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An Unsigned Arbitration Agreement Is Not A Bar To Arbitration

The Court has explained the meaning & significance of an arbitration agreement. The Court has correctly held that in accordance with Section 7(3) of the Arbitration and Conciliation Act, the pre-requisite for a valid arbitration agreement is that it should be in writing.

The Court further articulates that the conditions u/s 7(4) of the Arbitration and Conciliation Act are not exhaustive to the extent and are merely conditions to show that there exists an arbitration agreement between the parties. Also, it would not be right to interpret that if the conditions u/s 7(4) are not met, it would cease to be a valid arbitration agreement. Thus, what is essentially required is that the arbitration agreement should be in writing.

The absence of a signed arbitration agreement shall not preclude a court from finding that there is a valid and binding arbitration agreement. Thus, as a general position, to uphold that an arbitration agreement can be concluded by conduct is a pro-arbitration stand.

Supreme Court Judgments

  1. Name of the case: Caravel Shipping Services Private Limited vs. Premier Sea Foods Exim Private Limited.
    Citation: (2019) 11 SCC 461. - Relevant para nos.: Para 8.

    "In addition, we may indicate that the law in this behalf, in Jugal Kishore Rameshwardas v. Goolbai Hormusji, is that an arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in the 1996 Act in Section 7(3) thereof. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only pre-requisite is that it be in writing, as has been pointed out in Section 7(3)."
  2. Name of the case: PEC Ltd. v. Austbulk Shipping Sdn. Bhd.
    Citation: (2019) 11 SCC 620. Relevant para nos.: Para 25.

    "The learned counsel for the appellant also submitted that the appellant did not sign the charter party and cannot be treated as a party to the agreement. There is no dispute that the contract is governed by the English law under which there is no requirement for the charter party to be signed by the parties to make it binding. We have no doubt in approving the conclusion of the High Court on this point and rejecting the submission made on behalf of the appellant. Abundant material was examined by both the arbitrator and the High Court to record a finding that there existed a valid arbitration agreement. Article II of the First Schedule of the Act defines "arbitration agreement as including an arbitral clause in a contract or an arbitration agreement signed by the parties or contained in an exchange of letters or telegrams.

    The High Court found that the charter party which contained the arbitration agreement was agreed to and entered upon by the parties and the same is supported by the correspondence between the parties. The term "agreement in writing in Article II is very wide. An arbitral clause need not necessarily be found in a contract or an arbitral agreement. It can be included in the correspondence between the parties also. In the present case the arbitration agreement is found in the charter party which has been accepted by both the arbitrator and the High Court. We see no reason to differ from the view taken by the High Court on this point."
  3. Name of the case: Govind Rubber Ltd. vs Louids Dreyfus Commodities Asia Ltd.
    Citation: (2015) 13 SCC 477.
    Relevant para nos.: Para 14, 15 and 16.

    "So far as the first contention made by the learned .counsel for the appellant that since the appellant did not sign the agreement, it cannot be said to be a party to the agreement, we would like to refer Section 7 of the Arbitration and Conciliation Act."

    "A perusal of the aforesaid provisions would show that in order to constitute an arbitration agreement, it need not be signed by all the parties. Section 7(3) of the Act provides that the arbitration agreement shall be in writing, which is a mandatory requirement Section 7(4) states that the arbitration agreement shall be in writing if it is a document signed by all the parties. But a perusal of clauses (b) and (c) of Section 7(4) would show that a written document which may not be signed by the parties even then it can be arbitration agreement. Section 7(4)(b) provides that an arbitration agreement can be culled out from an exchange of letters, telex telegrams or other means of telecommunication which provide a record of the agreement."

    "On reading the provisions it can safely be concluded that an arbitration agreement even though in writing need not be signed by the parties if the record of agreement is provided by exchange of letters, telex, telegrams or other means of telecommunication Section 7(4)(c) provides that there can be an arbitration agreement in the exchange of statements or claims and defence in which the existence of the agreement is alleged by one party and not denied by the other.

    If it can be prima facie shown that the parties are at ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement. In the present day of e-commerce in cases of internet purchases, tele purchases, ticket booking on internet and in standard forms of contract, terms and conditions are agreed upon. In such agreements, if the identity of the parties is established, and there is a record of agreement it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the parties."
  4. Name of the case: Trimex International Fze Ltd. vs. Vedanta Aluminium Ltd.
    Citation: (2010) 3 SCC 1. Relevant para nos.: Para 57 and 60.
    "Both in the counter-affidavit as well as at the time of arguments Mr C.A. Sundaram, learned Sen Counsel for the respondent has pointed out various differences between the version of the respondent and the petitioner. However, a close scrutiny of the same shows that there were only minor differences that would not affect the intention of the parties.

    It is essential that the intention of the parties be considered in order to conclude whether the parties were ad idem as far as adopting arbitration as a method of dispute resolution was concerned. In those circumstances, the stand of the respondent that in the absence of signed contract, the arbitration clause cannot be relied upon is liable to be rejected."

    "It is clear that in the absence of signed agreement between the parties, it would be possible to infer from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of telecommunication."
  5. Name of the case: Shakti Bhog Foods Ltd. vs. Kola Shipping Ltd.
    Citation: (2009) 2 SCC 134. Relevant para nos.: Para 14, 15 and 17.

    "In our view, we should give reasons for dismissing this appeal. We have already noted that by the charter party agreement dated 18-7-2005 the appellant agreed to load and the respondent agreed to carry 13,500 tons of cargo from Kakinada to the Port of Cotonou. We have also observed that the said charter party agreement provided for arbitration in Box 25 and Clause 19 and that the disputes pertaining to the same were to be referred to arbitration in London under the English Arbitration Act. The appellant herein has not refuted the signature on the front page of the charter party agreement. We cannot entertain his claim that such a signature would not amount to a valid arbitration agreement.

    For this purpose, it would be relevant to quote Section 7 of the Act:
    Therefore, it is clear from the provisions made under Section 7 of the Act that the existence of an arbitration agreement can be inferred from a document signed by the parties, or an exchange of letters, telex. Telegrams or other means of telecommunication, which provide a record of the agreement."

    "In the present case, the appellant had not denied the fact that it had signed the first page of the charter party agreement. Moreover, the subsequent correspondences between the parties also lead us to conclude that there was indeed a charter party agreement, which existed between the parties. We cannot accept the contention of the appellant that under Section 7 of the Act the letter/faxes or mails or any other communications will have to contain the arbitration clause in the absence of any agreement. The expressions of Section 7 do not specify any requirement to this effect."

    "The appellant contended that the respondent did not file the original charter party agreement in any of the proceedings before any of the lower courts. We would want to reiterate that as far as the provision of Section 7 of the Act is concerned, an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement and furthermore an arbitration is considered to be in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrarns or other means of telecommunication which provide a record of the agreement or an exchange of statement of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

    So from the provisions of Section 7, it is clear that a charter party agreement need not be in writing signed by both parties and this could as well be made out from the acts of the parties to the agreement by way of their exchange of letters and information through fax, e-mails, etc."
  6. Name of the case: Great Offshore Ltd vs. Iranian Offshore Engineering & Construction Company.
    Citation: (2008) 14 SCC 240. Relevant para nos.: Para 56 and 60.

    “ Technicalities like stamps, seals and even signatures are red tape that have to be removed before the parties can get what they really want - an efficient, effective and potentially cheap resolution of their dispute.”

    The Supreme Court again relying upon the acceptance of the tender condition and supply of the machines, held that even in absence of the signed formal Agreement between the parties, the Arbitration Agreement would be deemed to have come into existence.
  7. Name of the case: UNISSI (India) Pvt. Ltd. v. Post Graduate Institute of Medical Education & Research.
    Citation: (2009) 1 SCC 107. Relevant para nos.: Para 16 and 17.

    "In this case a contract containing an arbitration clause was between the parties but no agreement was signed between the parties. The Bombay High Court held that the arbitration clause in the agreement was binding. Finally, this Court upholding the judgment of the Bombay High Court held that the arbitration clause in the agreement that was exchanged between the parties was binding. Therefore, it would be illogical to let Smita escape its obligations under the contract simply because it failed to sign. The Court also found that because the arbitrator’s conclusions were plausible, enforcing the award would not be contrary to the public policy of India."
  8. Name of the case: Smita Conductors Ltd. v. Euro Alloys Ltd.
    Citation: (2001) 7 SCC 728. Relevant para nos.: Para 9 and 10.
  9. Name of the case: Nimet Resources INC & another vs. Essar Steels Ltd.
    Citation: (2000) 7 SCC 497. Relevant para nos.: Para 5.

Delhi High Court Judgments

  1. Name of the case: Himalayan Heli Adventures Pvt. Ltd vs. Utair India Pvt. Ltd. & Others.
    Citation: 2019 SCC OnLine Del 8843. Relevant para nos.: Para 18, 23 to 25.

    "I am unable to agree with the said submission of the counsel for the respondents. As noted hereinabove, the petitioner not only accepted the same terms as were offered by the respondents, the parties have thereafter acted on the same with the respondents supplying the helicopters and the petitioner making the payment for the same."

    "Learned counsel for the respondents stated that the helicopters were supplied to the petitioner not on the basis of the Agreement but on basis of an oral understanding between the parties. In my opinion, the very fact that the respondents were insisting on the Agreement to be first finalized before supply of the helicopters; supplied helicopters on the receipt of email dated 15.02.2018 from the petitioner; and did not respond to the repeated correspondences thereafter addressed by the petitioner to the respondents, including those making reference to this Agreement, does not support the contention of the counsel for the respondents."

    "Similarly, reliance of the learned counsel for the respondents on the SMS message dated 17.02.2018 is also ill-founded. The said message does not denude from the already concluded Arbitration Agreement between the parties 25. In view of the above, I have no hesitation in holding that there is an Arbitration Agreement between the parties as contained in the draft Agreement circulated by the respondents first and duly accepted by the petitioner."

    "As far as the relief claimed by the petitioner, the disputes between the parties are in relation to the supply of helicopters in the year 2018 which in the submission of the petitioner was to be made by February, 2018. The claim of the petitioner is one of damages. Admittedly, the arbitration proceedings are yet to be commenced between the parties.

    In view of the above, I do not deem this to be a fit case for grant of an order which would in fact amount to an attachment before judgment. For such an order, the petitioner has to make a stronger than prima facie case and has to also prove that in case the Award is made in its favour, the respondents would not be in a position to honor the same. I do not find such a case to have been made out by the petitioner."
  2. Name of the case: M/s. P.B. Jagtyani & Co. & anr. vs. M/S. Gaurav Agencies & anr.
    Citation: 2006 SCC OnLine Del 677. Relevant para nos.: Para 20, 22 and 27.

    3. Name of the case: Unipack Industries vs. Subhash Chand Jain & Ors.
    Citation: 2001 SCC OnLine Del 1210. Relevant para nos.: Para 7.

    "In other words as per Section 7 read with Section 2(b) of the Act there has to be an agreement to refer the disputes or certain disputes with respect to defined legal relationship to arbitration. The arbitration agreement has to be in writing but as is apparent from sub-section (4) Section 7 even if it is not signed under certain circumstances contemplated under clause (b) and (c) of sub-section (4) to Section 7 still there can be an arbitration agreement."

Madhya Pradesh High Court Judgment

  1. Name of the case: Madhya Pradesh Paschim Kshetra Vidyut Vitran Company Ltd. vs. SERCO BPO Pvt. Ltd.
    Citation: 2017 SCC OnLine MP 2025. MP HIGH COURT JUDGMENTS

    Relevant para nos.: Para 11, 12, 14 to 16

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