Accepting Terms And Conditions on Website Containing Arbitration Agreement, Valid: Bombay High Court

The Bombay High Court has reiterated that reference of a dispute to arbitration can only be refused in cases of "serious allegations of fraud", which is made out when either of the tests propounded by the Apex Court in Avitel Post Studioz Limited & Ors. versus HSBC PI Holdings (Mauritius) Limited (2020), are satisfied.The Single Bench of Justice G.S. Kulkarni ruled that a declaration made by a party in the KYC executed by it, accepting the terms and conditions provided on the opposite party's website, which included an arbitration agreement, was sufficient for incorporation of an arbitration clause between them. The applicant- Ingram Micro India Pvt. Ltd., a distributor of computer and software products, entered into an agreement with the respondent Creative Infotech. The applicant supplied certain products on the basis of the purchase orders placed by the respondent, against which the applicant issued invoices to the respondent which contained an arbitration clause. After the respondent failed to clear the applicant's dues under the various invoices issued by it, the applicant invoked the arbitration clause and filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Bombay High Court seeking appointment of arbitrator. The applicant Ingram Micro India submitted before the High Court that it follows a standard business procedure while entering into contracts with all its customers. The applicant added that in line with the said standard procedure, the respondent executed a KYC form provided by the applicant, which made a reference to the "terms and conditions of sale", as mentioned on the website of the applicant, which provided for referring the disputes arising under the contract to arbitration. The applicant averred that the said "terms and conditions of sale", which formed a part of the KYC, were duly accepted by the respondent. Hence, the applicant argued that the said terms and conditions along with the KYC constituted an arbitration agreement between the parties. The applicant added that the respondent had accepted the supplies made by the applicant as well as the invoices issued by the applicant, which also contained an arbitration agreement. Thus, the applicant contended that the parties must be referred to arbitration. Disputing the existence of the arbitration agreement, the respondent Creative Infotech contended that fake purchase orders were issued by the employee of the respondent and hence, there was no transaction between the parties. Alleging that the entire contract between the parties was vitiated by fraud, the respondent argued that the dispute cannot be referred to arbitration. The respondent added that since criminal proceedings were initiated by the respondent against its employee for issuing fake purchase orders, the subject matter of the dispute was non-arbitrable. The Court held that, apart from the arbitration agreement contained in the invoices issued by the applicant, a declaration was made by the respondent in the KYC executed by it, agreeing to the terms and conditions set out on the website of the applicant, which included an arbitration agreement. The Court thus ruled that since the respondent had signed the declaration in the KYC, accepting the terms and conditions published on the applicant's website, the respondent was bound by the arbitration clause contained in the said terms and conditions. Holding that such actions on the part of the parties which recognizes elements of contemporary "e-business" are required to be given a due meaning, the Court referred to the decision of the Supreme Court in Inox Wind Ltd. versus Thermocables Ltd. (2018), where the Apex Court had ruled that a general reference to a standard form of contract by one party is sufficient for incorporation of an arbitration clause. Further, the Bench noted that the invoices issued by the applicant also contained an arbitration clause. Observing that the material supplied by the applicant under the invoices was accepted by the respondent, the Court said that since the said invoices were received and acted upon by the respondent, the respondent could not deny the existence of the arbitration clause contained in the invoice. While dealing with the contention of the respondent regarding the non-arbitrability of the dispute, the Court held that it is for the arbitral tribunal to determine as to whether the dispute is non-arbitrable in view of the allegations of fraud raised by the respondent. While holding that a mere allegation of fraud would not make the dispute non-arbitrable, the Court reiterated that reference of a dispute to arbitration can only be refused in cases of "serious allegations of fraud". The Bench referred to the twin tests propounded by the Apex Court in Avitel Post Studioz Limited & Ors. versus HSBC PI Holdings (Mauritius) Limited (2020) for...

Accepting Terms And Conditions on Website Containing Arbitration Agreement, Valid: Bombay High Court

Parina Katyal

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