Arbitration Agreement Valid Between Parties If It’s Contained In Exchange Of Email & WhatsApp: Delhi High Court

The Delhi High Court held that the arbitration agreement is valid between the parties if it is contained in exchange of email and WhatsApp.

The Court held thus in a Petition filed under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act).

A Single Bench of Justice Jasmeet Singh observed, “The above correspondence leaves no room for doubt that the arbitration agreement was contained in the exchange of email and WhatsApp communications between the parties, and hence, there is an existence of a valid arbitration agreement between the parties. Hence, issue no.1 as enumerated in paragraph 48 is decided in favor of the petitioner.”

The Bench said that mere existence of a branch office which, prima facie, had nothing to do with the transaction in question will not give Delhi, jurisdiction to entertain the Petition.

Advocate Gauhar Mirza represented the Petitioner while Senior Advocate Krishnaraj Thaker represented the Respondents.

Facts of the Case

The Petitioner was a company incorporated in UAE, providing quality and bespoke services including selling of coal. OCL Iron and Steel Ltd., the Respondent was engaged in production of coal based direct reduced iron as well as making of steel. Oriental Iron Casting Limited (OICL), a wholly owned subsidiary of the Respondent was engaged in manufacture of steel. Aron Auto Limited was also a wholly owned subsidiary of the Respondent, engaged in production of parts and accessories for motor vehicle and their engines. In 2022, a representative of a company requested the Petitioner’s representative to make an offer for sale of cargo of coal for November through WhatsApp communication. In response, the Petitioner conveyed the prices and quantities. Further, discussions took place via WhatsApp and then the Petitioner formally offered to sell between 75,000MT to 150,000MT (+/-10%) of coal on a CFR basis two ports (Paradip and Sagar) at a price of USD 155.50 PMT or basis one port (Sandheads) at a price of USD 150 PMT dated (hereinafter referred to as Offer), which was accepted.

To formalize the deal, the Petitioner circulated a globally accepted Standard Coal Trading Agreement. From November 3, 2022 to November 14, 2022, the Petitioner sent multiple reminders to SMN via WhatsApp and email requesting the signed contract and settlement in advance payment. Finally, the company responded to the same, asking to change or swap the month of delivery. Expressing its disappointment, the Petitioner invoked arbitration, seeking damages for wrongful termination of contract. The Petitioner was made aware of the NCLT, Kolkata Bench’s Order sanctioning the amalgamation of the company with the Respondent.

Reasoning

The High Court after hearing the contentions of the counsel, noted, “In the facts and circumstances of the present case, SCoTA was sent vide email dated 02 November 2022 by the petitioner to R1. The respondent No.1 duly responded to the said email on 03 November 2022 and in furtherance thereof, asked for its updated ETA/ETB on a daily basis. Additionally, R1 via WhatsApp on 03 November 2022 informed the petitioner that the SCoTA would be signed and sent immediately.”

The Court reiterated that unliquidated damages do not give rise to debt unless the liability is adjudicated upon by a competent Court or an adjudicating authority and the damages have been assessed.

“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”, it added.

The Court said that the claim for damages is not in the nature of a debt till it is adjudicated upon by a Court or an adjudicating authority and there exists no obligation to an amount when damages are claimed for breach of contract unless the competent court adjudicates upon the claim and holds that there has been a breach of contract committed by the Defendant and is thereby liable to compensate the aggrieved party for the loss following which the quantum of such liability is assessed.

“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”, it further remarked.

The Court observed that in order to successfully establish a case, the Petitioner is required to show that the Defendant with an intent to obstruct or delay the execution of a decree that may be passed against him is about to dispose of whole or part of his property or is about to remove any part or whole of his property from the local limits of the jurisdiction of the Court.

“It is settled law that an order under Section 9 the Arbitration and Conciliation Act, 1996 as sought by the petitioner, cannot be passed unless the conditions as provided under Order XXXVIII Rule 5 are satisfied”, it also noted.

Conclusion

Moreover, the Court said that the Petitioner has a claim, but that claim is yet to be established, the amount is yet to be quantified, financial health of the Respondent being bad is yet to be established and the fact that Respondent is malafidely disposing of its assets is also yet to be established.

“The orders of attachment affects the financial health of the company and are not to be passed merely as a routine. In the present case, there is nothing to show as to the intent of R1 to obstruct or delay the execution of a decree that may be passed against it. … The fact that R1 was under CIRP and R1 has loans secured by mortgaging its properties is not sufficient to pass an order under Order XXXVIII Rule 5. R1 is a commercial company and its operations require taking loans, mortgaging assets and to my mind the same cannot be sufficient to effect attachment”, it concluded.

Accordingly, the High Court dismissed the Petition.

Cause Title- Belvedere Resources DMCC v. OCL Iron and Steel Ltd. & Ors. (Neutral Citation: 2025:DHC:5128)

Appearance:

Petitioner: Advocates Gauhar Mirza and Shivi Chola.

Respondents: Senior Advocate Krishnaraj Thaker, Advocates Anand Sukumar, S. Sukumaran, Bhupesh Kumar, and Ruche Anand.

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