Unsigned Arbitration Agreement Not Invalid In All Cases, Holds SC [Read Judgment]

‘Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed.’

The Supreme Court has held that the only prerequisite for an arbitration agreement is that it should be in writing and it cannot be said that in all cases, an arbitration agreement needs to be signed.

In Caravel Shipping Services Pvt. Ltd.  Vs. Premier Sea Foods Exim Pvt. Ltd., the argument of the plaintiff was that since the Bill of Lading was not signed, it is not bound by the arbitration clause contained in that document. It was contended that Section 7(4)(a) of the Arbitration and Conciliation Act, 1996, requires an arbitration agreement to be in a document that is signed by the parties.

In a suit was filed by consignor/shipper claiming to recover a sum of Rs. 26,53,593 from the agent, the latter filed an application seeking reference to arbitration. The Sub-Court dismissed the application on the ground that printed conditions annexed to the Bill of Lading would not be binding upon the parties. The high court also dismissed the petition challenging this order. The agent then approached the apex court.

The bench comprising Justice Rohinton Fali Nariman and Justice Navin Sinha observed that the plaintiff has itself relied upon the Bill of Lading as part of its cause of action in his suit against defendants.

The bench said: “The respondent, therefore, cannot blow hot and cold and argue that for the purpose of its suit, it will rely upon the Bill of Lading (though unsigned) but for the purpose of arbitration, the requirement of the Arbitration Act is that the arbitration clause should be signed.”

Allowing the appeal, the court further observed: “In addition, we may indicate that the law in this behalf, in Jugal Kishore Rameshwardas vs. Mrs. Goolbai Hormusji, AIR 1955 SC 812, is that an arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in the 1996 Act in Section 7(3) thereof. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only prerequisite is that it be in writing, as has been pointed out in Section 7(3).”

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