Arbitration clause in accepted invoices binds the parties despite the absence of a separate signature at the Section 11 stage

The Hon’ble High Court of Delhi considered whether an arbitration agreement existed between the parties where the arbitration clause was contained in the terms and conditions printed on the reverse side of invoices and had not been separately signed by the receiver of the goods. The Hon’ble Court held that a prima facie arbitration agreement existed within the meaning of Section 7 of the Arbitration and Conciliation Act, 1996.

M/s Tinna Rubber and Infrastructure Limited (‘Petitioner’) supplied goods to Mr. Pankaj Gandhi (‘Respondent’) pursuant to commercial transactions between the parties. In connection with these transactions, the Petitioner raised several invoices. The Petitioner asserted that the invoices incorporated terms and conditions of sale printed on their reverse side, including Clause 18 containing an arbitration agreement. The Respondent received the goods supplied under the invoices and made part-payments towards the invoice amounts. Subsequently, disputes arose regarding the commercial dealings between the parties. The Petitioner invoked the arbitration clause and sought appointment of an arbitrator.

The Respondent disputed the existence of any arbitration agreement, contending that the invoices relied upon by the Petitioner did not contain an arbitration clause and that the alleged terms and conditions were neither supplied to nor accepted by it. Owing to the disagreement regarding the existence of the arbitration agreement, an application was filed before the Hon’ble High Court of Delhi under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996.

Before the High Court, the Petitioner contended that the invoices constituted composite commercial documents whose terms and conditions formed an integral part of the transactions. It was submitted that the Respondent had accepted the goods supplied, acted upon the invoices, and made part-payments without raising any objection to the terms contained therein, including the arbitration clause. The Petitioner further argued that the Respondent could not selectively accept the commercial benefits of the invoices while denying the arbitration agreement contained therein.

The Respondent submitted that no arbitration agreement existed between the parties, as the alleged arbitration clause was contained in separate documents that were never supplied, accepted, or signed. It was further contended that there was no consensus ad idem regarding arbitration and, consequently, no enforceable arbitration agreement.

Rejecting the contention of the Respondent, the High Court held that the scope of examination under Section 11 of the Arbitration Act is limited to determining the prima facie existence of an arbitration agreement. The High Court observed that the arbitration clause contained in Clause 18 of the terms and conditions forming part of the invoices and that the Respondent had admittedly received the goods and acted upon the invoices by making part-payments.

Referring to Section 7 of the Arbitration and Conciliation Act, 1996, the Hon’ble High Court held that the statute did not require a separate signature on the arbitration clause for a valid arbitration agreement to exist. It further held that the intention of parties to arbitrate could be gathered from the written record, commercial conduct, and surrounding circumstances. The questions concerning actual incorporation or acceptance of specific terms, as well as objections relating to jurisdiction or arbitrability, involved issues requiring deeper examination and were more appropriately left to the arbitral tribunal under Section 16 of the Arbitration Act.

Accordingly, the Hon’ble High Court in Tinna Rubber and Infrastructure Limited v. Pankaj Gandhi held that no impediment existed to the constitution of the arbitral tribunal and allowed the petition for appointment of an arbitrator. The Court appointed a sole arbitrator to adjudicate the disputes between the parties, while reserving liberty to both sides to raise all objections relating to jurisdiction, arbitrability, and other issues before the arbitral tribunal in accordance with law.