Acceptance of goods and payment on the basis of bills containing arbitration clauses implies consent to the arbitration clause and creates a valid arbitration agreement.

( 1 ) THIS appeal is directed against order dates 27/05/1974, of the Sub-Judge, Delhi, by which he had accepted theobjections filed by the respondent and had set aside the award.

( 2 ) IT appears that taking resort to the arbitration clauses 20 and 21appearing in the printed terms at the back of the bills issued by the appellantto the respondent, the appellant appointed Shri S. N. Kumar as Arbitratorand despite notice to the respondent, the State of Bihar did not appoint anyarbitrator and the State of Bihar also did not appear before the Arbitratorand the Arbitrator gave the award dated 6/08/1970, by virtue of whichhe awarded Rs. 16, 144/47 to the appellant as price of the goods suppliedto the respondent and also filed the award in the Court taking resort undersection 14 (2) of the Arbitration Act. Notice of the filing of the award wasissued to both the parties and the respondent-State of Bihar filed theobjections under Sections 30 and 33 of the Arbitration Act.

( 3 ) IT was pleaded in the Objection Petition that there existed noarbitration agreement and thus, the matter could not be referred to thearbitrator and the award given by the Arbitrator on that score was a nullity. It was mentioned in the Objection Petition that on quotations being invited,m/s. Bharat Steel Tubes Limited gave their quotation and the State of Biharplaced the order for supply of tubes on certain terms which are reproducedin para 2 of the Objection Petition which show that 90% payment was to bemade on proof of despatch and the balance 10% was to be paid within 15days from the date of the receipt of materials at site after due veriefiation ofmaterials. The bill in duplicate was sent to the Executive Engineer, P. H. Division Patna West, Patna, for payment. Other terms have also beenquoted in this para which are not relevant for deciding the present appeal. Itwas averred that as there was no arbitration clause appearing in the contractentered into between the parties, thus, the Arbitrator had no jurisdiction toentertain the claim of the appellant and give any award. No other objectionwas raised in the Objection Petition.

( 4 ) IN evidence, however, it came out that at first there was a contract entered between M/s. S. B. Industries and the respondent and certainletters were exchanged, copies of which have been referred to in theimpugned order, and later on it was agreed between M/s. S. B. Industries andthe respondent that the appellant shall supply the goods directly to the Stateof Bihar and also shall raise the bills directly on the State of Bihar and onthe basis of that agreement, the appellant supplied the goods and alongwiththe goods the appellant had issued the bills which contained the arbitrationclauses as mentioned above. It is not disputed that the goods were suppliedby the appellant to the respondent on the basis of the aforesaid bills whichwere accepted by the respondent without demur.

( 5 ) NOW the short question which arises for consideration is whetherthe arbitration clauses printed on the bill could bind the parties or not?

( 6 ) THE learned Counsel for the respondent has vehemently arguedthat as there existed no arbitration clause in the agreement entered intobetween M/s. S. B. Industries and the respondent, there could be no occasionfor any arbitration agreement coming into existence between the partiesunless there has been some exchange of letters between the parties agreeingto such arbitration clauses. He has urged that in case the appellant wantedthe agreement to be reached for arbitration clause, the appellant should haveaddressed a letter to the respondent insisting upon having an arbitrationclause before supplying the goods.

( 7 ) THE learned Counsel for the appellant, on the other hand, hasargued that the goods were supplied on the basis of the said bills whichcontained the printed arbitration clause and as the goods were acceptedalongwith the bills an implied contract regarding the arbitration clause cameinto exi