Absence Of Signature On Credit Card Application Does Not Mean No Arbitration Agreement, But Bank Must Show Customer Accepted Its Terms: Bombay High Court
Law does not require signatures of both parties, but Bank cannot bind a person to its arbitration clause without material showing acceptance, the Bench noted and found a prima facie acceptance in clause treating use of card as acceptance.
The Bombay High Court has held that it cannot be said that there is no arbitration agreement only because a signature is not found. The Court added that this does not mean a bank can prepare an agreement containing an arbitration clause and make it binding on a person without showing that the person accepted its terms. The Court observed that Section 7 of the Arbitration and Conciliation Act, 1996 does not make a signature the only way of recording consent.
The Bench observed that some material must show acceptance, and that the consent of the parties must be found from some record. Applying this, he found prima facie acceptance in a clause of the Cardholder Agreement treating use of the card as acceptance, even though the Bank could not produce the digital application. A sole arbitrator was appointed in four applications.
A Bench of Justice Amit Borkar observed, “At the beginning, it is necessary to make clear that the law does not say that every arbitration agreement must have the physical or digital signatures of both parties. Therefore, only because a signature is not found, it cannot be said that there is no agreement. But this does not mean that a Bank can prepare an agreement containing an arbitration clause and make it binding upon a person without showing that the person had accepted its terms. Some material must be there to show such acceptance. A person may accept the terms by doing some act, if the written agreement says that such act will amount to acceptance. In simple words, the consent of the parties must be found from some record…".
Advocate Bijal Gogri appeared for the applicant while none appeared for the respondent.
“…After considering the entire material, the Court holds that only because the Credit Card Application does not bear the physical or digital signature of the Respondent, it cannot be held that no arbitration agreement exists. Section 7 does not say that a signature is the only method by which consent can be recorded. In the present case, Clause 2.1 of the Cardholder Agreement recognises use of the Card as acceptance of the agreement. The statement of account and the affidavit of the Bank's authorised representative provide prima facie material showing such use. Therefore, Clause 32.2, which contains the arbitration clause, is prima facie shown to form part of the agreement governing the Credit Card facility”, it had noted.
Kotak Mahindra Bank Limited sought appointment of an arbitrator against four cardholders. In the lead matter, the Bank said the respondent obtained a credit card through its digital process, accepted the Cardholder Agreement, used the card and defaulted on Rs. 5,46,655.34. It relied on the arbitration clause in Clause 32. The Bank admitted, however, that the original digital application and the record of acceptance were with a former vendor whose agreement had been terminated.
After the Bank served its statement of claim and a Section 17 application by e-mail, the respondent objected to the proposed sole arbitrator. An order dated October 7, 2026 had directed the Bank to produce the application bearing the respondent’s physical or digital signature.
The Court, referring to Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd. (2015) 13 SCC 477, held that an arbitration agreement must be in writing but need not be signed, provided the parties’ identity is established and a record of agreement exists. It added that a Bank cannot bind a person to its clause without showing acceptance. Citing A.P. Power Generation Corpn. Ltd. v. Tecpro Systems Ltd. (2026) 3 SCC 491 and the Constitution Bench in the Interplay case, it held that the Section 11 enquiry is prima facie but “cannot be used as a reason to avoid the requirement of Section 7”.
Clause 2.1 of the Cardholder Agreement provides that using the card constitutes acceptance. Together with the statement of account and the affidavit of the Bank’s representative on use of the card, the Court found this sufficient at the prima facie stage. It refused to treat the respondent’s objection to the arbitrator as an admission under Section 7(4)(c). It also held that RBI digital lending directions and the plea of public money cannot substitute for consent.
The Court appointed Advocate Shadab Jan as sole arbitrator in all four applications, with arbitral costs borne equally in the first instance. Objections on the genuineness of the digital application, actual use of the card, individual transactions and the accuracy of the statements were kept open, and the findings were confined to Section 11.
Cause Title: Kotak Mahindra Bank Limited v. Maulin Niranjan Patel (Neutral Citation: 2026:BHC-OS:23818)
Appearances:
Applicant: Bijal Gogri, instructed by GNP Legal.
Respondent: No appearance for the respondents is recorded.