Case Name: Glencore International AG v. M/s. Shree Ganesh Metals and another
Case Number: Civil Appeal No. 11067 of 2025 [@ Special Leave Petition (C) No. 27985 of 2019]
Date: August 25, 2025
Court: Supreme Court of India
Judge: Justice Sanjay Kumar and Justice Satish Chandra Sharma
Facts of the Case
- Glencore International AG, a Swiss-based trading company, had executed four contracts with Shree Ganesh Metals, an Indian Zinc Alloy producer, between 2011 and 2012; all these contracts had clauses with regard to arbitration providing for the London Court of International Arbitration with London as the seat.
- In March 2016, the parties renegotiated for a fifth contract as to the purchase of 6000 metric tons of zinc metal through email communications. On March 10 2016, Glencore proposed the terms of the contract, including provisional pricing based on a 10-day LME average and a standby letter of credit requirement.
- Shree Ganesha Metals reverted back to Glencore on March 11, 2016, confirming the acceptance of “terms of the contract” but requesting a change in the provisional pricing to a 5-day LME average instead of a 10-day LME average.
- Glencore International prepared the contract incorporating the requested changes and also inserted the Arbitration clause (clause 32.2 of the contract) similar to all the previous contracts. However, Shree Ganesha Traders never signed this contract.
- Despite never signing the contract, Shree Ganesha Traders went ahead and performed substantial acts under the contract, including
- Accepted delivery of 2000 metric tons of zinc metal
- Furnished two Standby Letters of Credit as per the contract.
- Engaged in correspondence of acknowledgement of the contract
- Received 8 invoices referring to the contract
- Later, when a dispute came up between the parties, Glencore invoked the Arbitration proceedings under Section 45 of the Arbitration and Conciliation Act, 1996; however, Shree Ganesha Traders contested this and filed a civil suit, contending that there was no binding contract in existence between the parties.
Issues Involved
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- Whether there exists a binding arbitration agreement between the parties when one party has not signed the contract but has performed certain acts under it?
- Whether the conduct of the parties establishes the acceptance of the contractual terms, including the arbitration clause?
- What is the standard of proof required under Section 45 of the Arbitration and Conciliation Act for establishing a prima facie existence of a valid arbitration agreement?
- Whether the communications and correspondence through email and the subsequent performance constitute a valid arbitration agreement?
Legal Provisions Involved
- Arbitration and Conciliation Act of 1996 – Sections 44 and 45.
- Arbitration and Conciliation Act of 1996 – Sections 7(3), 7(4) and 7 (5).
- Principles of Contract law talking about acceptance through the conduct of the parties.
Arguments by the Parties
- Appellant’s Arguments
- The appellant in this case argued that, even in the absence of a formal signature, Shree Ganesh Traders had accepted the contract through the performance of the acts stipulated in the contract, including the acceptance of the delivered goods, producing a letter of credit, making payments, etc.
- It was submitted by the appellants that the Email communication dated March 11 2016, shows acceptance of the terms of the contract, with only minor changes regarding the pricing, which were added in the contract.
- It was also contended that under section 7 of the Arbitration and Conciliation Act, a valid arbitration agreement can be established by virtue of communication and conduct, and agreements need not be formally signed.
- Respondent’s Arguments
- The respondent in this case contended that there was no concluded agreement as they never signed the contract, and therefore, in this light, there is no existence of a binding arbitration agreement between both parties.
- They also submitted that the email correspondence did not constitute the acceptance of all the terms, particularly with regard to the arbitration clause in the agreement, and mere reference to the contract number in the following subsequent dealings was insufficient to make out a proper acceptance of the arbitration terms.
Analysis
- Analysis of the Statutory Framework: Supreme Court, after examining section 45 and its requirements under the Act, held that there is no mandate for conclusive proof of an arbitration agreement; only prima facie proof is required to refer to arbitration proceedings under the Act.
- Acceptance based on Conduct: The Supreme Court’s analysis of the acceptance of the performance of the contractual obligations by Shree Ganesha Traders included the acceptance of the delivered goods, the provision of the letters of credit, and the correspondence accepting the contract.
- Analysis of the Email Communications: The Supreme Court, with regard to the email communications of the parties, held that the reply of Shree Ganesha Traders accepting the “same terms” of the contract with a change in pricing was an acceptance of the terms of the contract because Glencore honoured the pricing change request in the final contract.
- Analysis of Precedents: The Supreme Court, while delivering the judgment, relied upon the case of Govind Rubber Limited v. Louis Dreyfus Commodities, underlining that a signature is not an essential commodity when the parties’ conduct demonstrates a valid agreement and the courts should favour giving effect to the arbitration clauses in such an agreement.
Decision of the Court
Justice Sanjay Kumar allowed the appeal and set aside the judgments of both the single judge and the Division Bench of the Delhi High Court and reasoned:
- The Court held that the Contract in question was validly accepted by the parties through their conduct, making the arbitration clause put in the agreement under clause 32.2 binding on both parties.
- The Court also held that the substantial performance by the respondents, that is, Shree Ganesha Traders, including accepting the delivered goods, producing letters of credit, etc, demonstrated a clear acceptance of the contractual terms, including the arbitration clause.
- The Court also upheld, in the light of precedents, that under Section 45 of the Arbitration and Conciliation Act, only the establishment of prima facie existence of an agreement is necessary, and the evidence submitted by the appellant showing the performance of the respondents satisfies this requirement under the law.
- The Court, in its judgment, held and directed that the dispute can be referred to arbitration in accordance with Clause 32.2 of the contract, which provides for the London Court of International Arbitration with London as the seat.
Conclusion
This landmark judgment is now a precedent regarding the formation of arbitration agreements through conduct rather than through the presence of formal signatures. The Supreme Court’s ruling strongly confirms the belief that in a commercial relationship, a party’s actions, including performance of the contract, may give rise to a binding arbitration agreement even if the agreement has not been formally executed.
This judgment also provided clarity as to the fact that the courts have to look at all the actions of the parties concerned instead of just considering the formal requirements for the establishment of an arbitration agreement. This decision explains the narrow scope of the judicial inquiry under Section 45, in that referral courts only need to ascertain the prima facie arbitration agreement, not go into elaborate trials on their existence.
This newfound approach helps in the expeditious settlement of disputes and aids in India’s efforts to attract foreign investments and become a friendly international commercial arbitration dispute-resolution hub.
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WRITTEN BY: YANA S JACOB
