The Bombay High Court has held that the arbitration clause in a tax invoice cannot be treated as an arbitration agreement binding on the parties.
The petitioner, Concrete Additives and Chemicals Pvt. Ltd, contended that there is an arbitration agreement between the parties.
Justice G.S. Kulkarni observed that such contention as urged on behalf of the applicant cannot be accepted as the issuance of tax invoice is certainly required to be held to be a unilateral act on the part of the applicant.
“The contract between the parties is actually born under the purchase orders. The purchase orders do not contain or make any reference to an arbitration agreement between the parties.”
After perusing the provisions of Section 7 of the Act, the Court held that there is no conscious agreement between the parties to refer the disputes for adjudication in arbitration.
“Merely because the tax invoices which are in response to the purchase orders provide for an arbitration, certainly such invoices do not bring about an arbitration agreement as contemplated under Section 7 of the Act,” the Court said.
While concluding, the Court observed that “Mr. Menon’s contention that the tax invoices have been accepted by the respondent and therefore it is required to be presumed that there is an arbitration agreement between the parties also cannot be accepted. The acceptance of the tax invoices is required to be held to be relevant in accepting the delivery of the goods and the payment to be made under the invoices. Certainly, it cannot be accepted that the unilateral invoices brought about an arbitration agreement between the parties as section 7 would provide. In the above circumstances, in my opinion, there is no arbitration agreement between the parties.”
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