Kiran Raj

The Supreme Court of India Division Bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma held that an arbitration agreement under Section 45 of the Arbitration and Conciliation Act, 1996, existed between the parties despite the absence of a signed contract by one side. The Court directed that disputes be referred to arbitration under the London Court of International Arbitration Rules, setting aside earlier Delhi High Court orders that denied such reference. The Bench restored the appellant’s application in the civil suit, mandating that the referral court proceed to arbitration in accordance with law.

The dispute originated in the course of commercial transactions between a Swiss company engaged in mining and commodity trading and an Indian proprietorship firm located in Himachal Pradesh engaged in the production of zinc alloys. The parties had previously executed four separate contracts between April 2011 and January 2012. Each of these agreements contained arbitration clauses stipulating that disputes were to be resolved under the London Court of International Arbitration (LCIA) Rules with London as the seat of arbitration.

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Building upon their earlier dealings, the parties proposed to enter into a fifth contract for the supply of 6,000 metric tons of zinc metal to be delivered from March 2016 to February 2017. Negotiations were conducted primarily through email exchanges. On 10 March 2016, the appellant sent an email outlining terms including provisional pricing based on the London Metal Exchange (LME) average of ten days prior, and stipulating that a Standby Letter of Credit should be furnished. The appellant also indicated that all other terms would remain consistent with the last contract between the parties.

On 11 March 2016, the respondent replied, confirming the terms but suggesting one modification: that the provisional price for both Letter of Credit and Invoice would be based on the average of the last five LME days. The appellant acknowledged this confirmation and forwarded Contract No. 061-16-12115-S, duly signed by it, to the respondent for signatures. The draft contract incorporated the agreed terms, including the modification regarding provisional pricing.

The contract specified the purchase of 6,000 metric tons of zinc metal, with a tolerance of plus or minus two percent. Clause 11.2 of the contract reflected the modification concerning provisional pricing, while Clause 12.1 mandated the respondent to open a Standby Letter of Credit within five working days for an amount of USD 50,000. Significantly, Clause 32.2 contained an arbitration agreement stipulating that disputes would be resolved under the LCIA Rules, with London as the seat of arbitration and English as the language.

Despite these developments, the respondent did not sign the contract. However, the parties proceeded with performance. The appellant supplied 2,000 metric tons of zinc metal, which the respondent accepted. The appellant raised eight invoices referencing the contract number, while the respondent procured Standby Letters of Credit through HDFC Bank, each expressly tied to the same contract. Due to a clerical error in one letter of credit, the respondent issued an amended letter correctly referencing the contract date.

On 6 September 2016, the appellant wrote to the respondent citing the contract and pointing out non-receipt of Letters of Credit for July and August 2016 quotas, while reserving rights to claim compensation for costs arising from non-performance. In reply on 8 September 2016, the respondent again explicitly acknowledged the contract, promised to complete its obligations, and requested dispatch from an alternative location.

Further correspondence followed into February 2017, with the appellant ultimately informing the respondent that its failure to pay outstanding amounts had resulted in encashment of Letters of Credit. Nevertheless, the appellant expressed a willingness to continue the business relationship and urged the respondent to provide the required Letter of Credit to enable further deliveries.

At this stage, the respondent initiated a civil suit before the Delhi High Court seeking a declaration that invocation of the Standby Letters of Credit was null and void, recovery of USD 1.2 million, a permanent injunction against further invocation of the letters, and a restraint on HDFC Bank from releasing payments. In response, the appellant filed an application under Section 45 of the Arbitration and Conciliation Act, 1996, seeking reference of disputes to arbitration in terms of Clause 32.2 of Contract No. 061-16-12115-S.

The respondent opposed the application, contending that no concluded contract existed as it had not signed the document. On 2 November 2017, a single judge of the Delhi High Court dismissed the application, holding that there was no concluded contract and therefore no arbitration agreement binding the parties. The judge reasoned that the exchange of emails did not establish express or implied acceptance of arbitration.

The appellant’s appeal to a Division Bench of the Delhi High Court was dismissed on 14 November 2019. The Bench concurred with the single judge, finding no evidence that the respondent had accepted terms of the 2016 contract. It further held that the arbitration clause from the 2012 contract could not be applied to disputes concerning the 2016 dealings.

Aggrieved, the appellant approached the Supreme Court of India by way of civil appeal. Written statements were filed in the civil suit without prejudice, but proceedings remained stayed pending the outcome of this appeal.

The Supreme Court recorded that both the single judge and Division Bench of the Delhi High Court had overlooked crucial facts. The Court noted: “Contract No. 061-16-12115-S was duly accepted and acted upon by respondent No.1. Such actions on its part implied that the arbitration agreement therein also came into effect and bound the parties thereto.”

The Court observed that the confusion arose from references to the 2012 contract but stressed: “It was not necessary for the appellant to fall back upon the contract of 2012 in the light of the admitted facts that demonstrated, in no uncertain terms, that the parties duly accepted and acted upon Contract No. 061-16-12115-S dated 11.03.2016.”

The Bench stated that an arbitration agreement may be inferred from exchange of communications: “There is no denying the legal proposition that an arbitration agreement can be inferred even from an exchange of letters, including communication through electronic means, which provide a record of the agreement. The mere fact that Contract No. 061-16-12115-S was not signed by respondent No.1 would not obviate from this principle when the conduct of the parties in furtherance of the said contract, clearly manifested respondent No.1’s acceptance of the terms and conditions contained therein, which would include the arbitration agreement in clause 32.2 thereof.”

In reference to the supply and acceptance of goods, the Court recorded: “It is an admitted fact that 2,000 metric tons of zinc metal were supplied by the appellant pursuant to Contract No. 061-16-12115-S and not only were 8 invoices raised by the appellant in the context thereof, quoting the said contract number, but respondent No.1 also complied with its obligations under that contract by furnishing two Standby Letters of Credit.”

The Court rejected the respondent’s argument that contract numbers were casually used: “The feeble plea of respondent No.1 that this contract number was referred to in the context of the earlier email correspondence does not merit consideration as that contract number came into existence only after the exchange of email correspondence on 10.03.2016 and 11.03.2016.”

The Bench highlighted the consistency of respondent’s acknowledgments: “It is also significant to note that even in the course of this email correspondence, respondent No.1 indicated its concurrence with the terms and conditions proposed by the appellant… It was pursuant to such confirmation by respondent No.1 that the appellant thanked it for the business confirmation and promised to revert with the contract and proforma.”

Regarding the legal framework, the Court cited Section 44 and Section 45 of the Arbitration and Conciliation Act, 1996, emphasizing that referral courts need only a prima facie assessment: “The referral Court is not the appropriate forum to conduct a mini-trial by allowing the parties to adduce evidence in regard to the existence or validity of an arbitration agreement, as the same ought to be left to the Arbitral Tribunal.”

Citing precedents, the Court reiterated that signature was not mandatory for a valid arbitration agreement if conduct and documentation demonstrated consensus: “Signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the Act… the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement.”

The Court concluded: “In the light of the aforestated settled legal position and given the admitted facts, which unequivocally demonstrate that respondent No.1 signified its consent to the terms spelt out… we are of the considered opinion that the arbitration agreement in clause 32.2 thereof was very much available to the appellant and invocation thereof under Section 45 of the Act of 1996… was fully justified.”

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The Supreme Court allowed the appeal, categorically setting aside the Delhi High Court’s orders. The Bench held: “The appeal is accordingly allowed, setting aside the judgment dated 14.11.2019 of the Division Bench and the order dated 02.11.2017 of the learned Judge of the Delhi High Court.”

It directed restoration of the appellant’s application under Section 45: “In consequence, I.A. No.4550 of 2017 in CS (Comm) No. 154 of 2017 shall stand restored to the file and the disputes between the parties shall be referred to arbitration by the referral Court in accordance with law.”

The Court also ordered disposal of all pending applications: “Pending application(s), if any, shall stand disposed of.”

Advocates Representing the Parties

For the Petitioners: Mr. Gourab Banerji, Sr. Adv.; Mr. Sumeet Lall, AOR; Mr. Sidhant Kapoor, Adv.; Ms. Palak Rawat, Adv.; Mr. Rakesh Talukdar, Adv.

For the Respondents: Mr. Vinay Garg, Sr. Adv.; Mr. Piyush Sharma, AOR; Mr. Karunesh Tandon, Adv.; Mr. Anuj Kumar Sharma, Adv.; Mr. Aditya Dikshit, Adv.; Mr. Sonal Jain, AOR; Mr. Rishab Raj Jain, Adv.; Ms. Kajal Sharma, Adv.; Ms. Amiti Gupta, Adv.; Mr. Udayan Jain, Adv.

Case Title: Glencore International AG v. M/s. Shree Ganesh Metals and Another

Neutral Citation: 2025 INSC 1036

Case Number: Civil Appeal No. 11067 of 2025

Bench: Justice Sanjay Kumar, Justice Satish Chandra Sharma