27 August 2025 Legal Updates

 
MERE NON-SIGNING WON'T INVALIDATE ARBITRATION AGREEMENT IF PARTIES OTHERWISE CONSENTED TO ARBITRATION: SUPREME COURT 

(a) Case Title:

• Glencore International AG v. M/s. Shree Ganesh Metals and another

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• August 25, 2025

(d) Bench:

• Justice Sanjay Kumar and Justice Satish Chandra Sharma

Key Issue

Whether a binding arbitration agreement existed between the parties when one party had not signed the contract but had acted upon its terms.

Facts in Brief

1. Appellant:

Glencore International AG (Swiss mining and commodity trading company)

2. Respondent:

Shree Ganesh Metals (Indian proprietorship dealing in zinc alloys)

The parties had previously executed four contracts (2011-2012)

containing arbitration clauses with London as the seat of arbitration. For a fifth contract in 2016:

(a) Email negotiations occurred on March 10-11, 2016

(b) Respondent agreed to terms but requested one modification (provisional price calculation)

(c) Appellant prepared Contract No. 061-16-12115-S incorporating the requested modification

(d) Crucially:

• Respondent never signed the contract but:
• Accepted delivery of 2,000 metric tons of zinc
• Furnished Standby Letters of Credit referencing the contract
• Engaged in correspondence acknowledging the contract terms

When disputes arose, the appellant sought arbitration, but respondent claimed no binding contract existed since it hadn't signed the document.

Lower Court Decisions

1. Delhi High Court (Single Judge, 2017):

Rejected arbitration application, holding no concluded contract existed

2. Delhi High Court (Division Bench, 2019):

Upheld the single judge's decision

Supreme Court's Decision

The Supreme Court allowed the appeal and held that a binding arbitration agreement existed.

Key Legal Principles Established

1. Conduct-Based Contract Formation

• An arbitration agreement can be inferred from parties' conduct even without formal signatures when there is clear acceptance and performance.

2. Prima Facie Standard Under Section 45 

• Under Section 45 of the Arbitration and Conciliation Act, 1996, courts need only establish prima facie existence of an arbitration agreement, not conduct a mini-trial.

3. Writing vs. Signing Requirement 

• Arbitration agreements must be "in writing" but need not be "signed"
• Electronic communications and conduct can establish written agreements
• Modern commercial practices (e-commerce, online bookings) support this interpretation

Court's Reasoning

1. Clear Acceptance:

Respondent's email confirmed agreement to terms with only one modification

2. Performance:

Respondent furnished Letters of Credit, accepted goods, and engaged in contract-related correspondence

3. Estoppel:

Cannot deny contract existence while claiming benefits under it (respondent's suit was about Letters of Credit issued under the same contract)

4. Commercial Interpretation:

Courts should favor giving effect to arbitration clauses in commercial agreements

Outcome

The matter was referred to arbitration in London as per the contract terms, demonstrating the courts' pro-arbitration stance in commercial disputes.

Key Takeaway:

In commercial transactions, parties cannot benefit from a contract's performance while simultaneously denying its existence due to lack of formal signatures.