Giriraj Garg v. Coal India Ltd. & Ors.
Background
Coal India Ltd. ran a 2007 e-Auction Scheme for coal distribution, which contained an arbitration clause (Clause 11.12) covering disputes "arising out of" or "in relation to" the Scheme. The appellant, a coal buyer, had a dispute with a Coal India subsidiary arising from sale orders issued under this Scheme and applied to the Jharkhand High Court under Section 11(6) of the Arbitration Act for appointment of an arbitrator. A Single Judge rejected the application, apparently holding that the arbitration clause in the Scheme did not extend to disputes under the individual sale orders. The buyer appealed to the Supreme Court.
Decision Breakdown
The Supreme Court allowed the appeal and set aside the High Court's order, holding that Clause 11.12 of the 2007 Scheme stood validly incorporated into the sale orders issued under it, making this a "single contract case" where the arbitration clause in a standard-form document (the Scheme) extends to transactions referencing it. Relying on precedents interpreting phrases like "arising out of," "in relation to," and "in connection with" as being of the widest amplitude (Renusagar Power Co. v. General Electric; Doypack Systems v. Union of India), the Court held the clause covered the sale transaction dispute in question. At the parties' joint request, the Court itself appointed a named retired High Court judge as sole arbitrator to decide the dispute, with proceedings to be held in Kolkata.
Lesson Learnt
An arbitration clause written into a master scheme or standard-form document can bind parties to arbitration even for disputes arising under separate transactional documents (like individual sale orders) that merely reference the scheme: courts read phrases like "arising out of" or "in relation to" broadly when deciding whether a dispute falls within an arbitration clause's scope.