Case Note & Summary
The petitioners, Sai Wardha Power Ltd. and its directors, were original defendants in a civil suit filed by the respondent, M/s. Goyal Dhatu Udyog Pvt. Ltd., for recovery of Rs.36,24,598/- for goods supplied in February 2014. The respondent claimed that the petitioners failed to pay the balance amount of Rs.28,53,743/- along with interest at 24% per annum as per the terms in the bills. The petitioners filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference to arbitration, citing an arbitration clause in the purchase orders. The trial court rejected the application, holding that there was no arbitration agreement between the parties. The petitioners challenged this order in the High Court. The High Court allowed the petition, setting aside the trial court's order. It held that the purchase orders contained an arbitration clause and that the parties had acted upon those purchase orders, making the clause binding. The court emphasized that an arbitration agreement need not be in a single document and can be inferred from the conduct of the parties. The matter was remitted to the trial court to refer the parties to arbitration in accordance with Section 8 of the Act.
Headnote
A) Arbitration Law - Reference to Arbitration - Section 8 of Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The dispute pertained to unpaid goods supplied under purchase orders containing an arbitration clause. The court held that the arbitration clause in the purchase orders was binding as the parties had acted upon those purchase orders, and the absence of a signed arbitration agreement did not preclude reference to arbitration. The trial court's rejection was set aside. (Paras 1-10) B) Arbitration Law - Existence of Arbitration Agreement - Section 7 of Arbitration and Conciliation Act, 1996 - The court held that an arbitration agreement need not be in a single document; it can be evidenced by exchange of statements of claim and defence or other correspondence. The purchase orders containing the arbitration clause were sufficient to establish the agreement. (Paras 5-10)
Issue of Consideration
Whether the trial court erred in rejecting the application under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the parties to arbitration, despite the existence of an arbitration clause in the purchase orders.
Final Decision
The High Court allowed the writ petition, set aside the trial court's order, and directed the trial court to refer the parties to arbitration in accordance with Section 8 of the Arbitration and Conciliation Act, 1996.
Law Points
- Arbitration clause in purchase orders is binding if parties acted on them
- Section 8 of Arbitration and Conciliation Act
- 1996
- existence of arbitration agreement need not be a single document
- reference to arbitration mandatory if arbitration agreement exists
