Kerala High Court Upholds Validity Of Unsigned Arbitration Agreements

Thiruvananthapuram, Nov 13 (KNN) The Kerala High Court has held that a written arbitration agreement need not be signed by all parties, if their conduct and documentary evidence reflect mutual consent and intention to arbitrate.

Justice S. Manu, while allowing a plea for reference to arbitration, held that signatures are not a formal requirement under Section 7 of the Arbitration and Conciliation Act, 1996, if parties have acted upon the agreement or exchanged communications acknowledging its existence.

The case concerned Sigmatic Nidhi Ltd, which had advanced loans to borrowers who defaulted on repayment. The loan agreement was signed only by the borrowers. A sole arbitrator had issued an award that was later set aside by a lower court. The petitioner subsequently sought the appointment of a new arbitrator under Section 11 of the Act.

The petitioner argued that the parties’ conduct and related documents showed consensus and acceptance of the agreement’s binding nature, even without signatures.

Referring to multiple Supreme Court precedents, the High Court noted that signature is not a mandatory requirement under Section 7(4)(b) or (c) of the Act if the parties have exchanged communications acknowledging the agreement, or their conduct demonstrates reliance on it.

The court relied on the Supreme Court’s ruling in Mahanagar Telephone Nigam Ltd. v. Canara Bank, which held that commercial documents should be interpreted to give effect to parties’ intent rather than invalidate agreements on technicalities.

Summarising the legal position, the High Court stated that an arbitration agreement need not follow a specific form, and even an unsigned document may qualify if mutual intent to arbitrate can be inferred.

The ruling reinforces India’s pro-arbitration approach by focusing on parties’ intent over procedural formalities.

(KNN Bureau)