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NBCC (India) Limited vs Zillion Infraprojects Pvt. Ltd.

Not available · 2024 INSC 218Decided 19 Mar 2024
Not available

Background

NBCC (India) Limited had awarded a construction contract to Zillion Infraprojects (then Durha Constructions) in 2006 through a Letter of Intent (LOI) for building a weir for the Damodar Valley Corporation. A dispute arose in 2020, and Zillion invoked arbitration relying on a dispute-resolution clause found in the original tender documents issued by DVC to NBCC (which named a DVC officer as arbitrator, with Kolkata jurisdiction). NBCC did not respond, so Zillion approached the Delhi High Court under Section 11(6) of the Arbitration Act, which appointed a sole arbitrator. NBCC appealed to the Supreme Court, arguing the LOI itself specified only civil court jurisdiction in Delhi and never specifically incorporated that arbitration clause.

Decision Breakdown

The Supreme Court held this was a "two-contract" case (the tender documents being a separate document from the LOI actually signed between NBCC and Zillion), and under settled precedent (M.R. Engineers and Contractors), a general reference in one contract to another document's terms does not automatically import an arbitration clause from that other document unless there is a clear, specific reference to arbitration itself. The LOI's own Clause 7.0 expressly stated that disputes "shall only be" resolved through civil courts in Delhi, which pointed against any intention to arbitrate. The Court distinguished this from cases involving a single standard-form contract (like Inox Wind) where a general reference to standard terms can suffice. It held the High Court erred in appointing an arbitrator, allowed the appeal, and set aside the High Court's orders.

Lesson Learnt

When a contract merely refers to another document's general terms and conditions, that reference does not automatically bring in an arbitration clause from that other document: parties who actually want arbitration must specifically and clearly say so in the operative contract, not just cross-reference an old tender document.

Official source (sci.gov.in)View Judgment (PDF)

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