Communication through WhatsApp and Email constitutes valid Arbitration Agreement- Delhi High Court
- rit arora
- Jul 7
- 4 min read
Updated: Jul 12
Citation
O.M.P (I) (COMM) 397/2024
Court
Hon’ble Delhi High Court
Issue at Hand
Interim relief under Section 9, Arbitration & Conciliation Act, 1996 & whether communication exchange over WhatsApp & Email constitute valid arbitration agreement.
Case Background
Belvedere Resources DMCC, a UAE-based coal trader, sought interim reliefs—security for USD 2.77 million (~INR 23.34 Cr), restraint on asset disposal, and asset disclosure—from OCL Iron & Steel and its subsidiaries. The request stemmed from an alleged breach of a coal supply agreement initiated via WhatsApp and email. Arbitration is ongoing at SIAC.
Petitioner Claimed
- A valid contract was concluded via electronic communication & means.
- Respondent’s repudiation led to financial loss due to resale of coal at lower prices.
- Respondents’ financial health post-CIRP raised enforcement risks. Raised grounds for O.38 R.5 CPC, 1908.
- Delhi jurisdiction was asserted based on Respondent's corporate filings and shareholdings linked to Delhi.
Respondents' Objections
- No concluded contract; hence no arbitration clause.
- No territorial jurisdiction; no cause of action arose in Delhi. It claimed that location of shares or assets does not give rise for jurisdiction of courts u/s 9 of the Arbitration and Conciliation Act, 1996.
- Damages claimed were unliquidated and not a present debt; hence, no basis for security.
- Section 9 application barred as SIAC tribunal was already constituted.
Court’s Findings
i) Valid Arbitration Agreement
The Court held that a binding arbitration agreement existed based on WhatsApp/email exchanges, even in the absence of a signed contract. Cited: Cox & Kings Ltd. v. SAP India (2024).
ii) No Territorial Jurisdiction
- No cause of action arose in Delhi.
- Mere presence of corporate office or assets is insufficient.
Cited: Rattan Singh Associates v. Gill Power Generation Co. Pvt. Ltd.
iii) No Grounds for seeking any kind of Security (order 38 rule 5 of CPC, 1908)
- Damages claimed were unliquidated; not "debt due."
- Relief under Order XXXVIII Rule 5 CPC was not made out.
Cited:
- Union of India v. Raman Iron Foundry (1974)
- Thar Camps Pvt. Ltd. v. Indus River Cruises Pvt. Ltd. (2021)
- Skypower Solar India v. Sterling and Wilson International FZE (2023)
Conclusion
While the arbitration clause was upheld, the Court denied interim relief citing lack of territorial jurisdiction and the absence of a quantifiable debt. It was observed that WhatsApp and Email communication exchange constitutes a valid arbitration agreement, clause, even though unsigned.
Highlights: -
On the arbitration agreement and validity
“53. A perusal of Section 7(4)(b) of the Act reveals that it is not necessary for a concluded contract to be in existence for a valid arbitration agreement to be existing between the parties. The arbitration agreement must form a part of documents/communication exchange between the parties. The same has duly been so laid down by the Hon‟ble Supreme Court in Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1”
On Territorial jurisdiction!
1) Merely maintaining a branch office will not clothe the Hon’ble Court with the territorial jurisdiction. Rattan Singh Associates v. M/S Gill Power Generation Company Pvt. Ltd. 2007 SCC OnLine Del 19
2) In the absence of exclusive jurisdiction clause or exclusive seat of arbitration, Sections 15 to 20 of the Code of Civil Procedure, 1908 do not contemplate the jurisdiction of a court where the assets of the defendant situate.
On the issue of furnishing of security by the Respondent
1) It was observed by the Hon’ble Court that the claim of the Petitioner was for damages due to breach of contract. It was observed that these are unliquidated damages. It also observed that unless unliquidated damages are adjudicated upon by a competent court or an adjudicating authority the same do not give rise to debt.
2) When there is a breach of contract, the aggrieved party, does not ipso facto become entitled to debt due from the other party. The only right it has is the right to sue for damages. The aggrieved party is not entitled to compensation/damages due to an existing obligation on part of the party who committed the breach. Pecuniary liability only arises after the Court has determined that the aggrieved party is entitled to damages.
Union of India v. Raman Iron Foundry, (1974) 2 SCC 231
3) A breach of contract entitles the aggrieved party a right to sue for damages but does not create a right to claim “debt”. After the competent court holds an enquiry, as to whether the defendant has committed breach of the contract and has therefore incurred a liability towards the aggrieved party does a claim for damages turn into “debt due”. Damages are payable only by a decree of the Court and not on the account of quantification by the aggrieved party.
Thar Camps Pvt. Ltd. v. Indus River Cruises Pvt. Ltd. & Others 2021 SCC OnLine Del 3150
4) Further, it observed that the prayers as sought by the petitioner are akin to prayers under Order XXXVIII Rule 5 for attachment. The powers under the Order XXXVIII Rules 5 are extraordinary powers and must be exercised sparingly in accordance with the law. The object of Order XXXVIII Rule 5 is not to convert unsecured debt into a secured one but to ensure that the defendant does not obstruct or delay the execution of the decree.
Skypower Solar India (P) Ltd. v. Sterling and Wilson International FZE, (2023) 6 HCC (Del) 702,
Sanghi Industries Ltd. v. Ravin Cables Ltd. and Anr. 2022 SCC OnLine SC 1329
FIND ORDER HERE
