The Bombay High Court, in the case of Bennett Coleman & Co. Ltd Versus MAD (India) Pvt.Ltd, [Commercial Arbitration Application No. 211 of 2022 decided on 22.12.2022], held that the clause contained in the invoices, which clearly stipulates a reference to Arbitration, deserves to be construed as an Arbitration clause, when not disputed by the other party.
Bennett Coleman & Co. Ltd. (hereinafter referred to as the “Applicant”) is a news media company having an interface with the MAD (India) Pvt. Ltd. (hereinafter referred to as the “Respondent”), an advertising agency. According to the interface, various advertisers would approach the Respondent to place advertisements in the Applicant’s newspapers, channels, radio and other outdoor publications via release orders.
The Respondent was supposed to make the payment within 120 days of receiving the invoices. In case if payment is made after 120 days, it would be subject to interest at the rate of 18% p.a.
The Respondent was granted accreditation by the Indian Newspaper Society (hereinafter referred to as “INS”), to obtain special rates/commissions specified by INS from time to time for placing print advertisements on behalf of the advertisers in the INS Member publications, including the Applicant.
The Agreement clearly stipulated a condition that the Respondent had to make timely payments for advertisements placed on Member publications, regardless of receipt of payment from the customers.
Between the year July 2017 and April 2019, the Respondent issued various release orders to the Applicant and the advertisements were placed in prints and non-print media, and the invoices were raised by the Applicant in a timely manner for the work done under the release orders.
The Respondent failed to make the payment in timely manner and despite of the attempts on part of the Applicants to recover the dues, the payment was not received.
An amount of Rs. 11,49,23,640/- was due and payable by the Respondent until 30.04.2022. On 11.07.2022, the Applicant invoked the Arbitration, requesting the appointment of the Sole Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”) as specified in the Dispute Resolution Clause, which is envisaged in the tax invoice. The present application is filed to determine whether such clause can be construed to be an Arbitration Agreement.
ISSUE BEFORE THE HIGH COURT
Whether a clause envisaged in the tax invoice to refer the disputes to Arbitration would amount to a valid Arbitration Agreement?
CONTENTIONS OF THE PARTIES
The Applicant submitted that the tax invoices clearly referred to the nature of the transaction between the parties, including all necessary details regarding the terms and conditions of the business.
The Applicant also asserted that the Respondent was obligated to make timely payments for the advertisement; but the Respondent defaulted the payments due to the Applicant. . Moreover, the Respondents neglected the demand and legal notice issued by the Applicant subsequent to which the Arbitration Clause was invoked.
The Applicant argued that the Respondent never disputed the liability of the payment and hence, the Court must exercise its jurisdiction. Furthermore, there is no denial of existence of the Arbitration Clause as it is contained in the tax invoice.
The Respondent denied the existence of the Arbitration Agreement and claimed that there was no conscious agreement between the parties to refer the disputes for Arbitration, and only the tax invoices provided for Arbitration of disputes.
The Respondent contended that though there is no particular prescribed format for the Arbitration Agreement, but the words “must unequivocally” indicate that the parties intend to refer the matter for Arbitration.
DECISION AND FINDINGS
The High Court relied on Lewis W. Fernandez vs Jivatlal Partapshi and Ors. (AIR 1947 Bom 65) and held that the conduct of parties is a determinative and relevant factor in deciding the existence of Arbitration Agreement.
The Court further relied on Swastik Pipe Ltd vs. Dimple Verma, (ARBP 100/2021), wherein the Hon’ble Delhi High Court had held that when the receipt of tax invoice is not disputed, the Arbitration Clause envisaged in the tax invoice is valid.
The Court observed that the parties have acted upon the invoices and there was no denial of the invoices raised by the Applicant, the clause contained in the invoices which clearly stipulate a reference to Arbitration, and hence, shall be construed as an Arbitration Clause.
The Court further relied on Concrete Additives and Chemicals vs. S.N. Engineering Services Pvt .Ltd. (Arbitration Application (L) No.23207/2021) and held that any document exchanged between the parties that provide a record of Arbitration Agreement and is not denied by other party would amount to an Arbitration Clause under Section 7 of the A&C Act.
The Court exercised powers under Section 11(6) of the A&C Act and appointed Justice Akhil Kureshi as an Arbitrator. The Petition filed under Section 9 of the A&C Act was directed to be converted into Application under Section 17 of the A&C Act and shall be considered by the Arbitral Tribunal. The Application was disposed off.
The Bombay High Court held that even though there is no definite or particular format for the Arbitration Agreement, the intention of the parties to refer the dispute for Arbitration is of prime importance while determining the existence of Arbitration Clause.
However, any document that provides the reference of dispute to Arbitration is not disputed by other party will be deemed to be valid Arbitration Agreement and both the parties intend to refer the dispute for Arbitration.
– Team AMLEGALS assisted by Ms. Rishita Agarwal (Intern)
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