Arbitration Agreement Valid Without Signatures if Consensus Evident from Conduct: Kerala HC [Read Order]

Kerala: The Kerala High Court has held that an arbitration agreement need not be signed by all parties if the consensus ad idem and intention to arbitrate are reflected from the conduct of the parties and documentary evidence, emphasizing that signature is not a formal requirement under the Arbitration and Conciliation Act, 1996.

Justice S. Manu delivered this significant ruling while examining whether an unsigned loan agreement containing an arbitration clause could form the basis for appointing an arbitrator, observing that commercial documents should be interpreted to give effect to the agreement rather than render it invalid on technical grounds.

The Court addressed A.R. No. 68 of 2025 filed by Sigmatic Nidhi Limited against Suresh Kumar and two others seeking appointment of an arbitrator after an earlier arbitral award was declared unenforceable due to improper appointment procedures.

The petitioner company had provided financial assistance to the respondents under Annexure A2 agreement dated December 19, 2019. The first respondent was the borrower, while the second and third respondents were co-borrowers. Upon default in repayment, the company invoked the arbitration clause, pursuant to which an award was passed on May 2, 2023. However, the District Court dismissed the execution petition, finding that the arbitrator’s appointment was not in accordance with the Act.

The issue arose when it was noticed that Annexure A2, though signed by the respondents, bore no signature of any representative of the petitioner company, raising questions about the validity of the arbitration agreement.

Justice Manu extensively analyzed Section 7 of the Arbitration and Conciliation Act, 1996, noting, “Sub-section (3) mandates that an arbitration agreement shall be in writing. Sub-section (4) qualifies the previous sub-section.”

The Court observed that Section 7(4) recognizes three ways an arbitration agreement can be “in writing”: “(a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.”

Justice Manu emphasized, “Plain reading of sub-section (4) gives the impression that not only a document signed by the parties can be considered an arbitration agreement ‘in writing,’ but other communications as provided under clause (b) or even non-denial of the existence of the agreement by the opposite party in its defence to a statement of claim can be construed as an arbitration agreement ‘in writing.’”

The Court relied heavily on the Supreme Court’s judgment in Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited [(2015) 13 SCC 477], which held: “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 liability under the agreement.”

Justice Manu quoted extensively from Govind Rubber: “In the present day of e-commerce, in cases of internet purchases, tele-purchases, ticket booking on the internet, and in standard forms of contract, terms and conditions are agreed upon. In such agreements, if the identity of the parties is established and there is a record of agreement, it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the parties.”

The Court also referenced Mahanagar Telephone Nigam Ltd. v. Canara Bank [(2020) 12 SCC 767], which established that “the arbitration agreement need not be in any particular form; what is required to be ascertained is the intention of the parties to settle their disputes through arbitration.”

Justice Manu further cited the recent Supreme Court decision in Glencore International AG v. M/s. Shree Ganesh Metals [2025 SCC OnLine SC 1815], which held: “The mere fact that Contract No. 061-16-12115-S was not signed by respondent No. 1 would not obviate 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.”

The Court distilled seven key principles from Supreme Court precedents:

1. an arbitration agreement need not be in any particular form;
2. the essential element is accord to refer disputes to arbitration;
3. a written document may not need signatures;
4. an agreement can be inferred from an exchange of communications;
5. an agreement can exist through non-denial in pleadings;
6. if the parties’ identity is established and there is a record of agreement showing ad idem, it becomes valid; and
7. signature is not a formal requirement under Section 7(4)(b), (c), or Section 7(5).

The Court also emphasized the principle of commercial efficacy: “It is to be borne in mind that a commercial document containing an arbitration clause must be interpreted in such a manner as to give effect to the agreement rather than invalidate it.”

The Court noted that the respondents had not disputed the validity of the arbitration clause either in previous proceedings or in the present case. Their counsel did not object to the appointment of the arbitrator, though liberty was reserved to raise all contentions, including arbitrability, before the arbitrator.

Justice Manu acknowledged a contrary view taken by this Court in Raju J. Vayalattu v. Veeteejay Motors Pvt. Limited [2025 KHC 1754], but observed: “The binding precedents referred above were not brought to the notice of the Court while rendering the judgment in Raju J. Vayalattu (supra), and hence a different view was taken.”

The Court also addressed the limitation issue, holding that since the earlier award dated May 2, 2023, was declared unenforceable due to illegal appointment, it should be treated as set aside for the purposes of exclusion of limitation under Section 43(4) of the Act.

Accordingly, the Court allowed the arbitration request and directed the Kerala High Court Arbitration Centre to nominate a retired District Judge empanelled under Panel-III, preferably from Thrissur, as sole arbitrator. The learned arbitrator was empowered to entertain all issues, including arbitrability, jurisdiction, and limitation, with liberty preserved for the parties to raise all contentions.

The Court also provided detailed directions regarding communication with the Arbitration Centre, fee structure governed by Rule 28 of the Kerala High Court (Arbitration Centre) Rules, 2025, and liberty for the arbitrator to seek expert assistance if needed.

Case Title: Sigmatic Nidhi Limited v. Suresh Kumar & Ors.

[Read Order]