The Bombay High Court has held that card usage, coupled with contractual terms treating such use as acceptance, is sufficient prima facie evidence of consent to arbitration at the Section 11 Arbitration Act stage. The Court clarified that Section 7 of the Arbitration and Conciliation Act, 1996 requires the agreement to be in writing, but does not mandate physical or digital signatures in every case.
ince Clause 2.1 of the Cardholder Agreement expressly provided that use of the card constitutes acceptance of the agreement, the Court treated card usage as a valid mode of acceptance. Although Kotak Mahindra Bank Limited could not produce the original digital application or electronic acceptance records, the Court found prima facie support in the Cardholder Agreement, account statement and sworn affidavit of the Bank’s authorised representative.
The Court reiterated that while appointing an arbitrator, it is not required to undertake a mini-trial on disputed facts such as liability, genuineness of transactions, correctness of dues or validity of individual entries. Further, questions relating to actual card usage, unauthorised transactions, authenticity of digital records, correctness of statements and the amount payable were expressly left open for adjudication in arbitration.
Briefly, case arose from four arbitration applications filed by Kotak Mahindra Bank Limited vs Maulin Niranjan Patel, wherein the Bank sought appointment of an arbitrator for disputes arising out of credit card facilities availed by the respondents. The Bank contended that the respondents had obtained credit cards through a digital process, accepted the Cardholder Agreement and Most Important Terms and Conditions (MITC), and subsequently used the cards but failed to repay the outstanding dues. The Cardholder Agreement contained an arbitration clause.
The respondents’ credit card applications, however, did not contain any physical or digital signatures. Further, the Bank admitted that the original digital applications and audit trail records showing acceptance of terms were not presently available because they remained with a former service vendor. On this basis, the principal issue before the Court was whether an arbitration agreement could still be said to exist despite the absence of signed applications and digital acceptance records.
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A Single Judge Bench of Justice Amit Borkar observed that Section 7 of the Arbitration and Conciliation Act, 1996 requires an arbitration agreement to be in writing, but does not mandate that it must always bear the signatures of both parties. The Court emphasized that lack of a physical or digital signature, by itself, cannot lead to the conclusion that no arbitration agreement exists.
The Court noted that Clause 2.1 of the Bank’s Cardholder Agreement specifically provided that acceptance of the agreement could occur not only through signing an application form but also by applying online, applying through email, signing the reverse of the card, or using the credit card itself. Therefore, card usage was contractually recognized as a mode of accepting the agreement and all its terms, including the arbitration clause. The Court reiterated that arbitration agreements need not always be evidenced by signed documents. What is essential is the existence of material showing consensus between the parties and a written record indicating acceptance of arbitration.
The Court further observed that although the Bank had not produced the original digital application or audit trail, it had placed on record the written Cardholder Agreement, the statement of account identifying the respondent as the cardholder, details of the credit card account, and an affidavit of its authorized representative affirming that the respondent had obtained and used the facility. Considered collectively, these materials constituted sufficient prima facie evidence of acceptance of the Cardholder Agreement.
The Court also clarified that proceedings under Section 11 of the Arbitration Act are confined to a prima facie examination of whether an arbitration agreement exists. The Court is not expected to conduct a detailed trial regarding disputed questions such as validity of transactions, correctness of dues, genuineness of applications, or liability of the cardholder. Those issues fall within the domain of the arbitral tribunal.
