Case: – R.P. Infosystems Pvt Ltd v/s Redington (India) Limited; AP 626 of 2018
The recent ruling by the High Court of Calcutta has shed light on the enforceability of arbitration clauses embedded within tax invoices and on their validity and binding nature.
The case revolved around a series of transactions between a company, the petitioner, engaged in the distribution of IT-related products, and its vendor, the respondent. Disputes arose due to alleged delays in the supply of ordered components, leading to financial impacts and subsequent arbitration proceedings initiated by the respondent.
One of the primary contentions raised by the petitioner was the lack of a valid arbitration agreement. They argued that the arbitration clause, located on the overleaf of the invoices and unsigned by them, did not constitute a binding contract. Moreover, they challenged the jurisdiction of the arbitrator, citing discrepancies and bias in the arbitration process.
However, the High Court’s judgment provided clear guidelines regarding the validity of arbitration clauses within tax invoices. It stated that when a party accepts an invoice incorporating a prominently displayed arbitration clause and subsequently acts in accordance with it, that party cannot contest the existence of a valid arbitration clause at a later stage. The court laid down specific conditions for such clauses to be considered valid and binding, stressing the need for explicit consent or timely objection by the party receiving the invoice.
Crucially, the Court highlighted that an arbitration clause need not adhere to a particular form but must unequivocally reflect the Parties’ intention to arbitrate. As long as the intent to arbitrate is clear, the Clause’s format can vary, validating its enforceability.
Furthermore, the judgment also addressed the issue of jurisdictional conflicts arising from differing clauses within the documents. It highlighted that an exclusive jurisdiction clause specified within the arbitration agreement supersedes generic jurisdiction clauses in other agreements between the parties. In this case, the court upheld the exclusive jurisdiction clause in the invoices, thereby denying jurisdiction to other courts mentioned in alternate agreements.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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