The Delhi High Court, in M/s Hetampuria Tax Fab v. M/s Daksh Enterprises [FAO (COMM) 169/2022 and CM No.48962/2022 decided on 15.11.2022] held that mere acceptance of delivery of goods does not amount to acceptance of the Arbitration Clause unilaterally included in the invoice.
FACTS
M/s/ Hetampuria Tax Fab (hereinafter referred to as the “Appellant”) is engaged in the business of the sale and supply of fabrics, shirts and textiles material. During the course of his business, the Appellant supplied goods to M/s. Daksh Enterprise (hereinafter referred to as the “Respondent”) under various invoices and delivery receipts (hereinafter referred to as the “Delivery Challans”). The invoices contained the terms of the contract of sale and specifically refers to an Arbitration Agreement.
The Appellant had supplied goods amounting to Rs. 19,43,618/- to the Respondent in the year 2016-17. The Respondent had paid an amount to Rs.12,74,200/- and an amount of Rs.6,68,518/- was unpaid. The Appellant invoked the Arbitration Agreement in the invoices and claimed the outstanding amount along with 24% interest before the Arbitral Tribunal constituted by three members of the Delhi Hindustani Merchantile Association. The Arbitral Tribunal passed the Arbitral Award in favour of the Appellant on 16.03.2022.
The Respondents challenged the Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”). The Commercial Court set aside the Arbitral Award on the ground that no Arbitration Agreement existed between the parties (hereinafter referred to as the “Impugned Order”).
The Appellant aggrieved by the Impugned Order has filed an appeal under Section 37 of the A&C Act.
ISSUE
Whether acceptance of delivery of goods implies acceptance of the Arbitration Clause envisaged in the invoice?
CONTENTIONS
The Appellant contended that the Respondent had signed Delivery Challan, hence it is acceptance of the Arbitration Clause. The Appellant submitted that the Arbitration Agreement is in writing and in accordance with Section 7(3) of the A&C Act.
The Appellants relied on Scholar Publishing House Pvt. Ltd. v. Khanna Traders (ILR (2013) V Delhi 3343) and argued that as there is no specified form for an Arbitration Agreement, it could also be recorded on an invoice.
The Appellant further argued that as per the conditions mentioned in the Delivery Challans, the present case falls under the exception set out in Newsprint Sales Corporation v. The Daily Pratap (CS(OS) 2630-A of 1992 dated 01.09.2006).
DECISION AND FINDINGS
The Delhi High Court examined the Delivery Challan and opined that ex-facie notation in the Delivery Challan cannot be considered as an Arbitration Agreement. Moreover, it was not stated that the parties had agreed to refer the disputes to arbitration or accepted that the award was binding and final.
The High Court observed that the signature in the Delivery Challan only signifies that the goods have been received in a good condition and does not mean any acceptance of an Arbitration Clause. Thus, a unilateral document issued by a party cannot be construed as a binding Arbitration Agreement.
The High Court did not dispute the written clause, in absence of material except the Delivery Challan, it was unable to accept that the Arbitration Clause was agreed by the Respondent. It was held that in the present case, there was no material to indicate that the parties had agreed to refer the disputes to Arbitration.
The High Court relied on Priknit Retails Ltd. And Others v. Aneja Agencies (2018 SCCOnline Del 13424) and held that when an Arbitration Clause is printed on the invoices, mere acceptance of delivery of goods, does not imply acceptance of the Arbitration Clause in the invoices. The High Court upheld the order passed by the Commercial Court and dismissed the appeal.
AMLEGALS REMARKS
One of the main objectives of the A&C Act is to uphold party autonomy. A dispute can be referred to Arbitration, only when both parties mutually agree to refer to Arbitration. The Arbitration Clause would bind the parties only when both parties have agreed upon the agreement mutually. The Delhi High Court has upheld the party autonomy and consensus ad idem between the parties. The High Court has rightly held that mere acceptance of goods by signing the delivery challan does not amount to accepting an Arbitration Clause inserted unilaterally by the seller in the delivery challan.
– Team AMLEGALS assisted by Mr. Niloy Gosh (Intern)
For any queries or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or himanshi.patwa@amlegals.com.
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