Arbitration Clause In Terms & Conditions (T&C) On A Website Is Binding On The Parties If The Digital Agreement Incorporated Hyperlink To Such T&C: Delhi High Court

The bench of Justices Vibhu Bakhru and Ravinder Dudeja held that such an incorporation of arbitration clause would satisfy the requirement of Section 7(5) of the A&C Act which provides that reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement.

Facts

The parties entered into a Marketing and Operational Consulting Agreement (MOCA) on 27.07.2018. Clause 15 of MOCA incorporated terms and conditions available on the appellant's website. Clause 14 of the website provided for reference to arbitration.

A dispute arose between the parties regarding the non-payment of assured monthly benchmark revenue by the appellant. Resultantly, the respondent filed a Suit before the Commercial Court. The appellant filed an application under Section 8 of the A&C Act seeking reference of the dispute to arbitration.

The Commercial Court held that Clause 14 of the T&C got incorporated in MOCA and there was a valid arbitration agreement, however, it held that the scope of arbitration clause was limited to 'Construction, Interpretation and Application' of the agreement and the lis in the suit pertained to non-compliance of the terms of the agreement. Both parties filed appeal against this order. The High Court decided both the appeals together.

Submissions by the Parties

The appellant challenged the order on the following grounds:

• Commercial Court erred in concluding that the disputes were not covered by the arbitration agreement (Clause 14 of the Terms and Conditions).
• The phrase "application of the terms and conditions of the agreement" included disputes regarding non-compliance.
• the arbitration clause used three distinct expressions: "construction, interpretation, and application," indicating that the scope of "application" was broader than "interpretation."

The respondent (appellant in the second appeal) challenged the order on the following grounds:

• Clause 14 of the Terms and Conditions could not be considered as incorporated into the MOCA by reference, as there was no specific mention of the arbitration clause.
• The incorporation of an arbitration clause into an agreement could not be inferred by reference unless explicitly mentioned.
• that clicking the link provided in Clause 15 of the MOCA did not lead directly to the Terms and Conditions containing the arbitration clause.

Analysis by the Court

The Court noted that the parties had digitally entered into the MOCA, which expressly referred to the Terms and Conditions published on appellant's website. It noted that Clause 15 of the MOCA explicitly stated that by agreeing to the MOCA, the respondent also accepted the terms and conditions published on the website, which would constitute the entire agreement between the parties.

The Court held that an arbitration clause contained in the terms and conditions available on the website of a company would get incorporated in the agreement between the parties if the agreement makes an express reference and provide a hyperlink to T&Cs.

The Court held that such an incorporation of arbitration clause would satisfy the requirement of Section 7(5) of the A&C Act which provides that reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement.

The Court concluded that the link provided in Clause 15 of the MOCA, leading to the website's Terms and Conditions, was sufficient to incorporate the arbitration agreement into the MOCA.

Next, the Court dealt with the issue if the dispute was covered by the arbitration agreement or not. It observed that the respondent is premised on the ground that the appellant has failed to pay the monthly sum guaranteed under the agreement

The Court observed that determining whether appellant was obliged to pay the claimed amounts would require interpreting the MOCA's terms and ascertaining the parties' rights and obligations under the agreement. It rejected respondent's argument that the dispute was only about the non-payment of amounts due, emphasizing that such disputes would still involve interpreting and applying the MOCA's terms.

The Court referred to the Supreme Court's decision in Vidya Drolia & Ors. v. Durga Trading Corporation, which stated that at the pre-referral stage, the examination is prima facie as to the existence of the arbitration agreement and arbitrable disputes.

Accordingly, the Court allowed the appeal and terminated the proceedings before the Commercial Court.

Case Title: M/s Oravel Stays Pvt Ltd v. Nikhil Bhalla

Citation: 2024 LiveLaw (Del) 514

Date: 23.04.2024

Counsel for the Appellant: Mr. Nikilesh Ramachandran, Mr. Sagar Kumar Pradhan, Mr. Diptiman Acharyya, Mr. Shubham Seth & Mr. Anuj Panwar, Advs

Counsel for the Respondent: Mr. Dhruva Bhagat, Ms. Meenu Sethi & Mr. Aviral Chandra, Advs

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