Introduction

Parekh Plastichem Distributors LLP ("Applicant") filed an Application1 under Section 11 of the Arbitration and Conciliation Act, 1996 ("Act") before the Hon'ble Bombay High Court ("Bombay High Court / Hon'ble Court") for the appointment of an arbitrator relying on the arbitration clause in the invoices. As per the invoices the Courts in Mumbai had exclusive jurisdiction and the venue of arbitration was Mumbai. Simplex Infrastructure Limited ('Respondent"), relying on the arbitration clause in the purchase orders objected to the jurisdiction and the venue of arbitration.

Facts

  1. The Applicant had supplied Callipar brand Micro Silica to the Respondent as per the purchase orders. Consequently, the Applicant raised invoices for the said supplies. However, after receiving part payments, the Respondent defaulted in payment of Rs. 21,78,910. Even though Applicant sent several reminders and notices, the Respondent failed to clear the outstanding dues.

  2. On 15th July 2021, the advocate for the Applicant issued a notice to the Respondent thereby invoking arbitration as per clause 3 of the terms and conditions mentioned in the invoices. The Applicant nominated an arbitrator to resolve the disputes between the parties. As the Respondent failed to respond to the said invocation notice, the Applicant filed the present Application before Bombay High Court for appointment of the arbitrator.

Issue

The question before the Hon'ble Court is whether the disputes between the parties have to be resolved by invoking arbitration clause under the invoices or the purchase orders.

Submissions of Petitioner

  1. The terms under invoices were acknowledged by the Respondent as they accepted the supplies and made part payments. Therefore, the arbitration clause under the invoices supersedes the arbitration clause contained in the purchase orders.

  2. The purchase orders also referred to "Other Terms" which specifically mentioned that the jurisdiction would be subject to the Bombay High Court.

  3. Reliance was placed on the judgments in:
    1. Swastik Pipe Ltd. v Dimple Verma2:

      Wherein the court held that as there were no purchase orders issued, the arbitration clause in the invoices raised by one party was binding on the other;

    2. Bennett Coleman and Co. Ltd. v MAD (India) Pvt. Ltd.3, Skanska Cementation India Ltd. v Bajranglal Agarwal4 and Ors. and Aviagen India Poultry Breeding Company Ltd. v R. Geetha Ranjani5:

      Wherein the courts held that even though purchase order did not contain any arbitration clause, the arbitration clause under the invoices raised by one party will be binding on the other party.

Submission of Respondent

  1. The purchase orders comprised the main agreement between the parties and therefore, the arbitration clause in purchase orders shall prevail over the arbitration clause in the invoices.

  2. The Applicant unilaterally included arbitration clause in the invoices and the parties had not agreed to the Arbitration Clause in the purchase order being superseded by that in the invoices.

  3. Reliance was placed on the judgments in
    1. Concrete Additives and Chemicals Pvt. Ltd. v S N Engineering Services Pvt. Ltd.6 and Alupro Building System Pvt. Ltd. v Ozone Overseas Pvt. Ltd.7

       Wherein courts held that when purchase orders do not contain the arbitration clause, it shall be construed that there is no arbitration agreement between the parties even though the invoices contain an arbitration clause;

    2. Balasore Alloys Limited v Medima LLC8

       Wherein the court held that the arbitration clause in the main agreement would govern the disputes as there was consensus ad-idem to the terms and conditions mentioned therein which was comprehensive and encompassed all the terms of the transaction between the parties as compared to the terms mentioned in the purchase order.

Observation

  1. It is settled law that the intention of the parties is paramount while deciding the existence of the arbitration agreement between the parties as arbitration is a consensual form of dispute resolution.
  2. The purchase order constitutes the main agreement as it contained all the terms and conditions of the entire transaction agreed between the Applicant and Respondent. Also, there was no express agreement between the parties which specifically provides that the arbitration clause in the invoices would supersede the arbitration clause in the purchase orders.
  3. The Hon'ble Court distinguished the judgments relied upon by the Applicant and placed reliance on the judgment passed by the Apex Court in the case of Balasore Alloys Ltd. (Supra) and held that the purchase orders issued by the Respondent would be considered as the main agreement between the parties, the arbitration clause therein would govern the disputes.
  4. In consideration of the argument advanced by the Applicant with respect to the "Other terms" under the purchase orders which mentioned that the jurisdiction would be subject to the Bombay High Court. The Hon'ble Court observed that as the arbitration clause specifically provided that the seat of arbitration would be at Kolkata and jurisdiction to be Calcutta High Court, therefore the court of Mumbai shall not have jurisdiction to entertain the said Application under Section 11 of the Act.

Conclusion

Basis its observations, the Hon'ble Court concluded that the arbitration clause in the purchase orders will govern the dispute. Placing reliance on the judgment passed by the Apex Court in the matter of Indus Mobile Distribution Pvt. Ltd. v Datawind Innovations Pvt. Ltd. & Ors.9, the Hon'ble Court further held that as the arbitration clause provides venue and seat as Kolkata, the Calcutta High Court shall have the jurisdiction to try and entertain an application under Section 11 of the Act. Thus, the said Application was dismissed.

Foootnotes

1. Arbitration Application No. 250 of 2021

2. Arbitration Petition No. 100 of 2021 (Delhi High Court)

3. Commercial Arbitration No. 211 of 2022 (Bombay High Court)

4. MANU/MH/1085/2002

5. MANU/TN/1991/2023

6. Arbitration Petition (L) No. 23207 of 2021 (Bombay High Court)

7. 2017 SCC Online Del 7228

8. MANU/SC/0691/2020

9. (2017) 7 SCC 678

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