- The Delhi High Court has ruled that an arbitration clause mentioned in a tax invoice is binding between the parties.
- Certain commodities were purchased by the respondent Dimple Verma from the petitioner Swastik Pipe Ltd. on a running account basis.
- Based on the tax invoices issued by the petitioner, part installments were subsequently made by the respondent.
- After the respondent neglected to clear the levy, the petitioner invoked the arbitration clause contained in the terms and conditions of the tax invoice.
- The petitioner filed a petition before the Delhi High Court, requesting for the appointment of a Sole Arbitrator.
- The respondent Dimple Verma submitted before the High Court that there was no presence of an arbitration agreement, provided under Section 7 of the Arbitration and Conciliation Act, 1996, that existed between the parties.
- The respondent was dependent upon the judgment of the Bombay High Court in the case of Concrete Additives and Chemicals Pvt. Ltd. versus S.N. Engineering Services Pvt. Ltd. (2022) to argue that tax invoices cannot be construed as an agreement between the parties since they were unilateral and were not signed by the respondent.
- The petitioner Swastik Pipe Ltd. asserted that since the tax invoices containing an arbitration clause were received by the respondent and since, under similar invoices payment was made by the respondent, consequently, the arbitration clause was binding between the parties.
- The petitioner affirmed that in view of Section 7(4)(b) of the A&C Act, an arbitration agreement can be understood from exchange of letters, telex, telegram or other means of communication, including through electronic means.
- The petitioner presented that despite the fact that the other party may not have signed a formal contract, if it is shown that the parties are at ad idem, it cannot pardon the other party from the liability under the arbitration agreement.
- The Court observed that the plaintiff had in effect accepted the contract notes which had been sent to him by the defendant.
- The Court ruled that since the said contract notes containing the arbitration clause were in effect accepted by the plaintiff by his conduct, the said contract notes were arbitration agreements within the significance of the Indian Arbitration Act, 1940.
- The Court further noted that the Supreme Court in the case of MTNL versus Canara Bank (2019) had held that the arbitration agreement need not be in any specific structure and what is required to be established is the intention of the parties to settle their disputes through arbitration and that if it can be prima facie shown that the parties are ad idem, then despite the fact that the other party might not have signed a from the liability under the arbitration agreement.
- The Court discerned that the respondent had earlier received similar tax invoices from the petitioner against which she had made payments to the petitioner. The Court ruled that the respondent cannot cast aside the clear stipulation contained in the tax invoice with respect to any dispute being referred to arbitration. The Court consequently permitted the application, appointed a Sole Arbitrator, and referred the parties to arbitration.
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