Not Signing doesn’t Cancel Arbitration Agreement

Source: Supreme Court  

Why in News? 

Recently, Justices Sanjay Kumar and Satish Chandra Sharma has held that an arbitration agreement need not be signed to be enforceable if the parties otherwise demonstrate mutual consent—via written conduct such as emails—setting aside the Delhi High Court’s refusal to refer the dispute to arbitration solely because one party did not sign the arbitration agreement. 

• The Supreme Court held this in the matter of Glencore International AG v. M/s. Shree Ganesh Metals and another (2025). 

What was the Background of Glencore International AG v. M/s. Shree Ganesh Metals and another, (2025) ? 

• Glencore International AG, a Swiss mining and commodity trading company, had an established business relationship with Shree Ganesh Metals, an Indian proprietorship concern producing zinc alloys in Himachal Pradesh. Between 2011-2012, Shree Ganesh Metals purchased zinc metal under four contracts, all containing London arbitration clauses. 
• In March 2016, parties negotiated a fifth contract for 6,000 metric tons of zinc metal delivery from March 2016 to February 2017. Through email exchange on 10-11 March 2016, Glencore proposed terms including LME pricing based on 10-day average, while Shree Ganesh Metals accepted but requested modification to 5-day LME average. Glencore prepared Contract No. 061-16-12115-S incorporating the agreed modification and signed it, but Shree Ganesh Metals never signed the document. 
• Shree Ganesh Metals accepted 2,000 metric tons of zinc metal, arranged Standby Letters of Credit through HDFC Bank specifically referencing the unsigned contract, and engaged in correspondence acknowledging the contract terms. When payment disputes arose, Glencore encashed the Letters of Credit in February 2017. 
• Shree Ganesh Metals sued in Delhi High Court seeking to declare the Letter of Credit encashment void and claiming US$ 1.2 million damages. Glencore sought arbitration reference under the unsigned contract's arbitration clause, which both the single judge and Division Bench rejected solely due to absence of signature. 

What were the Court’s Observations? 

• The Supreme Court observed that arbitration agreements need only be in writing under Section 7(3) of the Arbitration Act, 1996, and signatures are not mandatory requirements. Electronic communications and conduct demonstrating mutual consent can establish valid arbitration agreements. 
• The Court noted that Shree Ganesh Metals' conduct - accepting material delivery, issuing Letters of Credit referencing the contract, and corresponding about contract performance - unequivocally demonstrated acceptance of all contract terms including the arbitration clause, making signature absence irrelevant. 
• The Court observed that modern commercial practices including e-commerce, internet transactions, and standard form contracts frequently operate without traditional signatures, emphasising that established party identity and recorded agreement consensus suffice for valid arbitration agreements. 
• The Court noted that referral courts need establish only prima facie proof of arbitration agreement existence and should favour giving effect to arbitration clauses rather than finding technical grounds for invalidation, leaving detailed validity determinations to arbitral tribunals. 
• The Court observed that Delhi High Court ignored crucial factual evidence of contract acceptance and performance, erroneously focusing solely on signature absence while disregarding clear conduct demonstrating mutual agreement and arbitration clause binding effect. 

Can Arbitration Agreements Be Enforced Without Signatures? 

• Section 7(3) of the Arbitration and Conciliation Act, 1996 mandates that arbitration agreements must be in writing, establishing this as the sole formal requirement for validity without imposing any signature obligation. 
• Section 7(4) recognises three distinct forms of written arbitration agreements: documents signed by parties  
  • under clause (a), exchange of communications providing agreement records  
  • under clause (b), and mutual non-denial of arbitration existence in pleadings  
  • under clause (c), demonstrating that signature represents only one pathway among several valid formation methods. 
• Section 7(4)(b) specifically includes "exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means" as valid forms of written arbitration agreements, provided they maintain records of the agreement, thereby eliminating signature requirements for electronically communicated consent. 
• Section 7(4)(c) establishes that arbitration agreements exist when one party alleges their existence in statements of claim and defence while the other party fails to deny such existence, creating binding arbitration obligations through procedural conduct rather than signature formalities. 
• Section 45 empowers courts to refer parties to arbitration upon request unless they find the agreement "prima facie null and void, inoperative or incapable of being performed," establishing a low threshold that focuses on agreement substance rather than signature formalities. 
• Modern commercial practices including e-commerce transactions, internet purchases, telephone bookings, and standard form contracts frequently operate without traditional signatures, requiring legal recognition of alternative consent manifestation methods to maintain commercial viability. 
• When parties demonstrate mutual consent through contract performance, material acceptance, financial arrangements, and ongoing correspondence referencing specific agreement terms, such conduct constitutes sufficient evidence of arbitration agreement acceptance regardless of signature absence. 
• Courts applying Section 45 need establish only prima facie proof of arbitration agreement existence rather than conducting detailed validity examinations, preventing technical signature requirements from defeating substantive arbitration consent demonstrated through party behaviour.