Acceptance of Invoices and Part-Payment Constitutes a Valid Arbitration Agreement Despite Silence in Purchase Orders

The Applicant, a distributor of Indonesian coal, supplied goods to the Respondent following quotations sent via email and Purchase Orders (POs) issued by the Respondent

While the Respondent’s POs did not contain an arbitration clause, the Applicant’s initial quotation emails, subsequent Delivery Challans, and Tax Invoices all contained a specific stipulation referring disputes to arbitration under the Arbitration and Conciliation Act

The Respondent accepted the coal, acknowledged the invoices/delivery challans without protest, and made part payments against several invoices

A dispute arose regarding unpaid dues of ₹19,73,409/- and alleged quality deductions, leading the Applicant to invoke arbitration on 12 January 2023

The Respondent resisted, claiming the absence of an arbitration agreement in the primary contract (the POs)

1. Whether an arbitration clause printed on Tax Invoices and Delivery Challans constitutes a valid arbitration agreement under Section 7 of the Arbitration Act when the primary Purchase Orders are silent on arbitration.

2. Whether the Respondent’s conduct in accepting goods and making payments against such invoices signifies "consensus ad idem" regarding the arbitration agreement.

The Court applied Section 7 of the Arbitration and Conciliation Act, 1996, regarding the definition and requirements of an arbitration agreement

It relied on the principle from Bennett Coleman and Co. Ltd. v. MAD (India) Pvt. Ltd., which holds that acting upon invoices without denial constitutes an arbitration agreement

The Court followed the Supreme Court’s ruling in Concrete Additives and Chemicals v. S.N. Engineering Services Pvt. Ltd. (Civil Appeal No. 7858 of 2023), which reversed a High Court finding to establish that acknowledged invoices with terms and conditions can form a valid arbitration agreement

It also referenced Article 137 of the Limitation Act, 1963, for the three-year limitation period for filing Section 11 applications

The Court reasoned that the transaction was not governed solely by the Purchase Orders but by a continuum of documents including quotations, delivery challans, and invoices

The Court rejected the Respondent's argument that invoices are unilateral acts, noting that the Respondent had "numerous transactions" over several months and never objected to the arbitration clause printed on the acknowledged documents

Following the Supreme Court’s precedent in Concrete Additives, the Court held that the Respondent’s conduct—specifically acknowledging receipt of invoices/challans and making part payments—amounted to an acceptance of the terms therein

The Court distinguished TCI Infrastructure Limited by noting that in this case, the Respondent had actually acted upon and paid against the documents containing the clause, rather than just receiving a unilateral proposal

The application was found to be within the limitation period as it was filed within three years of the notice of invocation

The Court allowed the application and appointed Mr. Suyash Gadre as the Sole Arbitrator to adjudicate the disputes

All merits and specific claims regarding limitation were left open for the Arbitral Tribunal