CASE COMMENT : Glencore International AG Versus. Shree Ganesh Metals and Another
By Fayza Hayat
CITATION: 2025 SCC OnLine SC 1815
Decided on August 25, 2025
CASE NO: Civil Appeal No. 11067 of 2025
[ Special Leave Petition (C)No.27985 of 2019]
BENCH: SANJAY KUMAR AND SATISH CHANDRA SHARMA, JJ.
PARTIES:
Appellant: Glencore International AG.
Respondents: Shree Ganesh Metals and Another.
ISSUE :
WHETHER THERE EXISTS AN ARBITRATION AGREEMENT BETWEEN PARTIES WITHOUT EXPRESSLY ACCEPTING THEM.
IS THERE A BINDING AGREEMENT BETWEEN APPELLANT AND RESPONDENT NO. 1?
WHETHER AN ARBITRATION AGREEMENT CAN BE INFERRED FROM ELECTRONIC COMMUNICATIONS.
INTRODUCTION:
This is a case of a cross-border agreement between parties via email. The respondent disputes the invocation of standby letters of credit. The appellant contended that the matter should be referred to arbitration. This case is significant as the court decided the formation of an arbitration agreement through conduct in a commercial transaction.
FACTS: Glencore International AG, the appellant, is a Swiss company engaged in the business of mining and commodity trading. Shree Ganesh Metals, respondent No. 1, is an Indian proprietorship concern located at Kala Amb, Himachal Pradesh, and is a producer of zinc alloys. Earlier, there were four contracts between the parties regarding the purchase of zinc alloy. The parties then proposed to enter into a fifth agreement via email addressed to respondent No. 1, whereby respondent No. 1 was to buy 6,000 metric tons of zinc metal from the appellant from March, 2016 to February, 2017. It stipulated that all other terms and conditions, as per the last contract between the parties, would remain intact, with an arbitration agreement in clause 32.2.
It stated, “Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration,
As per the contract, 2,000 metric tons of zinc metal were supplied by the appellant and accepted by respondent No. 1, leading to the raising of 8 invoices referred to Contract No. 061-16-12115-S. At the behest of respondent No. 1, HDFC Bank, respondent No. 2 herein, issued two separate Standby Letters of Credit dated 22.04.2016 and 17.11.2016, specifically referring to Contract No. 061-16-12115-S. Later, the appellant addressed a letter dated 06.09.2016 to respondent No. 1, referring to the same contract, stating that it had not received Letters of Credit for the contractual monthly quotas of July and August, 2016. In reply, respondent No. 1 addressed an email dated 08.09.2016, wherein it explicitly referred to Contract No. 061-16-12115-S, stating that it would not commit any default in the performance of the contract and also promised to furnish the Letters of Credit.
PROVISIONS:
Section 44 of the Act of 1996 speaks of a foreign award being an arbitral award in pursuance of an agreement in writing for arbitration.
Section 45 provides that the parties to arbitration by a judicial authority in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it prima facie finds that the said agreement is null and void, inoperative or incapable of being performed.
EARLIER ORDERS:
Respondent No. 1 filed a civil suit in CS (Comm) No. 154 of 2017 before the Delhi High Court. Its prayer therein was to declare that the invocation of the Standby Letters of Credit dated 22.04.2016 and 17.11.2016 by the appellant was null and void. The appellant, thereupon, filed I.A. No. 4550 of 2017 in the civil suit invoking Section 45 of the Arbitration and Conciliation Act, 1996, and requested that the matter be referred to arbitration in terms of clause 32.2 of Contract No. 061-16-12115-S. Respondent No. 1 contested this application claiming that the parties had never concluded the said contract. By order dated 02.11.2017, a learned Judge of the Delhi High Court rejected I.A. No. 4550 of 2017 filed by the appellant. learned Judge recorded that no concluded contract came into existence as the contract did not bear the signature of Respondent No. 1
Aggrieved thereby, the appellant filed an appeal in FAO (OS) (COMM) No. 195 of 2017. However, by way of the impugned judgment dated 14.11.2019, a Division Bench of the Delhi High Court concurred with the view taken by the learned Judge and dismissed the appeal.
ARGUMENTS ADVANCED BY RESPONDENT :
The learned senior counsel for respondent No. 1 relies on M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. Therein, this Court considered Section 7(5) of the Act of 1996 which deals with arbitration agreements in relation to domestic arbitrations and observed that the wording of the provision made it clear that mere reference to a document would not have the effect of making an arbitration clause in that document a part of the contract.
The Court observed that this judgment would have had relevance if the appellant were to claim only under the contract of 2012, but the alternative plea was unnecessary as it is Contract No. 061-16- 12115-S that governed the field and the arbitration agreement in clause 32.2 thereof was, therefore, available to the appellant and was rightly invoked by it.
JUDGEMENT :
The court held that there exists the legal proposition that an arbitration agreement can be inferred even from an exchange of letters, including communication through electronic means, which provide a record of the agreement.
It 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. The mere fact that Contract No. 061-16- 12115-S was not signed by respondent No. 1 would not obviate from this principle when the conduct of the parties in furtherance of the said contract clearly manifested respondent No. 1's acceptance of the terms and conditions contained therein.
Further, it opined that the arbitration agreement in clause 32.2 thereof was very much available to the appellant and invocation thereof under Section 45 of the Act of 1996, by way of I.A. No. 4550 of 2017 in CS (Comm) No. 154 of 2017, was fully justified and required to be accepted and acted upon by the referral Court. The refusal by the referral Court of the learned Judge and the confirmation of such refusal by the Division Bench are, therefore, unsustainable on facts and in law.
REASONING OF COURT:
The court observed that 2,000 metric tons of zinc metal were supplied by the appellant and accepted by respondent pursuant to Contract No. 061-16-12115-S and not only were 8 invoices raised by the appellant in the context thereof, but respondent No. 1 also complied with its obligations under that contract by furnishing two Standby Letters of Credit on 22.04.2016 and 17.11.2016. quoting Contract No. 061-16-12115-S. Such actions clearly demonstrated due and complete acceptance of the said contract.
The Court further observed that Section 7(4)(c) provides that there can be an arbitration agreement in the exchange of statements of 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 ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement. Therefore, signature is not a formal requirement under Section 7(4) b) or 7(4)(c) or under Section 7(5) of the Act.
It stated that for construing an arbitration agreement, the intention of the parties must be looked into. The materials on record are evidently clear that the appellant was prima facie acting pursuant to the sale contract issued by the respondent. So, it is not very material whether it was signed by the second respondent or not.
Noting the fact that the requirement of the arbitration agreement being in writing has been continued in Section 7(3) of the Act of 1996, it was observed that Section 7(4) only added that an arbitration agreement could be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4) but that did not mean that, in all cases, an arbitration
agreement needs to be signed. It was held that the only pre-requisite is that it should be in writing, as pointed out in Section 7(3). This legal principle would hold good equally for an arbitration agreement covered by Sections 44 and 45 of the Act of 1996.
CASES REFERRED:
In Re1, a Constitution Bench noted that the burden of proving the existence of an arbitration
agreement generally lies on the party seeking to rely on such an agreement and in jurisdictions, such as India, which accept the doctrine of Kompetenz-Kompetenz, only prima facie proof of the existence of an arbitration agreement needs to be adduced before the referral Court. It was further observed that the referral Court is not the appropriate forum to conduct a mini-trial by allowing the parties to adduce evidence regarding the existence or validity of an arbitration agreement, as the same ought to be left to the Arbitral Tribunal.
This Court in Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited observed that a commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it.
In Caravel Shipping Services Private Limited v. Premier Sea Foods Exim Private Limited, this Court affirmed and reiterated the legal position laid down in Jugal Kishore Rameshwardas v. Goolbai Hormusji to the effect that an arbitration agreement needs to be in writing, though it need not be signed.
ANALYSIS:
The significance of the decision lies in the structural inconsistency it reveals within the Arbitration and Conciliation Act, 1996. It highlights a legislative gap between the framework of the New York Convention and the statutory language adopted under Indian law.
Article II(1) and Article II(2) of the Convention lay down two distinct methods through which an arbitration agreement may satisfy the requirement of “agreement in writing.” While the first alternative provides a formally signed agreement, the second adopts a commercially realistic method: an exchange of letters, telegrams, emails, or other communications that provide a record of agreement.
Section 45 of the 1996 Act substantially incorporates Article II of the Convention but omits Article II(2). Unlike the Convention, the Indian provision does not expressly recognise exchange of communications as independently sufficient evidence of an arbitration agreement. This omission has created uncertainty regarding whether modern commercial conduct, especially electronic correspondence and transactional performance, can independently establish consent to arbitrate.
The Supreme Court, in the present case, effectively bridged this legislative deficiency through judicial interpretation. By relying on correspondence, conduct, invoices, and transactional performance to infer assent to the arbitration clause, the Court achieved a commercially pragmatic outcome consistent with international arbitration practice. However, the reasoning simultaneously reveals the dangers of excessive judicial improvisation in the absence of clear statutory guidance.
The judgment also raises an important doctrinal question concerning the nature and extent of judicial scrutiny permissible at the referral stage under Section 45 of the 1996 Act. Although the Court ultimately referred the parties to arbitration, its reasoning appears to move beyond a purely prima facie examination of the arbitration agreement. The role of the court at the referral stage is not to conclusively determine the validity of the arbitration agreement, but merely to assess whether a plausible and arguable arbitration agreement exists.
However, in the present case, the Court undertook a comparatively detailed examination of commercial conduct, correspondence, invoices, standby letters of credit, and transactional performance in order to infer acceptance of the arbitration clause. This raises a deeper doctrinal concern: to what extent may courts investigate the quality and sufficiency of conduct constituting acceptance while ostensibly applying a prima facie standard?
The issue is particularly significant because an expansive inquiry at the Section 45 stage risks transforming referral proceedings into mini-trials on consent. Such an approach may undermine the efficiency-oriented structure of international arbitration and dilute the principle of kompetenz-kompetenz, under which arbitral tribunals retain primary authority to determine their own jurisdiction.