Court affirms validity of arbitration agreement in tax invoices and delivery challans despite absence in primary purchase orders.
In a landmark judgment, the Bombay High Court has ruled that arbitration clauses included in supplementary documents such as tax invoices and delivery challans can constitute a valid arbitration agreement, even if the primary purchase orders do not contain such a clause. The decision came in the case of Hitesh Coal Traders v. Indapur Dairy & Milk Products Ltd., where the applicant sought the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
The dispute arose from the supply of imported Indonesian coal by Hitesh Coal Traders to Indapur Dairy & Milk Products Ltd. The purchase orders issued by the respondent did not include an arbitration agreement. However, the tax invoices and delivery challans accompanying the coal shipments contained explicit arbitration clauses. The applicant argued that by accepting the delivery and making payments against the invoices, the respondent implicitly agreed to the arbitration terms.
Justice Sandeep V. Marne, presiding over the case, emphasized the Supreme Court's clarification in the Concrete Additives and Chemicals case, which held that invoices acknowledged by the parties with arbitration clauses are sufficient to constitute a valid arbitration agreement. The court noted that the respondent had accepted delivery of coal and made part payments without protesting the arbitration clause printed on the invoices.
The judgment further highlighted that the absence of an arbitration clause in the primary purchase orders does not invalidate the arbitration clauses in supplementary documents, as long as they are acknowledged and acted upon by the parties. The court inferred the parties' intention to arbitrate from their conduct, particularly the acknowledgment and part payment of invoices containing arbitration clauses.
The court also addressed the issue of limitation, ruling that the application for the appointment of an arbitrator was within the three-year limitation period prescribed by Article 137 of the Limitation Act, 1963. The period of limitation commenced from the date of failure to appoint an arbitrator after the notice invoking arbitration.
The Bombay High Court appointed Mr. Suyash Gadre as the sole arbitrator to adjudicate the disputes between the parties, emphasizing the need for a fair resolution through arbitration. The court's decision underscores the importance of supplementary documents in establishing arbitration agreements and sets a precedent for similar disputes in commercial transactions.
Bottom line:-
Arbitration clause in tax invoices, delivery challans, and emails providing quotations can constitute a valid arbitration agreement if acknowledged and acted upon by the parties, even in the absence of an arbitration clause in the primary purchase orders.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 11, Arbitration and Conciliation Act, 1996 Section 7, Limitation Act, 1963 - Article 137
Hitesh Coal Traders v. Indapur Dairy & Milk Products Ltd., (Bombay) : Law Finder Doc id # 2893524
