In the High Court at Calcutta

Original Civil Jurisdiction

Commercial Division

The Hon’ble Justice Sabyasachi Bhattacharyya

AP-COM No. 77 of 2024

M/s Zillion Infraprojects Pvt Ltd

Vs

Bridge and Roof Co India Ltd

With

AP No. 407 of 2022

Zillion Infraprojects Pvt Ltd

VS

Bride and Roof Co (India) Ltd

For the petitioner : Mr. Kishore Datta, Sr. Adv.

Mr. Soumen Das, Adv.

Mr. Altamash Alim, Adv.

Ms. Promita Ghose, Adv.

For the respondent : Mr. Amitabh Shukla, Adv.

Mr. Mohit Gupta, Adv.

Mr. Prakash Ch. Pandey, Adv.

Hearing concluded on : 27.06.2024

Judgment on : 08.07.2024

Sabyasachi Bhattacharyya, J:-

1. Both the applications under Section 11 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as, “the 1996 Act”) arise

from arbitration clauses embodied in two similar contracts between

the parties. The issues involved being the same, the matters are taken

up together for hearing. 2024:CHC-OS:189

2

2. Both the agreements are works contracts issued to the petitioner by

the respondent Bridge and Roof Company (India) Limited (in short,

“the B&R”). The principal contract was executed between Indian Oil

Corporation of India Limited (IOCL) and the respondent in respect of

work regarding mechanical equipments, erection and pending works

by VGO-DHT Units of Paradwip Refinery Project of M/s. IOCLO,

Paradwip, Orissa. The work was sub -contracted to the petitioner.

Disputes and differences having arisen between the petitioner and the

respondent, the present applications have been filed.

3. The relevant clause in both the works contracts is Clause 14.0.

4. Learned senior counsel for the petitioner argues that the said Clause

provides for resolution of disputes between the petitioner/sub-

contractor and B&R. However, in case of the petitioner desires to refer

the matter to arbitration, it has to approach B&R with such request

substantiating its claim and only if B&R feels justified to initiate an

arbitration, it will invoke the arbitration clause with M/s. IOCL. The

decision of the Arbitrator will be final an d binding on the

petitioner/sub-contractor. The sub-contractor has to bear pro rata

cost of the arbitration expenses in respect of its portion of the claim.

5. Learned senior counsel highlights the inherent lopsidedness of the

clause. Even if the petitioner seeks to raise a dispute by invoking the

Arbitration clause, it has to approach B&R, despite the dispute being

against B&R itself. In such case, the petitioner has to depend on the

decision of B&R to invoke the arbitration clause. Even then, the

petitioner cannot itself participate independently in the arbitral 2024:CHC-OS:189

3

proceedings but, on the other hand, would be bound by the award

passed by the Arbitrator.

6. The other injustice implicit in the clause is that the petitioner is to

bear its portion of expenses regarding its claim, without having any

participation in the arbitral process.

7. It is argued that the said conditions of the arbitration clause are

unreasonable and violative of Article 14 of the Constitution of India

and ought to be set aside. It is argued that such question can be

entered into by the Court while taking up an application under

Section 11 of the 1996 Act and such challenge need not be restricted

to applications under Article 226 of the Constitution. In support of

such contention, learned senior counsel cites Lombardi Engineering

Ltd. v. Uttarakhand Jal Vidyut Nigam Ltd., reported at 2023 SCC

OnLine SC 1422.

8. It is further argued that since the expression of intention to refer the

disputes to arbitration finds place in the clause, the portion of the said

clause which is violative of Article 14 of the Constitution ought to be

struck down and the petitioner ought to be permitted to independently

refer the matter to arbitration in disputes between the petitioner and

the B&R.

9. For such proposition, the petitioner relies on Jagdish Chander v.

Ramesh Chander, reported at (2007) 5 SCC 719, which lays down the

well-settled principle of law that if arbitration is expressly or impliedly

provided, the matter ought to be referred to arbitration. 2024:CHC-OS:189

4

10. Learned senior counsel appearing for the petitioner further argues

that even if the petitioner consented to the arbitration clause, there

can no waiver of fundamental rights embodied in Article 14.

11. The arbitration agreement, it is argued, does not comply with and falls

fowl of Section 7 of the 1996 Act as well as the Constitution of India

and militates against the concept of party autonomy, which is

inherent in arbitration.

12. The court, it is contended, has jurisdiction to sever the

unconscionable part of the clause, retaining the intention to refer to

arbitration.

13. As such, it is argued that the matter ought to be referred to arbitration

and in view of lack of consensus between the parties in that regard,

this Court ought to appoint an Arbitrator for such purpose under

Section 11 of the 1996 Act.

14. Learned counsel for the respondent takes a preliminary objection in

that the arbitration clause specifically bars reference to arbitration in

respect of disputes exclusively between the petitioner/sub-contractor

and the respondent (B&R). In view of such negative clause, the matter

cannot be referred to arbitration, since the present dispute is between

the petitioner and B&R, and IOCL is not involved at all.

15. The respondent, in such context, relies on M.R. Engineers &

Contractors Private Ltd. v. Som Datt Builders Ltd., reported at (2009) 7

SCC 696, where the applicability of Section 7(5) of the 1996 Act was

considered and it was held that wording of the said sub-section makes

it clear that mere reference to a document in a contract would not 2024:CHC-OS:189

5

have the effect of making the arbitration clause in that document a

part of the contract. Thus, the GCC, SCC, technical specification, etc.

between the IOCL and B&R cannot be looked into to find out an

arbitration clause therein, as the petitioner is not a party in any of

such documents. Section 7(5) requires a conscious acceptance of the

arbitration clause from another document by the parties as a part of

their contract. In the absence of the same, the petitioner cannot take

advantage of the arbitration clause in the agreement between IOCL

and B&R.

16. A general reference to another contract would not suffice to import the

arbitration clause in such contract between the parties to a different

contract.

17. In the case of NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd.,

reported at 2024 SCC OnLine SC 323, the Supreme Court relied on the

judgment of M.R. Engineering (supra) and set aside the order of the

Delhi High Court whereby an Arbitrator was appointed for

adjudication of disputes between NBCC and Zillion, the present

petitioner. There, the Supreme Court was considering similar facts as

in the present case. As such, the ratio of the said judgment is binding

in the present case as well.

18. In the instant case, there is only a general reference to GCC, SCC,

technical specification, etc. issued by IOCL to the respondent in the

contract between the parties. The arbitration clause contained in the

GCC issued by IOCL is not incorporated in the agreement between the

petitioner and the B&R. On the contrary, the condition s of this 2024:CHC-OS:189

6

particular agreement provide that the disputes between the parties

herein shall not be referred to arbitration or to any similar Alternative

Dispute Resolution forum.

19. It is next argued that the respondent is not relying on the restrictive

part of Clause 14.0, which is the arbitration clause. Even if such part

of Clause 14.0 is severed, the other part still remains which states

that the disputes between the parties shall not be adjudicated through

arbitration or similar disputes resolution system, which means that

there cannot be a reference of such disputes to arbitration or to other

similar Alternative Dispute Resolution forums. Thus, the proposition

in Lombardi Engineers Ltd. (supra) does not apply. Hence, it is argued

that the applications under Section 11 of the 1996 Act ought to be

dismissed.

20. The moot question which falls for consideration in the present case is

whether there is a valid arbitration clause in the agreement between

the parties which covers the disputes raised by the petitioner.

21. For deciding such issue, the relevant arbitration clause in the

agreement between the present parties is required to be gone into and

is set out below:

“14.0 The Arbitration of disputes if any between IOCL & B&R will be

final & binding upon the subcontractor. No dispute can be

adjudicated separately through arbitration or any other similar

forum for any disputes between subcontractor & B&R. However

incase subcontractor desires B&R to raise certain disput es

pertaining to its claim for reference to arbitration, the

subcontractor shall approach B&R with such request

substantiating its claim and incase B&R feels justified to initiate

an arbitration (decision of concerned General Manager of B&R in

this regard will be final & binding), the arbitration may be 2024:CHC-OS:189

7

invoked by B&R with M/s. IOCL and decision of the arbitrator

will be final and binding upon the subcontractor for all disputes.

However the subcontractor has to bear prorata cost of its portion

of claim of arbitration expenses. The jurisdiction of Court, if

situation so arises, in any circumstances shall be at Kolkata.

22. A perusal of the clause shows that there are primarily two components

of the same. The first part, apart from lending finality to the decision

of the Arbitrator, provides that any dispute between the sub-

contractor/petitioner and the contractor/B&R is not to be adjudicated

separately through arbitration or in other similar forum.

23. The second component deals with issues pertaining to disputes

between the contractor (B&R) and/or the sub-contractor (petitioner)

on the one hand and M/s IOCL on the other.

24. According to the second limb of the arbitration clause, in case the

subcontractor desires B&R to raise a dispute pertaining to its claim

for reference to arbitration, the sub-contractor shall approach B&R

with such request. If the B&R feels it justified to initiate an arbitration

on the said claim, regarding which the decision of the General Manger

of B&R will be final, arbitration may be invoked by B&R with M/s

IOCL, in which case the sub-contractor has to bear pro rata cost of its

portion of the claim of arbitration expenses. The jurisdiction of the

court has been fixed at Kolkata.

25. Hence, there are two distinct sub-divisions in the clause. The first part

deals with disputes arising between the subcontractor (petitioner) and

the respondent/ B&R. Regarding such dispute s, it is specifically

provided that such dispute cannot be adjudicated through arbitration 2024:CHC-OS:189

8

or any similar forum. The obvious meaning of “similar’’ is any other

Alternative Dispute Redressal forum.

26. Although in the succeeding sentence, being the second limb of the

clause, it is not made clear as the whether the disputes sought to be

raised by the sub-contractor pertaining to its claim has to be against

IOCL or can be exclusively against B&R only, the rest of the provision,

read harmoniously, leaves no manner of doubt that such dispute has

to be against the IOCL. Otherwise, an absurdity would arise inasmuch

as the subcontractor has to approach the respondent/contractor, the

very entity against which the dispute is raised, for deciding even

whether to initiate an arbitration proceeding. Further, in such event

there would be no scope of the petitioner paying its portion of the

arbitration expenses, as in such cases the entire dispute would be

between the petitioner and the respondent/contractor and there

would not be any occasion to calculate any pro rata portion of the

petitioner’s costs. A cardinal rule of construction of documents is that

any interpretation which leads to absurdity or unworkability is to be

avoided. Since the provisions of the present arbitration clause can be

read harmoniously without imputing any such absurdity, such

harmonious construction is to be adopted by the court.

27. Hence, it is inevitable that the claim which is proposed by the

petitioner to the respondent for being taken up in arbitration has to be

a component of the primary dispute raised by the respondent against

the IOCL where the petitioner may also have a say since it will also be

affected, being bound by the arbitration between B&R and IOCL. In 2024:CHC-OS:189

9

such cases, the petitioner has to approach the respondent with the

petitioner’s claim against the IOCL, the respondent deciding whether

to incorporate such component in its arbitration with IOCL or

independently raise it with IOCL.

28. The cardinal challenge by the petitioner is on the footing of violation of

Article 14 of the Constitution. A perusal of the arbitration clause

shows that it is segregable into two parts – the first part dealing with

disputes between the petitioner and the respondent, which is non-

arbitrable, and the second dealing with disputes between the B&R and

the IOCL, in which case the petitioner can side with the B&R and seek

to raise its sub-claim against the IOCL through the respondent, in the

arbitral proceedings initiated between the respondent and the IOCL.

29. It is evident that the second part is unjust and violative of party

autonomy, since the petitioner would not, in such case, have any

participation in the arbitral process with IOCL, although it has a stake

in the outcome of the same. Moreover, the decision whether to take

the claim of the petitioner to arbitration also lies within the exclusive

discretion of the respondent, which is also unjust and lopsided. The

petitioner, in such case, has to pay according to its portion of the

claim but have no participation in the arbitration, which definitely is

violative of Article 14 of the Constitution of India and ought to be

struck down.

30. However, as discussed above, the second limb being segregable,

striking down the same does not affect the first limb which clearly 2024:CHC-OS:189

10

debars any exclusive dispute between the petitioner and the

respondent from being referred to arbitration.

31. The petitioner has argued that the arbitration clause does not comply

with and falls fowl of Section 7 of the 1996 Act. Section 2(1)(b) of the

1996 Act defines “arbitration agreement” to mean an agreement

referred to in Section 7. Section 7 provides that an arbitration

agreement means an agreement by the parties to submit to arbitration

all or certain disputes which have arisen or which may arise between

them in respect of a defined legal relationship, whether contractual or

not.

32. In the present case, the arbitration clause, insofar as it relates to

disputes between the petitioner/sub -contractor and the

respondent/contractor is concerned, which is a defined legal

relationship, provides in clear terms that no such dispute can be

adjudicated separately through arbitration or any other similar forum.

In view of the negative language used in the said provision, there is a

clear bar to disputes between the petitioner and the respondent to be

referred to arbitration.

33. There is nothing in the other part of the said clause to create such

right of reference of exclusive disputes between the petitioner and the

respondent to arbitration. The rest of the clause deals with disputes

against the IOCL. Such dispute may be solely between the respondent

and the IOCL or might have some components of challenge by the

petitioner as well. Clause 14.0, the arbitration clause in the

agreement between the petitioner and the respondent, provides that in 2024:CHC-OS:189

11

case of such disputes between the respondent and the IOCL, t he

petitioner may add its own component, subject to the discretion of the

respondent, in which case, the petitioner would not have participatory

right but would be liable to pay its portion of the expenses.

34. Hence, there is no violation of Section 7 of the 1996 Act, at least

insofar as the petitioner and the respondent are concerned.

35. Admittedly, the present dispute has arisen exclusively between the

petitioner and the respondent, the IOCL having no part to play in it.

36. Although the agreement between the petitioner and the respondent, in

certain places, refers to the GCC, SCC, technical specification,

drawings, addendums and other clauses to which the IOCL is also a

party, there is no specific provision in the agreement between the

present parties incorporating the arbitration clause therein in the

contract between the present parties. As held in NBCC (India) Ltd.

(supra), Section 7(5) of the 1996 Act provides for a conscious

acceptance of the arbitration clause from any document by the parties

as a part of their contract, before such arbitration clause could be

read as a part of the contract between the parties.

37. Section 7(5) stipulates that the reference in a contract to a document

containing an arbitration clause constitutes an arbitration agreement

if the contract is in writing and the reference is such as to make that

arbitration clause part of the contract.

38. In the present case, however, there is not a single sentence in the

agreement between the petitioner and the respondent to indicate that

the arbitration clause in the agreements between the IOCL and the 2024:CHC-OS:189

12

respondent have been made a part of the contract between the

petitioner and the respondent.

39. Again, in M.R. Engineers (supra), Section 7(5) was discussed and it

was held in categorical terms that the arbitration clause from another

contract can be incorporated into the contract only by specific

reference to the arbitration clause in the other contract.

40. In the present case, such specific incorporation being absent, it

cannot be said that the petitioner can take advantage of the

arbitration clause in the agreements between the IOCL and the

respondent.

41. The only clause relating to arbitration which is operative insofar as the

petitioner is concerned, is Clause 14.0 in the agreement between the

petitioner and the respondent which, in specific terms, debars any

arbitration regarding disputes arising exclusively between the

petitioner and the respondent.

42. The petitioner further alleges violation of Artic le 14 of the

Constitution. The restriction to refer matters between the petitioners

and respondent to arbitration merely restricts the forum to civil courts

and other forums under general law, precluding any reference to

arbitration or other Alternative Dispute Resolution forum. Clause 14.0

merely states in that regard that such disputes cannot be adjudicated

through arbitration or any other “similar forum”, meaning thereby any

other Alternative Dispute Resolution Forum, and does not take away

the remedy of the petitioner under general law to move the civil court

or any other forum, if available under any other law. Hence, it cannot 2024:CHC-OS:189

13

be said that the right of the petitioner to have access to justice has

been curtailed in any manner.

43. Arbitration is a choice to be exercised on consensus by the parties.

The petitioner entered into the contract with the respondent with open

eyes and nothing prejudicial to the petitioner has been incorporated in

the said agreement by precluding arbitratio n regarding disputes

between the present parties which could be said to take away the

party autonomy of the petitioner. The petitioner cannot selectively

pick and choose particular terms of the agreement and shut its eyes

or assail the others. The ground of unequal bargaining power is not

applicable, since the petitioner took full advantage of the contract and

did the work envisaged therein.

44. The petitioner places reliance on Lombardi Engineering Ltd. (supra)

where it was held that the court, while considering an application

under Section 11(6) of the said 1996 Act, can test the validity or

reasonableness of the condition stipulated in the arbitration clause at

the touch-stone or anvil of Article 14 of the Constitution.

45. Again, in Jagdish Chander’s case, the Supreme Court observed that

the court may sever and declare unenforceable a provision of the

arbitration clause that is violative of law or fundamental rights.

46. In the present case, there are two clearly segregable parts of the

arbitration clause. The first part deals with a specific bar to

arbitration in respect of disputes arising exclusively between the

petitioner and the respondent. On the other hand, the second limb of 2024:CHC-OS:189

14

the clause deals with disputes between the respondent and the IOCL

where the petitioner may also stake a claim.

47. Thus, the segregation is complete in the clause between the disputes

arising exclusively between the petitioner and the respondent and

those arising between the IOCL and the one hand and the respondent

and, in certain cases the petitioner, on the other.

48. Insofar as the first part is concerned, there is a specific bar to

arbitration. The petitioner tends to argue that if there is an intention

of the parties to refer matters to arbitration, the same has to be

honoured unless the provision is totally unworkable.

49. In the present case, there is no dichotomy or unworkability, nor is

there any absurdity or violation of Article 14 of the Constitution of

India insofar as the portion of the arbitration clause dealing with

disputes between the petitioner and the respondent is concerned. The

clause clearly provides a bar to reference of such disputes to

arbitration. Thus, the intention to refer to arbitration of disputes

arising exclusively between the petitioner and the respondent, which a

sine qua non for such reference in the first place, is completely absent

in the said clause. It is not for the Court, sitting in jurisdiction under

Section 11 of the 1996 Act, to modify the contract and carve out such

right for the parties where the parties themselves choose not to confer

upon themselves the same.

50. Hence, Clause 14.0 does not, in any manner, clothe the petitioner or

the respondent with any right to refer the disputes which arise inter se

between them to arbitration. 2024:CHC-OS:189

15

51. However, insofar as the other part of the said clause is concerned, the

same imposes unreasonable fetters on the petitioner in respect of

disputes with the IOCL. In such cases, the petitioner is given a right

to raise the issue with the respondent and join in an arbitration

initiated by the respondent against the IOCL.

52. There are two components of such provision which militate against

Article 14 of the Constitution. First, the petitioner is not allowed to

participate in the proceedings, although mandated to bear the

expenses regarding its portion of the claim. Secondly, even the

reference of the dispute to the adjudicatory forum is left entirely to the

discretion of the respondent, thereby denuding the petitioner of its

independent right to raise a dispute before the appropriate

adjudicatory authority. Such curtailment of right tantamounts to

contravention of the right to access to justice, which is a fundamental

component of the right to equality enshrined in Article 14 of the

Constitution.

53. Hence, such second limb of the arbitration clause, being violative of

Article 14 of the Constitution of India, is hereby struck down insofar

as the petitioner is concerned. The effect of such striking down is that

the petitioner will be at liberty to raise any dispute against the IOCL

alone or against the IOCL as well as the respondent, if the petitioner

so chooses, before the competent civil court having jurisdiction and/or

any other authority if vested with such adjudicatory power under any

other statute. However, there is no scope of the petitioner joining in

an arbitration proceeding between the respondent and the IOCL, since 2024:CHC-OS:189

16

the petitioner is not a party to the other agreements between the IOCL

and the respondent which contemplate arbitration between them.

54. Thus, in view of the above discussions, this Court c omes to the

following conclusions:

(i) Disputes arising out of or in respect of the agreement between

the petitioner and the respondent exclusively are not amenable

to arbitration due to the specific bar in the arbitration clause.

(ii) In the event the petitioner has a dispute against IOCL where the

respondent may or may not be a party, it will be open to the

petitioner to ignore the arbitration clause, that is, Clause 14.0

and the restrictions imposed therein and to independently file a

legal action before the competent civil court and/or any other

authority, if vested with such power under any other statute

than the Arbitration and Conciliation Act, 1996.

(iii) As a result, the petitioner is not entitled to invoke the

arbitration clause in the present dispute, which arises

exclusively between the petitioner and the respondent, in view of

the specific bar in Clause 14.0 of the agreement between the

parties.

(iv) However, the petitioner will be at liberty to file a regular civil

suit before the competent civil court and/or move any other

forum if the petitioner has such right under any other statute

than the Arbitration and Conciliation Act, 1996.

55. In view of the above, there is no occasion for this Court to appoint an

Arbitrator in respect of the present dispute. As such, the applications 2024:CHC-OS:189

17

under Section 11 of the Arbitration and Conciliation Act, 1996 are not

maintainable in law.

56. Hence, AP-COM No. 77 of 2024 and AP No. 407 of 2022 are dismissed

on contest without any order as to costs, leaving it open for the

petitioner to approach the competent civil court or any other statutory

forum with the disputes raised by the petitioner with the respondent.

57. There will be no order as to costs.

58. Urgent certified server copies, if applied for, be issued to the parties

upon compliance of due formalities.

( Sabyasachi Bhattacharyya, J. ) 2024:CHC-OS:189