Clause Contained In The Tax Invoice Amounts To An Arbitration Clause: Bombay High Court

The Bombay High Court has held that the clause contained in the invoices, which clearly stipulates a reference to arbitration, deserves to be construed as an arbitration clause.

The single bench of Justice Bharati Dangre has observed that any document in writing exchanged between the parties that provide a record of the agreement and in respect of which there is no denial by the other side would squarely fall within the ambit of Section 7 of the Arbitration and Conciliation Act, 1996, and would amount to an arbitration clause.

The applicant is a news media company indulging in various activities like publishing, television, the internet, radio, and outdoor advertising. The applicant had an interface with the respondent, an advertising agency, to be approached by various advertisers to place advertisements in the applicant’s newspapers, channels, radio, and other outdoor publications via release orders.

The issue raised was whether a clause contemplating the reference of disputes and differences arising out of or in relation to a contract, order of advertisement, bill, or another breach to be referred to a sole arbitrator, printed at the back of the tax invoice, would amount to an arbitration clause.

The applicant contended that the tax invoices clearly referred to the nature of the transaction between the parties with all the necessary details about the manner in which the publication is to take place with the corresponding rate for printing the material in print ads and magazine ads, and overleaf the tax invoice, the business terms and conditions are found to be ingrained. The respondent was obligated to make payments for the advertisement placed in the member publications of INS. However, there was a default, and in fact, there was complete neglect even to respond to the correspondence from the applicant. A demand notice was issued, clearly indicating that legal proceedings could be instituted if there was a failure to deliver the amount. Despite all strenuous efforts, there was no response, and as a consequence, arbitration was invoked.

The respondent denied the existence of the arbitration agreement. There was no conscious agreement between the parties to refer the disputes for adjudication. The invoices would not result in an arbitration agreement simply because the tax invoice was issued in relation to the purchase orders provided for arbitration.

Section 7 describes an "Arbitration Agreement" as an agreement by the parties to submit to arbitration all or certain disputes that have arisen or may arise between them in respect of a defined relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or it may exist in the form of a separate agreement, with the condition that it be in writing.

The court held that it amounted to an arbitration clause, particularly when the petitioner has not disputed receipt of the tax invoices. The respondent cannot disown the clear stipulation in the tax invoice with regard to any dispute being referred to arbitration, and an arbitrator was appointed.

Case Title: Bennett Coleman & Co. Ltd Versus MAD (India) Pvt.Ltd

Citation: 2023 LiveLaw (Bom) 7

Citation: Commercial Arbitration Application No. 211 of 2022

Date: 22.12.2022

Counsel For Applicant: Advocates Ashish Kamat, Pradeep Mane, Huzan Bhumgara, Dhruv Dandekar

Counsel For Respondent: Advocates Girish Kedia with Kushang Kedia

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