ivil Appeal No 1755  1756 of 1982 From the Judgment and Order dated 11121981 of the Delhi High Court inCMPNo 41 to 1981
PR Andhyarjina DN Misra and MP Baroocha for the Appellant
G Ramaswamy Additional Solicitor General VP Singh and Miss Sushma Relan for the Respondents
960 The Judgment of the Court was delivered by DUTT J
These two appeals by special leave one pre ferred by the National Agricultural Co operative Marketing Federation of India Ltd for short NAFFD  and the other by Alimenta SA for short Alimenta  a Swiss Company are both directed against the judgment of the Delhi High Court dated December 11 1981 whereby the application of NAFFD under section 33 of the  has been allowed in part
A contract dated January 12 1980 was entered into by and between the parties namely NAFED and Alimenta for the sale and supply of 50008000 MT of HPS groundnut kernels Jaras
After the usual terms as to quality quantity price etc the contract provided in clause 11 thereof as follows Other terms and conditions as per FOSFA 20 contract terms
 The expression FOSFA  means the Federation of Oils Seeds and Fats Association Ltd Subsequently another contract dated April 3 1980 was entered into between the parties in respect of 4000 metric tonnes of groundnut kernels
Clause 9 of this contract provided as follows All other terms and conditions for supply not specifically shown and covered hereinabove shall be as per previous contract signed between us for earlier supplies of HPS The FOSFA 20 contract contains an arbitration clause which is as follows ARBITRATION Any dispute arising cut of this contract including any question of law arising in connection there with shall be referred to arbitration in London or else where if so agreed in accordance with the Rules of Arbitra tion and Appeal of the Federation of Oils Seeds and Fats Association Limited in force at the date of this contract and of which both the parties hereto shall be deemed to be cognizant
Neither party hereto nor any persons claiming under either of them shall bring any action or other legal proceedings against the other of them in respect of any such dispute 961 until such dispute shall first have been heard and deter mined by the arbitrators umpire or Board of Appeal as the case may be in accordance with the Rules of Arbitration and Appeal of the Federation and it is hereby expressly agreed and declared that the obtaining of an Award from the arbi trators umpire or Board of Appeal as the case may be shall be a condition precedent to the right of either party hereto or of any person claiming under either of them to bring any action or other legal proceedings against the other of them in respect of any such dispute
 Disputes and differences arose between the parties
Alimenta alleged that NAFED committed breach of their obli gations under both the contracts and sought to commence arbitration proceedings
On the other hand on March 19 1981 NAFED filed a petition in the Delhi High Court under section 33 of the alleging inter alia that there was no valid arbitration agreement between the parties
It was contended by NAFED that when it agreed in clause 11 of the first contract that the parties would be governed by the terms and conditions of FOSFA 20 contract it only had in mind such terms and conditions as would govern the relationship between the parties
Further the fact that there was an arbitration clause in FOSFA 20 con tract came as a complete surprise to NAFED
In other words it was sought to be contended that NAFED was not at all aware of any arbitration clause in FOSFA 20 contract and accordingly it could not agree to incorporate any such arbitration clause in the contracts in question
The said petition under section 33 of the was opposed by Alimenta
A learned Single Judge of the High Court came to the finding that in view of the fact that NAFED had been nomi nated as the canalising agent for export of HPS groundnut under the provisions of the Export Control Order by the Central Government it would not be unjustified to assume that the Senior Manager of NAFED was well aware of the foreign trade in groundnut and the implications of reference to FOSFA 20 contract when he put his signature to the con tract in question
The learned Judge could not believe that the Manager of NAFED was not aware of the terms of FOSFA 20 contract
Accordingly the plea of NAFED that it was not aware of the existence of an arbitration clause in FOSFA 20 contract was overruled
The learned Judge held that the arbitration clause in FOSFA 20 contract was incorporated into the first contract dated January 12 1980 by virtue of clause 11 thereof providing other terms and conditions as per FOSFA 20 contract terms
962 So far as the second contract dated April 3 1980 is concerned it was pointed out by the learned Judge that it did not make any mention of FOSFA 20 contract and all that was stated in clause 9 thereof was that all other terms and conditions for supply not specifically shown and covered therein should be as per previous contract signed between the parties for similar supply of HPS
The learned Judge took the view that only those terms and conditions which were referred to or connected with and germane to the sup ply had been made applicable from the earlier contract that is to say the first contract dated January 12 1980
Further it was observed that a term about arbitration was not incidental to supply of goods and it was difficult to read from the provisions of clause 9 of the second contract that the arbitration clause was lifted from there and made a part of the same
Upon the said findings the learned Judge allowed the petition under section 33 of the in so far as it related to the second contract dated April 13 1980
It was held that no arbitration agreement existed between the parties and as such none of them was entitled to seek reference to arbitration with regard to the first contract and that the same was governed by the arbitration clause as having been incorporated therein from the FOSFA 20 contract
The petition under section 33 was disallowed so far as the first contract was concerned
Hence these two appeals one by NAFED against the judgment of the learned Judge disallowing the petition under section 33 in respect of the first contract and the other by Alimenta in so far as it allowed the petition relating to the second contract
We may at first deal with the appeal preferred by the appellant NAFED relating to the first contract
The question is whether by clause 11 in the first contract the arbitra tion clause in FOSFA 20 contract can be said to have been incorporated into the contract
It is now well established that the arbitration clause of an earlier contract can by reference be incorporated into a later contract provided however it is not repugnant to or inconsistent with the terms of the contract in which it is incorporated
Mr G Ramaswamy learned Additional Solicitor General appearing on behalf of the appellant has strenuously urged that the High Court was wrong in holding that the arbitration clause in the FOSFA 20 contract was incorporated into the first con tract by virtue of the incorporation clause
He has drawn our attention to the second illustration at page 46 of Russell on Arbitration Twentieth Edition
The illustration refers to the decision of Lord Esher MR in Hamilton  Co vs Mackie  Sons We have looked into that decision as much reliance has been placed thereon on behalf of NAFED
In that case a bill of lading 963 contained the words all other terms and conditions as per charterparty
The charterparty contained an arbitration clause
It was contended on behalf of the ship owners that the arbitration clause in the charterparty was incorporated into the bill of lading
In overruling the said contention Lord Esher MR Observed Where there was in a bill of lading such a condition as this all other conditions as per charterparty  it had been decided that the conditions of the charterparty must be read verbatim into the bill of lading as though they were there printed in extenso
Then if it was found that any of the conditions of the charterparty on being so read were inconsistent with the bill of lading they were insensible and must be disregarded
The bill of lading referred to the charterparty and therefore when the condition was read in All disputes under this charter shall be referred to arbi tration it was clear that condition did not refer to disputes arising under the bill of lading but to disputes arising under the charterparty
The condition therefore was insensible and had no application to the present dispute which arose under the bill of lading
 According to Lord Esher MR the arbitration clause in charterparty all disputes under this charter shall be referred to arbitration if incorporated into the bill of lading would be quite insensible because of the words under this charter
The arbitration clause was therefore meant only for the charterparty and not for the bill of lading
In a Full Bench decision of the Calcutta High Court in Dwarkadas  Co vs Daluram Gaganmull AIR 1951 Cal 10 FB the said observation of Lord Esher MR was considered by Harries CJ
The learned Chief Justice also took the view that if the arbitration clause in the charterparty was imported into the bill of lading it would be quite meaning less because no dispute under the charter could arise in the contract evidenced by the bill of lading
According to the learned Chief Justice if the words of the arbitration clause in the charterparty had read all disputes under this contract shall be referred to arbitration then if that term was transported into the bill of lading it would be a perfectly sensible and reasonable term for once it had imported the phrase all disputes under this contract it would refer to all disputes arising under the bill of lad ing
There would therefore be nothinhg inconsistent be tween such a term and the terms of the bill of 964 lading and that being so cases similar to the case of Hamilton  Co vs Mackie  Sons supra would have no appli cation to the case
This view was also taken by the other learned Judges of the Full Bench
In our opinion Harries C J had taken a very reasona ble and sensible view
It is true as pointed out by Lord Esher MR that the expression all disputes under this charter if incorporated into the bill of lading would be quite insensible
But if the clause had been any dispute under this contract then after incorporation into the bill of lading the words this contract would only mean the bill of lading into which it had been incorporated
In the in stant case as has been already noticed the arbitration clause in the FOSFA 20 contract provides any dispute aris ing out of this contract and as such there is no diffi culty in the incorporation of the arbitration clause into the first contract for the words this contract would mean the first contract into which it has been incorporated
Such incorporation would be quite intelligible and not inconsistent with the terms of the first contract
There is therefore no substance in the contention made on behalf of the appellant on the basis of the decision in Hamilton  Co vs Mackie  Sons supra
It is next contended by the learned Additional Solicitor General that the arbitration clause in FOSFA 20 contract not being germane to the subject matter of the first contract it cannot be said to have been incorporated therein
It is pointed by him that the FOSFA 20 contract is a CIF contract relating to cost insurance and freight while the first contract is a fob contract
It is accordingly submitted by the learned Counsel that the arbitration clause is not germane to the subject matter of the first contract
In support of his contention he has placed much reliance upon the decision of the Court of Appeal in the case of The Annefield 1971 1 AIIER 394
In that case the question was whether the arbitration clause in the charterparty was incorporated into the bill of lading by  virtue of the incorporation clause
Clause 39 which was the arbitration clause contained the words All disputes from time to time arising out of this contract
In considering the question Lord Denning MR referred to the decision in The Negos 935 AIIER Rep 863 where in the course of the discus sion it transpired that these clauses in the charterparty and bill of lading had been in existence since 1914 and it had always been held that the arbitration clause was not incorporated in the bill of lading
On behalf of the ship owners in that case it was argued that if the arbitration clause 39 was incorporated into the bill of lading the expression this contract in clause 39 would then be the contract evidenced by the bill 965 of lading
In other words the arbitration clause must be read in its bill of lading context
This contention was made on the basis of the observation made by Lord Esher MR as extracted above
The contention also finds support from the observation of Harries C J in Dwarka Das s case supra
Lord Denning MR took the view that a clause which is directly germane to the subject matter of the bill of lading that is to the shipment carriage and delivery of goods could and should be incorporated into the bill of lading contract even though it might involve a degree of manipula tion of the words in order to fit exactly the bill of lad ing
But if the clause was one which was not thus directly germane it should not be incorporated into the bill of lading contract unless it was done explicitly in clear words either in the bill of lading or in the charterparty
It was however held by Lord Denning MR that an arbitration clause was not directly germane to the shipment carriage and delivery of goods
So it was not incorporated by gener al words in the bill of lading
Relying upon the decision in The Annefteld it is sub mitted on behalf of the appellant that the arbitration clause in FOSFA 20 contract is not germane to the subject matter of the first contract and accordingly it was not incorporated into the first contract
We are unable to accept the contention
It has already been noticed earlier that there has been a long continued practice in England that the arbitration clause is not incorporated into the bill of lading by general words unless it is explicitly done in dear words either in the bill of lading or in the charterparty
In the instant case we are not however concerned with a charterparty and a bill of lading contract
Even assuming that the subject matters of FOSFA 20 contract and the fob contract are different we do not think that any question as to the germaneness of the arbitration clause to the subject matter would be relevant
It has been found by the learned Judge of the High Court that the Manager of NAFED who had signed the first contract was aware of the terms of the FOSFA 20 contract inducting the arbitration clause contained therein
It is therefore manifestly dear that by the incorporation of clause 11 in the tint contract the appellant intended to incorporate into it the arbitra tion clause of FOSFA 20 contract
Thus where as in the instant case the parties are aware of the arbitration clause of an earlier contract the subject matter of which is different from the contract which is being entered into by them incorporates the terms of the earlier contract by reference by using general words we do not think there would be any bar to such incorporation merely because the subject matters of the two contracts are different unless however the incorporation of the arbitration clause will be 966 insensible or unintelligible as was in Hamilton  Co vs Mackie  Sons supra
In the instant case the arbitration clause in FOSFA 20 contract will fit in the first contract
In other words it will not be either insensible or unintel ligible
In our opinion therefore the High Court was tight in holding that the arbitration clause in FOSFA 20 contract was incorporated into the first contract
In the other appeal which hasbeen preferred by Alimen ta it has been held by the High Court that there has been no incorporation of the arbitration clause into the second contract
In the second contract clause 9 provides all other terms and conditions for supply not specifically shown and covered hereinabove shall be as per previous contract signed between us for earlier supplies of HPS
There is a good deal of difference between clause 9 of this contract and clause 11 of the first contract
Clause 11 has been couched in general words but clause 9 refers to all other terms and conditions for supply
The High Court has taken the view that by clause 9 the terms and conditions of the first contract which had beating on the supply of HPS were incorporated into the second contract and the term about arbitration not being incidental to supply of goods could not be held to have been lifted as well from the first contract into the second one
It is however contended on behalf of the appellant that the High Court was wrong in its view that a term about arbitration is not a term of supply of goods
We do not think that the contention is sound
It has been tightly pointed out by the High Court that the normal incidents of terms and conditions of supply are those which are connected with supply such as its mode and process time factor inspection and approval if any reliability for transit incidental expenses etc
We are unable to accept the conten tion of the appellant that an arbitration clause is a term of supply
There is no proposition of law that when a con tract is entered into for supply of goods the arbitration clause must form part of such a contract
The parties may choose some other method for the purpose of resolving any dispute that may arise between them
But in such a contract the incidents of supply generally form part of the terms and conditions of the contract
The first contract includes the terms and conditions of supply and as clause 9 refers to these terms and conditions of supply it is difficult to hold that the arbitration clause is also referred to and as such incorporated into the second contract
When the incor poration clause refers to certain particular terms and conditions only those terms and conditions are incorporated and not the arbitration clause
In the present case clause 9 specifically refers to the terms and conditions of supply of the first 967 contract and accordingly only those terms and conditions are incorporated into the second contract and not the arbi tration clause
The High Court has taken the correct view in respect of the second contract also
In the result the judgment of the High Court is af firmed and both these appeals are dismissed
There will however be no orders as to costs
MLA Appeals dis missed


Summary:
The appellant and the respondent entered into two con tracts on two different dates for supply of HPS groundnut Kernels jaras
After the usual terms as to quality quanti ty price etc the first contract provided in clause II thereof that other terms and conditions as per FOSFA 20 contract terms
 However clause 9 of the second contract did not make any mention of FOSFA 20 contract and all that was stated was that all other terms and conditions for supply not specifically shown and covered therein should be as per previous contract signed between the parties for similar supply of HPS groundnut
The FOSFA 20 contract  contained an arbitration clause to the effect that any dispute arising out of this contract including any question of law arising in connection therewith shall be referred to arbitration and neither party hereto nor any persons claiming under either of them shall bring any action or other legal proceedings against the other in respect of any such dispute until such dispute shall first have been heard and determined by the arbitrators
Disputes and differences arose between the parties
The appellant in Civil Appeal No 17551982 alleged that the respondent therein committed breach of their obligations under both the contracts and sought to commence arbitration proceedings
The respondent on the other hand filed a peti tion in the High Court under s33 of the alleging that there was no valid arbitration agreement between the parties and contended that when it agreed in clause 11 of the first contract that the parties would be governed by the terms and conditions of FOSFA 20 contract  it only had in mind such terms and 958 conditions as would govern the relationship between the parties and the fact that there was an arbitration clause in FOSFA 20 contract came as a complete surprise to the re spondent
This petition was opposed by the appellant
A Single Judge of the High Court held that in view of the fact that the respondent had been nominated the canalis ing agent for export of HPS groundnut it would not be unjustified to assume that the respondent was well aware of the foreign trade in groundnut and the implications of reference to FOSFA 20 contract  when he put his signatures to the contract in question that the arbitration clause in FOSFA 20 contract was incorporated into the first contract by virtue of clause 11 providing other terms and conditions as per FOSFA 20 contract terms 
With regard to the second contract it was held that it did not make any mention of FOSFA 20 contract and all that was stated in clause 9 there of was that all terms and conditions for supply not specifi cally shown and covered therein should be as the previous contract signed between the parties for similar supply of HPS
It was accordingly held that there existed no arbitra tion agreement between the parties and as such none of them was entitled to seek reference to arbitration and that a term about arbitration was not incidental to supply of goods and it was difficult to read from the provisions of clause 9 of the contract that the arbitration clause was lifted from there and made a part of the same
The applications under s33 of the was allowed in so far as it related to the second contract and disallowed so far as the first contract was concerned
Both parties filed appeals to this Court
Dismissing the appeals HELD 1i The arbitration clause of an earlier contract can by reference be incorporated into a later contract provided however it is not repugnant to or inconsistent with the terms of the contract in which it is incorporated
962F G 1ii Where the parties are aware of the arbitration clause of an earlier contract the subject matter of which is different from the contract which is being entered into by them incorporating the terms of the earlier contract by reference by using general words there would be no bar to such incorporation merely because the subject matters of the two contracts are different unless however the incorpora tion of the 959 arbitration clause will be insensible or unintelligible
965G H 966A 1 iii There is no proposition of law that when a contract is entered into for supply of goods the arbitra tion clause must form part of such a contract
The parties may choose some other method for the purpose of resolving any dispute that may arise between them
But in such a contract the incidents of supply generally form part of the terms and conditions of the contract
966F G 1 iv When the incorporation clause refers to certain particular terms and conditions only those terms and condi tions are incorporated and not the arbitration clause
967A 2
The normal incidents of terms and conditions of supply are those which are connected with supply such as its mode and process time factor inspection and approval if any reliability for transit incidental expenses etc
An arbitration clause is not a term of supply
966E F In the instant case there is a good deal of difference between clause 9 of the second contract and clause 11 of the first contract
Clause 11 has been couched in general words but clause 9 refers to all other terms and conditions for supply
The first contract includes the terms and conditions of supply and as clause 9 refers to these terms and condi tions of supply it is difficult to hold that the arbitra tion clause is also referred to and as such incorporated into the second contract
966C D Dwarkadas  Co vs Daluram Gaganmull AIR 1951 Cal 10 FB approved
Hamilton  Co vs Mackie  Sons The Annefield  The Njegos  held inapplicable