Summary: In the case of Glencore International AG v. Shree Ganesh Metals, the issue before the Supreme Court was whether an unsigned arbitration agreement could bind parties based on their conduct and correspondence. Answering in affirmative, the Court held that such agreements are enforceable if parties are ad idem and have acted upon the contract terms, including arbitration clauses. The ruling affirms India’s pro-arbitration stance, ensuring legal certainty for modern commercial transactions involving conclusion via electronic communication and performance.
Introduction
In Glencore International AG v. Shree Ganesh Metals[1], the Supreme Court[2] answered a simple yet crucial question of law: whether an arbitration clause binds parties despite the written arbitration agreement being unsigned by a party?
In doing so, the Supreme Court (“SC”) has addressed a recurring problem in the commercial world, where performance of contractual duties often begins even before the contract is formally signed and completed. By holding in the affirmative, the top court has strengthened India’s pro-arbitration stance, aligning with international commercial practices, dispelling the uncertainty that repeatedly surfaces with unsigned arbitration agreements.
Facts in Brief
Shree Ganesh Metals (“Respondent”), a proprietorship firm in Himachal Pradesh, entered into four individual contracts with Glencore International AG (“Appellant”), a Swiss multinational engaged in mining and commodity trading, from the period 2011 to 2012 for purchase of zinc alloy metals. All four contracts contained arbitral clauses that stated that any dispute in relation to the contract would be referred under the Rules of the London Court of International Arbitration while the seat of arbitration would be London, United Kingdom.
In 2016, the parties proposed to enter a fifth contract (“Fifth Contract”) with the terms and modalities being discussed over email. The Appellant proposed price fixation based on London Metal Exchange (“LME”) averages of 10 market days proper and insisted on standby letters of credit. The Respondent suggested modifying the number of days to five (5), to which the Appellant promised to respond with the contract and proforma. The Appellant, thereafter, forwarded the duly signed Fifth Contract, incorporating the terms and modalities discussed over email, incorporating the Respondent’s point regarding five consecutive days market price, to the Respondent for signature. The Fifth Contract contained a provision requiring the Respondent to open a Standby Letter of Credit in favour of the Appellant after conclusion of their respective business. It also contained an arbitral clause.
Admittedly, the Respondent did not sign the Fifth Contract. However, it accepted 2,000 metric tonnes of zinc metal in accordance with the Fifth Contract and at its behest, HDFC Bank (Respondent No. 2) issued two separate Standby Letters of Credit, dated April 22, 2016, and November 17, 2016 (“Standby Letters”).
Disputes arose when Respondent No. 1 failed to furnish further letters of credit, which is when the Appellant invoked the Standby Letters. This led to the Indian buyer filing a civil suit bearing CS(COMM) No. 154 of 2017, before the Delhi High Court (“Civil Suit”), seeking the following reliefs: (i) declare invocation of the Standby Letters by the Appellant as null and void; (ii) pass decree of recovery of money, along with interest per annum in its favour; (iii) permanently injunct the Appellant from invoking the Standby Letters. Thereafter, the Appellant filed an application in the Civil Suit bearing I.A. No. 4550 of 2017, invoking Section 45 of the Arbitration and Conciliation Act, 1996 (“Act”), requesting the matter to be referred to arbitration in terms of the contract.[3] This was contested by the Respondent on grounds that the parties never concluded the said contract, so the application was liable to be dismissed in limine.
By order dated November 02, 2017, the learned Single Bench of the Delhi High Court rejected I.A. No. 4550 of 2017, filed by the Appellant. It was recorded that no concluded contract came into existence as the contract did not bear signatures of the Respondent. Thus, the terms and conditions contained therein were not accepted, signed or stamped. It was further held, “…In any event, holding that the intention to refer disputes to arbitration must be clear and specific, the learned Judge opined that the parties were not ad idem to do so…”
Aggrieved, the Appellant filed an appeal bearing FAO(OS)(COMM) No. 195 of 2017. However, by way of impugned judgement, the Division Bench concurred with the Single Bench’s decision and dismissed the appeal. Hence, the Appellant filed the present Civil Appeal in the SC.
Court’s Reasoning
The key issue before the SC was whether a legally binding arbitration agreement existed between the parties due to the conduct and performance of the parties despite the absence of formal signatures, which the SC answered in the affirmative.
The SC’s decision is grounded in well-established arbitration jurisprudence that emphasises on party autonomy, conduct of parties, consensus ad-idem and a pro-arbitration approach. Reliance was placed on the landmark judgment of Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996, and Stamp Act, 1899,[4] which established the foundational principle that the burden of proving existence of an arbitration agreement lies on the party seeking to rely on it, and only prima facie proof is needed before the referral court in light of the Kompetenz-Kompetenz doctrine. The view expressed earlier in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd,[5] wherein the Court clarified that Section 45 does not require final determination by the judicial authority, and that the arbitral tribunal can try the issue fully, was thus re-affirmed.
The Court also drew upon the commercial interpretation principles established in Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited,[6] which held that commercial documents with arbitration clauses should be interpreted to give effect to the agreement rather than invalidate it, and crucially established that arbitration agreements need not be signed if parties are ad idem and there is a record of agreement by way of exchange of communication. This approach was consolidated in Caravel Shipping Services Private Limited v. Premier Sea Foods Exim Private Limited,[7] which affirmed that arbitration agreements need to be in writing but need not be signed, with the only prerequisite being that it should be in writing as per Section 7(3) of the Act.
Pertinently, the SC distinguished M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd.[8] and NBCC (India) Ltd. v. Zillion Infraprojects Private Limited,[9] relied upon by the Respondent on the basis that both cases dealt with incorporation of arbitration clauses from external documents, which differs from the present case.
Court’s Decision
The SC held that arbitration agreements can be inferred from the exchange of letters and electronic communications, and that conduct of parties can manifest acceptance of contract terms, including arbitration clauses. The Court found that the Respondent’s performance — accepting deliveries, furnishing Letters of Credit, and acknowledging contractual obligations — clearly demonstrated acceptance of the Fifth Contract, including its arbitration clause.
Significantly, SC noted that the Respondent’s own suit claim pertained to Letters of Credit furnished pursuant to the very contract it claimed never existed, highlighting the inconsistency in its position. The Court thus stated, “…that such actions on its part clearly demonstrated due and complete acceptance of the said contract. Therefore, it cannot blithely bank upon its own failure to sign the said contract to wriggle out of the terms and conditions mentioned therein.”[10]
Key Takeaways and Concluding Thoughts
At a time when commercial transactions increasingly rely on electronic communications and performance-based agreements, the present case has far-reaching consequences and becomes of substantial relevance. The SC has silenced any alternative discourse and validates arbitration agreements without formal signatures, based on correspondence and conduct of the parties. The SC’s decision is an essential safeguard for new-age businesses, that often close deals over emails and other electronic modes of communication before any formal documentation takes place, and provides them with crucial legal certainty. On the other hand, the decision helps to discourage tactical litigation by parties that attempt to benefit from partial performance of contracts without fulfilling their own obligations.
Thus, clearly the SC’s decision is a step in the right direction, aligning India’s arbitration jurisprudence with international best practices and conventions. Article 7 of the UNCITRAL Model Law on International Commercial Arbitration provides for arbitration agreements in writing, without requiring signatures, recognising modern commercial realities.[11] Article II of the New York Convention, 1958, similarly adopts a liberal approach to written arbitration agreements.[12] This approach is further consistent with the recommendations of the UNCITRAL Working Group.[13]
By prioritising substance over form, the decision ensures that businesses do not exploit agreed contractual terms and conditions on mere procedural technicalities, fortifying commercial certainty in the increasingly globalised set up.
This approach strengthens India’s position as an arbitration friendly jurisdiction, particularly benefiting international commodity trading where business relationships often develop through performance rather than formal documentation.
For further information, please contact:
Vikash Kumar Jha, Partner, Cyril Amarchand Mangaldas
vikashkumar.jha@cyrilshroff.com
[1] 2025 SCC OnLine SC 1815
[2] Bench comprising of Justice Sanjay Kumar and Justice Satish Chandra Sharma
[3] The Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996)
[4] In Re (2024) 6 SCC 1
[5] (2005) 7 SCC 234
[6] (2015) 13 SCC 477
[7] (2019) 11 SCC 461
[8] (2009) 7 SCC 696
[9] (2024) 7 SCC 174
[10] (n1) Glencore, ¶21
[11] UNCITRAL Model Law on International Commercial Arbitration (1985, amended 2006), Article 7: “An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.”
[12] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), Article II(2): “The term ‘agreement in writing’ shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.”
[13] UNCITRAL Working Group II (Arbitration and Conciliation) – Electronic Commerce and Arbitration Agreements (A/CN.9/WG.II/WP.108) Page 4 [https://docs.un.org/en/A/CN.9/WG.II/WP.108/Add.1]
