“Purchase Order Containing Arbitration Clause Will Supercede Tax Invoice Which Does Not Contain Arbitration Clause”: Calcutta High Court

The Court docket held that the acquisition order was the primary contract which contained all the phrases and situations which the events agreed to be certain by, together with the arbitration clause. The tax bill was issued later. It contained the description of products bought and the cost to be acquired. The bill didn’t comprise any arbitration clause, though the primary settlement contained the identical. Thus, the intention of the events to arbitrate was clear and the arbitrator must be appointed.

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The Petitioner floated a young inviting quotations for design, manufacture, provide, testing and commissioning of capacitor panels for its plant in Jamuria. The Respondent’s proposal was accepted and accordingly, a purchase order order bearing no P119Y-00458 dated September 6, 2019, was issued in favour of the Respondent.

Upon the trial run of the aforementioned capacitor panels on the Petitioner’s plant, numerous points arose in respect of all of the eight capacitor panels. Subsequently, the Petitioner tried to begin the operations of the mentioned capacitor panels, however they had been discovered to be malfunctioning. The problem was dropped at the discover of the Respondent by the Petitioner and several other conferences had been held between the representatives of the events between December 2, 2021 and September 16, 2022.

The grievance of the Petitioner was not solved until November, 2023 and no effort was made by the Respondent to interchange the faulty capacitor panels. Discovering, no different various, the Petitioner terminated the acquisition order by a termination letter issued by way of e-mail dated December 14, 2023. The Petitioner demanded refund of all the consideration sum paid, amounting to Rs. 1,97,06,000/- along with curiosity on the price of 24% every year from January 23, 2021 until date of precise cost. The Respondent denied the termination letter and made a requirement for additional sum of cash.

Thus, variations arose between the events and the Petitioner invoked the arbitration clause, by letter dated January 12, 2024. In reply to the Petitioner’s letter, the Respondent by a letter dated February 20, 2024 raised numerous objections and sought to dispute the arbitration clause itself by counting on a jurisdiction clause contained within the tax bill dated January 13, 2021 issued by the Respondent pursuant to the acquisition order.

Thereafter, this utility was filed for appointment of a sole arbitrator, by way of the arbitration clause within the buy order.

Contentions

The Counsel for the Petitioner submitted that the acquisition order dated September 06, 2019 was forwarded to the Respondent, who acknowledged it with none objection. On the premise of the acquisition order, a number of invoices had been raised by the Respondent which had been paid. The conduct of the events would present that the complete buy order, together with the phrases and situations thereof, had been accepted by the events and the events had been advert idem on the difficulty of reference of disputes arising out of the mentioned buy order, to arbitration.

The Counsel highlighted that proforma invoices had been issued by the Respondent in furtherance to the steps taken underneath the acquisition order. Solely when the Petitioner invoked arbitration, a frivolous and arbitrary plea was taken by the Respondent with regard to non-existence of the arbitration clause in view of a jurisdiction clause within the tax bill. The tax bill was issued subsequently by the Respondent and allegedly accepted by the Petitioner.

The Counsel for the Petitioner additional submitted that whereas the acquisition order contained the industrial phrases and situations of the enterprise, the bill merely contained the outline and value of products. The acquisition order, was a binding contract and the identical would prevail over the bill.

The Counsel for the Respondent opposed the applying on the bottom {that a} tax bill had been judicially held to be a binding contract and the next issuance of the tax invoices was an modification to the acquisition order. He additional submitted that the tax bill was accepted by the Petitioner and funds had been made in accordance with the contents of the tax bill. The tax bill did not comprise any arbitration clause and the jurisdiction of this court docket was ousted by the jurisdiction clause within the tax bill. The clause supplied that Courts at Satna would have jurisdiction.

It was additional averred that the acquisition order was a doc generated by the Petitioner. The identical was not signed by the Respondent. Thus, the consensus and assembly of minds of the events was absent. The intention to refer the dispute to a sole arbitrator was thus absent.

Observations

The Court docket noticed that the primary difficulty for consideration was whether or not the Court docket ought to appoint a sole arbitrator, by way of Clause 6 of the acquisition order.

The Court docket highlighted Clause 6 of the acquisition order which supplies for reference of disputes to arbitration. It states that any dispute or distinction in anyway, arising between the events out of or in relation to the work/provide of the work order/buy order, or impact to dis-contract or breach thereafter, shall be settled amicably, and if the events did not resolve the disputes, the identical shall be finalised by arbitration. The award made in pursuance thereof, shall be binding. Thus, the Court docket noticed that the intention of the events to refer the dispute to arbitration is obvious.

The Court docket noticed that the industrial phrases and situations and the overall phrases and situations of the settlement for items to be equipped by the Respondent, are all contained within the mentioned buy order. The legislation supplies that consensus advert idem may additionally be inferred from the conduct of the events. An settlement which is electronically exchanged between the events will suffice the requirement of legislation for an arbitration settlement to be recorded in writing as required by Part 7, ACA as was the case right here.

The Court docket additional noticed that the correspondences between the events clearly point out that the Respondent acknowledged receipt of the acquisition order and acted in phrases thereof. The Respondent didn’t elevate any objection to the identical.

The Court docket held that the acquisition order was the principal settlement between the events. The intention of the events to refer the disputes and variations arising out of the acquisition order to arbitration, is offered from Clause 6 thereof. The tax bill is a doc of proof for provide of products or companies and can be important for the recipient to avail of enter tax credit score. The tax bill supplies the description of the products with the specification code, quantum, complete worth, and so forth, with out additional specification or particulars. Subsequently, the tax bill was unilaterally raised by the Respondent after having acted by way of the buy order. Thus, the tax bill was an ancillary doc to the primary settlement i.e. the acquisition order.

In view of the above, the Court docket held that the phrases and situations of the acquisition order together with the arbitration settlement would prevail over and supersede the phrases and situations of the tax bill. The Court docket famous that the tax bill didn’t point out any arbitration settlement and solely states that the courts at Satna can have jurisdiction.

Thus, the Court docket concluded that the arbitration clause within the buy order would bind the events as it’s an all-encompassing settlement. The tax bill doesn’t comprise an arbitration clause but it surely additionally doesn’t point out that the acquisition order has been outdated. Moreover, the tax bill has been signed by the Respondent alone. In any occasion, the difficulty of novation of the acquisition order will probably be determined by the Arbitrator who’s competent to rule on his personal jurisdiction and determine the arbitrability of the dispute.

Accordingly, the Court docket allowed the petition and appointed Mr. Amitesh Banerjee because the Sole Arbitrator to arbitrate upon the disputes between the events.

Case Title – Tremendous Smelters Restricted v United Cables Restricted

Case No. – AP-COM 470 OF 2024

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For Petitioner – Mr. Kumarjit Banerjee, Adv; Ms. Sanchari Chakraborty, Adv.; Mr. Akanksha Chowdhury, Adv.; Mr. Samriddha Saha, Adv

For Respondent- Mr. Narendra Sharma Adv.; Mr. Deva Anand Misra, Adv.; Mr. Prashant Kr. Singh, Adv.

Date – 30.06.2025