Case: M/s. Inox Wind Ltd Vs. M/s. Thermocables Ltd

3. The Appellant is a manufacturer of wind turbine generators (WTGs). The Respondent is engaged in the business of manufacture of wind power cables and other types of cables. Two purchase orders dated 13.12.2012 and 02.02.2013 were issued by the Appellant to the Respondent for supply of cables for their WTGs. According to the Purchase Order, the supply was to be according to the terms mentioned in the order and the Standard Terms and Conditions that were attached thereto. Apart from the other conditions, the Standard Terms and Conditions contain a clause pertaining to dispute resolution. The said clause provides for a dispute to be resolved by a sole arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The material on record indicates that the Respondent accepted all the terms and conditions mentioned in the Purchase Order except the delivery period as is evident from a letter dated 15.12.2012.4. The Respondent, pursuant to the Purchase Order, supplied wind power cables to the Appellant. While laying the cables supplied by thethe Appellant discovered that the outer sheaths of the cables of 150 sq. mm. were cracked. This forced them to stop the WTGs so as to avert damage to expensive equipment. According to the Appellant, thedid not replace the cables. The Appellant, therefore, was constrained to issue a notice dated 30.10.2014 proposing the name of a sole arbitrator in terms of the Standard Terms and Conditions. In the absence of any response, the Appellant moved the High Court of Judicature at Allahabad by filing an application under Section 11 (6) of the Act.5. The High Court dismissed the said application by holding that an arbitrator cannot be appointed as the Appellant did not prove the existence of an arbitration agreement. The High Court relied upon the judgment of this Court in M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited, (2009) 7 SCC 696     to hold that there is no special reference to the arbitration clause in the standard terms and conditions, so the arbitration clause cannot be said to have been incorporated into the purchase order.

Court's reasoning:
19. 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 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? 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 24 th Edition (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. We are in agreement with the judgment in M.R. Engineer?s case 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.20. In the present case, the purchase order was issued by the Appellant in which it was categorically mentioned that the supply would be as per the terms mentioned therein and in the attached standard terms and conditions. The Respondent by his letter dated 15.12.2012 confirmed its acceptance of the terms and conditions mentioned in the purchase order except delivery period. The dispute arose after the delivery of the goods. No doubt, there is nothing forthcoming from the pleadings or the submissions made by the parties that the standard form attached to the purchase order is of a trade association or a professional body. However, the Respondent was aware of the standard terms and conditions which were attached to the purchase order. The purchase order is a single contract and general reference to the standard form even if it is not by a trade association or a professional body is sufficient for incorporation of the arbitration clause.