GLENCORE INTERNATIONAL AG V. M/S SHREE GANESH METALS AND ANOTHER 2025 INSC 1036:

DATE: 25/08/2025

COURT: Supreme Court of India

BENCH: Justice Sanjay Kumar and Justice Satish Chandra Sharma

FACTS:

The appellant, Glencore International AG, a Swiss company engaged in mining and commodity trading, had a long-standing business relationship with respondent No.1, Shree Ganesh Metals, a proprietorship concern in Himachal Pradesh manufacturing zinc alloys. Between 2011 and 2012, the parties entered into four contracts for the supply of zinc, each containing an arbitration clause referring disputes to the London Court of International Arbitration (LCIA) with London as the seat. In 2016, they negotiated a fifth contract for the supply of 6,000 metric tons of zinc to be delivered between March 2016 and February 2017. The terms were settled via email correspondence, including a modification by respondent No.1 regarding the calculation of provisional price, which was accepted by the appellant. Pursuant to this, Glencore forwarded Contract No. 061-16-12115-S (signed by it) incorporating the agreed terms, including an arbitration clause (Clause 32.2). Although respondent No.1 did not sign the contract, it accepted delivery of 2,000 metric tons of zinc, acknowledged the contract in correspondence, and facilitated the issuance of standby letters of credit through HDFC Bank that specifically referred to the said contract.

Disputes arose in September 2016 over pricing and failure to furnish letters of credit for subsequent quotas. Glencore raised claims for compliance and costs, while respondent No.1 assured performance and acknowledged obligations under the contract. Eventually, due to continued defaults, Glencore encashed standby letters of credit, leading respondent No.1 to file a civil suit before the Delhi High Court in 2017 seeking declaration that such invocation was null and void, recovery of USD 1.2 million, and injunctions against further encashment. In response, Glencore invoked Section 45 of the Arbitration and Conciliation Act, 1996, seeking reference of disputes to arbitration under Clause 32.2 of the 2016 contract. The Single Judge of the Delhi High Court (02.11.2017) and later the Division Bench (14.11.2019) rejected this plea, holding that no concluded contract containing an arbitration clause existed since respondent No.1 had not signed the 2016 agreement. Glencore, aggrieved by these findings, carried the matter to the Supreme Court.

ISSUES:

The primary issue in this case was whether Contract No. 061-16-12115-S, though unsigned by respondent No.1, constituted a valid and binding agreement, particularly with respect to the arbitration clause (Clause 32.2). The Court needed to determine whether the appellant could invoke the arbitration agreement under Section 45 of the Arbitration and Conciliation Act, 1996, given that the respondent argued no concluded contract existed. An ancillary issue raised by the appellant was whether, alternatively, the arbitration clause in the 2012 contract could apply to the 2016 transaction.

JUDGEMENT WITH REASONING:

The Supreme Court allowed the appeal, setting aside the judgment of the Division Bench (14.11.2019) and the order of the Single Judge (02.11.2017) of the Delhi High Court. The Court restored I.A. No. 4550 of 2017 in CS (Comm) No. 154 of 2017, directing that the disputes between the parties be referred to arbitration under Clause 32.2 of Contract No. 061-16-12115-S.

The Court held that the Division Bench and the Single Judge failed to consider crucial facts demonstrating that Contract No. 061-16-12115-S was duly accepted and acted upon by respondent No.1, even though it was not signed. The appellant supplied 2,000 metric tons of zinc metal, raised invoices referencing the contract, and respondent No.1 facilitated Standby Letters of Credit in compliance with the contract terms. Email correspondence further showed that respondent No.1 had agreed to the contract’s terms, modifying only the provisional pricing as reflected in the final contract. The Court emphasized that an arbitration agreement need not be formally signed if the parties’ conduct, correspondence, and performance clearly manifest consent, citing precedents including Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia Pvt. Ltd. and Caravel Shipping Services v. Premier Sea Foods. The Court also clarified that the referral Court under Section 45 need only be satisfied prima facie of the existence of an arbitration agreement, leaving full adjudication to the arbitral tribunal. Consequently, the arbitration clause in Contract No. 061-16-12115-S was found valid and binding, and the appellant was entitled to invoke it for resolution of disputes.

ANALYSIS:

The present case underscores the principle that the validity of a contract and its arbitration clause cannot be negated solely on the ground of an unsigned agreement when the parties’ conduct clearly indicates acceptance and performance. Despite respondent No.1 not signing Contract No. 061-16-12115-S, its actions, including accepting 2,000 metric tons of zinc, raising invoices referencing the contract, and facilitating Standby Letters of Credit, demonstrated unequivocal assent to the terms. The email exchanges between the parties further reinforced that they were ad idem regarding the contract’s essential terms, with only minor modifications incorporated. This shows that in commercial transactions, consent and intent may be inferred from conduct, correspondence, and performance, rather than formal signatures alone, aligning with the modern approach to e-commerce and telecommunication-based agreements.

Moreover, the case highlights the importance of enforcing arbitration agreements under Section 45 of the Arbitration and Conciliation Act, 1996, where the court’s role is limited to a prima facie assessment of the existence of such an agreement. The Supreme Court emphasized that disputes regarding validity or performance of the contract are to be fully adjudicated by the arbitral tribunal, not the referral Court. By restoring the appellant’s application for arbitration, the Court reinforced that commercial parties cannot evade arbitration by merely withholding a signature when their conduct otherwise indicates agreement. The judgment thus strengthens the principle of honouring contractual commitments and promotes the efficient resolution of disputes through arbitration, preventing parties from using formalities as a pretext to avoid their obligations.