Acceptance Of Goods Does Not Constitute Acceptance To Arbitration Clause, Unilaterally Included In Delivery Challan: Delhi High Court

The Delhi High Court has ruled that unilaterally including a clause in the Delivery Challan would not constitute an arbitration agreement between the parties merely because the opposite party had accepted the delivery of goods and had signed the Delivery Challan certifying the acceptance of goods. The bench of Justices Vibhu Bakhru and Amit Mahajan held that in order to constitute an arbitration agreement, there must be a consensus between the parties. Therefore, the Court ruled that an arbitration agreement cannot come into existence by a party unilaterally issuing a Delivery Challan and the opposite party accepting delivery of the goods. The appellant-M/s Hetampuria Tax Fab, supplied goods to the respondent- M/s Daksh Enterprises. The appellant issued invoices to the respondent, who allegedly failed to clear the outstanding dues against the goods supplied to it. Thereafter, the appellant invoked arbitration proceedings and an arbitral award was passed by the Arbitral Tribunal in favour of the appellant. Against this, the respondent filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Commercial Court, contending that there was no arbitration agreement between the parties. The Commercial Court allowed the application and set aside the arbitral award. Against the order of the Commercial Court, the appellant filed an appeal under Section 37 of the A&C Act before the Delhi High Court. The appellant M/s Hetampuria Tax Fab submitted before the High Court that the invoices issued by the appellant as well as the delivery of goods receipt, i.e., the Delivery Challan, expressly provided that the dispute between the parties shall be resolved by arbitration. Thus, it argued that an arbitration agreement existed between the parties. Referring to the Delivery Challan issued by the appellant to the respondent, the Court observed that the said Challan included a statement specifying that any dispute arising between the parties would be settled as per the rules of the Delhi Hindustani Mercantile Association Delhi, and that the award of the arbitrator appointed by the said association would be final and binding upon the parties. The Court further noted that the said clause was followed by a statement providing that the goods had been received by the respondent in good condition, which was signed by the respondent. Rejecting the contention raised by the appellant that since the respondent had signed the Delivery Challan, he had also accepted the arbitration clause, the Court held that the signatures made by the respondent only related to the certification that the goods were received by it in good condition. Holding that the relevant clause contained in the Delivery Challan did not constitute an arbitration agreement between the parties, the Court ruled that a unilateral document issued by a party cannot be construed as a binding arbitration agreement. Further, the Court added that the notation included in the invoices issued by the appellant, containing the statement, "Subject to DELHI HINDUSTANI MERCANTILE ASSOCIATION delhi jurisdiction", did not constitute an arbitration clause. "There is no statement that the parties had agreed that the disputes would be referred to arbitration, or to accept that the arbitral award as final and binding. The statement, "subject to Delhi Hindustani Mercantile Association delhi jurisdiction" cannot be construed an agreement to refer the disputes to arbitration", the Court said. The bench referred to the provisions of Section 7(3) of the A&C Act, which expressly provides that an arbitration agreement shall be in writing. The Court ruled that though the relevant clause contained in the Delivery Challan was set out in writing, it cannot be held that the same was agreed to by the respondent. It added that in order to constitute an agreement, there must be a consensus between the parties. Therefore, the Court ruled that an arbitration agreement cannot come into existence by the appellant unilaterally issuing a Delivery Challan and the respondent accepting delivery of the goods. Thus, the Court laid down that though the respondent had accepted the goods and had signed the Delivery Challan indicating such acceptance, however, it cannot be said that by doing so, the respondent had affixed signatures to the arbitration agreement or had agreed to the arbitration clause as set out in the Delivery Challan. The Court ruled that as per Section 7(4) of the A&C Act, an arbitration agreement may also be contained in exchange of letters or other means of telecommunication, and that it can also be discerned from an exchange of the statement of claims and defence in which the arbitration clause is asserted by one party and not denied by the other. However, the Court added that it is essential for the Court to find out whether the parties were ad idem for...

Acceptance Of Goods Does Not Constitute Acceptance To Arbitration Clause, Unilaterally Included In Delivery Challan: Delhi High Court

Parina Katyal

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Acceptance Of Goods Does Not Constitute Acceptance To Arbitration Clause, Unilaterally Included In Delivery Challan: Delhi High Court

Parina Katyal

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