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of <h1>Arbitration clause 32.2 applies; parties' conduct and emails prima facie establish agreement despite unsigned contract, s.45 invoked under Kompetenz-Kompetenz</h1> <h3>Glencore International AG Versus M/s. Shree Ganesh Metals and another</h3> Glencore International AG Versus M/s. Shree Ganesh Metals and another - 2025 INSC 1036 ISSUES PRESENTED AND CONSIDERED 1. Whether there existed a binding arbitration agreement between the parties in respect of supplies governed by Contract No. 061-16-12115-S dated 11.03.2016 despite the purchaser not signing that contract. 2. Whether the conduct of the parties (supply of goods, invoicing, and issuance of Standby Letters of Credit) can give rise to an arbitration agreement in writing for the purposes of Sections 44 and 45 of the Arbitration and Conciliation Act, 1996. 3. Whether the referral Court under Section 45 was obliged to refer the dispute to arbitration on a prima facie finding of existence of an arbitration agreement, or whether it could undertake a detailed inquiry into the existence and validity of the arbitration agreement. 4. (Alternative) Whether an arbitration clause in an earlier 2012 contract could be read into the 2016 supply arrangement between the parties. ISSUE-WISE DETAILED ANALYSIS - Existence and binding effect of arbitration agreement in Contract No. 061-16-12115-S Legal framework: Sections 44 and 45 of the Act of 1996 - Section 44 defines foreign award as being pursuant to an agreement in writing; Section 45 empowers a judicial authority to refer parties to arbitration where an agreement referred to in Section 44 exists, unless it prima facie finds the agreement null, inoperative or incapable of performance. Section 7(3)-(5) and related principles on what constitutes an arbitration agreement in writing are applied by analogy. Precedent treatment: The Court relied on authoritative principles reaffirmed in recent decisions holding (a) the party invoking arbitration bears the burden of prima facie proof of the arbitration agreement; (b) the referral Court should not conduct a mini-trial on existence/validity and only needs to be satisfied prima facie; and (c) an arbitration agreement need be in writing but need not be signed, and can be constituted by correspondence or conduct. Interpretation and reasoning: The Court examined the undisputed factual matrix: (i) emails of 10-11.03.2016 evidencing mutual negotiation and acceptance (with one pricing modification accepted and incorporated); (ii) appellant issued Contract No. 061-16-12115-S dated 11.03.2016 which incorporated the modified pricing; (iii) 2,000 metric tons were supplied and accepted; eight invoices referencing that contract were raised; and (iv) two Standby Letters of Credit (and an amended one) were issued by the bank at the purchaser's request specifically referencing Contract No. 061-16-12115-S. The Court held that these facts, taken together, established respondent's acceptance of the contract terms and, therefore, of the arbitration clause (clause 32.2) therein. Ratio vs. Obiter: Ratio - Conduct amounting to acceptance of contractual terms (including arbitration clause) can render an unsigned contract binding and satisfy the 'agreement in writing' requirement under Sections 44/45 so as to mandate referral to arbitration on a prima facie showing. Obiter - Comments distinguishing the necessity of reliance on the earlier 2012 contract are ancillary but supportive. Conclusion: The arbitration agreement in clause 32.2 of Contract No. 061-16-12115-S existed prima facie and bound the parties; the referral Court erred in refusing to refer the dispute to arbitration on the basis that the purchaser had not signed the contract. ISSUE-WISE DETAILED ANALYSIS - Conduct, correspondence and electronic records as constituting arbitration agreement in writing Legal framework: Section 7 read with Sections 44-45 and established principle that arbitration agreement must be in writing but may be evidenced by exchange of letters, electronic communications, or conduct; doctrine of Kompetenz-Kompetenz insofar as prima facie proof before referral Courts is concerned. Precedent treatment: The Court applied and followed precedents holding that (i) signature is not a formal requirement for an arbitration agreement if the record of agreement is provided by exchange of electronic communications or conduct; (ii) the referral Court's role is limited to a prima facie satisfaction; and (iii) commercial documents with arbitration clauses are to be construed to give effect to arbitration where possible. Interpretation and reasoning: The Court emphasised that (a) the purchaser's email of 11.03.2016 expressly accepted the terms proposed by the seller except for a single pricing modification which the seller adopted in the contract issued that same day; (b) subsequent acts (LCs, amended LC, deliveries and invoices referencing the contract number) constituted objective manifestations of acceptance; and (c) these manifestations satisfied the 'in writing' requirement and showed ad idem between parties. Ratio vs. Obiter: Ratio - Electronic correspondence and subsequent performance can constitute a written arbitration agreement even absent a signature; the referral Court must accept such prima facie evidence and refer to arbitration unless the agreement appears null, inoperative or incapable of performance on its face. Obiter - Observations on the modernization of commercial practices and e-commerce context are explanatory. Conclusion: The parties' conduct and electronic correspondence constituted a written arbitration agreement; signature was not a prerequisite; and clause 32.2 was available for invocation under Section 45. ISSUE-WISE DETAILED ANALYSIS - Role and limits of referral Court under Section 45 Legal framework: Section 45 mandates reference to arbitration when an agreement in writing exists, unless the judicial authority prima facie finds the agreement null, inoperative or incapable of being performed; doctrine of Kompetenz-Kompetenz and the limited scope of inquiry by referral Courts. Precedent treatment: The Court relied on precedents holding that the referral Court should not conduct a mini-trial on the arbitration agreement's existence or validity, and that only prima facie proof is necessary from the party seeking referral. Interpretation and reasoning: The Court found that the referral Court performed impermissible fact-finding and required more than prima facie proof - focusing on absence of purchaser's signature and an asserted lack of ad idem - despite documentary and conduct-based evidence indicating acceptance. The Court held that such issues of validity should be tried by the Arbitral Tribunal unless the agreement is prima facie null, inoperative or incapable of performance. Ratio vs. Obiter: Ratio - Referral Courts must confine themselves to a prima facie evaluation and refer disputes to arbitration when prima facie evidence of an arbitration agreement exists; extensive factual disputes are for the arbitral tribunal. Obiter - Critique of the referral Court's failure to frame the issue under clause 32.2 is explanatory. Conclusion: The referral Court erred in declining to refer the matter to arbitration; on the prima facie record the Court was required to refer the dispute under Section 45. ISSUE-WISE DETAILED ANALYSIS - Alternative contention: applicability of earlier (2012) arbitration clause Legal framework: Principles as to incorporation of arbitration clauses from earlier documents into subsequent contracts and Section 7(5) jurisprudence regarding reference to a document containing an arbitration clause. Precedent treatment: The Court distinguished precedents that require conscious acceptance of an arbitration clause from another document (i.e., that mere reference to a document does not automatically incorporate its arbitration clause) and noted these would be relevant only if reliance on the 2012 contract were necessary. Interpretation and reasoning: The Court observed that reliance on the 2012 contract was unnecessary because Contract No. 061-16-12115-S itself, properly construed with the parties' conduct and correspondence, established an arbitration agreement. Consequently, decisions limiting incorporation of prior arbitration clauses were inapposite to the primary question. Ratio vs. Obiter: Obiter - Treatment of earlier-contract incorporation authorities is ancillary as the Court's decision rests on the 2016 contract and conduct. Ratio - If a later contract itself manifests agreement (in writing) including an arbitration clause, there is no necessity to import an earlier clause. Conclusion: The alternative plea based on the 2012 arbitration clause was unnecessary and did not affect the determination that clause 32.2 of the 2016 contract governed and was enforceable. FINAL CONCLUSION AND RELIEF DIRECTIVE (as determined by The Court) The Court concluded that on the admitted facts the arbitration agreement in clause 32.2 of Contract No. 061-16-12115-S dated 11.03.2016 existed prima facie, was binding despite absence of the purchaser's signature, and required referral under Section 45; the refusal by the referral Court and the Division Bench was unsustainable; matter remitted - I.A. No.4550 of 2017 shall be restored and the disputes referred to arbitration in accordance with law.
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