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The Supreme Court of India has held that an arbitration clause contained in an unsigned contract is binding if both parties have demonstrably accepted and acted upon its terms. This significant decision overrules prior Delhi High Court orders which asserted that a signed agreement was necessary for valid arbitration.

In Glencore International AG vs. Shree Ganesh Metals, the dispute arose from a large zinc supply contract negotiated in 2016. Even though the Indian buyer did not physically sign the contract, their conduct—such as honoring invoices, opening standby letters of credit referring to the contract, and carrying out substantial obligations under its terms—was considered sufficient evidence of consent to the contract and its arbitration mechanism.

The Supreme Court emphasized that a party may not later disown obligations or seek to invalidate an arbitration clause simply due to lack of signature when their actions show clear acceptance. The Bench clarified, “The mere fact that the contract was not signed… would not obviate from this principle when the conduct of the parties… clearly manifested acceptance of the terms and conditions contained therein, including the arbitration agreement”.

Referencing previous rulings—including Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia Pvt. Ltd. and Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd.—the Court reiterated that commercial contracts and arbitration clauses must be interpreted to effectuate the parties’ true intentions, not frustrate them through technicalities.

Key legal principles affirmed:

• Arbitration agreements must be in writing but need not be signed if mutual consent is evident from conduct.
• Matters of substance and intention outweigh strict formalities regarding the presence of a signature.
• Courts should give effect to the actual conduct and intention behind commercial contracts, especially those involving arbitration clauses.
• Once consent is demonstrated through actions, subsequent objections on the ground of unsigned agreements lack merit.

The Supreme Court allowed the seller’s appeal, reinstated the application for reference to arbitration, and directed the referral court to proceed accordingly. Advocates Gourab Banerji and Vinay Garg represented the parties in this decisive ruling, which sets a crucial precedent for contract enforcement and arbitration in India’s commercial landscape.