Arbitration Clause in Principal Contract Cannot Be Incorporated Into Sub-Contract Without Specific Mention or Reference

In brief

The question

1. Whether a Section 9 petition is maintainable in the absence of an express arbitration agreement between the parties

The court held

The Court held that the petition under Section 9 is not maintainable because no arbitration agreement exists between the Petitioner and the Respondent

It also directed

The Court dismissed the petition and all pending applications, vacated any existing interim orders, and granted the Petitioner liberty to pursue other legal remedies

01Facts

The North Eastern Railway (NER) floated a tender for civil engineering and electrification works via EPC mode

pp. 1-2

The Petitioner (Sannverse) and Respondent (Konkan Railway) entered into a Memorandum of Understanding (MOU) dated 29.10.2025 to jointly participate in the tender

p. 2

Pursuant to the MOU, the Petitioner provided a Bank Guarantee of Rs. 2 Crores as bid security

p. 2

The Respondent was awarded the work and subsequently issued a letter to the Petitioner on 01.04.2026 for back-to-back performance

p. 2

Disputes arose regarding delays in submitting performance securities, leading the Petitioner to file this petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain the Respondent from encashing the Bank Guarantee and taking coercive actions

pp. 1-2

The court raised a preliminary objection regarding the maintainability of the petition due to the absence of an arbitration clause in the MOU

p. 3

02Issues

i.1. Whether a Section 9 petition is maintainable in the absence of an express arbitration agreement between the parties

p. 6

ii.2. Whether an arbitration clause from a principal contract (NER and Respondent) can be incorporated by reference into a subcontract (Respondent and Petitioner) without specific mention

pp. 4-5

03Law Applied

The court applied Section 9 of the Arbitration and Conciliation Act, 1996, which requires the existence of an arbitration agreement as a prerequisite for interim relief

p. 6

It relied heavily on the precedent set in NBCC (India) Limited v. Zillion Infrastructure Pvt. Ltd., which established that a general reference to a principal contract in a secondary contract does not ipso facto incorporate an arbitration clause unless there is a specific mention

pp. 3-4

The court also distinguished State of U.P. v. Combined Chemicals Company Pvt. Ltd. regarding the binding nature of tender documents between the same parties and emphasized that party autonomy is the "hallmark of arbitration"

p. 4, 6

Provisions in the judgment · 1 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 9

04Reasoning

The Court examined the MOU dated 29.10.2025 and found that Clause 5 only provided for dispute resolution through "mutual discussion or negotiations," with no mention of arbitration

p. 4

The Petitioner argued that because the MOU was an outcome of the NER tender (which contained an arbitration clause), that clause should be "borrowed" into the MOU

p. 4

The Court rejected this, noting that the Petitioner failed to show any term in the MOU that specifically incorporated the RFP/Tender's arbitration clause by reference

p. 5

Following the NBCC ruling, the Court held that since the MOU was a subcontract between different parties than the principal contract, a literal or implied "transplanting" of the arbitration clause could not be assumed

p. 5

Without evidence that the parties were ad idem (in agreement) regarding arbitration at the time of execution, the Court cannot "stitch" such a clause into the agreement

p. 6

05Holding

The Court held that the petition under Section 9 is not maintainable because no arbitration agreement exists between the Petitioner and the Respondent

p. 6

The Court dismissed the petition and all pending applications, vacated any existing interim orders, and granted the Petitioner liberty to pursue other legal remedies

pp. 6-7

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