Case Overview
The dispute arose when the petitioner, Sanjiv Manmohan Gupta, provided outdoor advertising services to the respondent, Sai Estate Consultants Chembur Pvt. Ltd. The invoices issued between February 2018 and June 2019 contained an arbitration clause. While partial payments were made, the respondent contested the existence of an arbitration agreement and opposed arbitration proceedings.
Financial Stakes and Dispute Timeline
The petitioner sought arbitration after outstanding payments remained unpaid despite the issuance of 20 cheques totaling Rs. 1 crore, of which 10 cheques were honored. Arbitration was invoked on August 22, 2023, but the respondent challenged it, arguing that an arbitration clause within an invoice does not constitute a formal agreement.
Court’s Ruling and Key Observations
Justice Sundaresan, while delivering the judgment, noted that “the invoices were accepted and partially paid for without challenging the arbitration clause. The respondent had multiple opportunities to dispute its validity but failed to do so.” The ruling reinforced that even if invoices were marked “received for verification,” the payment and lack of initial objection amounted to tacit acceptance of the arbitration clause.
The court further referenced a similar precedent in Bennett Coleman & Co. Ltd. v. MAD (India) Pvt. Ltd., where it was held that “any document in writing exchanged between parties that provides a record of agreement, without denial from the other side, falls within the ambit of Section 7 of the Arbitration and Conciliation Act, 1996.”
Legal Implications
The ruling clarifies that:
- Arbitration clauses within invoices are enforceable if the recipient acts upon them.
- Disputes regarding the validity of such clauses should be resolved by the arbitral tribunal, not the High Court under Section 11.
- The arbitration process remains valid, even if the matter has previously been litigated under the Insolvency and Bankruptcy Code (IBC).
Appointment of Arbitrator
The court appointed Mr. Cyrus Bharucha, a learned advocate, as the sole arbitrator, directing both parties to appear before him to settle the dispute. The arbitration costs will be borne equally by both parties initially, subject to the tribunal’s final decision.
This ruling strengthens the enforceability of arbitration clauses in commercial transactions, ensuring greater clarity for businesses. By reinforcing contractual commitments, the Bombay High Court has set a crucial precedent for future arbitration disputes.
Read The Judgment Here
keywords: bombay high court ruling, arbitration clause, arbitration in invoices, legal precedent, arbitration dispute, commercial arbitration
