Overview
In this case, the Delhi High Court considered whether a commercial dispute could be referred to arbitration in a situation where the arbitration clause was in the invoices that had not been signed by the party seeking to avoid arbitration.
The Court had to examine whether an unsigned invoice could be considered as a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996 (the Act) and how far a referral court should examine consent at the stage of Section 8 of the Act. It also had to consider whether earlier dealings could amount to consent when no separate agreement was signed by the parties.
Facts of the Case
Ambica Enterprises, the petitioner herein, traded in disposable and allied products, while Alok Gupta, the respondent herein was the proprietor of Tirupati Balaji Overseas. The petitioner placed an order for two disposable bowls and trays in April 2024, and paid an advance amount of ₹15 lakh and ₹16 lakh on 30 April and 22 May 2024.
Later, it alleged that the consignments were substandard. As per the books, an amount of ₹21,18,680 remained unpaid on 15 June 2024, which resulted in filing of a commercial suit seeking ₹23,09,361 with 12% annual interest.
A written statement was filed by the respondent along with an application under Section 8 based on the arbitration clauses in the invoices. The petitioner argued that it had never signed the invoices and had never agreed to arbitration.
The respondent pointed out that the petitioner accepted the invoices and acted upon identical invoices.
The Commercial Court referred the dispute to arbitration on 10 July 2026. The petitioner challenged the order before the High Court while arguing that there was no valid arbitration agreement. The invoices were the documents on which the parties conducted these transactions.
Legal Issues
- Whether an unsigned invoice that contains an arbitration clause can constitute a valid arbitration agreement under Section 7 of the Act.
- Whether accepting invoices, making payments and relying on them in a recovery suit can show consent to the arbitration clause.
- Whether the referral court should finally determine consent and intention at the preliminary stage, or leave such questions for the Arbitral Tribunal.
- Whether arbitration terms can be accepted through conduct despite the absence of a signature.
Decision
The Delhi High Court dismissed the petition and the order of the Commercial Court referring the dispute to arbitration was upheld.
It was held that an arbitration agreement must be in writing, but Section 7 does not require a signature in every case. An arbitration clause in an invoice can bind the parties wherever their conduct shows acceptance.
The petitioner accepted the invoices which had the arbitration clause, made the payments against earlier invoices which were identical to the ones containing the arbitration clause and also relied on those invoices in its claim for recovery. This conduct was sufficient for the Court to determine that there was consent.
Relying on the case of Caravel Shipping Services, Glencore International and other precedents, the Court held that the Section 8 referral court only needed to make a prima facie examination of the arbitration agreement.
The petition was dismissed while all the rights on the dispute remained open.
