No Separate Signature Needed On Invoice Arbitration Clause If Parties Acted On It: Delhi High Court
The Delhi High Court on 9 September held that the absence of a separate signature on an arbitration clause printed on the reverse of invoices does not, by itself, negate the existence of an arbitration agreement where the invoices were received and acted upon.
Justice Om Prakash Shukla referred the commercial dispute between Tinna Rubber and Infrastructure Limited and Pankaj Gandhi to arbitration and appointed Advocate Mansvini Jain as the sole arbitrator. The Bench observed:
“The Respondent's principal objection is that the terms contained in Clause 18 of the agreement were never separately signed or accepted by him. However, mere absence of separate signature on the reverse/overleaf of the invoices, in the facts of the present case, does not by itself conclude the issue against the existence of an arbitration agreement.”
The dispute arose from commercial transactions under which Tinna Rubber supplied goods to Gandhi and raised invoices containing terms and conditions on the reverse, including an arbitration clause under Clause 18.
Tinna Rubber approached the High Court under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator under Clause 18. It submitted that Gandhi had received the invoices, accepted the goods and made part-payments without raising any contemporaneous objection to the terms and conditions or the arbitration clause.
It also argued that the front and reverse of the invoices formed a composite commercial document and that, having acted upon them, Gandhi could not subsequently dispute the terms printed on the reverse.
Gandhi opposed the petition and denied the existence of an arbitration agreement. He contended that the invoices were single-page documents containing no arbitration clause and that the terms relied upon by Tinna Rubber appeared on separate papers which were never supplied to, accepted or signed by him. He therefore argued that there was no mutual agreement between the parties to arbitrate.
The High Court held that its inquiry under Section 11 was confined to determining whether an arbitration agreement prima facie existed. It was not required at this stage to examine the underlying commercial dispute, including questions concerning defective material or entitlement to damages, which were matters for the arbitral tribunal.
Considering Clause 18, the invoices, Tinna Rubber's assertion that Gandhi had received and acted upon them and made part-payments, and the material on record, the Bench was prima facie satisfied that an arbitration agreement existed under Section 7 of the Act.
It held that the absence of a separately signed arbitration agreement was, by itself, insufficient to decline the request for appointment of an arbitrator. Referring to Triom Hospitality v. J.S. Hospitality Services Pvt. Ltd., the Court reiterated that Section 7 does not require a separate signature and that an intention to arbitrate may be inferred from the parties' written record and conduct.
It found the requirement of a written arbitration agreement prima facie satisfied. It left the question of whether the reverse-side terms were actually incorporated into and accepted as part of the transactions to the arbitral tribunal, holding that the issue did not warrant a detailed evidentiary examination at the referral stage.
Accordingly, the High Court appointed Advocate Mansvini Jain as the sole arbitrator and directed her to enter upon the reference within two weeks. The arbitration will be conducted under the aegis of the Delhi International Arbitration Centre (DIAC).
The parties were left free to raise objections concerning arbitrability and jurisdiction before the sole arbitrator.
Appearances for petitioner (M/s Tinna Rubber and Infrastructure Limited): Advocates Rachna Maheshwari, Mannu Bansal, with Ravinder Kumar (AR).
Appearances for respondent (Pankaj Gandhi): Advocate Rohan Khanna.