Two contracts, two arbitration clauses — which one wins?

DLF said the dispute was under one contract. Rajapura pointed to another with Singapore arbitration. The Supreme Court had to choose.

Two companies. Two agreements. Two entirely different arbitration clauses. One dispute over Rs 75 crore. The question before the Supreme Court was deceptively simple: when a business relationship is governed by multiple contracts, each with its own dispute resolution mechanism, which one actually controls the fight?

When the completion notices were rejected

DLF Home Developers Limited (DHDL) and Ridgewood Holdings Limited had entered into a joint venture to develop residential projects. They operated through special purpose vehicles — companies created specifically for these projects — including Rajapura Homes Private Limited and Begur OMR Homes Private Limited.

Ridgewood later transferred its stake to Resimmo PCC, a foreign investor. When Resimmo wanted to exit, it exercised a put option (a contractual right to sell its shares back). DHDL could not provide the exit. So the parties agreed that Resimmo would acquire sole ownership of these project companies instead.

Two sets of documents were signed. First came the Share Purchase Agreements (SPAs), which governed the transfer of ownership. Then came the Construction Management Agreements (CMAs), under which DHDL would complete the residential projects and receive a fee of Rs 75 crore upon completion.

DHDL completed the work and issued completion notices. The respondent companies rejected them. The rejection letter sat on the table, unsigned — a deliberate silence that spoke louder than words. DHDL said the rejection was unreasonable and amounted to a breach of the CMAs. It invoked arbitration under the CMAs. The respondents refused, arguing that the real dispute was about the Share Purchase Agreements — which mandated arbitration in Singapore under the Singapore International Arbitration Centre (SIAC) rules. The SIAC clause was buried on page 47 of the SPA, a dense paragraph that now became the battlefield.

The arbitration clause that split the parties

DHDL filed applications under Section 11(6) read with Section 11(12) of the Arbitration and Conciliation Act, 1996 (the legal provisions that allow a party to approach the court directly for appointment of an arbitrator when the other side refuses to cooperate). The company sought appointment of a sole arbitrator for disputes arising under two Construction Management Agreements — one called the RCMA and the other the SCMA.

The respondents countered that the disputes fell squarely under the Share Purchase Agreements. Those agreements contained arbitration clauses specifying SIAC arbitration with Singapore as the seat (the legal location of the arbitration, which determines which courts can supervise the process). If that were true, the respondents argued, the Section 11 applications before the Supreme Court were not maintainable at all.

The court had to decide which arbitration clause governed the dispute — and whether consolidated proceedings were appropriate for what the law calls an "international commercial arbitration" (arbitration involving at least one party based outside India, governed by Section 2(1)(f) of the Act).

Why the court looked beyond the bare existence of a clause

The bench of Justice N.V. Ramana and Justice Surya Kant began with the settled principle from Vidya Drolia and Others v. Durga Trading Corporation and Duro Felguera, S.A. v. Gangavaram Port Limited. Under Section 11(6) of the Act, the court's jurisdiction is primarily limited to determining whether a written arbitration agreement exists and whether the aggrieved party has made out a prima facie (at first glance) arbitrable case.

But the court held that this limited jurisdiction does not strip the court of its judicial function entirely. The court can look beyond the bare existence of an arbitration clause to "cut the deadwood" — that is, to determine whether the dispute actually correlates to the agreement under which arbitration has been invoked. As the court put it, "the limited jurisdiction under Section 11 does not denude the court of its judicial function to cut the deadwood." The bench leaned forward as the argument shifted to the Olympus precedent, the air in the courtroom thick with the weight of conflicting clauses.

This was critical. The respondents had argued that the court's role under Section 11 was so narrow that it could not even examine which agreement governed the dispute. The court rejected that argument. If a party could simply point to any arbitration clause in any agreement and insist the court appoint an arbitrator, the entire system would be open to abuse.

When two arbitration clauses must be read in harmony

The court then turned to the core question: how to reconcile two different arbitration clauses in two related but separate agreements.

The court held that where parties have executed multiple related agreements with different arbitration clauses, the court must read them in harmony. The scope of each arbitration clause is limited to its agreement's primary subject matter. A separate arbitration clause in a later-in-time agreement cannot be rendered redundant by subsuming all disputes under an earlier agreement's clause.

The court examined the precedent from Olympus Superstructure Pvt. Ltd. v. Meena Vijay Khetan and Others. In that case, the court had held that disputes from a related agreement could be adjudicated under the main agreement's arbitration clause. But the Supreme Court in the present case clarified: that principle applies only where the main agreement's clause is worded broadly enough to cover disputes "connected with" or "in relation to" its subject matter.

Here, neither the CMA's arbitration clause nor the SPA's arbitration clause had overriding effect or broader scope. Each clause governed disputes arising from its own agreement. The dispute over rejection of completion notices was a dispute under the CMAs, not the SPAs. The respondents could not drag it to Singapore arbitration simply because the SPAs had a different clause.

Why one arbitrator was appointed for both proceedings

But the court did not stop there. It recognised that the two agreements were interlinked. The computation of claims required consideration of financial components from both agreements. If two different arbitrators heard two different proceedings, there was a real risk of conflicting awards — one arbitrator might find DHDL entitled to the fee, while another might find the rejection valid.

To avoid this, the court appointed the same sole arbitrator for both proceedings: Mr. Justice (Retd.) R.V. Raveendran, former Judge of the Supreme Court of India. The court left the decision on whether to consolidate the proceedings to the arbitrator's discretion under Section 16 of the Act (the provision that gives the arbitral tribunal the power to rule on its own jurisdiction, known as the Kompetenz Kompetenz principle). The file on the bench was thin — just two petitions, two agreements, and a single question that had consumed months of litigation.

The arbitrator would be paid fees in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996.

What this means for your contracts

For any business that operates through multiple agreements — a share purchase agreement, a construction management agreement, a service agreement, a licence agreement — this judgment is a warning. If you draft different arbitration clauses into different agreements without thinking about how they interact, you are inviting a jurisdictional fight before the substantive dispute is even heard.

The implications extend beyond construction and real estate. Any sector where transactions are structured through layered contracts — joint ventures, mergers and acquisitions, infrastructure projects, technology licensing — faces the same risk. A dispute that could have been resolved in months can stretch into years simply because the parties cannot agree on where to fight, let alone what they are fighting about.

Consider the cost. The respondents in this case spent time and resources arguing that the Supreme Court had no jurisdiction to appoint an arbitrator under the CMAs — an argument they ultimately lost. Meanwhile, the underlying dispute over the Rs 75 crore fee remained untouched. The court's decision to appoint a single arbitrator for both proceedings was pragmatic, but it was also a recognition that the parties had created a mess that the court had to clean up.

The judgment also reinforces a broader principle: arbitration clauses are not interchangeable. A clause that says "all disputes arising under this agreement" is narrower than one that says "all disputes arising out of or in connection with this agreement." Drafters must be precise. If you intend for one arbitration clause to govern all disputes across multiple agreements, say so explicitly. If you intend for each agreement to stand alone, ensure the clauses are consistent or clearly demarcate their scope.

For litigators, the takeaway is equally important. The court's willingness to "cut the deadwood" under Section 11(6) means that a party cannot be forced into arbitration under an agreement that has nothing to do with the actual dispute. But the corollary is also true: a party cannot avoid arbitration by pointing to a different clause in a different agreement if the dispute clearly arises under the agreement with the arbitration clause.

THE PLAY: When drafting multiple related agreements, ensure the arbitration clauses are either identical or contain an express provision stating which clause prevails in case of conflict — or the court will decide for you, and neither side may like the answer.

The two agreements sat on the bench. The court chose neither clause — it chose a third path: one arbitrator, two proceedings, and a reminder that clarity in drafting is not a luxury but a necessity.