In a recent judgment passed by the Bombay High Court in the matter of Bennett Coleman & Co Limited vs MAD (India) Private Limited it has been held that any document in writing (tax invoice in the present case) exchanged between the parties which provide a record of the agreement and in respect of which there is no denial by the other side, would squarely fall within the ambit of Section 7 (i.e., Arbitration agreement) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) and would amount to an arbitration clause. This legal update briefly analyses this judgment of the Bombay High Court.
Facts:
Facts: Bennett Coleman & Co Limited (Bennett Coleman) is a news
media company engaged in news publishing, television, the internet,
radio, and outdoor media. MAD (India) Private Limited (Agency) is
an advertising agency which had approached Bennett Coleman to place
advertisements in their newspapers, channels, radio, and other
outdoor publications through a release order process. Bennett
Coleman would then publish the required advertisement on various
media platforms, both physical and virtual, based on the release
orders obtained from the Agency, and provide an invoice for payment
toward the issuing of such advertisement. The payment was to be
made within 120 days from the receipt of the invoices, failing
which an interest of 18% p.a. would be charged.
On the basis of the release orders issued by the Agency between
July 2017 to April 2019, various advertisements were put in the
print and non-print media by Bennett Coleman and corresponding to
this, invoices were raised upon the Agency for the work done.
Agency defaulted and an amount of Rs 11,49,23,640/- was due and
payable till 30 April 2022. As a result, Bennett Coleman invoked
the arbitration on 11 July 2022, seeking appointment of the sole
arbitrator as contemplated in the Dispute Resolution Clause, which
was a part of the tax invoice.
The Clause in question which was mentioned in the tax
invoice-
``(F) 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``
Issue:
Whether a clause contemplating reference of disputes and
differences arising out of, or in relation to a contract or order
of advertisement, bill or otherwise breach thereof, to be referred
to Sole Arbitrator, printed at the back of the tax invoice would
amount to an arbitration clause?
Contention of the parties:
It was contended by Bennett Coleman that there was no denial of the
existence of the arbitration clause in the tax invoice by Agency
thus, the clause is mutually agreed and it binds both the parties
irrespective of the wording used in the clause. It was also
submitted that the notice was issued clearly indicating that legal
proceedings could be instituted if the Agency fails to deliver the
amount. Agency failed to respond to the notice. The advocate for
the Agency submitted that there was no conscious agreement between
the parties to refer disputes for adjudication. He further
submitted merely on the basis on the tax invoice of the purchase
orders which had a clause of arbitration, a reference to
arbitration cannot be made. Accordingly, Agency denied the
existence of the arbitration agreement.
Held:
Bombay High Court after relying on several judgments observed that
the parties have acted upon the invoices and there was no denial of
invoices raised by Bennett Coleman. It was decided that the clause
in the invoices, which expressly mentions arbitration, should be
interpreted as an arbitration clause. A formal format is not
specified as to what would contemplate an arbitration agreement,
but the essentials of it are by now well-established. The Court
while describing the requirement as to what constitutes an
arbitration agreement observed that although no specific form is
required to create an arbitration agreement, the words "must
unequivocally", reflect the parties' consent to refer the
dispute to arbitration, regardless of the wording they choose to
use. It was decided that MAD India cannot disown the clear
stipulation in the tax invoice regarding any dispute being referred
to arbitration, and an arbitrator was appointed in the present
case.
MHCO Comment: It is well settled that in cases where there exists an arbitration agreement, the court is under obligation to refer the parties to arbitration in terms of the arbitration agreement. This judgment gives an utmost clarity about reference to arbitration from an arbitration clause mentioned in a tax invoice.
This update was released on 08 February 2023.
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