Delhi High Court: Acceptance Of Goods Delivered Under Invoice Would Amount To Accepting Terms Governing It, Including Arbitration Clause

The Delhi High Court while sending a dispute to Arbitration reiterated that acceptance of goods delivered under the invoice would amount to accepting the terms governing it, including the arbitration clause contained therein.

The Court was considering a Petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitral Tribunal.

The single bench of Justice Manoj Kumar Ohri observed, "......As against the subject invoices issued by the petitioner, not only were the subject goods accepted by the respondent without any complaints/claims, but also part payment was made to discharge part liability arising out of the said transactions. The conduct of the parties point towards intention to be governed by the terms of the invoices. Moreover, the arbitration clause contained in the invoice itself is clear to the extent that acceptance of subject goods delivered under the invoice would amount to accepting the terms governing it, including the arbitration clause contained therein. The same was in knowledge of the respondent, who, at no point, objected to the same."

The Petitioner was represented by Advocate Kamal Garg.

Facts of the Case

The Respondent along with his son entered into a business transaction with the Petitioner wherein against the purchase orders issued the Petitioner supplied alcoholic beverages to the Respondent and his son. In pursuance of the same, various tax invoices were issued in the name of the Respondent, either by the Petitioner or by its subsidiary, associated or sister concerns/units and the subject goods were supplied thereof. Under the ‘Terms & Conditions’ printed on the invoices, Clause 5 provided for reference of disputes arising between the parties to arbitration by a Sole Arbitrator and further stipulated Delhi to be the seat of arbitration.

It was the case of the Petitioner that at the time of entering into the business transactions, it was mutually agreed between the parties that all the business transactions between the parties will be governed as per the ‘Terms & Conditions’ printed on the subject invoices and that any dispute arising between the parties thereto, whether contractual or otherwise, shall be the referred to arbitration in terms of the provisions of the A&C Act. Counsel for the Petitioner submitted that the Petitioner continuously supplied the subject goods to the Respondent and his son, statedly to their satisfaction, against which, they made part-payments to the petitioner on a running account basis towards partial discharge of their outstanding liability. One cheque issued by the Respondent was dishonoured with the remarks, ‘funds insufficient’ leading to dispute between the parties and thereby issuance of Notice invoking arbitration under Section 21 of the A&C Act by the Petitioner.

Counsel for the Petitioner submitted that the arbitration clause, as contained in the subject tax invoices, governs the present dispute. Furthermore, it constitutes a valid arbitration agreement inasmuch as when the said invoices were raised upon the Respondent, who not only understood and acknowledged the import of the same, but also continued to transact business with the Petitioner and even made part payments to the Petitioner against them, in the regular course of business. It was therefore contended that the conduct of the respondent goes on to indicate consent to be governed by the said arbitration clause.

Reasoning By Court

The Court at the outset pointed out the the legal question for it to examine is as to whether an arbitration clause contained in an invoice, issued unilaterally by one of the parties to the dispute, amounts to a valid arbitration agreement between the parties.

It accepted the submissions of the Counsel for the Petitioner and referred to Supreme Court's decision in Concrete Additives and Chemicals Pvt. Ltd. v. S.N. Engineering Services Pvt. Ltd.

"Pertinently, it is now a settled position in law is that even if there is a doubt as to the existence of the arbitration agreement between the parties, the Court ought to refer the parties to Arbitration. All contentions as to the existence and validity of an arbitration agreement are to be looked into by the Arbitral Tribunal," the Court observed.

It thus stressed that in cases where an arbitration clause is contained in an invoice generated by one of the parties to the dispute, the same binds both the parties as a valid arbitration agreement as long as the parties intend to be governed by it.

The Petition was accordingly allowed.

Cause Title: Radico Khaitan Limited vs. Harish Chouhan (2025:DHC:1767)

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