An arbitration agreement is an important aspect of commercial contracts in our times, providing a mechanism for resolving disputes between parties. The Arbitration and Conciliation Act, 1996, outlines certain requirements that must be met for an agreement to be considered as an arbitration agreement. However, the wide scope of an arbitration agreement has given rise to the question of whether an arbitration clause printed on an invoice can be considered a binding arbitration agreement. The Bombay High Court was faced with this issue in the Bennett Coleman & Co. Ltd. v. MAD (India) Pvt. Ltd. case. This essay provides an analysis of the court’s ruling on the validity of an arbitration clause printed on an invoice, as follows:
“All disputes and differences arising out of or in relation to a contract or order or advertisements, bill in connection therewith or otherwise, or breach thereof shall be referred to the sole arbitration in accordance with the Arbitration and Conciliation Act, 1996 for any modifications thereof, BENNETT, COLEMAN & CO.LTD, shall have the right to nominate such arbitrator. The award made in pursuance thereof shall be final and binding on both parties”
The Bombay High Court held that for an arbitration agreement to be valid, the parties must mutually intend to settle their dispute by a private tribunal, and the agreement must be in writing. While there is no strict format for an arbitration agreement, the Act clarifies that an agreement claimed by one party and not denied by the other party is considered to be in writing.
In the case at hand, Bennett Coleman had raised invoices on MAD India for payment towards the publication of advertisements. As MAD India failed to make timely payment, Bennett Coleman invoked the arbitration clause printed on the invoices. MAD India disputed the validity of the arbitration clause, and the matter was eventually brought before the Bombay High Court for the appointment of an arbitrator.
The court noted that the parties had acted upon the invoices, and there was no denial of the invoices by MAD India. Therefore, the arbitration clause contained in the invoices was considered a valid arbitration agreement. The court held that an arbitration clause in a tax invoice would amount to a valid arbitration agreement if the invoice was accepted by the party receiving it without disputing the arbitration clause. The court appointed an arbitrator to decide the disputes and differences between the parties.
The Bennett Coleman case clarifies that an arbitration clause printed on an invoice can be considered a valid arbitration agreement if the party receiving the invoice accepts it without disputing the arbitration clause. The ruling emphasizes the importance of acting in good faith and acknowledging the terms of a commercial contract, including an arbitration clause printed on an invoice. This decision serves as a reminder to parties to pay attention to the terms of commercial contracts and act in accordance with the same.
