Tax Invoices Containing Reference To Arbitration, Does Not Constitute An Arbitration Agreement: Bombay High Court

The Single Bench of Justice G.S. Kulkarni held that unilateral invoices cannot bring about an arbitration agreement between the parties.

The respondent S N Engineering Services Pvt Ltd issued purchase orders to the Applicant Concrete Additives and Chemicals Pvt Ltd. After a dispute arose between the parties under the purchase orders issued by the respondent, the Applicant Concrete Additives filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Bombay High Court for appointment of an arbitral tribunal to adjudicate the disputes between the parties.

The Applicant Concrete Additives submitted before the High Court that it had issued tax invoices containing an arbitration clause to the respondent against the purchase orders. The Applicant contended that the tax invoices were accepted by the respondent and therefore an arbitration agreement between the parties was required to be presumed.

The High Court ruled that the contract between the parties was born under the purchase orders issued by the respondent and the said purchase orders did not contain any reference to an arbitration agreement. The Court held that the issuance of tax invoices was a unilateral act by the Applicant and there was no conscious agreement between the parties to refer the disputes for arbitration.

The Court held that the tax invoices issued by the Applicant providing for adjudication by arbitration does not constitute an arbitration agreement under Section 7 of the A&C Act.

The Court ruled that acceptance of tax invoices by the respondent S N Engineering Services was a relevant fact only with respect to the acceptance of the goods delivered and the payment made thereunder and not for presuming the existence of an arbitration agreement. The Court held that unilateral invoices cannot bring about an arbitration agreement between the parties under Section 7 of the A&C Act.

The Court therefore held that there was no arbitration agreement between the parties and rejected the application filed by the Applicant.

Case Title: Concrete Additives and Chemicals Pvt Ltd versus S N Engineering Services Pvt Ltd

Citation: 2022 LiveLaw (Bom) 133

Dated: 17.01.2022 (Bombay High Court)

Counsel for the Applicant: Mr. Mahesh Menon with Ms. Nutan Patel

Counsel for the Respondent: Mr. Viral Vora

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