Hon’ble Supreme Court: Arbitration Clause Binding Even in an Unsigned Contract if Parties Act Upon Its Terms
Citation: Civil Appeal No. 11067 of 2025
Introduction
The Hon’ble Supreme Court of India, through its decision in Glencore International AG v. Shree Ganesh Metals & Anr. reaffirmed India’s pro-arbitration stance by ruling that an arbitration clause is enforceable even if the underlying contract was not signed, as long as the parties have acted in accordance with its terms. The Court vide its order dated 25th August 2025, clarified that Section 7 of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’) only requires an arbitration agreement to be in writing, not necessarily signed. This ruling enhances commercial certainty in both cross-border and domestic trade by prioritising substance over form in determining consent to arbitrate.
Parties Involved
Appellant: Glencore International AG (‘Glencore’), a Swiss multinational trading company.
Respondent: Shree Ganesh Metals (‘Shree Ganesh’), an Indian proprietorship firm.
Facts of the Case
In March 2016, Glencore entered into a contract with Shree Ganesh for the supply of 6,000 metric tons of zinc. Glencore signed the agreement, which included an arbitration clause referring disputes to LCIA (London Court of International Arbitration), but Shree Ganesh did not sign. Despite the absence of a signature, Shree Ganesh accepted delivery of 2,000 MT zinc, facilitated Standby Letters of Credit through HDFC Bank expressly referencing the contract number, and raised invoices that cited the agreement. When disputes arose, Shree Ganesh filed a civil suit before the Delhi High Court, contending that there was no binding arbitration agreement as the contract remained unsigned. Both the Single Judge and the Division Bench accepted this contention, leading to Glencore’s appeal before the Supreme Court.
Issue
Whether an arbitration clause contained in an unsigned contract is binding on parties who have otherwise acted upon the terms of the agreement.
Arguments
Appellant’s Arguments:
- Arbitration agreement in writing: Section 7(3)–(4) of the Arbitration Act requires the agreement to be in writing, but not necessarily signed; the written contract, invoices, and SLCs satisfy this requirement.
- Acceptance by conduct: Respondent accepted 2,000 MT of zinc, received eight invoices citing the contract, and facilitated two SLCs expressly referencing Contract No. 061-16-12115-S.
- Meeting of minds: The only modification—changing the provisional price from a 10-day to a 5-day LME average—was incorporated into the contract and acted upon. This demonstrates consensus on essential terms.
- Pro-arbitration standard under Section 45: Courts must adopt a prima facie approach at the referral stage; questions of validity and enforceability lie within the arbitral tribunal’s jurisdiction (Kompetenz-Kompetenz).
Respondent’s Arguments:
- No concluded agreement: Absence of the respondent’s signature means no binding contract or arbitration clause.
- No true consensus: The initial exchange reflected divergence, undermining the argument that the parties were ad idem.
- Formal requirement: Without a signature or explicit incorporation of previous contracts, arbitration cannot be enforced.
- Court jurisdiction: Arbitration cannot be compelled when the main contract itself is disputed; courts must first determine the contract’s validity.
Held
The Supreme Court held that:
- Signature Not Mandatory: An arbitration agreement must be in writing, but a signature is not essential if the agreement can be inferred from documentary evidence and conduct.
- Conduct Establishes Consent: By performing key obligations under the contract, Shree Ganesh demonstrated clear acceptance of the agreement, including the arbitration clause.
- Prima Facie Standard at Referral Stage: At the stage of referral under Section 45, courts need only assess the existence of a prima facie arbitration agreement. Detailed questions on validity or enforceability fall within the jurisdiction of the arbitral tribunal under the principle of Kompetenz–Kompetenz.
- Overruling Delhi High Court: The Court set aside the High Court’s orders and directed the matter to arbitration in accordance with the contract.
Conclusion
The Supreme Court’s ruling in Glencore International AG v. Shree Ganesh Metals reinforces India’s pro-arbitration framework by confirming that substantive consent evidenced through conduct suffices to enforce an arbitration agreement. The judgment strengthens commercial confidence and minimises technical objections aimed at avoiding arbitration.
Takeaway
- Arbitration agreements need not be signed to be enforceable; written evidence and performance of obligations may suffice.
- Parties must exercise caution before acting on unsigned contracts, as their conduct may bind them to arbitration clauses.
- Courts will adopt a minimal interference approach, referring parties to arbitration when prima facie evidence of consent exists.
- The decision harmonises Indian arbitration law with global best practices, advancing India’s status as an arbitration-friendly jurisdiction.