Can an Arbitration Clause Bind Linked Contracts? Supreme Court Clarifies
Case Title: NATIONAL SKILL DEVELOPMENT CORPORATION VERSUS SURYA WIRES PRIVATE LIMITED & ORS.
Case No.: S.L.P. (C) NO.10030 OF 2026
Coram: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
Court Observation
“…in case of a composite transaction involving multiple agreements, it would be incumbent for the courts and tribunals to assess whether the agreements are consequential or in the nature of a follow-up to, the principal agreement.”
“The phrase “as if the provisions thereof were set out herein in extension” operates as a deeming fiction internal to the contract, binding every facility agreement, including the Personal Guarantee, within the same legal and arbitral framework as the Loan Agreement. The Personal Guarantees do not, therefore, stand apart from the Loan Agreements, and are woven into their very fabric…Read together, the definition clauses under Article I, Article XII and the Schedules conclusively establish that the Loan Agreements and Personal Guarantees were designed to operate not as isolated or self-contained contracts, but as component parts of one composite transaction governing a single commercial arrangement.”
“Respondent no. 2 furnished precisely such a guarantee, contemporaneously with and as a condition precedent to each Loan Agreement, which by its own deeming fiction treats every Facility Agreement, with the Personal Guarantee included, as set out “as if … in extension” of the Agreement itself. A guarantee so defined and so integrated cannot be severed, for purposes of dispute resolution alone, from the very Clause 11.2 that governs disputes touching the rights and obligations arising under that Agreement, while remaining tethered to it for every other purpose, including the extent of liability.”
“…we hold that the arbitration clause contained in Clause 11.2 of the Loan Agreements stands incorporated, within the meaning of Section 7(5) of the 1996 Act, into the Personal Guarantees dated 27.12.2016 and 18.08.2017 executed by respondent no. 2, who is accordingly bound to submit to arbitration in respect of disputes arising therefrom.”
Can an Arbitration Clause Bind Linked Contracts? Supreme Court Clarifies
