WhatsApp Messages as an Arbitration Agreement?
In a recent decision of Belvedere Resources DMCC v. OCL Iron & Steel Ltd. & Ors. the Hon'ble Delhi High Court, Hon'ble Mr. Justice Jasmeet Singh has ruled that WhatsApp messages between the parties would constitute as a valid arbitration agreement.
Before delving into the facts of this case, it is pertinent to reiterate the law laid down by the Hon'ble Supreme Court of India in this regard. The Supreme Court of India's decision in Ambalal Sarabhai Enterprise Ltd. v. KS Infraspace LLP Limited (2020) is perhaps the most significant judgment addressing the evidentiary and contractual value of WhatsApp messages .
In this case, the Court specifically addressed the status of WhatsApp messages in the context of contract formation, stating:
"The WhatsApp messages which are virtual verbal communications are matters of evidence with regard to their meaning and its contents to be proved during trial by evidence-in-chief and cross examination. The e-mails and WhatsApp messages will have to be read and understood cumulatively to decipher whether there was a concluded contract or not" .
The Supreme Court recognized that WhatsApp messages, as "virtual verbal communications," can potentially form part of the evidence establishing a contract. However, the Court emphasized that such messages must be evaluated in conjunction with other communications and evidence to determine whether a concluded contract exists.
In view of the already existing law, let us know understand the Delhi HC's decision:
Firstly, the factual matrix of the case: Petitioner is a UAE based company, which provided bespoke services including selling of coal. For the ones wondering what are 'bespoke services', it essentially means custom made services or services that are tailored to a specific need. OCL Iron/Respondent No.1 in the case is engaged in production of coal based iron and steel. OICL/Respondent No.2 is a Wholly Owned Subsidiary of R-1. Aron Auto Limited/Respondent No.3 is also a Wholly Owned Subsidiary of R-1 engaged in production of accessories of vehicles/engines. A representative of the Petitioner company had made an offer for sale of cargo of coal through WhatsApp to SM Niryat, wherein discussion took place for prices and the offer was accepted on the same day. Petitioner had also circulated ScoTA, the formal contract. SMN through WhatsApp sought the performance of the contract. Subsequently, the parties had exchanged correspondence with respect to performance of the contract. SNM later had sought to cancel the contract, for which the Petitioner invoked arbitration against the illegal termination, of course to seek damages for the same.
The issues arising in the present case were as under:
(i) Whether the documents and correspondence show existence of a valid arbitration agreement between the parties?
(ii) Whether this Court has the territorial jurisdiction to entertain and try the present petition under Section 9 of the Arbitration and Conciliation Act, 1996?
(iii) Whether the respondent should be directed to furnish security to the extent of USD 2,777,000/-.
Findings/Analysis of the Court: DHC extensively relied/referred the communication exchanged between the parties. The Hon'ble Court has taken note of the fact that the contract was duly sent by the Petitioner Company, to which a response was also received that the said contract shall soon be signed. ScoTA, the agreement contained an arbitration clause. The Hon'ble Court held that the arbitration agreement was duly contained in the email correspondence exchanged between the parties. Relying on a WhatsApp chat issued by the other party to the Petitioner Company and other available information on record, the Ld. Judge was of the view 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. As regards the Jurisdiction, Ld. Judge held 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 present petition.
The present case contract was between the petitioner, having its office at Dubai and R1 having its office at Kolkata was negotiated through brokers at Singapore. As per the contract, the supply for coal was from Richards Bay, South Africa to Paradip, Orrisa and Sagar, West Bengal. Lastly, the contract was repudiated from Kolkata. Therefore, Ld. Judge held that the Hon'ble Delhi High Court will not have jurisdiction to try the matter.
Despite the matter being not within the jurisdiction of the Hon'ble Delhi High Court, Hon'ble Mr. Justice Jasmeet Singh also gave certain findings on the merits of the matter pertaining to 'Damages', wherein he held that damages is not in the nature of a debt till it is adjudicated upon by a Court or an adjudicating authority. 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.
Ld. Judge also held that 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. The Ld. Judge also rejected to pass on order for attachment against R-1 in a routine manner as 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. Moreover, the case is yet to be decided on the merits. With these findings and decision the Hon'ble Court dismissed the petition.
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