An arbitration agreement requires mutual assent evidenced in writing. An award rendered in the absence of a valid agreement is a nullity, allowing an executing court to decline enforcement on the basis of an inherent lack of jurisdictional foundation.

Headnote:(A) Arbitration and Conciliation Act - Section 7 - Existence of a valid arbitration agreement - A document signed by only one party does not satisfy the requirement of a written agreement unless consensus ad idem is proven through other verifiable correspondence or communication - An arbitration agreement cannot be inferred from a unilateral document - (Paras 15-20).

(B) Execution proceedings - Code of Civil Procedure - Section 47 - Power of executing court - An executing court is not precluded from examining the validity of an arbitration agreement when the challenge pertains to the inherent lack of jurisdiction rendering the award a nullity - (Paras 28-31).

(C) Arbitral Tribunal - Constitution - Independence and impartiality - Arbitral proceedings must be based on a mutually agreed procedure; unilateral designation of an arbitrator without valid consensus violates the core principles of fairness and party autonomy - (Paras 39-46).

Facts of the case:
The appeal challenged an order dismissing an execution petition for an arbitral award. The lower court held that the document containing the arbitration clause was signed by only one of the parties, thereby failing to constitute a valid arbitration agreement. The appellant contended that the agreement was binding, while the respondent argued that the award was a nullity due to the lack of a valid foundational agreement.

Findings of Court:
The court found that the record lacked evidence of any mutual consensus or exchange of communications that would satisfy the statutory requirement of a written agreement. The arbitral tribunal's assumption regarding the existence of signatures on the document was factually incorrect, and its constitution was found to be a unilateral exercise of power lacking statutory compliance.

Issues: The main issues were whether a document signed by only one party constitutes a valid arbitration agreement and whether an executing court is empowered to address the lack of jurisdiction inherent in such an award.

Ratio Decidendi: An arbitration agreement is rooted in the principle of consensus; therefore, a document lacking signatures from both parties and devoid of proof of mutual assent fails to establish the jurisdiction of an arbitral tribunal. Consequently, an award resulting from such a defect is a nullity, permitting the executing court to intervene.

Result: Appeal dismissed.

Table of Content
1. establishing the factual matrix and jurisdictional dispute regarding the absence of a signed arbitration agreement. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10)
2. parties' contentions regarding the validity of the arbitration agreement and the scope of section 47 cpc. (Para 11 , 12 , 13 , 14)
3. defining requirements of section 7 of the a&c act regarding written arbitration agreements and mutual consent. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21)
4. requirement of consensus ad idem for a valid arbitration agreement and consequences of its absence. (Para 22 , 23 , 24 , 25 , 26)
5. executing court's authority under section 47 cpc to declare an award a nullity for inherent jurisdictional defects. (Para 27 , 28 , 29 , 30 , 31 , 38)
6. scrutiny of the bona fides of the arbitration initiation and the implications of unilateral documentation. (Para 32 , 33 , 34 , 35 , 36 , 37)
7. limitations on party autonomy where unilateral appointment of an arbitrator compromises independence and fairness. (Para 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46)
8. final confirmation that an non-existent arbitration agreement renders an arbitral award legally unenforceable. (Para 47 , 48)

JUDGMENT :

ANIL KSHETARPAL, J.

1. Through the present Appeal, the Appellant (Decree Holder) assails the correctness of the order dated 01.04.2024 [hereinafter referred to as 'Impugned Order'], passed in EX. (COMM.) No.287/2023, whereby the learned District Judge declined to enforce the ex-parte arbitral award dated 22.10.2022 [hereinafter referred to as 'the Award'] primarily on the ground that the receipt-cum acknowledgement dated 16.09.2020 [hereinafter referred to as 'acknowledgement letter'] containing the arbitration clause was not signed by the Appellant.

2. The learned District Judge has held that since the acknowledgement, though signed by the Respondent (Judgment Debtor) and handed over to the Appellant, did not bear the Appellant's signature, it did not constitute a valid arbitration agreement within the meaning of Section 7 of the Arbitration and Conciliation Act, 199 A&C Act.

3. Therefore, the issue that arises for consideration before this Court is whether an acknowledgment letter issued by the Respondent to the Appellant, containing an arbitration clause but signed by only one of the parties, constitutes a valid arbitration agreement within the meaning of Section 7 of the A&C Act, and consequently, whether the initiation of the arbitral proceedings pursuant thereto was legally sustainable in the facts of the present case.

FACTUAL MATRIX:

4. In order to appreciate the controversy, it is necessary to briefly advert to the relevant facts.

5. The Appellant is a company registered under the Companies Act, 2013, acting through its Authorised Representative ('AR'), Mr. Bhupendra Kumar Gupta. The Appellant filed the Execution Petition bearing Ex. (Comm.) No. 287/2023 seeking enforcement of the ex parte Award passed by the learned Sole Arbitrator, whereby a sum of Rs.10,00,000/- along with interest was awarded against the Respondent.

6. Upon service of notice, the Respondent entered appearance and filed objections to the maintainability of the Execution Petition. The principal objection raised was that there existed no valid arbitration agreement between the parties and, therefore, the learned Sole Arbitrator lacked jurisdiction to initiate arbitral proceedings and render the Award.

7. The acknowledgment letter, relied upon by the Appellant as containing the arbitration clause, inter alia, recorded that in the event of disputes arising between the parties, the same would be referred to arbitration and adjudicated by a sole arbitrator appointed in terms thereof. The arbitration clause contained therein provided that disputes or differences between the parties would be settled through arbitration in accordance with the provisions of the A&C Act. The said document, however, admittedly bore the signature of the Respondent and did not bear the signature of the Appellant. Th

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2026 Supreme(Del) 968

An arbitration agreement requires mutual assent evidenced in writing. An award rendered in the absence of a valid agreement is a nullity, allowing an executing court to decline enforcement on the basis of an inherent lack of jurisdictional foundation.

Cases Referred (1)