Invoices Containing Arbitration Clause Which Were Partly Paid For Without Any Challenge Would Point To Arbitration Being Accepted: Bombay High Court

The High Court was considering whether the parties executed an arbitration agreement.

The Single Bench of Justice Somasekhar Sundaresan asserted, “Evidently, the invoices are an integral part of the documentation executed by the parties, and on these very invoices, cheques were issued, which prima facie is adequate indication of the invoices having been accepted. Such invoices containing an arbitration clause would point to the condition relating to arbitration being accepted. The invoices clearly had an arbitration clause”

Advocate Nirman Sharma represented the Applicant while Advocate Dharam Jumani represented the Respondent.

Factual Background

The Respondent availed of the services of the Applicant-Petitioner for outdoor advertisements on hoardings. The Applicant-Petitioner claimed outstanding payments owed by the Respondent for such services and invoked arbitration by a notice.

Arguments

It was the Applicant-Petitioner’s case that the arbitration agreement was contained in the invoices raised by the Applicant-Petitioner on the Respondent.

The Respondent, on the other hand, objected to such invocation by arguing that such arbitration agreement did not exist and an arbitration clause in an invoice cannot constitute an arbitration agreement.

Reasoning

Noting that the issues that the Respondent desired to drag the Section 11 Court into considering entailed assessment of evidence to answer mixed questions of fact and law, the Bench said, “This is in contrast to the declared law on the scope of this Court’s jurisdiction under Section 11 of the Act.”

On a perusal of the facts of the case, the Bench noticed that the services were indeed covered by the invoices. The invoices were accepted and partly paid for, without challenging the arbitration clause in them. Multiple opportunities to question the arbitration clause were available – each time an invoice was raised. On these very invoices, cheques were issued, and this was prima facie an adequate indication of the invoices having been accepted.

On a perusal of the facts of the case, the Bench further noticed that the parties had even litigated under the IBC all the way to the Supreme Court, and it was too late for the Respondent to feign surprise at the contents of the invocation notice. On the aspect of limitation, the Bench said, “The issue of limitation is a matter of evidence, involving mixed questions of fact and law, which fall in the domain of the arbitral tribunal and not the Section 11 Court.”

Coming to the scope of review under Section 11 as explicitly set out in Section 11(6A) of the Act, the Bench referred to the judgment in In Re: Interplay Between ArbitrationAgreements Under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899 (2024) SBI General Insurance Co. Ltd. v. Krish Spinning (2024) and Ajay Madhusudan Patel v. Jyotrindra S. Patel (2024) and reiterated that the Section 11 Court ought not to venture beyond examining the existence of a validly existing arbitration agreement that has been formally executed.

“In these circumstances, I find that the matter eminently deserves to be referred to arbitration leaving all questions on merits open to the arbitral tribunal to determine”, the Bench held while ordering, “Consequently, the Section 11 Application is finally disposed of, by referring all the disputes and differences between the parties in respect of the services covered by all the invoices referred to in the Section 11 Application.”

Cause Title: Sanjiv Manmohan Gupta v. Sai Estate Consultants Chembur Pvt. Ltd (Neutral Citation: 2025:BHC-OS:3938)

Appearance:

Petitioner: Advocates Nirman Sharma, Krushang Kedia, Girish Kedia

Respondent: Advocates Suraj Iyer, Mihir Nerurkar, Gauri Joshi, Ganesh & Co.

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