the respondents did not sign the
Loan Agreement but executed separate Deeds of Guarantee on the same
date. The question, therefore, turns on whether the arbitration clause in the
Loan Agreement can be said to have been incorporated into the Deeds of
Guarantee.
40. The appellant has placed reliance upon Clauses 2, 3 and 4 of the Deeds of
Guarantee, particularly Clause 4, which records that the Guarantor has read
and understood the Loan Agreement, agrees to be bound by its terms and
conditions and accepts that the Guarantee shall form an integral part of the
Loan Agreement. The Clauses are reproduced as under:
"2. INTEC CAPITAL LIMITED has at the request of the
Borrower and the Guarantor agreed to provide LOAN to the
Borrower.
3. The Guarantor, in consideration of INTEC CAPITAL
LIMITED providing the LOAN, hereby guarantees the due
performance and observance by the Borrower of all the terms
and conditions of the Agreement and agrees to pay on first
demand any moneys which may be due and etc.
4. The Guarantor confirms to have read and understood the
terms and conditions governing the LOAN and agrees to be
bound by the same. The Guarantor acknowledges and accepts
that this Guarantee shall form an integral part of the
Agreement."
(Emphasis applied)
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41. According to the appellant, these clauses establish incorporation of the Loan
Agreement in its entirety, thereby attracting the arbitration clause by virtue
of Section 7(5) of the Act, which reads as under:
"7. Arbitration agreement.--
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract."
42. Per contra, the respondents contend that the Deeds of Guarantee are
independent contracts, not containing any arbitration clause or express
incorporation of Clause 32 of the Loan Agreement. It is urged that unless the
Deeds of Guarantee specifically incorporate the arbitration clause of the
Loan Agreement, the respondents cannot be bound by arbitration
proceedings. The respondents rely heavily on the judgment of the Hon'ble
Supreme Court in M.R. Engineers & Contractors Pvt. Ltd. (supra), to argue
that mere reference to another contract does not ipso facto incorporate its
arbitration clause.
43. In my considered view, the distinction between "general reference" to
another contract and "incorporation by specific reference" laid down in the
decision of the Hon'ble Supreme Court in M.R. Engineers & Contractors
Pvt. Ltd. (supra) is relevant and apposite. The relevant paragraphs of the
said judgment read as under:
"8. There is a difference between reference to another
document in a contract and incorporation of another document
in a contract, by reference. In the first case, the parties intend to
adopt only specific portions or part of the referred document for
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the purposes of the contract. In the second case, the parties
intend to incorporate the referred document in entirety, into the
contract. Therefore when there is a reference to a document in a
contract, the court has to consider whether the reference to the
document is with the intention of incorporating the contents of
that document in entirety into the contract, or with the intention
of adopting or borrowing specific portions of the said document
for application to the contract. We will give a few instances of
incorporation and mere reference to explain the position
(illustrative and not exhaustive).
9. If a contract refers to a document and provides that the
said document shall form part and parcel of the contract, or that
all terms and conditions of the said document shall be read or
treated as a part of the contract, or that the contract will be
governed by the provisions of the said document, or that the
terms and conditions of the said document shall be incorporated
into the contract, the terms and conditions of the document in
entirety will get bodily lifted and incorporated into the contract.
When there is such incorporation of the terms and conditions of
a document, every term of such document, (except to the extent it
is inconsistent with any specific provision in the contract) will
apply to the contract. If the document so incorporated contains a
provision for settlement of disputes by arbitration, the said
arbitration clause also will apply to the contract."
(Emphasis applied)
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44. On perusal, the Hon'ble Supreme Court held that a general reference to
another document would not incorporate the arbitration clause of that
document, unless the reference is specific to the arbitration clause or the
entire document is expressly incorporated.
45. Thus, the test is whether there is clear intention of the parties to import the
arbitration clause.
46. Applying this principle to the present case, it is seen that Clause 4 of the
Deeds of Guarantee is not a mere general reference but expressly
acknowledges that the Guarantor has read and understood the Loan
Agreement, agrees to be bound by its terms and accepts the Guarantee to be
an "integral part" of the Loan Agreement. The use of the phrase "integral
part" is significant, as it denotes that the Guarantee is not intended to operate
as an isolated instrument, but in conjunction with and subject to the terms of
the Loan Agreement.
47. Thus, this satisfies the test of incorporation of the Loan Agreement in
entirety.
48. Further, the reliance of the appellants on Shinhan Bank (supra) is well-
founded. In that case, the Hon'ble Supreme Court held that where the
amenities agreement forms part of the leave and license agreement, all terms
of the leave and license agreement, including the arbitration clause, would
stand incorporated. The relevant paragraphs of the said decision read as
under:
"15. The plain consequence of Clause (1) of the amenities
agreement is that all the terms of that agreement constitute an
integral part of the Leave and Licence agreement. The amenities
agreement does not merely contain a reference to the Leave and
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Licence agreement. It incorporates all the terms of the amenities
agreement as an integral part of the Leave and Licence
agreement. By doing so, the parties have intended to make the
arbitration clause in the amenities agreement an integral part of
the Leave and Licence agreement.
16. Section 7(5) of the Arbitration and Conciliation Act, 1996
stipulates that the reference in a contract to a document
containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference is such
as to make that arbitration clause part of the contract. Clause (1)
of the amenities agreement is intended to make the arbitration
clause which is embodied in the amenities agreement (Clause 17)
an integral part of the Leave and Licence agreement.
17. In M.R. Engineers & Contractors (P) Ltd. v. Som Datt
Builders Ltd. [M.R. Engineers & Contractors (P) Ltd. v. Som
Datt Builders Ltd., (2009) 7 SCC 696 : (2009) 3 SCC (Civ) 271] ,
this Court held thus : (SCC p. 704, para 17)
...
18. The principle which emerges from the provisions of
Section 7(5) is elucidated in para 19 of the judgment [M.R.
Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd.,
(2009) 7 SCC 696 : (2009) 3 SCC (Civ) 271] , which is extracted
below : (SCC p. 705)
"19. Sub-section (5) of Section 7 merely reiterates
these well-settled principles of construction of
contracts. It makes it clear that where there is a
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reference to a document in a contract, and the
reference shows that the document was not intended to
be incorporated in entirety, then the reference will not
make the arbitration clause in the document, a part of
the contract, unless there is a special reference to the
arbitration clause so as to make it applicable."
19. The arbitration agreement which is embodied in Clause 17
of the amenities agreement was intended by the parties for all
intents and purposes to be a part of the Leave and Licence
agreement."
49. Thus, the case of the appellant is on a stronger footing, since the Deeds of
Guarantee reference the Loan Agreement in clear terms and expressly make
themselves an integral part thereof.
50. The reliance placed by the respondents on NBCC (India) Ltd. (supra) and
S.N. Prasad (supra) is distinguishable.
51. The relevant paragraph of NBCC (India) Ltd. (supra) reads as under:
"30. We are of the considered view that the present case is not
a case of "incorporation" but a case of "reference". As such, a
general reference would not have the effect of incorporating the
arbitration clause. In any case, Clause 7.0 of the LoI, which is
also a part of the agreement, makes it amply clear that the
redressal of the dispute between NBCC and the respondent has
to be only through civil courts having jurisdiction of Delhi
alone."
52. The relevant paragraph of S.N. Prasad (supra) reads as under:
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"9. There is no dispute that the loan agreements among the
first respondent (lender), the second respondent (borrower) and
the third respondent (guarantor) contained a provision for
arbitration. The said provision for arbitration is extracted below:
"In the event of any dispute, question or difference
arising out of or in connection with this agreement and
the respective rights and obligations of the parties
hereunder, the same shall be referred to the arbitration
in accordance with the provisions of the Arbitration
Act, 1940."
But the appellant was not a party to the same. In fact the
appellant's letter of guarantee for Rs. 75 lakhs was given on 27-
10-1995, prior to the dates of the two loan agreements. It is also
not in dispute that the letter dated 27-10-1995 given by the
appellant to the first respondent did not contain a provision for
arbitration; and that except the said letter dated 27-10-1995, the
appellant did not execute any document or issue any
communication."
53. On perusal, in NBCC (India) Ltd. (supra) and S.N. Prasad (supra), the non-
signatories were not shown to have expressly incorporated the terms of the
principal contract. By contrast, in the present case, Clause 4 of the Deeds of
Guarantee goes beyond a general reference and reflects express
incorporation, thereby attracting the arbitration clause.
54. Even assuming that Clause 4 of the Deeds of Guarantee amounts only to a
reference to the Loan Agreement, the present case would still fall within the
exception recognized in Inox Wind Ltd. (supra), wherein the Hon'ble
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Supreme Court held that in the context of standard form contracts, even a
general reference is sufficient to incorporate the arbitration clause. In the
present case, the Loan Agreement and the Deeds of Guarantee are standard
form documents, thereby satisfying this test as well. The relevant paragraphs
of the said decision read as under:
"18. We are of the opinion that though general reference to an
earlier contract is not sufficient for incorporation of an
arbitration clause in the later contract, a general reference to a
standard form would be enough for incorporation of the
arbitration clause. In M.R. Engineers [M.R. Engineers &
Contractors (P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC
696 : (2009) 3 SCC (Civ) 271] this Court restricted the
exceptions to standard form of contract of trade associations and
professional institutions. In view of the development of law after
the judgment in M.R. Engineers [M.R. Engineers & Contractors
(P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696 : (2009) 3
SCC (Civ) 271] case, we are of the opinion that a general
reference to a consensual standard form is sufficient for
incorporation of an arbitration clause. In other words, general
reference to a standard form of contract of one party will be
enough for incorporation of arbitration clause. A perusal of the
passage from Russell on Arbitration, 24th Edn. (2015) would
demonstrate the change in position of law pertaining to
incorporation when read in conjunction with the earlier edition
relied upon by this Court in M.R. Engineers case [M.R.
Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd.,
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(2009) 7 SCC 696 : (2009) 3 SCC (Civ) 271] . We are in
agreement with the judgment in M.R. Engineers case [M.R.
Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd.,
(2009) 7 SCC 696 : (2009) 3 SCC (Civ) 271] with a modification
that a general reference to a standard form of contract of one
party along with those of trade associations and professional
bodies will be sufficient to incorporate the arbitration clause."
(Emphasis applied)
55. The learned arbitrator, however, held that Inox Wind Ltd. (supra) was
inapplicable, reasoning that the Loan Agreement and the Deeds of
Guarantee constitute two separate contracts and, therefore, the case falls
within the "two-contract" scenario.
56. I am of the considered view that this finding of the learned arbitrator is
erroneous, as the Hon'ble Supreme Court clarified in paragraph 16 of Inox
Wind Ltd. (supra), the principle applicable to "single contract" cases has
been extended even to situations where separate contracts exist, provided
they are part of a single commercial relationship. The Court observed as
under:
"16. For a better understanding of the single and two-contract
cases and reference to standard form terms it is relevant to
examine Russell on Arbitration, 24th Edn. (2015) which is as
under: (See pp. 52-54, 24th Edn.)
...
Extension of the single-contract cases.
Recently, the courts appear to have extended the
"single contract" principle applicable to standard
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form contracts, where general words of incorporation
will suffice, to other types of contract where the same
rationale can be said to apply. Thus, if the document
sought to be incorporated is a bespoke contract
between the same parties, the courts have accepted this
as a "single contract" case where general words of
incorporation will suffice, even though the other
contract is not on standard terms and constitutes an
entirely separate agreement. The rationale for this
approach is that the parties have already contracted on
the terms said to be incorporated and are therefore
even more likely to be familiar with the term relied on
than a party resisting incorporation of a standard
term. Put another way, if general words of
incorporation are sufficient for the latter, they should
be even more so for the former. The courts also appear
to have accepted as a "single contract" case a
situation where the contract referred to is between one
of the parties to the original contract and a third party,
where the contracts as a whole "were entered into in
the context of a single commercial relationship". (Para
2.050)"
(Emphasis applied)
57. In light of this exposition, the Loan Agreement and the Deeds of Guarantee,
though distinct in form, are part of a single composite transaction executed
on the same date and intended to govern the same commercial arrangement.
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The evident commercial intention was to secure the repayment of the loan
by binding both the borrower and the guarantors to the same set of
obligations, including the dispute resolution mechanism. The principle that
contemporaneous documents forming part of a single transaction must be
read together, as enunciated in Punjab National Bank Ltd. (supra), also
fortifies the case of the appellant. Therefore, the present case squarely falls
within the "single contract" scenario envisaged in Inox Wind Ltd. (supra)
and the arbitration clause contained in the Loan Agreement stands duly
incorporated into the Deeds of Guarantee.
58. In view of the considered analysis, this Court finds that the learned arbitrator
erred in treating the reference to the Loan Agreement in the Deeds of
Guarantee as a mere general reference. On a proper construction, the terms
of the Deeds of Guarantee establish incorporation of the Loan Agreement in
entirety, thereby binding the respondents to its arbitration clause.
59. Hence, the impugned order dated 20.04.2024 passed by the learned
arbitrator suffers from patent illegality under Section 37(2)(a) of the Act and
is liable to be set aside.
CONCLUSION
60. For the said reasons, the present appeal filed under Section 37(2)(a) of the
Act is allowed and the impugned order dated 20.04.2024 passed by the
learned arbitrator in the arbitrator matter, being Case Ref. No.
DIAC/6864B/09-23 titled as "M/s Intec Capital Ltd. v. M/s Shikhir Plast
India Pvt. Ltd. & Others", is hereby set aside.
61. Accordingly, the appeal is allowed and is disposed of.
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JASMEET SINGH, J
SEPTEMBER 04th, 2025 / shanvi
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