The Invoices Containing Arbitration Clauses Which Show Mutual Acceptance Considered As An Arbitration Agreement

Summary:

[1]In the recent development, a Bench of the Delhi High Court led by Hon’ble Justice Prateek Jalan has held that when there is a situation where the parties are engaged in actions based on invoices which contains the arbitration clause and that the invoices demonstrate the mutual acceptance, then it can be inferred that the parties have entered into an arbitration agreement directly from those invoices.

Facts:           

M/s Dhawan Box Sheet Containers Pvt Ltd (Petitioner), a manufacturer and supplier of corrugated boxes and packaging materials, argued that despite supplying goods under invoice terms, M/s SEL Manufacturing Co Ltd (Respondent) has defaulted on full payment. In response to a legal notice, demanding payment of Rs. 1,25,80,425/- and invoked arbitration. Thereafter, the Petitioner nominated an arbitrator for resolution.

In contestation, the Respondent disputed the existence of a valid arbitration agreement. Consequently, the Petitioner approached the Delhi High Court for appointment of arbitrator.

Issues:

Whether the invoices Containing Arbitration Clauses Which Show Mutual Acceptance be considered as a Prima Facie Arbitration Agreement?

Judgement:

The Hon’ble Delhi High Court in the case mentioned that the fundamental question revolved around whether the arbitration clause mentioned in the terms and conditions of the invoices. The court referred to the judgement of Swastik Pipe Ltd. v. Shri Ram Autotech Pvt. Ltd. (“Swastik Pipe -1”), wherein it was held that if the invoices with arbitration clauses were acted upon, demonstrating mutual acceptance, an arbitration agreement could be inferred. The Hon’ble High court also referred to Vidya Drolia v. Durga Trading Corpn. and reiterated that in cases of doubt regarding the arbitration agreement’s existence, the default is to refer the matter to arbitration. High court held that these invoices were signed by representatives of both parties. While the Respondent argued that its signature merely acknowledged receipt of goods and not agreement to the terms, the High Court found this contention unsuitable for summary judgement. Additionally, The Hon’ble High Court ruled in the favour of petitioner and mentioned that the petition is allowed and the disputes between the parties are referred to arbitration and an arbitrator was appointed. The arbitration will be held under the aegis of Delhi International Arbitration Centre, Delhi High Court, Shershah Road, New Delhi-110503, and will be governed by the Rules of DIAC, including as to the remuneration of the learned Arbitrator.

Analysis:

The Judgement by the Hon’ble High Court noted that the invoices issued by the petitioner included the terms specifying arbitration in Delhi. These invoices were signed by the representatives of both the parties. While the respondent argued that the signature merely acknowledged receipt of the good and not the agreement to terms. The Hon’ble High Court found this contention unsuitable and appointed an arbitrator to resolve the dispute between the parties.

[1]  https://ksandk.com/wp-content/uploads/ms-dhawan-box-sheet-containers-pvt-ltd-vs-ms-sel-manufacturing-co-ltd-549309.pdf

BEFORE THE HON’BLE DELHI HIGH COURT

M/S Dhawan Box Sheet Containers Pvt Ltd Vs M/S Sel Manufacturing Co Ltd. 

ARB. P. NO. 26 OF 2024

Judgement dated 10th July, 2024