Arbitration Clause in Tax Invoices Binds Parties Where Continuous Business Relationship and Mutual Consent are Established

The Petitioner, a supplier of Steel Tubular Poles, maintained a running account with the Respondent since 2018

Disputes emerged regarding an outstanding principle amount of ₹8,03,807 arising from Tax Invoices dated April 2019, totaling ₹38,54,568 including interest

After the Respondent failed to clear dues following Debit Notes and a Legal Notice dated June 7, 2024, the Petitioner approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator

The Respondent contested the petition, alleging it was barred by limitation and that no formal purchase order or valid arbitration agreement was placed on record

Whether an arbitration clause contained within a Tax Invoice constitutes a valid arbitration agreement between parties in a continuing business relationship.

Whether the Court, at the Section 11 stage, should conduct an intricate inquiry into claims allegedly barred by limitation.

Whether the notice invoking arbitration under Section 21 was defective for failing to disclose detailed factual or contractual bases.

The court applied Section 11(6) of the Arbitration and Conciliation Act, 1996, regarding the appointment of arbitrators, and Section 21 concerning the commencement of arbitral proceedings

Swastik Pipe Ltd. v. Dimple Verma and Radico Khaitan Limited v. Harish Chouhan, which establish that arbitration clauses in invoices bind parties if they have a history of continuous business transactions and acceptance of goods

Regarding limitation, it followed Vidya Drolia v. Durga Trading Corpn. and SBI General Insurance Co. Ltd. v. Krish Spinning, which mandate that referral courts should only refuse appointment if claims are "ex-facie" time-barred, otherwise leaving the issue for the tribunal

The Court observed that the parties shared a multi-year commercial relationship where the Respondent routinely accepted invoices containing the arbitration clause and made part-payments, thereby signifying intent to be bound by those terms

To the Respondent's objection regarding the missing Purchase Order, the Court held that the existence of an arbitration agreement is a prima facie determination, and contractual construction is the domain of the Arbitral Tribunal

On the issue of limitation, the Court found a "live" dispute as the Petitioner claimed the last payment was made in April 2020 and sought exclusions for the Covid-19 period

Since the limitation was not "ex-facie" expired and required evidentiary inquiry into WhatsApp chats and ledgers, the Court ruled it must be decided by the arbitrator

The Court clarified that a Section 21 notice is a procedural mechanism to intimate disputes and need not contain the exhaustive details of a Statement of Claim

The Court appointed Mr. Ritvik Chawla, Advocate, as the Sole Arbitrator [para. 26(i)]. All rights and contentions, including those regarding the bar of limitation and the merits of the claims/counter-claims, were left open for adjudication by the learned Arbitrator. The Registry was directed to communicate the order to the Arbitrator.