- Case
- SANJIV MANMOHAN GUPTA v. SAI ESTATE CONSULTANTS CHEMBUR PVT LTD (Bombay High Court, 11-03-2025)
- Law
- Arbitration and Conciliation Act, Insolvency and Bankruptcy Code.
Facts: Sanjiv Manmohan Gupta (Applicant-Petitioner) sought arbitration against Sai Estate Consultants Chembur Pvt. Ltd. (Respondent) based on an arbitration clause allegedly contained in invoices raised for outdoor advertising services provided between February 2018 and June 2019. The Respondent contended that no arbitration agreement existed, an arbitration clause in an invoice cannot constitute an agreement, and the invoices were received by staff without authority. The Applicant-Petitioner had previously initiated insolvency proceedings against the Respondent under the IBC, which were overturned by NCLAT due to the existence of a dispute over operational debt.
Procedural Posture: The Applicant-Petitioner filed a Commercial Arbitration Application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. A related Commercial Arbitration Petition under Section 9 was also filed. The High Court was considering the Section 11 Application to determine if an arbitration agreement existed.
Issue: (1) Does an arbitration clause contained in invoices, which were acted upon by the parties, constitute a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996? (2) What is the scope of the Court's jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996, in determining the existence of an arbitration agreement?
Holding: (1) Yes, the arbitration clause contained in the invoices constitutes a valid arbitration agreement. (2) The Court's jurisdiction under Section 11 is limited to examining the prima facie existence of a validly existing arbitration agreement.
Reasoning: The Court relied on the conduct of the parties, noting that the Respondent availed of the services, accepted the invoices, and made partial payments without initially challenging the arbitration clause. The Court cited a previous decision, Bennett Coleman, which held that if parties have acted upon invoices containing an arbitration clause and there is no denial of the invoices, the clause should be construed as an arbitration clause. The Court emphasized that the scope of review under Section 11, as clarified by the Supreme Court in the Interplay Judgement and subsequent cases, is limited to examining the existence of a formally executed arbitration agreement. Issues of existential substance and limitation are matters for the arbitral tribunal to decide under Section 16 of the Act. The Court appointed an arbitrator, referring all disputes to arbitration.
