Unsigned Unilateral Acknowledgment Letter Lacks Legal Efficacy to Constitute a Valid Arbitration Agreement Under Section 7

The Appellant (Decree Holder) sought to execute an ex-parte arbitral award dated 22.10.2022, which awarded Rs. 10,00,000 against the Respondent.

The arbitral proceedings were initiated based on a "receipt-cum-acknowledgment" letter dated 16.09.2020 containing an arbitration clause.

While the Respondent had signed the document, the Appellant had not.

The Respondent filed objections to the execution, arguing that no valid arbitration agreement existed.

The Executing Court (District Judge) dismissed the execution petition on 01.04.2024, holding the award to be a nullity due to the lack of a valid written agreement under Section 7 of the Arbitration and Conciliation (A&C) Act, 1996.

1. Whether an acknowledgment letter signed by only one party constitutes a valid arbitration agreement within the meaning of Section 7 of the A&C Act.

2. Whether an Executing Court can entertain an objection regarding the non-existence of an arbitration agreement under Section 47 of the CPC.

3. Whether the unilateral appointment of a pre-named arbitrator in multiple proceedings by one party affects the validity of the arbitral process.

The Court applied Section 7 of the Arbitration and Conciliation Act, 1996, which mandates that an arbitration agreement must be in writing and reflects the consensus ad idem of both parties.

It relied on Section 7(4), which specifies that an agreement is "in writing" if it is signed by the parties or recorded through an exchange of communications.

The Court referred to Section 47 of the Code of Civil Procedure (CPC), 1908, and the Supreme Court's ruling in Dhurandhar Prasad Singh v. Jai Prakash University, which permits an Executing Court to refuse enforcement if a decree is a nullity due to an inherent lack of jurisdiction.

Additionally, it applied the principle from Bhadra International (India) Pvt. Ltd. v. Airport Authority of India that party autonomy cannot allow one party to unilaterally dominate the constitution of an arbitral tribunal.

The Court observed that the acknowledgment letter failed to satisfy Section 7(4)(a) because it was not signed by the Appellant.

Since no other correspondence was produced to prove mutual assent, Section 7(4)(b) was also inapplicable.

The Court found that the Arbitrator's assumption that both parties had signed the document was factually incorrect.

Regarding the execution, the Court reasoned that while an Executing Court cannot generally go behind a decree, a defect in the very existence of an arbitration agreement constitutes an "inherent lack of jurisdiction," rendering the resulting award a nullity and thus reviewable under Section 47 of the CPC.

Furthermore, the Court noted that the Appellant’s repeated appointment of the same arbitrator for various borrowers—based on a disputed and unsigned document—amounted to a unilateral constitution of the tribunal, violating the principles of neutrality and independence essential to the arbitral process.

The High Court dismissed the appeal and upheld the Impugned Order dated 01.04.2024.

It affirmed that the Respondent’s objections were correctly entertained by the Executing Court under Section 47 of the CPC.