Case Note & Summary
The dispute concerned the existence of a binding arbitration agreement between a Swiss commodity trader and an Indian proprietorship concern producing zinc alloys. The parties had previously entered into four contracts that contained arbitration clauses mandating London Court of International Arbitration (LCIA) arbitration in London. They then negotiated a fifth contract for supply of 6,000 metric tons of zinc metal from March 2016 to February 2017. Via email correspondence, respondent No.1 confirmed the same terms as the previous contract except for provisional price, requesting that it be the average of the last five LME days. The appellant prepared Contract No. 061-16-12115-S dated 11.03.2016, signed it, and sent it to respondent No.1 for signature, but respondent did not sign. Nevertheless, appellant supplied 2,000 metric tons of zinc metal under that contract, raised eight invoices referencing it, and respondent accepted the goods. HDFC Bank issued two standby letters of credit referencing the contract, later amended to correct the date. Disputes arose over letters of credit and performance. Respondent No.1 filed a commercial suit before the Delhi High Court seeking declaration that invocation of the standby letters of credit was null and void, recovery of US$1,200,000 with 18% interest, and injunctions against the appellant and bank. Appellant filed I.A. No. 4550 of 2017 under Section 45 of the Arbitration and Conciliation Act, 1996 seeking referral to arbitration under clause 32.2 of the contract. A learned Judge dismissed the application on 02.11.2017, holding that no concluded contract existed because it was unsigned and terms were not accepted. The Division Bench affirmed on 14.11.2019, but erroneously focused on clause 29.2 of the 2012 contract instead of clause 32.2. In the Supreme Court, appellant argued that the contract was accepted by conduct and the arbitration agreement bound the parties; respondent contended that no concluded contract came into existence. The Supreme Court observed that the High Courts lost sight of crucial factual aspects showing that the contract was duly accepted and acted upon, and that the arbitration agreement therein came into effect. The provided judgment excerpt ends before a final operative order is stated.
Headnote
A) Arbitration - Existence of Arbitration Agreement - Unsigned Contract - Arbitration and Conciliation Act, 1996, Section 45 - Contract No. 061-16-12115-S was not signed by respondent No.1 but parties acted upon it by supplying and accepting 2,000 metric tons of zinc metal, raising 8 invoices, and issuing standby letters of credit referring to the contract - Court held that these actions implied that the arbitration agreement in clause 32.2 came into effect and bound the parties (Paras 5-9, 18). B) Arbitration - Formation of Contract - Acceptance by Conduct - Arbitration and Conciliation Act, 1996, Section 45 - Respondent No.1's email dated 11.03.2016 confirmed same terms except provisional price; appellant incorporated modification; subsequent conduct evidenced acceptance - High Court erred in holding no concluded contract came into existence (Paras 5-9, 15-16). C) Arbitration - Incorporation of Arbitration Clause - LCIA Rules and London Seat - Arbitration and Conciliation Act, 1996, Section 45 - Clause 32.2 provided for arbitration under LCIA Rules with London seat, similar to clause 29.2 in earlier contract; difference not material - Court found learned Judge erred in holding parties were not ad idem (Paras 7-8, 15).
Issue of Consideration
Whether there was a binding arbitration agreement between the appellant and respondent No.1 under clause 32.2 of Contract No. 061-16-12115-S dated 11.03.2016.
Law Points
- existence of arbitration agreement in unsigned contract
- acceptance by conduct
- Section 45 Arbitration and Conciliation Act 1996
- LCIA Rules
- London seat
- ad idem
- Standby Letter of Credit
- invoice references
- concluded contract
