Sanchayita Lahkar

The High Court of Kerala Single Bench of Justice S. Manu held that a written arbitration agreement need not bear the signatures of the parties if their mutual understanding and intention to arbitrate are evident from their conduct and supporting documents. The case arose from a financial dispute where a lending company sought reference to arbitration based on an unsigned agreement containing an arbitration clause. Finding that both sides had acted on the terms of the agreement and there was clear evidence of consensus ad idem, the Court allowed the application for reference to arbitration. Justice Manu directed the Kerala High Court Arbitration Centre to appoint a sole arbitrator to adjudicate the disputes between the parties in accordance with law.

The petitioner, Sigmatic Nidhi Limited, a financial institution, granted a loan to the first respondent, with the second and third respondents as co-borrowers. The respondents executed Annexure A2, an agreement dated 19.12.2019, which contained an arbitration clause. The document bore the signatures of the respondents but was not signed by any representative of the petitioner. The respondents subsequently defaulted on repayment. Acting on the arbitration clause, the petitioner appointed an arbitrator unilaterally, resulting in an award dated 02.05.2023.

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The petitioner-initiated execution proceedings through E.P. No.551/2023 before the District Court. The respondents entered appearance and filed objections. By order dated 01.03.2024, the execution court dismissed the application, holding that the arbitrator’s appointment did not comply with the Arbitration and Conciliation Act, 1996, thereby rendering the award unenforceable. The petitioner then filed the present Arbitration Request seeking the appointment of a sole arbitrator.

The respondents did not dispute the appointment of an arbitrator but sought liberty to raise all possible objections, including those concerning arbitrability and jurisdiction. The Court examined Section 7 of the Arbitration and Conciliation Act, 1996, including sub-sections (3) and (4), and considered whether Annexure A2 constituted a valid arbitration agreement despite the petitioner’s missing signature. The petitioner relied on precedents from the Supreme Court, contending that an arbitration agreement need not be signed by both parties if consensus can be inferred from conduct or written exchanges. The Court reviewed the absence of objections from the respondents regarding the existence of the arbitration clause and the prior reliance on the same agreement during earlier proceedings. The Court also took note of the execution court’s finding, which effectively nullified the earlier award, bringing Section 43(4) regarding exclusion of limitation into consideration.

The Court recorded that Annexure A2 “contains an arbitration clause” though “not signed by any representative of the petitioner” and that this made it necessary “to analyse the issue as to whether there was a proper agreement between the parties.” It observed that Section 7(4) makes it clear that “not only a document signed by the parties can be considered as an arbitration agreement ‘in writing’” and that other forms of written communication or conduct may also satisfy the statutory requirement.

The Court stated: “Therefore, plain reading of sub-section (4) gives the impression that… non-denial of existence of the agreement by an opposite party in its defence to a statement of claim can be construed as an arbitration agreement ‘in writing’.” It discussed the legal position explained in Jugal Kishore Rameshwardas, noting the Supreme Court’s statement that “to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties.”

When referring to Govind Rubber Ltd., the Court quoted: “If it can be prima facie shown that the parties are at ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement.” It further cited: “Signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the Act.”

In analysing Mahanagar Telephone Nigam Ltd., the Court stated the Supreme Court’s words: “What is required to be ascertained is the intention of the parties to settle their disputes through arbitration.” It also quoted: “The meaning of a contract must be gathered by adopting a common sense approach, and must not be allowed to be thwarted by a pedantic and legalistic interpretation.”

The Court recorded that in Glencore International AG, the Supreme Court held: “The mere fact that Contract… was not signed… would not obviate from this principle when the conduct of the parties… clearly manifested… acceptance of the terms and conditions contained therein.”

Summarising the legal principles, the Court stated: “The Hon’ble Supreme Court has consistently held… that for an arbitration agreement to be valid and binding, it is not always essential that the same shall be signed by all parties.” It noted that respondents “have not filed any counter… disputing the validity of the arbitration clause” and accepted their request that they retain liberty to raise objections before the arbitrator.

The Court recorded that the earlier award “is to be treated as set aside for the purpose of exclusion of limitation as provided under Section 43(4).”

The Court allowed the Arbitration Request and directed that the Kerala High Court Arbitration Centre “nominate a District Judge (Retd.) from Panel-III, preferably from Thrissur, as the sole Arbitrator to resolve the disputes that have arisen between the petitioner and the respondents under Annexure A2 agreement.”

It stated that the learned Arbitrator “may entertain all issues between the parties in connection with the said Agreements, including arbitrability as well as questions of jurisdiction and limitation, if any, raised by the parties. All contentions of the parties are left open and they are at liberty to raise their claims and counterclaims, if any, before the learned Arbitrator, in accordance with law.”

“The Registry shall communicate the substance of this order to the Kerala High Court Arbitration Centre within ten days and the Centre shall inform the learned Arbitrator within a further period of one week and shall obtain duly signed Form 3… and forward the same to this Court.”

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“Upon receipt of Form 3, the Registry shall issue a certified copy of this order with a copy of the Form 3 appended to the Kerala High Court Arbitration Centre” and that “the original of the Disclosure Statement shall be retained by the Kerala High Court Arbitration Centre.”

“The fees of the learned Arbitrator… shall be governed by Rule 28” and that “the manner in which the fees and costs payable by the parties shall be governed by Rule 27 of the Kerala High Court (Arbitration Centre) Rules, 2025. If the learned Arbitrator needs the assistance of an expert, then he is at liberty to seek such assistance in the course of the arbitration proceedings.”

Advocates Representing the Parties

For the Petitioner: Shri. P. Paulochan Antony, Shri. Sreejith K.
For the Respondents: Sri. V.A. Johnson (Varikkappallil)

Case Title: Sigmatic Nidhi Limited v. Suresh Kumar & Others
Neutral Citation: 2025: KER:85293
Case Number: A.R. No. 68 of 2025
Bench: Justice S. Manu