The Delhi Court recently comprising of a bench of Justice Sanjeev Narula observed that in the event the written arbitration agreement is not signed by the parties, it is essential to ascertain if there is an intention on the part of the parties to settle their disputes through arbitration. (Swastik Pipe Ltd. Vs. Shri Ram Autotech Pvt. Ltd.)
The court was dealing with an issue where the petitioner had filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator to adjudicate the disputes arising from the tax invoices issued by the Petitioner [hereinafter referred to as ‘SPL’] in the course of their dealings with the Respondent [hereinafter referred to as ‘SRAPL’].
Facts of the Case
The SRAPL had placed orders with SPL for the purchase of ‘C.R. Strips’. The same was supplied by SPL as per SRAPL’s request and specifications, on a running account basis. The said commercial dealings between the parties lasted between 1st April 2019 to 29th December 2020. While some payment was made, an amount of 15,63,217/- was outstanding on the part of SRAPL. Since such payment was outstanding, a legal notice was issued against SRAPL, for either payment of the outstanding amount or to agree to arbitration in accordance with the terms and conditions of the invoices which contained an arbitration clause. But neither SRAPL paid the outstanding amount nor did they send any reply to the legal notice.
Thereby SPL approached the court with this petition seeking the appointment of a Sole Arbitrator. The petition was taken up and notice was issued on 15th February 2021, despite serving notice, none appeared for SRAPL. The matter was heard at length on 18th March but still, there was no representation from SRAPL’s side. Thereby the court proceeded to decide the petition ex-parte on the basis of submissions advanced by the Counsel of SPL.
Contention of the Parties
The counsel of SPL had contended that the clause contained in the invoice constitutes a valid arbitration agreement in view of the judgments of the Supreme Court in Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd., India and thus the Court must proceed to appoint an Arbitrator.
SPL contended that the goods accompanying the invoices have been duly received by SRAPL under a Goods Receipt, signed and acknowledged by the representative of SRAPL. In view of the above, the transaction between the parties and the resultant dispute arising on account of alleged non-payment of outstanding sums is prima facie established.
He also relied upon Section 7(4) of the Act and stressed that SRAPL has not denied the existence of the arbitration agreement, notwithstanding the categorical assertion to that effect in the notice of invocation of arbitration, and thus, this Court should not have any hesitation in appointing an Arbitrator.
Courts Observation & Judgment
The Court after referring to section 7 of the Arbitration and Conciliation Act, 1996, observed, “Since the terms and conditions printed on an invoice are generally inserted unilaterally by the party issuing the invoice, the Court had called upon SPL to validate the mutual intention of the parties to settle the disputes through arbitration”.
The court further held,“Despite service of notice, SRAPL have chosen not to appear, for reasons best known to them” and hence the court allowed the petition and appointed the sole arbitrator to adjudicate the disputes arising between the petitioner and the respondent.
The bench allowing the petition noted, “It is clarified that the Court has not examined any of the contentions of the parties on merit, and both the parties shall be free to raise their claims/counter-claims before the learned Arbitrator in accordance with law. All rights and contentions of the parties are left open. SRAPL shall be free to raise all objections as are available under law, including but not limited to the existence of the arbitration agreement before the learned Arbitrator. As and when such a plea is raised, the learned Arbitrator would be competent to rule on their own jurisdiction and decide as to whether there exists an arbitration agreement or not, uninfluenced by the observations made by this Court which are only prima facie in nature.”
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