Incorporation of Arbitration Clause by Reference: Inox Wind v Thermocables (SCI: 05.01.2018)

On 05.01.2018, the Supreme Court of India delivered an important judgement on the law on incorporation of arbitration clause by reference. The question before the Supreme Court was whether the arbitration clause forming a part of standard form of contract of a party is binding on the contracting parties if the standard form is incorporated by reference to govern their contract.

The court was of the view that the previous decision of the Supreme Court in MR Engineers & Contractors Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696 restricted incorporation only to standard forms of terms of trade associations/ professional bodies, and not to standard terms of a party. The court held that English law (which was relied on by the court in MR Engineers) had evolved and that a mere reference in the contract to the standard terms of one of the parties to the contract is sufficient to treat the arbitration clause containing in such standard terms as binding between the parties. 

This presentation critically evaluates the decision and raises significant questions on the efficacy of the current law on the subject. While it agrees with the conclusion of the Supreme Court on the main aspect before the case, it raises questions on the manner in which the change of law has been achieved without reference of the question to a larger Bench. The presentation also argues that the position on the law as regards incorporation in general is not satisfactory and requires detailed consideration by a larger Bench. 

For those readers who do not prefer PPTs, a pdf version of the presentation can be accessed from this link. The judgement of the Supreme Court is available here.