Signature Is Not a Formal Requirement for an Arbitration Agreement”: Supreme Court Enforces Foreign Arbitration Clause Despite Absence of Signed Contract

“Parties Acted Upon the Contract and Arbitration Clause Was Clearly Incorporated — Refusal to Refer Dispute to Arbitration Is Unsustainable” —  In a decisive judgment Supreme Court of India upheld the validity and enforceability of an arbitration clause in a contract that was unsigned by one party, ruling that the conduct of the parties is sufficient to infer consent, particularly in commercial arrangements.

The Bench comprising Justices Sanjay Kumar and Satish Chandra Sharma reversed concurrent findings of both a Single Judge and a Division Bench of the Delhi High Court, which had previously held that there was no concluded arbitration agreement between the parties.

“Acceptance Can Be Implied by Conduct—Even an Unsigned Contract Can Bind Parties to Arbitration”

The core issue before the Court was whether the arbitration clause in Contract No. 061-16-12115-S dated 11.03.2016, referencing London Court of International Arbitration (LCIA) Rules and stipulating London as the seat, could be enforced despite the absence of the respondent’s signature.

Justice Sanjay Kumar, writing for the Bench, held:

“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.”

The Court relied on a series of emails, invoices, and letters of credit exchanged and executed by both parties, establishing beyond doubt that the contract had been fully acted upon.

“Courts Cannot Conduct a Mini-Trial on Existence of Arbitration Clause—Only Prima Facie Satisfaction Needed”

Citing the doctrine of Kompetenz-Kompetenz, the Court reiterated that at the referral stage under Section 45 of the Arbitration and Conciliation Act, 1996, courts are only required to make a prima facie determination of the existence of a valid arbitration agreement:

“Only prima facie proof of the existence of an arbitration agreement needs to be adduced before the referral Court. The referral Court is not the appropriate forum to conduct a mini-trial by allowing parties to adduce evidence.”

The Court clarified that even if the arbitration clause was not expressly signed by both parties, it could still be binding if the parties had clearly acted upon it, as per Section 7(4) and 7(5) of the Act.

“Reference to Foreign Arbitration Cannot Be Denied Where Agreement Is Clearly Incorporated and Acted Upon”

The Supreme Court emphasized the global standards and principles of commercial certainty. Referring to the LCIA arbitration clause, clause 32.2, the Court observed:

“An arbitration agreement can be inferred even from an exchange of letters, including communication through electronic means, which provide a record of the agreement.”

Respondent No.1 had issued two Standby Letters of Credit and received 2,000 MT of zinc metal, all under the impugned contract, yet later denied the existence of the contract itself. The Court held this to be a self-serving and untenable position.

“Judiciary Must Promote Arbitration, Not Undermine It with Rigid Formalities”

Relying on its earlier ruling in Govind Rubber Ltd. vs. Louis Dreyfus Commodities Asia Pvt. Ltd. (2015) 13 SCC 477 and Caravel Shipping Services vs. Premier Sea Foods Exim (2019) 11 SCC 461, the Supreme Court reiterated:

“If it can be prima facie shown that the parties are ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement.”

The Court decisively rejected the Delhi High Court’s view that the arbitration clause was not binding for want of a signed contract, holding that:

“The refusal by the referral Court of the learned Judge and the confirmation of such refusal by the Division Bench are, therefore, unsustainable on facts and in law.”

“Commercial Documents Must Be Construed to Uphold Agreements Rather Than Render Them Invalid”

The judgment underscores the pro-arbitration stance of Indian courts in line with international practice. The Court explicitly leaned in favour of enforcing the arbitration clause, noting:

“A commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it.”

High Court Judgments Set Aside, Dispute to Be Referred to Arbitration

The Supreme Court:

• Allowed the appeal filed by Glencore International AG.

• Set aside both the Single Judge’s order (dated 02.11.2017) and the Division Bench judgment (dated 14.11.2019).

• Directed the referral court to refer the dispute to arbitration under Clause 32.2 of Contract No. 061-16-12115-S, as per LCIA Rules.

The Court concluded: “The arbitration agreement in clause 32.2 was very much available to the appellant and invocation thereof under Section 45... was fully justified and required to be accepted and acted upon.”

Date of Decision: 25 August 2025