Can WhatsApp Conversation Be A Valid Arbitration Agreement?: An Analysis

Introduction

Dynamic global trade scenario and economic volatility necessiated expeditious disposal of the commercial dispute, which impels parties to opt for various 'Alternative Dispute Resolution' mechanisms, which includes 'Arbitration' for flexible, effective and cost-efficient resolution of justice. The principle of 'Party Autonomy' i.e. 'parties at will', is the foundation stone of the commissioning of the arbitration and the procedures to be followed by the Parties during the arbitration proceeding. The principle is well-recognized by the different International conventions1 and 'The Arbitration and Conciliation Act, 1996', ('the 1996 Act').

Arbitration's most critical feature is that the dispute is being resolved through a mechanism agreed upon and adopted by the party as per an arbitration agreement, whether in the form of an arbitration clause or separate agreement, which reflects the parties' autonomy and their consensus ad idem. In the absence of a valid arbitration agreement, the Arbitral Tribunal cannot assume jurisdiction to adjudicate upon the disputes2. The existence of a valid arbitration agreement is sine qua non for initiation of the arbitration, appointment of arbitrator and enforcement of an award. In present digital world, negotiation has been going through digital mode, which includes exchanges of messages on Whatsapp and Email between the parties, wherein such communication between parties can also led the constitution of the arbitration agreement between them. This article analyses the factors/elements guiding the part autonomy and legal threshold to constitute a valid arbitration agreement through exchanges of messages on Whatsapp, Email and other electronic communication mode.

Scope of a valid Arbitration Agreement

Section 7 of the 1996, Act defines what would constitute a valid Arbitration agreement, which was interpreted by the Hon'ble Supreme Court in the case of Mahanadi Coalfields. Ltd. v. M/S IVRCL AMR Joint Venture3, , wherein the Hon'ble Supreme court has observed the following points to be considered while evaluating an agreement as a valid arbitration agreement:

• Parties should have agreed to refer their present or future arbitrable disputes to the arbitral tribunal and agreed to be bound by the decision of such arbitral tribunal.
• Agreement shall mandatorily oblige parties to refer the dispute to arbitration, and not merely contemplates the possibility of submitting the dispute to arbitration.
• Agreement must be in writing. However, it is not required to be in any express format or have the explicit use of word 'arbitration'.
• Mere use of the word 'arbitration' in any document would not qualify the same as an arbitration agreement, if other provision of document reflect contrary intentions. 
• Intention of parties' to refer dispute to resolve through arbitration shall have to be gathered from the terms of the agreement.

The aforesaid requisites need to be satisfied to qualify an agreement to be a valid arbitration agreement. However, as stated above and required by the Section 7(3) of the 1996 Act, an arbitration agreement must be in writing. However, it does not states that it must be signed by the parties. Therefore, it is interesting to see whether exchanges of draft of agreement in form of messages on Whatsapp and Email without signing it would constitute a valid arbitration agreement and whether the non-signatories can be bound by such communication.

Unsigned Document as an Arbitration Agreement

Section 7(4)(b) & 7(4)(c) of the 1996 Act provides that an arbitrationion agreement can also be contained in an exchange of letters, telex, telegrams, or other means of communication electronic or non-electronic, which contain a record of such agreement or in exchange of statement of claims and defense wherein the existence of arbitration agreement is not denied.4 Therefore, this clearly shows the intent of the Statute to not restrict the scope of arbitration agreement only to a signed agreement.

The Hon'ble Supreme Court in the case of Nimet Resources Inc. vs. Essar Steels Ltd.5, wherein the Hon'ble court held that, if an unsigned contract containing an arbitral clause exchanged by the parties in their communications, then parties will be bound by such an arbitral clause. Further, in Unissi (India) Pvt. Ltd. vs. Post Graduate Institute of Medical Education and Research6, the Hon'ble Supreme Court relying upon Nimet held that even an arbitration agreement signed by one of the parties and contained in the communication of offer and acceptance between the parties will be a valid arbitration agreement.

The Five Judge bench of the Hon'ble Supreme Court in Cox & Kings vs SAP India Pvt. Ltd. & Anr.7, has determined the threshold to constitute a valid arbitration agreement through exchanges of messages on Whatsapp and Email, and held that communication between parties must shows the consenses ad idem of the parties to refer the disputes to arbitration. Following factors to be reviewed by the Court to held a correspondence as a binding arbitration agreement.

1. Written documents necessarily not be signed by all the parties, as long as the existence of a valid arbitration agreement can be culled out from communications between the parties8 and Consensus ad idem between parties is unequivocal9.
2. Court is required to review what the parties wrote in the agreement and how they acted on the correspondence to infer the intention of parties10. If the parties have initially agreed on the terms of the arbitration agreement and have acted in furtherance of the same without signing the same, such an arbitral clause will be binding.
3. Court shall not go outside the clear language used in the correspondence and create a new contract.

Relying upon Cox & Kings, recently, the Hon'ble Delhi High Court in Belvedere Resources DMCC v. OCL Iron & Steel Ltd.11, has upheld a non-signed document received on email along with the WhatsApp Chat considered a valid arbitration Agreement. The Court has observed as follows:

In the aforesaid cases, one party shared the draft of agreement on Email and confirmed on Whatsapp that it would be signed and sent. The Delhi High ourt considered it as consensus ad idem between the parties amd held that a valid arbitration agreement exists between the parties.

Conclusion

It can be concluded from the above discussion that, an arbitration agreement is not required in the form of the signed document to be valid and enforceable. It even does not require the main contract incorporating arbitration clause need to be concluded, which strengthen the doctrine of separability that dictates that main contract agreement and arbitration agreement is legally distinct and independent. Therefore, even in absence of a invalid or void contract agreement, the arbitration clause remains valid and enforceable12. The only factor that is required to evaluate an agreement as a valid arbitration agreement is the Parties's consensus and their unequivocal intention to refer dispute to arbitration, which is in line with the Principle of 'Party autonomy' i.e. inherent to arbitration proceeding. The intention of parties can either be expressed or implied and inferred either from the substance of document exchanged between the parties and their subsequect action on the same.