What did the Supreme Court decide in Smita Conductors v. Euro Alloys?

The Court enforced the arbitration clause and the foreign award, holding that the New York Convention framework applied and the award was not against India’s public policy.

Why was the arbitration clause treated as valid even without signatures?

Because the parties’ conduct—letters of credit, shipments, and force majeure communications—showed acceptance of the written terms, including arbitration.

What role did the New York Convention play?

It governed recognition and enforcement of the foreign award. The Court read Section 2(a) with the Convention to confirm applicability to the written arbitration agreement.

When is an award against public policy of India?

Only when enforcement would seriously offend fundamental policy. Here, the arbitrators’ findings were coherent and not contrary to such policy.

What relief was finally granted?

The appellant was directed to pay the awarded sum with interest, including post-award interest until payment, as directed by the Court.

Smita Conductors Ltd v. Euro Alloys Ltd

Supreme Court of India 2001 (2001) 7 SCC 728 Arbitration & Foreign Awards 7 min read

AUTHOR_NAME: Gulzar Hashmi • LOCATION: India • PUBLISH_DATE: 02 Nov 2025

PRIMARY_KEYWORDS: arbitration clause, foreign award, New York Convention SECONDARY_KEYWORDS: public policy, letters of credit, Section 2(a)

Quick Summary

The Supreme Court said the arbitration clause was enforceable. Even without signatures on the formal contract, the parties’ conduct—opening letters of credit, shipping goods, and invoking force majeure—showed acceptance of the written terms, including arbitration. The foreign award was enforceable under the New York Convention and was not against India’s public policy.

Issues

Can the arbitration clause be enforced when the contract was not signed?
Does the New York Convention regime apply to the award?
Is the award contrary to the public policy of India?

Rules

New York Convention governs recognition and enforcement of qualifying foreign awards.
Section 2(a) (read with the Convention Schedule) covers foreign awards made under a written agreement to arbitrate.
Conduct can prove acceptance of a written arbitration clause, even if the formal document is unsigned.
Public policy bar applies only where enforcement would offend India’s fundamental legal policy.

Facts (Timeline)

1990: Respondent sent a contract with an arbitration clause for sale of aluminium rods.

Appellants did not sign or return the document.

Despite no signatures, appellants opened letters of credit and shipments went ahead.

Commercial performance started on those terms.

1992: Disputes arose; respondents pursued arbitration and obtained Bombay High Court orders.

Appellants objected: no written agreement; award violates public policy.

High Court enforced the award and granted post-award interest at 15%.

Matter reached the Supreme Court.

Timeline of events in Smita Conductors Ltd v. Euro Alloys Ltd

Arguments

Appellant

No signed contract; arbitration clause is not “in writing”.
Award offends public policy of India.

Respondent

Conduct shows acceptance of written terms, including arbitration.
New York Convention requires enforcement; no public policy breach.

Judgment

The Supreme Court upheld enforcement. The parties’ letters of credit, shipments, and force-majeure communications proved acceptance of the written contract and its arbitration clause. The foreign award came within the New York Convention framework. The findings were reasoned and did not violate India’s public policy.

Payment of the awarded sum with interest was ordered, including post-award interest until final payment.

Gavel and award document symbolizing the decision in Smita Conductors Ltd v. Euro Alloys Ltd

Ratio

Acceptance by conduct can satisfy the “written agreement” requirement for arbitration.
New York Convention and its Schedule guide enforcement of foreign awards in India.
Public policy is a narrow exception; coherent and fair awards should be enforced.

Why It Matters

International trade often moves faster than paperwork. This case assures traders that consistent conduct can bind parties to a written arbitration clause, and that Indian courts will support New York Convention awards unless fundamental policy is at stake.

Key Takeaways

Conduct can confirm a written arbitration clause.
NY Convention favors enforcement of foreign awards.
Public policy defense is exceptional, not routine.
Post-award interest can follow until payment.

Mnemonic + 3-Step Hook

Mnemonic: ACT — Acceptance by conduct, Convention applies, Tiny (narrow) public policy.

Look at conduct: LCs, shipments, letters = acceptance.
Check Convention: NY Convention + Schedule → enforce.
Test policy: Only clear policy harm blocks enforcement.

IRAC Outline

Issue: Can the arbitration clause and award be enforced despite no signed contract and a public policy objection?

Rule: Written arbitration agreement + NY Convention regime; conduct can show acceptance; public policy bar is narrow.

Application: LCs, shipments, and force-majeure letters proved acceptance of the written clause; award was reasoned and not against policy.

Conclusion: Enforcement ordered with interest until payment.

Glossary

Foreign Award: An arbitral award made in another country that may be enforced in India under the NY Convention.
Public Policy: A narrow ground to refuse enforcement where fundamental legal policy would be offended.
Acceptance by Conduct: Actions that show agreement to terms, even if the formal document is unsigned.