Case Note & Summary
The applicant, Hitesh Coal Traders, filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator for disputes arising out of the supply of Indonesian coal to the respondent, Indapur Dairy & Milk Products Ltd. The applicant contended that although the purchase orders placed by the respondent did not contain an arbitration clause, the tax invoices raised by the applicant contained a clause providing for arbitration. The applicant argued that the respondent accepted the invoices by receiving the coal and making part payments, thereby agreeing to the arbitration clause. The respondent opposed the application, asserting that the purchase orders constituted the primary contract and did not contain any arbitration agreement, and that the unilateral insertion of an arbitration clause in invoices was not binding. The court examined the facts and held that there was no valid arbitration agreement between the parties. The court noted that the purchase orders were the primary contracts and did not contain any arbitration clause. The arbitration clause in the tax invoices was unilaterally inserted by the applicant and was not shown to have been accepted by the respondent. The court distinguished the present case from precedents where invoices were held to contain binding terms, emphasizing that the invoices here were not contracts of adhesion and the respondent had not explicitly or implicitly accepted the arbitration clause. The court dismissed the application, holding that no arbitrator could be appointed in the absence of an arbitration agreement.
Headnote
A) Arbitration Law - Existence of Arbitration Agreement - Section 7, Arbitration and Conciliation Act, 1996 - The court examined whether an arbitration clause printed on tax invoices can constitute a valid arbitration agreement when the underlying purchase orders do not contain any arbitration clause. The court held that the arbitration clause in the invoices was unilaterally inserted by the applicant and not accepted by the respondent, and therefore no arbitration agreement exists between the parties. (Paras 1-24) B) Arbitration Law - Appointment of Arbitrator - Section 11(6), Arbitration and Conciliation Act, 1996 - The court considered an application for appointment of an arbitrator under Section 11(6) and held that since there was no valid arbitration agreement, the application was not maintainable and was dismissed. (Paras 1-24) C) Contract Law - Formation of Contract - Acceptance of Terms - The court analyzed whether the respondent's acceptance of delivery and part payment against invoices amounted to acceptance of the arbitration clause. The court held that mere acceptance of goods and payment does not imply acceptance of all terms printed on invoices, especially when the purchase orders did not refer to those terms. (Paras 5-24)
Issue of Consideration
Whether disputes relating to supply of coal can be referred to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996 when the purchase orders do not contain an arbitration clause but the tax invoices raised by the applicant contain an arbitration clause.
Final Decision
The application under Section 11 of the Arbitration and Conciliation Act, 1996 is dismissed. No arbitrator is appointed as there is no valid arbitration agreement between the parties.
Law Points
- Arbitration agreement must be in writing and accepted by both parties
- Unilateral insertion of arbitration clause in invoices not binding
- Section 7 of Arbitration and Conciliation Act
- 1996 requires mutual consent
- Purchase orders constitute primary contract
- Tax invoices are not contracts of adhesion
