Legal Case Analysis: Arbitration Agreement Inferred from Conduct

Case Snapshot

• Court: Supreme Court of India
• Case Title: Glencore International AG v. M/s. Shree Ganesh Metals & Another
• Citation: Civil Appeal No. 11067 of 2025 (2025 INSC 1036)
• Date of Judgment: 25 August 2025
• Coram: HON’BLE MR JUSTICE SANJAY KUMAR and HON’BLE MR JUSTICE SATISH CHANDRA SHARMA
• Read the Judgement

Case Background

Glencore International AG (Swiss commodity trader) and Shree Ganesh Metals (Indian company) had a business relationship. It was governed by contracts with arbitration clauses for London/LCIA arbitration. In 2016, a new contract was negotiated via email, including price term adjustments. Although Glencore signed and sent the written contract, Shree Ganesh Metals never formally signed. However, the contract was partially performed: 2,000 MT of zinc were supplied, invoices referenced the contract, and HDFC Bank issued standby letters of credit citing the contract number.

Disputes over payment led to litigation in Delhi High Court. Hon’ble High Court refused to refer the matter to arbitration—prompting a Supreme Court appeal.

Key Legal Issues

• Whether a binding arbitration agreement could exist absent signatures from both parties?
• Whether performance, correspondence, and conduct can evidence parties’ consent to arbitrate under Section 45 of the Arbitration and Conciliation Act, 1996?

Supreme Court’s Reasoning & Decision

• Actions matter. Finding of Conduct-Based Acceptance:
  The Supreme Court disagreed with the High Court. It looked at what the companies did. Shree Ganesh Metals did business according to the unsigned contract. They took delivery, accepted goods, made payments, and sent letters of credit. All these actions were linked to the contract. And it proved parties accepted terms of contract, including the arbitration clause.
• Signature Not Essential:
  The Court cited Section 7 and Section 45 of the Arbitration and Conciliation Act. It reiterated that an arbitration agreement must be “in writing,” but not necessarily “signed.” Communications and documented conduct suffices, if the parties’ intention to arbitrate is apparent.
• Look beyond just paperwork. Substance Over Form:
  Courts should look at everything. Even if a contract is not signed, if the parties act in line with it, they can be bound by its terms.

Established Legal Principles

This case follows earlier Supreme Court rulings. Courts have allowed unsigned contracts to create binding arbitration if both sides act in agreement.

• Arbitration agreements can be inferred from conduct, correspondence, and documentation—not just formal execution by affixing signatures. Thus, arbitration agreements can be proven by what parties do, not just what they sign.
• Intention of parties to refer dispute to arbitration matters the most. Courts should pay attention to real actions, not just documents. For example, sending goods, making payments, and referencing contracts can show mutual agreement.
• Courts must use a practical approach, fitting business needs, especially for international deals.

Precedent and Practical Impact

• Legal Precedent:
  Confirms and develops Indian law (see also Govind Rubber Ltd v. Louis Dreyfus Commodities, (2015); Caravel Shipping v. Premier Sea Foods (2019)), aligning more fully with commercial realities.
• For Practitioners:
  • Advise clients on the evidentiary value of emails, invoices, and banking instruments.
  • Tell clients to speak up if they disagree with any part of a contract. And document negotiations clearly.
  • Make clients aware that part performance, such as delivery or payment, can activate contract terms like arbitration.

Advisory Notes

• Clients seeking arbitration: Collect all communications, invoices, and banking documents referencing the disputed contract.
• Clients wishing to avoid arbitration: Say no to arbitration in writing. Avoid actions signalling acceptance of unwanted contract terms.
• General best practices:
  • Prioritize clear communication.
  • Remember, you do not always need a signature for arbitration to be binding in India.
  • Indian courts will honor the actual behaviour and intentions of parties, especially in global business.

Key Takeaways

• Ratio Decidendi:
  Arbitration can be binding if both sides’ actions show agreement, even without signatures. Indian courts focus on the real intent and actions of parties, not just on technicalities.
• Arbitration in India:
  Modern commercial realities, including email and digital correspondence, are fully recognized by Indian courts in assessing contractual and arbitration agreements. Courts accept emails and digital records as good evidence of a contract, including the agreement to arbitrate.

This article reflects judicial reasoning and statutory interpretation as of August 2025. For professional advice, always consult a lawyer.