Conduct & Bid Participation Establish Prima Facie Arbitration Agreement, Formal Contract Signature Not Essential: Delhi High Court under Section 11(6) Arbitration Act - 2025-07-28

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Formally Unsigned Contract No Bar to Arbitration, Rules Delhi High Court in Vedanta-GSPC Gas Dispute

New Delhi, July 28, 2025 — The Delhi High Court has ruled that a prima facie arbitration agreement can be inferred from the conduct of parties during a bidding process, even if the final contract was never formally signed. In a significant decision for commercial contracts formed through e-auctions, Justice Subramonium Prasad held that GSPC's active participation and success in Vedanta's gas auction, coupled with subsequent email exchanges, were sufficient to refer their dispute to arbitration.

The court was hearing a petition filed by Vedanta Limited under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator on behalf of Gujarat State Petroleum Corporation Ltd. (GSPC) to resolve disputes arising from a Gas Sales Agreement (GSA).

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Background of the Dispute

Vedanta Limited, as the operator of the RJ-ON-90/1 gas block in Rajasthan, issued a Request for Proposal (RFP) in December 2022 for the sale of natural gas. As part of the bid process, interested parties, including GSPC, were required to upload a signed copy of the draft GSA.

On January 18, 2023, GSPC emerged as the single largest successful bidder in the e-auction. Vedanta promptly notified GSPC of its success and sent a finalized GSA—with the price, quantity, and effective date filled in based on GSPC's winning bid—for formal counter-signing. Despite multiple reminders, GSPC did not sign the final agreement. Instead, on February 27, 2023, GSPC cited "unforeseeable and adverse material changes in the natural gas market" as a reason for its inability to market the gas at the bid price, effectively backing out of the deal.

Vedanta invoked arbitration as per Clause 18 of the GSA, but GSPC refused, arguing that no valid and binding agreement, and therefore no arbitration clause, existed between the parties.

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Key Arguments

Vedanta Limited (Petitioner) , represented by Senior Advocate Jayant Mehta, argued:

* A binding contract was concluded the moment Vedanta accepted GSPC's successful bid. The formal signing of the GSA was a mere formality.

* GSPC had uploaded a signed copy of the draft GSA and submitted declarations (Forms C1 & C6) confirming it had read, understood, and agreed to be bound by the GSA's terms.

* GSPC's email of February 27, 2023, which cited market changes and efforts to sell gas to "downstream customers," implicitly acknowledged the existence of an agreement. Backing out due to price fluctuations was a commercial afterthought, not a legal invalidation of the contract.

Gujarat State Petroleum Corporation Ltd. (Respondent) , represented by Senior Advocate Ramji Srinivasan, contended:

* No valid arbitration agreement existed as the final GSA was never executed by both parties.

* The RFP itself stated that the obligation to supply gas would become effective "only upon the execution of the GSA by all the parties."

* Uploading a signed draft GSA was merely a pre-qualification requirement for the bid and did not constitute a final, concluded contract. Key terms like price and quantity were blank in the draft, making it incomplete.

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Court's Rationale and Legal Principles

Justice Subramonium Prasad focused on the limited scope of review under Section 11(6A) of the Arbitration Act, which requires the court only to examine the prima facie existence of an arbitration agreement.

The court observed that the essential terms of the contract—price and quantity—were finalized upon the conclusion of the e-auction process, where GSPC had bid 46 times. The subsequent communication from Vedanta simply memorialized these agreed-upon terms in the GSA.

The judgment emphasized that an arbitration agreement need not be in a formally signed document. Quoting Section 7 of the Act, the court highlighted that an agreement can be established through an "exchange of letters, telex, telegrams or other means of telecommunication."

Key excerpts from the judgment underscore the court's reasoning:

"The fact that the Respondent herein submitted Forms C1 & C6 would mean that it agreed to the various terms and conditions of the GSA, which also contained Arbitration clause."

"This Court is of the opinion that on the conclusion of the RFP... and after giving a declaration in form C1 & C6 that they would start the offtake of the natural gas... and after one party having signed the GSA and only a mere formality being left for the other party to sign the GSA, this Court is of the opinion that there is a prima facie existence of an Arbitration Agreement between the parties which is sufficient for this Court to refer the parties to Arbitration..."

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Final Decision and Implications

Finding a prima facie case for the existence of an arbitration agreement, the court allowed Vedanta's petition. It appointed Justice Ravinder P. Bhatt , former Judge of the Supreme Court of India, as GSPC's nominee arbitrator. Justice Bhatt will join Vedanta's nominee, Justice L. N. Rao (former Supreme Court Judge), to appoint a presiding arbitrator for the three-member tribunal.

This ruling reinforces the principle that courts will look beyond procedural formalities to the substantive conduct and intent of commercial parties. It serves as a caution to bidders in e-auctions that their participation and success can create binding obligations, including the agreement to arbitrate, even before the final ink is dry on the contract.