Delhi District Court
Neha Chopra And Others vs M/S Om Prakash And Company on 26 November, 2024
IN THE COURT OF SH. NIKHIL CHOPRA, DISTRICT
JUDGE (COMMERCIAL COURT)-06, CENTRAL DISTRICT,
TIS HAZARI COURT, DELHI
OMP (Comm) No.96/2020
CNR No. DLCT01-004977-2020
1. Mrs. Neha Chopra,
Proprietor, M/s Bird Clothing,
465, Mundka Village, New Delhi-110041.
2. Japjeet Chopra,
S/o Sukhbir Singh Chopra,
C-1/18, 2nd Floor, Vasant Vihar, Delhi.
3. Sukhbir Chopra,
S/o late Sh. Harbhajan Chopra,
C-1/18, 2nd Floor, Vasant Vihar, Delhi.
......Petitioner
Versus
Om Prakash & Co.,
Through its partner,
Sh. Om Prakash Chandna,
S/o Late Sh. Hari Chand Chandna,
30-B, 2nd Floor, Krishna Cloth Market,
Chandni Chowk, Delhi-110006.
Also at:-
F-18, Lajpat Nagar-II,
New Delhi-110024.
....Respondent
Date of Institution : 27.02.2019
Final arguments : 07.11.2024
Date of decision : 26.11.2024
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 1 of 29
ORDER
1. Order disposes off the petition under Section 34 of The Arbitration & Conciliation Act, 1996 challenging the Award dated 14.01.2020 passed by the Ld. Sole Arbitrator under the aegis of Delhi Hindustan Merchantile Association (Regd.), wherein the respondent was awarded a sum of Rs.12,85,441 together with interest etc i.e. 15% p.a. w.e.f 28.10.2018.
2. It is not in dispute that the respondent had supplied certain material to the petitioner under invoices and that the respondent had initiated the arbitration proceedings, claiming an amount of Rs.12,85,441/- to be due, on the basis of the arbitration clause inscribed on the invoices. It is an admitted case of the parties that the petitioner has also participated in the proceedings and award has been rendered after recording of evidence.
3. Main grounds for challenge to the Award are that the Ld. Sole Arbitrator did not have any authority and jurisdiction to decide the disputes as claimed by the respondent for the reason that the clause on invoices cannot be treated as an arbitration clause; the Arbitrator did not consider the objections raised by the petitioner as to absence of any arbitration clause and that the standard clause does not confer any jurisdiction over the Arbitrator; the Arbitrator has erred in not appreciating that M/s Bird Clothing is a proprietorship concern of petitioner no.1, and the petitioners nos. 2 and 3 have no role with the business of the OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 2 of 29 said concern; the application for deletion of name of petitioner nos.2 and 3 have not been decided by the Ld. Arbitrator; the Arbitrator has returned an incorrect finding inasmuch as, no amount remained as due to the respondent inasmuch as excess amount has already been paid to the respondent.
4. Main thrust of the petitioner is on the grounds that the parties were never ad idem inasmuch as the arbitration clause mentioned on the invoices is not binding, and there is no arbitration agreement; and the signatures if any over the invoices can at best be treated as receipt of goods alone as there is no endorsement to arbitral clause. The petitioner side has further laid stress upon the ground that the clause is vague, devoid of any consensus and has been mentioned in small letters which per se is neither noticeable nor does give any insight as to rules or regulations or manner of constitution of the arbitral tribunal and as such, stating that the same cannot be treated as arbitration clause.
5. The respondent is found to be objecting to the petition on several grounds including that the petition has not been signed on each page; there is no territorial jurisdiction and pecuniary jurisdiction clause in the petition; that the petition is time barred and not accompanied by any application for condonation of delay inasmuch as the Award was served upon the petitioners on 18.01.2020 and the stipulated period of 90 days had expired on 18.04.2020 and the present suit has been filed on 21.08.2020, OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 3 of 29 which is much beyond the limitation as prescribed under the law; the Arbitrator has rightly interpreted the clause mentioned on the invoices as valid arbitration agreement in light of Section 7 of Arbitration & Conciliation Act; there is no requirement of signing on agreement clause by both the parties as per Section 7 of Arbitration & Conciliation Act, 1996; and that the parties were ad-idem on the alternate dispute resolution in case of dispute; and part payments were made to claimant after acknowledging the invoices which contains arbitration agreement besides other terms.
6. I have heard learned counsel for the parties at length and have also gone through the written submissions filed.
7. Main contentions of the learned counsel for the petitioner are:-
(i) There is no arbitration clause, as there had been no consensus ad-idem qua the clause being relied upon by the Respondent.
(ii) In view of the law laid down by the Hon'ble High Court of Delhi, the same can only be treated merely as receipt of goods.
(iii) The signatures, if any, upon the invoices, cannot be treated as consent to the arbitration clause, which has deliberately been printed in a manner, that is hardly noticeable.
(iv) Considering the consequences involved and import of such a clause, a party cannot be just deemed to have consented merely by receiving the goods under such invoices.
(v) In the absence of any valid arbitration clause, no arbitration could have been initiated in the first place, and as such, the Arbitrator had no jurisdiction to decide any dispute between the parties.OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 4 of 29
(vi) Petitioner has neither impliedly, nor expressly agreed for any arbitration by Delhi Hindustan Mercantile Association and the said Association, even otherwise, could not have appointed any arbitrator without consent from the petitioners assuming there was any clause for arbitration. The petitioners are not even members to such association.
(vii) The Petitioners had raised objections as to lack of arbitration clause, but the Ld. Arbitrator has not decided the same in accordance with law.
(viii) The Award is patently illegal as Ld. Arbitrator had not decided the objection/application for deletion of petitioners no.2 to 4, who have no role in the business.
(ix) Ld. Arbitrator has not considered the fact that it is the petitioner side which is to recover money from the respondent.
(x) The Court has made certain observations while disposing off the application under Order VII Rule 11 CPC, going to the root of the matter.
8. Ld. Counsel for the petitioners has also relied upon following judgments in support of his contentions:-
a. Parmeet Singh Chatwal Vs. Ashwani Sahani [OMP 1445/2014 & IA No.22669/2014 dated 14.02.2020], b. Taipack Limited & Ors. Vs. Ram Kishore Nagar [2007 (3) ARBLR 402 Delhi] c. Mr. Mohammad Eshrar Ahmed Vs. M/s Tyshaz Buildmart India Private Limited [OMP (T) (Comm) 105/2023, IA 22122/2023 dated 03.09.2024],
9. Main contentions of learned counsel for the respondent are:-
(i) The arbitral clause printed on the invoice is a valid arbitration clause as well as a binding one, and there is no mandatory requirement under the law that an arbitration agreement must be signed by all the parties.OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 5 of 29
(ii) Section 7 of the Arbitration & Conciliation Act, 1996 allows an arbitration clause to be constructed from within the e-mails, letters and telex messages etc between the parties.
(iii) All invoices issued to the petitioners clearly mentioned reference of disputes to Delhi Hindustani Mercantile Association in accordance with their rules and regulations and the petitioners have never raised any objection qua the same.
(iv) The petitioners are estopped from claiming that the clause is not binding as they have continued to receive material under the invoice clearly mentioning the arbitration clause.
(v) The arbitration clause has become term of the contract, and hence binding, especially when the same was neither objected to, nor did the petitioners file any application challenging the reference or appointment at any time after reference.
(vi) The appointment is as per rules/regulations which are binding upon the petitioners, by virtue of the clause printed on the invoices, and as such, the appointment of Ld. Arbitrator or the proceedings cannot be claimed to be without any jurisdiction.
(vii) The power and jurisdiction of the Court under Section 34 is limited to grounds mentioned in the provision. The Court can neither re-appreciate the evidence, nor can sit into appeal against the Award.
(viii) The Award is a reasoned one, and the appreciation of evidence by the Ld. Arbitrator cannot be said to be perverse or erroneous. The Court cannot examine the reasonableness of reasons.
(ix) There is sufficient evidence on record for Ld. Arbitrator to have returned findings as the aspect of liability of petitioners no.2 and 3, as well as the quantum of liability.
(x) The filing of petition is not in accordance with rules and law relating to Commercial Courts and as such, it deserves outright dismissal.
(xi) Interim orders passed earlier cannot be looked into and the same cannot be claimed to be findings or finally binding on parts.OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 6 of 29
(xii) The petition is barred by limitation.
10. Ld. Counsel for the respondent has also relied upon following judgments in support of his contentions:-
a. Scholar Publishing House Pvt. Ltd. Vs. Khanna Traders, FAO (OS) 184/2013, C. M. Appeal No. 5414/2013, C.M. Appl. 5416/2013 and C.M. Appl. No. 5417/2013 (High Court of Delhi.) b. Trident Limited vs. Anand Talc & Stratite Pvt. Ltd., Arbitration No. 115 of 2016 (O & M), Decided on 18.10.2016 (High Court of Punjab and Haryana) c. Caravel Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd., Civil Appeal Nos. 10800-10801 of 2018 (Arising out of SLP (C) Nos. 31101-31102/2016, Decided on 29.10.2018 (Supreme Court of India) d. Swastik Pipe Ltd. Vs. Dimple Verma in ARB. No. 100/2021 decided on 06.07.2022 (High Court of Delhi) e. Mahanagar Telephone Nigam Ltd. Vs. Canara Bank & Ors. In Civil Appeal No. 6202-6205 of 2019 (Arising out of SLP (C) Nos. 13573-13576 of 2014, decided on 08.08.2019 (Supreme Court of India) f. Kanodia Infratech Limited vs. Dalmia Cement (Bharat) Ltd. In OMP (Comm) 297/2021 and I.A.s. 12902- 12904/2021 decided on 08.11.2021 (High Court of Delhi) g. P. B. Jagtyani and Co. and Ors. Vs. Gaurav Agencies and Ors. In OMP NO. 100/2000 decided on 01.06.2006.(High Court of Delhi) h. Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India (NHAI), Civil Appeal No. 4779/2019 (Arising out of SLP © NO. 19033 of 2017 decided on 08.06.2019 (Supreme Court of India) i. Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd., in Civil Appeal no. 5627/2021 (Arising out of SLP (C) No. 4115 of 2019) and Civil Appeal No. 5628 of 2021 (Arising out of SLP (c) no. 8311 of 2019, decided on 09.09.2021 (Supreme Court of India) OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 7 of 29
11. Time now to deal with the contentions.
12. At the core of the lis lies the question as to the validity and bindingness of the clause- "All disputes are to be decided by Delhi Hindustani Mercantile Association (Regd.), Delhi, as per its 'Rules & Regulations' as well as under "Arbitration & Conciliation Act", as is printed on the invoices that are the subject matter of the consideration.
13. The petitioners contend it to be as not binding, in absence of any consensus ad-idem on the part of the petitioners, and the respondent side presses that the same has become a valid term of the contract, more specifically so, when the petitioners have accepted such invoices as well as material thereunder, as a token of acceptance of the arbitration clause. The respondent side has further impressed upon the Court that the repeated instances of petitioners' having received the material under similar invoices estopps the petitioners from claiming that there had been no consent to the arbitration clause/agreement inasmuch as, the consent stands proved by the conduct of the petitioners, and is implicit in receiving the material under the invoices and not disputing the arbitration clause ever. The petitioners, however, contend that since there is no specific and express consent in relation with such clause, no arbitration agreement can be inferred on the basis of conduct or mere non denial of clause.
14. Before proceeding further, a reference to the case law cited OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 8 of 29 by both the parties seems desirable.
15. Learned counsel for the plaintiff has relied upon the judgment of Parmeet Singh Chatwal Vs. Ashwani Sahani [OMP 1445/2014 & IA No.22669/2014 dated 14.02.2020], Taipack Limited & Ors. Vs. Ram Kishore Nagar [2007 (3) ARBLR 402 Delhi] and Mr. Mohammad Eshrar Ahmed Vs. M/s Tyshaz Buildmart India Private Limited [OMP (T) (Comm) 105/2023, IA 22122/2023 dated 03.09.2024].
16. In Parmeet Singh Chatwal Vs. Ashwani Sahani [OMP 1445/2014 & IA No.22669/2014 dated 14.02.2020], the Hon'ble High Court of Delhi observed as under:-
"21. In this context reference may also be had to a judgment of the Division Bench of this Court in Scholar Publishing House Pvt. Ltd. vs. Khanna Traders, 2013 (5) ILR (DEL) 3343. That was a case also where invoices contained a stipulation having an arbitration clause. The court accepted the clause to be an arbitration agreement holding as follows:-
"9. The Court also notices that Section 7 of the Act does not compel the parties to adhere to any particular form of agreement or document. An arbitration agreement can be inferred through a series of correspondence, or even on demur of one of the parties to an arbitration proceeding, who can otherwise object to it, on the ground of absence of agreement; if such party does not urge the contention in the reply to claim, the arbitration agreement is deemed to exist.
10. In the present case, there is a wealth of material in the form of more than a decade of commercial relationship during which identically phrased invoices containing the arbitration stipulation were OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 9 of 29 accepted and acted upon. It is not the appellant's case that the disputed invoices were the only documents containing such stipulations, which were freshly introduced. Having regard to these circumstances, the court is of opinion that there is no merit in the appeal; it is therefore dismissed along with pending applications without any order as to costs."
22. The legal position that follows is that what is required to be ascertained is the intention of the parties to settle their disputes through arbitration. The essential attribute of an arbitration agreement is that it must be expressly or impliedly spelt out from a clause in the agreement that there is an agreement to refer their disputes/differences to arbitration.
23. I may only note that on facts the learned Arbitral Tribunal in the Award does not record any finding of fact regarding the intention of parties to agree to settle their disputes through arbitration. The award merely concludes the existence of an arbitration clause without giving any reasons.
24. For the purpose of adjudication of the issues raised by the petitioner, I may now look at some of the facts of this case. I may look at one of the invoices which contains the Arbitration Clause and which reads as follows:-
25. A perusal of the above invoice shows that it is not clear as to whether the petitioner who is the proprietor of the said Mahima Exports has signed the invoice or it has been signed on his behalf by some other entity. That apart, the manner of signing indicates that the person is only signing receipt of the goods rather than agreeing to the arbitration agreement between the parties. In my opinion, the manner in which the signatures have been affixed on the invoice does not indicate an intent on the part of the petitioner agreeing to settle their disputes through arbitration.
The so called Arbitration Clause is reproduced in a small font at the bottom of the invoice. It is doubtful if the petitioner even noticed that he was signing a document which has an Arbitration Clause. It is not possible to conclude that the parties were ad idem."
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 10 of 2917. In Taipack Limited & Ors. Vs. Ram Kishore Nagar [2007 (3) ARBLR 402 Delhi], the Hon'ble High Court of Delhi observed as under:-
"13. In my opinion, the submission of the Petitioner that there was no existing agreement between the parties to refer the disputes arising out of their commercial relationship to Arbitration, is well founded. The arbitrator has rejected the objection as to non-existence of an arbitration agreement on the basis of the said Clause 4 printed on the reverse of the invoices etc. raised by the Respondent. The arbitrator held that since the Petitioner herein received the goods without any protest and prejudice, or without intimating any contrary intention through a letter or notice, it was not open for it to resile from the conditions printed on the bills & invoices of the Respondent herein. As per the said clause, the matter was referable to Paper Merchants Association, Chawri Bazaar, for arbitration. Consequently, according to the learned Arbitrator, an arbitration agreement existed between the parties in relation to their commercial transactions and he had jurisdiction to arbitrate the same.
14. The issue that arises for consideration is whether there was an existing and enforceable arbitration agreement between the parties, to refer their disputes in relation to the contract in question to Arbitration by the Paper Merchants Association (Regd.).
15. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not. It may be in the form of an arbitration clause in a contract or in the form of a separate agreement. An arbitration agreement has necessarily to be in writing. It may be contained, inter alia, in a document signed by the parties, or in an exchange of letters, telex, telegrams or any other means of telecommunication, which provide a record of the agreement.
20. The signature by the petitioners agent on the respondents copy of the invoice cannot tantamount to OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 11 of 29 acceptance of the respondents so called offer for arbitration. The signatures in such a situation were evidently an acknowledgment of receipt of the goods and nothing more. There is another aspect of the so- called Arbitration Agreement contained in condition No. 4 of the Respondents invoice. The said condition in the invoice firstly does not use the expression 'arbitration' or 'arbitrator'. Secondly, the Respondent does not even make a reference to the Constitution and Regulations of the Paper Merchants Association (Regd.), Delhi. Consequently, it is difficult to accept that the Petitioner ever became aware of, or agreed to refer its dispute with the Respondent and relation to the contract in question to arbitration by the Paper Merchants Association (Regd.), Delhi......"
18. In Mr. Mohammad Eshrar Ahmed Vs. M/s Tyshaz Buildmart India Private Limited [OMP (T) (Comm) 105/2023, IA 22122/2023 dated 03.09.2024], the Hon'ble High Court of Delhi observed as under:-
"10. It is clear that, even assuming that the recitals in these invoices envisages resolution of dispute by arbitration, inasmuch as these invoices have not expressly or by necessary implication been accepted by the petitioner, they cannot be said to contain any arbitration agreement between the petitioner and the respondent ......
12. Ms. Swati Surbhi has place reliance on the judgment of the High Court of Madras authored by Sanjay Kishan Kaul, Chief Justice, as he then was, in NSK India Sales Company Pvt Ltd v Proactive Universal Trading Company Pvt Ltd2. Paragraph 17 of the said decision read thus:
"17. In the sequence of documents issued, it is the respondent who first issued the purchase order. This does not contain an Arbitration Clause. The document of delivery of goods also does not contain an arbitration clause. It is stated to be signed by the 'gate keeper' of the respondent. It is only the invoice issued to the petitioner which contains the arbitration clause OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 12 of 29 and it is stated to have been simultaneously issued in view of the factum of the same being interlinked to the goods received. This document neither contains the declaration in the prescribed form duly signed at the back nor is there any other endorsement so as to consider it as an acceptance on the part of the respondent. There is in fact thus no agreement whatsoever inter se the parties on the issue of the mode of resolution of the dispute through arbitration and there cannot be an arbitration clause by implication in any other document. In fact, the very fact that the respondent has not signed this document would show the unwillingness of the respondent to accept the arbitration as a mode of resolution of dispute, to which the petitioner had never protested."
14. Besides, even if, it were to be assumed that there was an existence of any arbitration agreement, the arbitrator has not been appointed by mutual consent. The law in this regard is perfectly clear. If one party writes to the other, seeking the appointment of the arbitrator, and the other party does not respond, the first party does not have a right to unilaterally appoint the arbitrator. The party has, in such a situation, to approach the Court under Section 11(5) or (6) as the case may be, for having an arbitrator appointed."
19. The respondent side, on the other hand, presses reliance on Scholar Publishing House Pvt. Ltd. Vs. Khanna Traders, [FAO (OS) 184/2013, C. M. Appeal No. 5414/2013, C.M. Appl. 5416/2013 and C.M. Appl. No. 5417/2013 (High Court of Delhi.)]; Trident Limited vs. Anand Talc & Stratite Pvt. Ltd., Arbitration No. 115 of 2016 (O & M), Decided on 18.10.2016 (High Court of Punjab and Haryana) and P. B. Jagtyani and Co. and Ors. Vs. Gaurav Agencies and Ors. [OMP NO. 100/2000 decided on 01.06.2006.(High Court of Delhi)] in support of the contention that OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 13 of 29 arbitration clause such invoices have been held to be arbitration agreement.
20. In Trident Limited vs. Anand Talc & Stratite Pvt. Ltd., Arbitration No. 115 of 2016 (O & M), Decided on 18.10.2016, the Hon'ble High Court of Punjab and Haryana dealt with the scope of Section 7 and held that the Purchase Order is a contract within the terms of Section 7 of the Arbitration Agreement and it does not need to be signed by the parties. The Court observed as under:-
"8. Sub section (1) of Section 7 merely defines an arbitration agreement. Sub section (2) merely states that an arbitration agreement may be in the form of an arbitration clause in the contract or in the form of a separate agreement. The purchase order is a contract. The purchase order communicated by the e-mail dated 22.09.2014 incorporated the terms and conditions contained in the attachment thereto. The terms and conditions, therefore, formed a part of the purchase order. A contract in terms, thereof, had been arrived at for the respondent accepted the same and acted pursuant thereto having actually supplied the goods and raised its invoices in respect thereof. Sub section (2) merely requires the arbitration agreement to be in writing. It does not require either the contract or the arbitration clause contained therein to be signed. A valid contract between the parties under them Contract Act does not have to be signed.
Admittedly the arbitration agreement in this case containing the terms and conditions, which form the part of the purchase order, is in writing.
.......
10. The case before me also falls under sub section (5) of Section 7 of the Act of 1996. The purchase order is a contract. There is a reference in this contract to a document i.e. the attachment to the e-mail and that document admittedly contains an arbitration clause. The terms and conditions attached to the e-mail is a document. Accordingly, the attachment to the e-mail is the document referred to in OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 14 of 29 the purchase order i.e. the e-mail itself and that document i.e. the attachment contains an arbitration clause. Sub section (5) of Section 7 recognizes the doctrine of incorporation of one document into another. Neither of these documents is required to be signed by the parties thereto. Once the Court comes to the conclusion that the contract is entered into and that contract contains an arbitration agreement, it is sufficient to constitute a valid agreement to refer the disputes and differences between the parties to arbitration."
21. In Caravel Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd., Civil Appeal Nos. 10800-10801 of 2018 (Arising out of SLP (C) Nos. 31101-31102/2016, Decided on 29.10.2018, the Hon'ble High Court of Delhi upheld the arbitration clause printed on a bill of ladding. The Hon'ble High Court of Delhi observed as under:-
" 8) A perusal of the same shows that the respondent has expressly agreed to be bound by the arbitration clause despite the fact that it is a printed condition annexed to the Bill of Lading. Secondly, it must be remembered that the respondent has itself relied upon the Bill of Lading as part of its cause of action to recover the sum of Rs.26,53,593/- in the suit filed by it. The respondent, therefore, cannot blow hot and cold and argue that for the purpose of its suit, it will rely upon the Bill of Lading (though unsigned) but for the purpose of arbitration, the requirement of the Arbitration Act is that the arbitration clause should be signed.
9) In addition, we may indicate that the law in this behalf, in Jugal Kishore Rameshwardas vs. Mrs. Goolbai Hormusji, AIR 1955 SC 812, is that an arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in the 1996 Act in Section 7(3) thereof. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only pre-
requisite is that it be in writing, as has been pointed out in Section 7(3).
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 15 of 2910) This being the case, the present is a clear case where, under Section 7(5) of the Act read with M.R. Engineers and Contractors Pvt. Ltd. (supra) (paras 22 & 24), the reference in the Bill of Lading is such as to make the arbitration clause part of the contract between the parties.
22. In Swastik Pipe Ltd. Vs. Dimple Verma [ARB. No. 100/2021 decided on 06.07.2022], the Hon'ble High Court of Delhi while relying upon the division bench judgment in Scholar Publishing House Pvt. Ltd. Vs. Khanna Traders, FAO (OS) 184/2013, C. M. Appeal No. 5414/2013, C.M. Appl. 5416/2013 and C.M. Appl. No. 5417/2013 upheld an arbitration clause printed on tax invoice.
23. Learned counsel for the plaintiff has placed heavy reliance on Scholar Publishing House Pvt. Ltd. Vs. Khanna Traders [FAO (OS) 184/2013, C. M. Appeal No. 5414/2013, C.M. Appl. 5416/2013 and C.M. Appl. No. 5417/2013] contending that the said decision by the Hon'ble Division Bench settles the law in this respect. The Hon'ble High Court of Delhi observed as under:-
" 5. This denial, in my opinion, is not honest and leads me to the conclusion that the plaintiff in factreceived all the contract notes and the statements of accounts as alleged by the defendants in the usual course at the address given by the plaintiff to the defendants in that behalf and in effect accepted the contract notes which had been so sent by the defendants to him. I am satisfied on these materials that the contract notes in respect of all the transactions except the last disputed one of the purchase of 1,000 bales of September 1944 settlement on June 30,1944, were sent by the defendants to the plaintiff and were in effect accepted by the plaintiff by his conduct, with the result that in respect of all of the contracts except the last disputed one which I have OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 16 of 29 mentioned above there were arbitration agreements within the meaning of the Indian Arbitration Act of 1940.
...
8. The Court also notices that Section 7 of the Act does not compel the parties to adhere to any particular form of agreement or document. An arbitration agreement can be inferred through a series of correspondence, or even on demur of one of the parties to an arbitration proceeding, who can otherwise object to it, on the ground of absence of agreement; if such party does not urge the contention in the reply to claim, the arbitration agreement is deemed to exist. In the present case, there is a wealth of material in the form of more than a decade of commercial relationship during which identically phrased invoices containing the arbitration stipulation were accepted and acted upon. It is not the appellant's case that the disputed invoices were the only documents containing such stipulations, which were freshly introduced. Having regard to these circumstances, the court is of opinion that there is no merit in the FAO(OS)184/2013 appeal; it is therefore dismissed along with pending applications without any order as to costs.
24. To support his contention that an arbitration agreement need not necessarily be signed by the parties, learned counsel for the respondent has also relied upon Mahanagar Telephone Nigam Ltd. Vs. Canara Bank & Ors. In Civil Appeal No. 6202-6205 of 2019 (Arising out of SLP (C) Nos. 13573-13576 of 2014, decided on 08.08.2019 wherein the Hon'ble Supreme Court of India while dealing with Section 7(4)(b) of the Arbitration and Conciliation Act, 1996 observed as under:-
" 9.2. The arbitration agreement need not be in any particular form. What is required to be ascertained is the intention of the parties to settle their disputes through arbitration. The essential elements or attributes of an arbitration agreement is the agreement to refer their disputes or differences to arbitration, which is expressly or impliedly spelt out from a clause in an agreement, separate agreement, or documents/correspondence exchanged between the parties.OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 17 of 29
"9.3. Section 7(4)(b) of the 1996 Act, states that an arbitration agreement can be derived from exchange of letters, telex, telegram or other means of communication, including through electronic means. The 2015 Amendment Act inserted the words "including communication through electronic means" in Section 7(4)(b). If it can prima facie be shown that parties are ad idem, even though the other party may not have signed a formal contract, it cannot absolve him from the liability under the agreement 3.
9.4. Arbitration agreements are to be construed according to the general principles of construction of statutes, statutory instruments, and other contractual documents. The intention of the parties must be inferred from the terms of the contract, conduct of the parties, and correspondence 3 Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd., (2015) 13 SCC 477 exchanged, to ascertain the existence of a binding contract between the parties. If the documents on record show that the parties were ad idem, and had actually reached an agreement upon all material terms, then it would be construed to be a binding contract. The meaning of a contract must be gathered by adopting a common sense approach, and must not be allowed to be thwarted by a pedantic and legalistic interpretation.
9.5. A commercial document has to be interpreted in such a manner so as to give effect to the agreement, rather than to invalidate it. An 'arbitration agreement' is a commercial document inter partes, and must be interpreted so as to give effect to the intention of the parties, rather than to invalidate it on technicalities.
9.7. In interpreting or construing an arbitration agreement or arbitration clause, it would be the duty of the court to make the same workable within the permissible limits of the law. This Court in Enercon (India) Ltd. and Ors. v. Enercon GMBH6, held that a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate the disputes between them. Being a commercial contract, the arbitration clause cannot be construed with a purely legalistic mindset, as in the case of a statute.
25. In P. B. Jagtyani and Co. and Ors. Vs. Gaurav Agencies and Ors [OMP NO. 100/2000 decided on 01.06.2006], the Hon'ble High Court of Delhi dealt with a similar challenge to the OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 18 of 29 Award that there was no arbitration agreement between the parties as the petitioners were not members of Delhi Hindustan Mercantile Association, nor even signatory to any arbitration agreement. The Hon'ble High Court of Delhi repelled the contention and observed as under:-
"22. Under Section 7 of the Arbitration and Conciliation Act,1996 an arbitration agreement should be in writing can it could be in a document signed by the parties or by exchange of letters, telex, telegrams or other means of telecommunications. The Learned Arbitrator has considered the relative bills and receipts given by the respondent and duly signed by him. They have Delhi Hindustan Mercantile Association clause printed thereon which were exhibited as CW 1/1 to CW 1/13. The learned Arbitrator also relied on the stamp bearing the arbitration clause of Delhi Hindustani Mercantile Association (Regd.) Delhi and consequently he inferred that there is a valid arbitration agreement between the parties.
23. In Punjab Pen House v. Samrat Bicycle Ltd. , it was held that when the goods are supplied through a bill on certain terms and conditions duly agreed between the parties, there is no escape from the conclusion that it amounts to a written contract between the parties. The relied can be placed on AIR 1989 DELHI 169, Luda Ram Ved Parkash v. Maharani of India and Anr. where it was held that if the goods are sold subject to the rules and regulations of Delhi Hindustani Mercantile Association (Registered), then the arbitration clause appearing in the said rules and regulations will be deemed to be binding on the parties even though the purchaser is not a member of the said Association and such a clause bearing in the bills of the goods sold, even though bills are not signed by the purchaser, would mean that an arbitration agreement had been entered between the seller and the purchaser.
24. When the goods were sold by the respondent No. 1 to the petitioners and were accepted by the petitioners by executing a specific receipt, one of which is exhibited as CW1/9 stipulating that the receipt is subject to the terms and conditions of Delhi Hindustani Mercantile Association (Registered), then such a clause regarding the goods having sold in accordance with the rules and regulations of Delhi Hindustani Mercantile Association (Registered) will create a OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 19 of 29 binding arbitration agreement between the parties despite the fact that the petitioners were not members of the said Association and even though the bills were not singed by the petitioners. The facts, in the present facts and circumstances, indisputably show that the goods were sold on the basis of the bills which contained printed clause that they were being sold subject to the rules and regulations of the said Association and rules and regulations of the said Association contained an arbitration clause and also detailed as to how the reference is to be made and that the arbitration agreement shall be legal and binding."
26. The petitioner side, on the other hand, contended that the judgments being relied upon by the respondent side- Scholar Publishing House Pvt. Ltd. Vs. Khanna Traders has also been referred to by the Hon'ble High Court of Delhi in Parmeet Singh Chatwal Vs. Ashwani Sahani [OMP 1445/2014 & IA No.22669/2014 dated 14.02.2020], and that the Hon'ble Court of Delhi proceeded to hold that intention is an essential attribute of an arbitration agreement and with such clauses, it is not possible to conclude that the parties were ad idem.
27. The question that crops up for next in the order of reasoning, is whether there is any consensus on the part of the petitioner insofar as the arbitration clause on the invoice is concerned. While the line of judgments relied upon by the respondent side lean in favour of upholding the clause printed on invoice even in the absence of any specific acknowledgment as to acceptance or any expression of consent, the judgments being relied upon by the petitioners indicate that mere signing of the invoices would at best imply the receipt of goods but not OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 20 of 29 sufficient for the purpose of inferring any Consensus-ad-idem so far as the arbitration clause is concerned.
28. Section 7 of the Arbitration and Conciliation Act, 1996, in its depth and spread, provides a wide latitude insofar as the 'form' of an arbitration agreement is concerned. The question, however, relates to "Formation" of the contract and not just the 'Form'. Section 7(4) (a) deals with an ordinary form of agreement, which is signed by parties to contract. Section 7(4)(b) and Section 7(4)(c) of the Act seem to deal with other forms of agreements, viz., contract through exchange of letters, telex, telegrams or other means of telecommunications through electronic means, providing a record of agreement; as well as by means of admission, even through implicit in assertion by a party, and non denial by the other, in their pleadings.
29. Consensus-ad-idem has been identified to be an essential attribute for the purposes of an arbitration agreement. Consensus-ad-idem is not merely a traditional requirement. Its relevance in the context of an arbitration clause becomes even more pronounced and defining. One can profitably resort to the observations made by the Hon'ble Supreme Court of India in Jagdish Chander Vs. Ramesh Chander & Ors. [2007 (5) SCC 719].
30. The necessity of consensus-ad-idem is finely ingrained in the provision, Section 7 (4) (b) of the Arbitration and OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 21 of 29 Conciliation Act, shows that the word 'exchange' qualifies the formation of an arbitration agreement. The phrase 'exchange of letters, telex, telegram' in Section 7(4)(b)' and phrase 'exchange of Statement of claim and defence' in Section 7(4)(c) shall be leached of their meaning if its application is extended to a unilateral assertion by one & 'deemed' acceptance by the other. What is further contemplated by the provision is the 'Record' of the agreement, which cannot be understood as a unilateral expression in writing by one coupled with no confirmation in writing from the other.
31. In Taipack Limited & Ors. Vs. Ram Kishore Nagar [2007 (3) ARBLR 402 Delhi], the Hon'ble High Court of Delhi observed-
"An arbitration agreement is a species of the genus, that is agreement. There has to be first and foremost an agreement. For the existence of an agreement there has to be consensus ad-idem between the parties i.e. they should agree to the same thing in the same sense.
The Hon'ble High Court of Delhi in yet another case M/s Hetampuria Tax Fab vs M/S Daksh Enterprises [FAO (COMM) 169/2022 dated 15.11.2022] pertaining to the Mercantile Association examined the issue of existence of arbitration agreement based on a unilateral clause printed on invoices. The Court observed :-
"In order to constitute an agreement, there must be a consensus between the parties.OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 22 of 29
This Court is unable to accept that the arbitration agreement had come into existence by the appellant unilaterally issuing a delivery challan and the respondent accepting delivery of goods."
The Court observed that an arbitration agreement may be constructed in exchange of letters, telex, telegrams and other means of telecommunication, or can be discerned through claim and defence statements, but stressed upon the necessity of parties being ad-idem. The Court observed:-
"However, it is essential for the Court to find that the parties were ad-idem for referring the disputes for arbitration".
32. A similar clause was examined by the Hon'ble High Court of Delhi in its earlier decision -Parmeet Singh Chatwal Vs. Ashwani Sahani. A reference to Divsion Bench decision in the case of Scholar Publishing House Vs. Khanna Traders was also made therein by the Court, while dealing with a cause printed in small font at the bottom of invoice. The Court observed:-
"22. The legal position that follows is that what is required to be ascertained is the intention of the parties to settle their disputes through Arbitration. The essential attribute of an arbitration agreement is that it must be expressly or impliedly spelt out from a clause in the agreement that there is an agreement to refer their disputes/differences to arbitration".
While concluding its findings on the aspect, the Court held:-
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 23 of 29"29. The above judgments would support the finding recorded above namely that the signatures affixed on the invoice are only the acknowledgment of receipt of goods and nothing more. Such a clause would not be an Arbitration agreement. The parties were not ad-idem. As there is no arbitration agreement, the Award and the proceedings to that extent are vitiated.
33. The observations also find their resonance in Mohammad Eshrar Ahmed Vs. M/s Tyshaz Buildmart India Private Limited [OMP (T) (Comm) 105/2023, IA 22122/2023 dated 03.09.2024]. The Court observed- "it is clear that, even assuming that the recitals in their invoices envisages resolution of dispute by arbitration, inasmuch as these invoices have not expressly or by implication been accepted by the petitioner. They cannot be said to contain any arbitration agreement between the petitioner and the respondent."
34. The contention as to petitioner/its agents having signed the invoices does not fare any better. The same would only validates the underlying or the main transaction relating to purchase and delivery of goods. Hon'ble High Court of Delhi dealt with a similar contention in Hetampuria's case. The Court repelled the contention observing:-
"10. The appellant claims that since the respondent had signed the Delivery Challan, he had also accepted the arbitration clause. This contention is unmerited. A plain view of the Delivery Challan indicates that the signature has been appended below the statement to the effect OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 24 of 29 that the goods have been received in good condition. It is apparent that the signatures relate to the said certification. It is well settled that a unilateral document issued by a party cannot, absent anything more, be constructed as a binding arbitration agreement."
35. Similar observations are found to have been made by Hon'ble High Court of Delhi in Priknit Retails Ltd. & Ors. Vs. Aneja Agencies [O.M.P. (COMM) 374/2016 & IA No.9569/2016 dated 22.08.2018]. The Court observed:
"27. Mere fact, that the delivery of goods had been accepted, would not imply that petitioner no. 1 had also agreed to the arbitration clause. As stated above, the said agreement is inchoate inasmuch as the blanks were never filled in. Further, the agreement remained unsigned. The contention, that petitioner no. 1 had not disputed the invoices would necessarily mean that petitioner no. 1 had also agreed to the arbitration agreement, is unmerited. This is so because in order to communicate its acceptance to the arbitration clause, petitioner no. 1 would require acknowledgement of the goods in the form as indicated in the invoices and further also affix its signatures. Admittedly, petitioner no. 1 has neither signed the arbitration agreement nor communicated its acceptance to the same."
36. The Court relied upon "Taipack Limited & Ors. Vs. Ram Kishore Nagar [2007 (3) ARBLR 402 Delhi]" and reiterated "34. In order to ascertain whether an agreement exists between the parties, it is necessary to establish that there was consensus ad idem between the parties. In the present case, it is not possible to accept that petitioner no. 1 had accepted the arbitration clause printed at the bottom of the invoice, as the same was neither filled in nor signed by petitioner no. 1. It is also not possible to accept that petitioner no. 1 had agreed to the arbitration clause."
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 25 of 2937. It is also impressed upon the Court that the Division Bench judgment cited by learned counsel for the respondent-Scholar Publishing House Pvt. Ltd. Vs. Khanna Traders, FAO (OS) 184/2013, C. M. Appeal No. 5414/2013, C.M. Appl. 5416/2013 and C.M. Appl. No. 5417/2013 of Hon'ble High Court of Delhi, has also been considered in Parmeet Singh Chatwal Vs. Ashwani Sahani [OMP 1445/2014 & IA No.22669/2014 dated 14.02.2020] by the Hon'ble High Court of Delhi. As far as the finding in Caravel Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd. is concerned, the petitioner side has contended that the invoices in question cannot be compared with a bill of lading inasmuch as bill of lading has a statutory support and it is by virtue of operation of law that the arbitration clause mentioned therein have been held to be binding.
38. The line of judgments cited by both the sides appears to be positioned against each other. However, the ideological consistency that runs through these judgments is quite noticeable. The Courts have been upholding the necessity of parties to be ad idem for the purpose of formation of the arbitration agreement. This aspect have been examined by the Hon'ble High Court of Delhi in M/s Hetampuria Tax Fab vs M/S Daksh Enterprises [FAO (COMM) 169/2022 dated 15.11.2022] and Priknit Retails Ltd. & Ors. Vs. Aneja Agencies [O.M.P. (COMM) OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 26 of 29 374/2016 & IA No.9569/2016 dated 22.08.2018], the observations made by the Hon'ble High Court of Delhi in the aforesaid decisions accords with and aligns closely with the facts involved in the case. The Court, accordingly, comes to the conclusion that the arbitration clause mentioned in the invoice cannot be said to have fructified into a binding arbitration clause in the absence of any specific consent or acknowledgment in writing by the petitioners.
39. Before proceeding further, the contentions of the learned counsel for the respondent as to scope of Section 34 needs to be addressed. Learned counsel for the respondent, while relying upon the judgments of Hon'ble Supreme Court of India in Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India (NHAI) and Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd. have contended that the Court does not sit in appeal under Section 34 of the Arbitration & Conciliation Act, 1996 and that the proviso only provides for a very narrow aperture as far as challenge to an Award is concerned. The Court is of the view that considering the findings recorded hereinabove relating to invalidity of the arbitration clause these questions need not be gone into.
No other points have been pressed.
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 27 of 2940. The invalidity of the arbitration clause strikes at the very jurisdiction of the Arbitrator. The aspect of jurisdiction in adjudicatory processes is characterized by compelling centrality, and is so stubbornly dominant, that once foregrounded, it may blur all other aspects. Absence or lack of jurisdiction, not only operates at the core, but also continues to persist all along the axis. Its functionality is such that its absence/lack can neither be diluted or exhausted by strength of factual calculus.
41. As regard objection as to limitation, considering the fact that the Award was passed on 14.01.2020 and the lockdown was imposed in the month of March, 2020. The filing of the petition in August, 2020 cannot be said to be outside limitation. In this respect, the Court relies upon the judgment of Hon'ble Supreme Court of India in Suo Moto Writ Petition (Civil) No.3/2020 dated 08.03.2021 and Misc. App No.665/2021 in SMW© No.3/2020 dated 23.09.2021.
42. Having regard to the observations made by Hon'ble High Court of Delhi in the cases of M/s Hetampuria Tax Fab vs M/S Daksh Enterprises [FAO (COMM) 169/2022 dated 15.11.2022]; Priknit Retails Ltd. & Ors. Vs. Aneja Agencies [O.M.P. (COMM) 374/2016 & IA No.9569/2016 dated 22.08.2018]; and Parmeet Singh Chatwal Vs. Ashwani Sahani [OMP 1445/2014 & IA No.22669/2014 OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 28 of 29 dated 14.02.2020], the vitals of a valid arbitration agreement are missing and the Court is of the view that there is no valid and binding arbitration clause.
43. In the ultimate analysis, it is observed that the clause mentioned in the invoices in question is not an arbitration clause, striking at the very jurisdiction and authority of the Ld. Arbitrator. The reference, appointment of Arbitrator as well as the arbitration proceedings, accordingly, are held to have been conducted without any jurisdiction.
44. Resultantly, the Award is hit by the grounds covered under Section 34(2)(a)(ii) of the Arbitration & Conciliation Act, 1996. The petition is allowed and the Award dated 14.01.2020 is hereby set aside.
45. Parties would be at liberty to avail the remedies available in accordance with law.
46. Parties are made to bear their own costs.
47. File be consigned to record room after due compliance.
Announced today Digitally signed
i.e. on 26.11.2024. NIKHIL
by NIKHIL
CHOPRA
in the open Court
Date:
CHOPRA 2024.11.26
18:52:23
+0530
(NIKHIL CHOPRA)
District Judge (Commercial Court 06)
Central District, Tis Hazari Courts,
OMP (Comm) 96/20 Neha Chopra & Ohters Vs. M/s Om Prakash & Company Page 29 of 29