Decided on 14 September 2023, High Court of Bombay
In Parekh Plastichem Distributors v. Simplex Infrastructure, the High Court of Bombay considered conflicting arbitration clauses in purchase orders and invoices and held that the arbitration clause contained in the purchase orders would govern the parties.
Parekh Plastichem Distributors LLP (the Applicant) supplied micro silica to Simplex Infrastructure Limited (the Respondent) on the basis of purchase orders issued by it. Disputes arose between the parties regarding the payment of the invoices.
The issue before the Court while deciding the jurisdiction of the Court to entertain the application filed under Section 11 of the Arbitration and Conciliation Act, 1996 was whether the dispute between the parties was subject to the arbitration clause in the invoices or a conflicting clause in the purchase orders. The Applicant contended that the Arbitration should be conducted according to the arbitration clauses in the invoices which stated that the venue of arbitration would be Mumbai and hence, the High Court of Bombay would have jurisdiction to appoint an arbitrator. The Respondent contended that the application was not maintainable as the arbitration clause contained in the purchase orders stated that the venue of the arbitration should be Kolkata.
The contention of the Applicant was that the arbitration clause in the invoices should supersede the clause in the purchase order produced by the Respondent because the a clause in the invoice specifically stated that the terms mentioned in the invoices would supersede all other terms agreed with the Respondent. Since the invoices were agreed upon by the Respondent and certain payments had been made to the Applicant pursuant to the invoices, the invoices would prevail over the purchase orders and Mumbai would have jurisdiction over the issue.
The Respondent claimed that the purchase orders contained the main agreement between the parties and that the arbitration clause mentioned in the purchase orders should therefore supersede the arbitration clause in the invoices. The Applicant had unilaterally included the arbitration clause in the invoices and this had not been agreed upon by the parties. The clause mentioning that the invoices would supersede the purchase orders had also not been agreed by the Respondent. Thus, the arbitration clause in the purchase orders would prevail and the courts of Kolkata would have jurisdiction over the case.
The Applicant also contended that the Annexure in the purchase orders stated that the jurisdiction for any dispute would be Mumbai.
The court held that in order to consider whether there is any arbitration agreement between the parties, the intention of the parties is paramount as arbitration is a consensual form of dispute resolution. In the present case, the purchase orders constituted the main agreement as they contained all the terms and conditions of the transaction agreed between the Applicant and Respondent.
If the parties intended that the arbitration clause in the invoices raised by the Applicant should supersede the arbitration clause contained in the purchase orders, then, there ought to have been an express agreement between the parties to specifically override or supersede the Arbitration Clause contained in the purchase orders. The mere presence of an arbitration clause in the invoices along with a term stating that the terms of invoices supersede any other terms agreed between the parties did not mean that the arbitration clause in the invoices supersedes the Arbitration Clause in the purchase orders.
The Court rejected the contention of the Applicant that the Court has jurisdiction as the Annexure in the purchase orders state that jurisdiction is Mumbai, since the words in the purchase orders were clear that the Arbitration would be at Kolkata.
The Court dismissed the application for appointment of arbitrator as the courts in Kolkata had exclusive jurisdiction over the present case.
The decision emphasises that when there are conflicting arbitration agreements between the parties, it is the intention of the parties which is of paramount importance. It is a reminder to draft clear and consistent arbitration clauses that are expressly agreed by both parties to avoid any challenge over their validity and interpretation.
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