Delhi High Court Upholds Arbitration for ₹23.09 Lakh Recovery Dispute; Holds Unsigned Invoice Arbitration Clauses Binding Where Parties’ Conduct Shows Acceptance and Consent
Delhi High Court Refers ₹23.09 Lakh Recovery Dispute to Arbitration; Holds Unsigned Invoice Arbitration Clause Valid When Parties Accepted and Acted Upon Invoices
Facts
The petitioner, M/s Ambica Enterprises, challenged the Commercial Court’s order dated 10 July 2026, which had allowed the respondent’s application under Section 8 of the Arbitration and Conciliation Act, 1996 and referred the dispute to arbitration.
The petitioner is a registered partnership firm engaged in trading disposable and allied products. The respondent, Alok Gupta, is the proprietor of M/s Tirupati Balaji Overseas & Anr., engaged in manufacturing and selling disposable products.
In April 2024, the petitioner placed an order for disposable bowls and trays worth approximately ₹2 crore and paid advances of ₹15 lakh on 30 April 2024 and ₹16 lakh on 22 May 2024.
According to the petitioner, the respondent’s last two consignments contained substandard products and were priced above market rates. The parties maintained an open and running account, under which the petitioner claimed that ₹21,18,680 was outstanding from the respondent as on 15 June 2024.
The petitioner therefore instituted a commercial recovery suit claiming ₹23,09,361 along with 12% annual interest.
The respondent filed a written statement and an application under Section 8 of the Arbitration Act. He relied upon arbitration clauses contained in invoices dated 9 April, 10 April, 24 May, 13 June and 15 June 2024, arguing that the petitioner knew about and acted upon those invoices.
The petitioner objected that there was no valid arbitration agreement under Section 7 because the invoices containing the arbitration clauses had not been signed by it. The Commercial Court rejected that contention and referred the parties to arbitration.
Issues
The principal issues were:
- Whether an arbitration clause contained in unsigned commercial invoices can constitute a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.
- Whether Section 7 requires an arbitration agreement merely to be in writing, or also mandatorily requires signatures of both parties.
- Whether acceptance of invoices, repeated transactions, advance payments and continued business dealings can establish consent to an arbitration clause through conduct.
- Whether a party can rely upon invoices as the basis of its recovery suit but simultaneously deny the arbitration clause contained in those same invoices.
- Whether there was sufficient consensus ad idem between the parties to refer their dispute to arbitration.
- What is the permissible scope of examination by a referral court while deciding a Section 8 application concerning the existence and validity of an arbitration agreement.
Petitioner’s Arguments
M/s Ambica Enterprises argued that reference under Section 8 was permissible only where there existed a valid arbitration agreement satisfying Sections 7(3) and 7(4) of the Arbitration Act.
The petitioner stressed that the invoices relied upon by the respondent had not been signed by it. Therefore, according to the petitioner, the arbitration clauses appearing on those invoices could not constitute a valid arbitration agreement.
It further argued that arbitration is a party-centric dispute resolution mechanism founded upon consent and that an unwilling party cannot be compelled to arbitrate.
According to the petitioner, there was neither explicit nor tacit consent on its part to submit disputes to arbitration.
The petitioner relied upon M/s Taipak Limited v. Ram Kishore Nagar Mal, Mohammad Eshrar Ahmed v. M/s Tyshaz Buildmart India Pvt. Ltd., Inspiration Cloths v. Yash Traders, Priknit Retails Ltd. v. Aneja Agencies and Indowind Energy Ltd. v. Wescare (I) Ltd. to support its case.
Respondent’s Arguments
The respondent contended that it was settled law that an arbitration clause contained in an invoice can constitute a valid arbitration agreement, even though the invoice is unsigned.
He principally relied upon the Supreme Court’s decision in Concrete Additives and Chemicals Pvt. Ltd. v. SN Engineering Services Pvt. Ltd..
The respondent further argued that the same invoices containing the arbitration clauses formed the foundation of the petitioner’s recovery suit.
The petitioner had accepted those invoices, made payments against previous identical invoices, continued business transactions on that basis and subsequently relied upon them to claim recovery.
Therefore, according to the respondent, the petitioner could not accept the commercial benefits and obligations arising from the invoices while selectively denying their arbitration clauses merely because the invoices were unsigned.
Analysis of the Law
Arbitration Agreement Must Be Written, But Need Not Always Be Signed
The High Court rejected the petitioner’s central proposition that an unsigned document can never constitute a valid arbitration agreement.
The Court relied upon the Supreme Court’s decision in Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd., (2019) 11 SCC 461.
In Caravel Shipping, the Supreme Court held that an arbitration agreement must be in writing, but it is not mandatory in every case that the agreement itself be signed.
Section 7(3) mandates writing, while Section 7(4) identifies circumstances in which a written arbitration agreement may be found.
The High Court accordingly concluded that:
writing is mandatory; signature is not invariably mandatory, particularly where the parties’ conduct demonstrates acceptance of the arbitration agreement.
Consent Can Be Inferred From Conduct
The Court relied upon Glencore International AG v. Shree Ganesh Metals & Anr., where the Supreme Court held that when the parties’ conduct clearly demonstrates acceptance of contractual terms containing an arbitration clause, mere absence of signatures does not prevent arbitration.
Similarly, in Scholar Publishing House Pvt. Ltd. v. Khanna Traders, the Delhi High Court had held that Section 7 does not prescribe a rigid form for arbitration agreements and that their existence may be inferred from correspondence and conduct.
Thus, the legal inquiry was not limited to whether Ambica Enterprises physically signed the invoices. The Court had to consider whether its commercial conduct objectively demonstrated acceptance of those invoices and their terms.
Limited Scope of Section 8 Referral Court
The Court then considered how deeply a court deciding a Section 8 application should investigate questions regarding consent and validity.
Relying upon Vidya Drolia v. Durga Trading Corporation, In Re: Interplay Between Arbitration Agreements and the Indian Stamp Act and SBI General Insurance Co. Ltd. v. Krish Spinning, the High Court held that the referral court’s jurisdiction is limited to a prima facie examination of the existence and validity of the arbitration agreement.
Once that prima facie threshold is satisfied, the referral court is not required to undertake an exhaustive adjudication regarding the parties’ consent or intention.
Precedent Analysis
Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd., (2019) 11 SCC 461
This was a central authority.
The underlying recovery suit in Caravel Shipping itself relied upon an unsigned bill of lading containing a printed arbitration clause.
The Supreme Court held that a party could not rely upon the bill of lading for its recovery claim but reject the arbitration clause because the document was unsigned. It clarified that an arbitration agreement must be written but need not necessarily be signed.
The Delhi High Court found the principle directly applicable because Ambica Enterprises similarly relied upon transactions arising from invoices containing the arbitration clauses.
Glencore International AG v. Shree Ganesh Metals & Anr., 2025 SCC OnLine SC 1815
The Supreme Court held that where the conduct of parties clearly demonstrates acceptance of contractual terms containing an arbitration clause, non-signing by itself does not defeat the arbitration agreement.
This reinforced the Court’s conclusion that signatures are not the sole means of demonstrating consent.
Scholar Publishing House Pvt. Ltd. v. Khanna Traders
The Delhi High Court Division Bench held that Section 7 does not compel parties to execute an arbitration agreement in one prescribed format.
An arbitration agreement may instead be established through correspondence and conduct between the parties.
Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1
The Court relied upon Vidya Drolia for the restricted jurisdiction exercised at the referral stage.
The court considering Section 8 performs only a prima facie examination of the existence and validity of the arbitration agreement, leaving deeper questions for the arbitral forum.
In Re: Interplay Between Arbitration Agreements and the Indian Stamp Act, 2023 SCC OnLine SC 1666
This decision was relied upon alongside Vidya Drolia in defining the restricted scope of the referral court and supporting minimal judicial intervention at the arbitration-reference stage.
SBI General Insurance Co. Ltd. v. Krish Spinning
This authority similarly supported the principle that a referral court should confine itself to a prima facie inquiry concerning the arbitration agreement rather than conduct an exhaustive adjudication.
Radico Khaitan Ltd. v. Harish Chouhan, 2025 SCC OnLine Del 1675
This Delhi High Court judgment involved an arbitration clause contained in the terms and conditions of tax invoices.
The Court had inferred an intention to arbitrate from continuous transactions, acceptance of invoices and part-payments, while also observing that doubts concerning validity and existence ordinarily favour reference to arbitration.
The factual similarity made this authority particularly relevant to Ambica Enterprises.
Court’s Reasoning
The Court found that Ambica Enterprises and the respondent had maintained a continuous commercial relationship with an open and running account.
Their purchases and sales were made against invoices containing arbitration clauses, and advance payments had been made against the transactions.
More importantly, the petitioner’s own recovery suit arose from purchases and advance payments made against those invoices.
The petitioner had:
- accepted the invoices;
- acted upon them;
- conducted repeated transactions under them;
- made payments in connection with the transactions;
- relied upon those transactions as the basis of its recovery claim; and
- never objected to the arbitration clauses until filing its reply to the Section 8 application.
This conduct demonstrated, in the Court’s view, clear consent and intention to be governed by the Arbitration Act.
The Court distinguished Taipak because that case involved an express stipulation conferring jurisdiction on Delhi courts and therefore lacked consensus ad idem.
It also distinguished Mohammad Eshrar and Inspiration Cloths because those cases involved no explicit acceptance of arbitration, whereas Supreme Court precedent established that acceptance could also be demonstrated through conduct.
Accordingly, the absence of the petitioner’s signature on the invoices did not invalidate the arbitration agreement.
Conclusion
The Delhi High Court dismissed M/s Ambica Enterprises’ petition and upheld the Commercial Court’s order referring the ₹23.09 lakh recovery dispute to arbitration.
The Court held that:
- an arbitration agreement must be in writing, but need not invariably be signed;
- an arbitration clause contained in commercial invoices can constitute a valid arbitration agreement;
- acceptance may be established through the parties’ commercial conduct;
- repeated transactions, acceptance of invoices, advance payments and reliance upon those invoices demonstrated the petitioner’s consent;
- a party cannot rely upon transactions under invoices for its recovery claim while denying the arbitration clause contained in them merely because it did not sign the invoices; and
- the Section 8 referral court correctly referred the dispute to arbitration.
The High Court found no infirmity in the Commercial Court’s order dated 10 July 2026 and dismissed the petition and pending applications. It expressly clarified that it had expressed no opinion on the merits of the commercial dispute and left all rights and contentions open in arbitration.
Case Details
Case: M/s Ambica Enterprises v. Alok Gupta
Court: High Court of Delhi at New Delhi
Case Number: CM(M) 1724/2026, CM APPL. 51407/2026 & CM APPL. 51408/2026; CNR No. DLHC010357712026
Judge: Hon’ble Mr. Justice Ajay Digpaul
Date: 24 August 2026
Result: Petition Dismissed; Commercial Court’s Section 8 order referring the ₹23.09 lakh recovery dispute to arbitration upheld; merits left open for arbitral proceedings.
