UNION OF INDIA vs SALWEEN TIMBER CONSTRUCTION (INDIA) & ORS.

The Supreme Court held that the test for determining whether a dispute arises out of a contract is whether recourse to the contract is necessary to adjudicate the claim. In this case, the dispute regarding the excess supply of timber was found to be within the scope of the arbitration clause, as it required reference to the contract terms for resolution. The Court upheld the jurisdiction of the arbitrators to decide the matter, affirming the lower court's decision.