Maharashtra State Electricity Distribution Company Limited (MSEDCL) & Orsv.R Z Malpani

Legal Analysis: Maharashtra State Electricity Distribution Company Limited (MSEDCL) & Ors. vs. R Z Malpani

Citation: 2026 INSC 342

Court: Supreme Court of India

Coram: Justice J.K. Maheshwari

Judgment Author: Justice J.K. Maheshwari

Nature of Judgment: This is a judgment by a Single Judge Bench of the Supreme Court in its civil appellate jurisdiction, arising from a Special Leave Petition against an order of the Bombay High Court appointing an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The Court allowed the appeal, set aside the High Court’s order, and held that there was no concluded contract between the parties, and consequently, no arbitration agreement existed.

1. Synopsis of the Judgment

This judgment arises from a dispute over the existence of an arbitration agreement following a tender process. The Respondent participated in a tender floated by the Appellant (MSEDCL) for civil works. The Appellant issued a Letter of Intent (LOI) accepting the Respondent’s bid, but no formal work order or agreement was ever executed. The Respondent invoked the arbitration clause contained in the tender documents. The High Court, under Section 11 of the Arbitration and Conciliation Act, 1996, appointed a sole arbitrator, holding that a concluded contract existed. The Supreme Court reversed, holding that: (i) the LOI was merely a “promise to make a promise” and did not create a binding legal relationship; (ii) there was no concluded contract between the parties; (iii) even assuming a contract existed, the LOI made only a general reference to the tender documents, which under Section 7(5) of the Arbitration Act and the law laid down in NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd. is insufficient to incorporate the arbitration clause; and (iv) the High Court’s finding that the Appellant did not dispute the arbitration agreement was patently erroneous. The appeal was allowed, and the High Court’s order appointing an arbitrator was set aside.

2. Basic Information of the Judgment

Case Title: Maharashtra State Electricity Distribution Company Limited (MSEDCL) & Ors. vs. R Z Malpani

Civil Appeal No.: Arising out of SLP (C) No. 36889 of 2025

Bench: Justice J.K. Maheshwari

Date of Decision: April 2026 (specific date not in extract)

Citation: 2026 INSC 342

Appeal From: Judgment dated 01.10.2025 of the Bombay High Court in Arbitration Application (L) No. 1417 of 2025

3. Legal Framework

This judgment involves the scope of the Court’s jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996 (appointment of arbitrators), the existence of an arbitration agreement under Section 7, the legal effect of a Letter of Intent (LOI), and the doctrine of incorporation of an arbitration clause by reference.

A. Key Provisions of Law:

Arbitration and Conciliation Act, 1996:

• Section 7: Definition of arbitration agreement – an agreement by the parties to submit disputes to arbitration, in writing, which may be contained in a signed document, an exchange of letters, or a reference in a contract to another document containing an arbitration clause.

• Section 7(5): A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

• Section 11: Appointment of arbitrators – the Court’s power to appoint an arbitrator when parties fail to agree.

• Section 11(6A): The Court shall confine its examination to the existence of an arbitration agreement (inserted w.e.f. 23.10.2015).

• Section 16: Competence of the arbitral tribunal to rule on its own jurisdiction (Kompetenz-Kompetenz).

Contract Act, 1872:

• Section 2(a)-(b): Proposal (offer) and acceptance – when one person signifies his willingness to do or abstain from doing anything with a view to obtaining the assent of the other, he makes a proposal; when the person to whom the proposal is made signifies his assent, the proposal is said to be accepted.

B. Related Precedents (Discussed in the Judgment):

• Vidya Drolia & Ors. v. Durga Trading Corporation (Citation not fully provided): Developed the ‘ex-facie’ test for Section 11 – the Court may interfere where the arbitration agreement is manifestly non-existent or the dispute is manifestly non-arbitrable. (Para 20)

• SBI General Insurance Co. Ltd. v. Krish Spinning (Citation not fully provided – referred as “SBI General Insurance Co. Ltd.”): Held that the scope of examination at the Section 11 stage is limited to finding a prima facie existence of the arbitration agreement and nothing beyond. Questions of accord and satisfaction, limitation, arbitrability are to be left to the tribunal under Section 16. (Para 21)

• State of Himachal Pradesh & Anr. v. OASYS Cybernatics Pvt. Ltd. (Citation not fully provided): Held that a Letter of Intent is ordinarily a precursor to a contract and not the contract itself; it creates no binding legal relationship until unconditional acceptance and satisfaction of preconditions. (Para 30)

• South Eastern Coalfields Limited & Ors. v. S. Kumar’s Associates AKM (JV) (Citation not fully provided): Held that whether a concluded contract exists depends on the NIT, LOI, and conduct of parties; an LOI merely indicates an intention to enter into a contract in the future. (Para 32)

• NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd. (2024) 12 SCC 1 (referred as “NBCC (India) Ltd.”): Held that a general reference to another document containing an arbitration clause is not sufficient for incorporation; a specific reference to the arbitration clause is required. (Paras 37-39)

• M.R. Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696: Laid down principles for incorporation of arbitration clauses by reference – general reference does not incorporate the arbitration clause; specific reference is required. (Para 38)

• Inox Wind Ltd. v. Thermocables Ltd., (2018) 2 SCC 519: Distinguished – a general reference to a standard form of terms and conditions of an independent trade institution may incorporate the arbitration clause. (Para 38)

• Glencore International AG v. Shree Ganesh Metals (Citation not fully provided): Distinguished – where the contract containing the arbitration clause was never signed but was acted upon, the arbitration agreement can still exist. (Para 40)

• UNISSI (India) (P) Ltd. v. Post Graduate Institute of Medical Education and Research (Citation not fully provided): Where the tender was acted upon and supplies were made, the arbitration clause was held applicable. Distinguished on facts. (Para 41)

4. Relevant Facts of the Case

• Tender (11.08.2021): MSEDCL floated Tender No. EEC/BND/TECH/42/21-22 for ‘Civil & Interior work – Providing / renovating 134 CFC Centres’ with an estimated cost of ₹17,41,37,020. The tender documents included Instructions to Tenderers, General Specifications, Technical Specifications, and Special Conditions of Contract (containing an arbitration clause at Clause 23).

• Respondent’s Bid (03.09.2021): The Respondent submitted its bid with a validity of 120 days and furnished an EMD bank guarantee of ₹17,45,100 valid up to 06.03.2022.

• Letter of Intent (LOI) (16.11.2022): The Appellant issued an LOI accepting the Respondent’s bid and entrusting the work for a value of ₹17,76,19,699. The LOI stated that it was issued “to enable you to start with preliminaries to start the work as soon as the detailed work order is issued.” It also stated that in case of conflict, the LOI’s terms would prevail over the tender specifications.

• Security Deposit (29.11.2022): The Respondent furnished a bank guarantee of ₹44,40,500 as security deposit, later revised on 31.01.2023 and 06.02.2023 as requested by the Appellant.

• No Work Order Issued: Despite repeated requests, the Appellant never issued a work order nor handed over the sites.

• Termination by Respondent (05.08.2024): The Respondent terminated the contract, citing the Appellant’s failure to hand over sites.

• Arbitration Notice (30.08.2024, 01.10.2024): The Respondent invoked Clause 23 of the Special Conditions of Contract, seeking arbitration and claiming compensation of ₹4,89,85,500.

• Appellant’s Reply (04.11.2024): The Appellant stated that there was no concluded contract and that the LOI did not create binding obligations. The Appellant also cancelled the tender on 27.09.2024 and refunded the EMD and security deposit on 24.10.2024.

• Section 11 Application: The Respondent filed an application before the Bombay High Court for appointment of an arbitrator.

• High Court Order (01.10.2025): The High Court, noting that the Appellant had not appeared despite service, passed an ex-parte order appointing a sole arbitrator, holding that a concluded contract existed and that the Appellant had not disputed the arbitration agreement.

• Appeal to Supreme Court: The Appellant challenged the High Court’s order.

5. Issues Identified by the Supreme Court

• Whether, on a prima facie view, there exists an arbitration agreement between the parties, warranting the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

• Whether the Letter of Intent (LOI) dated 16.11.2022, read with the tender documents, created a concluded contract between the parties.

• Whether the arbitration clause contained in the tender documents was incorporated into the LOI by reference, given that the LOI made only a general reference to the tender documents.

• Whether the High Court’s finding that the Appellant did not dispute the existence of an arbitration agreement was correct.

• Whether the High Court’s order appointing an arbitrator warrants interference by the Supreme Court.

6. Ratio Decidendi (The Reasoning and Decision of the Court)

A. Scope of Section 11 – Limited to Prima Facie Existence of Arbitration Agreement

The Court reiterated that after the insertion of Section 11(6A) and the pronouncement in SBI General Insurance Co. Ltd., the scope of enquiry at the referral stage is limited to finding a prima facie existence of an arbitration agreement. Questions of accord and satisfaction, limitation, arbitrability, and frivolity are to be left to the arbitral tribunal under Section 16 (Kompetenz-Kompetenz). However, this limited scope does not prevent the Court from examining whether there is any arbitration agreement at all – if even on a prima facie view no agreement exists, the Court must decline to appoint an arbitrator. (Paras 20-21, 42)

B. Letter of Intent – No Concluded Contract

The Court held that the LOI in this case was a “promise to make a promise,” not a promise itself. Relying on OASYS Cybernatics and South Eastern Coalfields, the Court noted that an LOI is ordinarily a precursor to a contract and does not create a binding legal relationship unless the intention to do so is clear and unambiguous. (Paras 30-32)

Applying these principles to the facts:

• The tender documents (Clause 23 of Instructions to Tenderers) specifically provided that the successful tenderer would have to execute a formal agreement with the Company.

• The LOI itself stated that it was issued “to enable you to start with preliminaries to start the work as soon as the detailed work order is issued.”

• No work order was ever issued, no sites were handed over, and no formal agreement was executed.

• The submission of bank guarantees and security deposits were merely preliminary requirements in contemplation of a future work order and agreement, not evidence of a concluded contract. (Paras 33-36)

Therefore, there was no concluded contract between the parties. (Para 36)

C. No Arbitration Agreement – General Reference Insufficient for Incorporation

The Court held that even assuming arguendo that the LOI created a binding legal relationship, the arbitration clause contained in the tender documents was not incorporated into the LOI. Under Section 7(5) of the Arbitration Act, a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement only if the reference is such as to make that arbitration clause part of the contract. (Para 37)

Relying on NBCC (India) Ltd. and M.R. Engineers & Contractors, the Court drew a distinction between “reference” and “incorporation.” A general reference to another document is not sufficient to incorporate an arbitration clause; there must be a specific reference to the arbitration clause itself. (Para 38)

In the present case, the LOI made a general reference to the tender documents. It did not specifically mention the arbitration clause. The LOI also contained a clause stating that in case of conflict, the LOI’s terms would prevail over the tender specifications, but it contained no dispute resolution clause of its own. Therefore, this was a case of “reference,” not “incorporation.” The arbitration clause was not part of any contract between the parties. (Para 39)

D. Distinguishing Other Precedents

The Court distinguished Glencore International AG on the ground that in that case, the contract containing the arbitration clause was never signed but was acted upon (supplies were made). In the present case, the tender was never acted upon – no work order was issued, no sites were handed over, and no work was performed. (Para 40)

The Court also distinguished UNISSI (India) (P) Ltd. on the ground that in that case, the tender was acted upon and supplies were made. Here, only preliminary steps (bank guarantees) were taken, which did not amount to performance of the contract. (Para 41)

E. High Court’s Finding on Non-Dispute of Arbitration Agreement – Patently Erroneous

The High Court had observed that the Appellant, in its reply dated 04.11.2024, did not question the formation of the arbitration agreement. The Supreme Court held that this finding “stares at the face of the record.” The Appellant’s reply had specifically stated that there was no concluded contract and that the LOI could not bind either party. There was, therefore, no admission of any arbitration agreement. (Para 29)

F. Conclusion – No Prima Facie Arbitration Agreement

The Court concluded that on a prima facie view, without going into disputed facts, there was no arbitration agreement between the parties. The LOI did not create a concluded contract, and the arbitration clause was not incorporated. The High Court had erred in appointing an arbitrator. The appeal was allowed, and the impugned order was set aside. (Paras 42-43)

7. New Legal Principles Established / Reiterated

• Letter of Intent (LOI) does not create a concluded contract unless it clearly and unambiguously evinces an intention to be bound immediately: An LOI is ordinarily a precursor to a contract. It is a “promise to make a promise,” not a promise itself. The mere issuance of an LOI, followed by submission of bank guarantees and security deposits, does not create a binding legal relationship if the tender documents and the LOI itself contemplate a future work order and formal agreement.

• General reference to tender documents in an LOI does not incorporate the arbitration clause: Under Section 7(5) of the Arbitration Act, a specific reference to the arbitration clause is required for incorporation. A general reference to “terms and conditions” of the tender documents is insufficient. This is a case of “reference,” not “incorporation.”

• Section 11(6A) limits the Court’s enquiry to the existence of an arbitration agreement, but that enquiry includes examining whether there is any concluded contract at all: While questions of accord and satisfaction, limitation, and arbitrability are left to the tribunal, the referral court must still determine whether a prima facie arbitration agreement exists. If even on a prima facie view there is no agreement (e.g., no concluded contract, no incorporation), the Court must decline to appoint an arbitrator.

• The “When in doubt, do refer” principle applies only when an arbitration agreement prima facie exists: The Court should lean towards referring matters to arbitration when the arbitration agreement is prima facie existent. However, where no agreement exists even on a prima facie view, the Court cannot appoint an arbitrator.

8. The Court’s Analysis and Examination of Concepts

A. Legal Character of a Letter of Intent (LOI)

The Court exhaustively analysed the legal nature of an LOI, relying on OASYS Cybernatics and Dresser Rand. It held that an LOI is not a contract but a mere expression of intent to enter into a contract in the future. It creates no vested rights until the conditions precedent are satisfied and a final acceptance is communicated. The Court distinguished between a “promise” (which is binding) and a “promise to make a promise” (which is not binding until the subsequent promise is made). The LOI in this case fell into the latter category because it explicitly stated that it was issued to enable the Respondent to start preliminaries “as soon as the detailed work order is issued.” (Paras 30-36)

B. Incorporation of Arbitration Clause by Reference – Section 7(5)

The Court provided a detailed analysis of Section 7(5) and the jurisprudence surrounding incorporation of arbitration clauses. The key distinction is between:

• Reference to a standard form of terms and conditions of an independent trade association: This may incorporate the arbitration clause even without specific mention (as in Inox Wind).

• Reference to another contract or document in a specific commercial transaction: This requires a specific reference to the arbitration clause. A general reference to “terms and conditions” is insufficient.

In the present case, the LOI did not specifically refer to the arbitration clause. It merely stated that the terms and conditions of the tender documents would be read together with the LOI, and in case of conflict, the LOI would prevail. This was a general reference, not a specific incorporation. (Paras 37-39)

C. Distinction Between “Reference” and “Incorporation”

The Court clarified that “reference” is a broader concept – one document may refer to another document for certain purposes (e.g., to understand the scope of work). “Incorporation,” however, requires that the referred document’s terms become part of the referring contract. For an arbitration clause to be incorporated, the intention to do so must be clear and explicit. A general reference does not evince such intention. (Paras 38-39)

D. The High Court’s Error – Misreading of the Appellant’s Reply

The High Court had noted that the Appellant “did not question the formation of arbitration agreement on any ground other than the fact that the project did not proceed further.” The Supreme Court held that this was a patent error. The Appellant’s reply dated 04.11.2024 had specifically stated: “there was no concluded contract between the parties” and “the LOI cannot bind either party to a contract.” This was a clear denial of the existence of any contract, and consequently, any arbitration agreement. The High Court’s ex-parte order, without proper consideration of the Appellant’s reply, was unsustainable. (Para 29)

E. The “When in Doubt, Do Refer” Principle – Limits

The Court acknowledged the pro-arbitration principle that courts should lean towards referring matters to arbitration when the arbitration agreement is prima facie existent. However, the Court held that this principle does not apply when there is no arbitration agreement at all. The Court cannot create an arbitration agreement where none exists. In this case, even on a prima facie view, there was no concluded contract and no incorporation of the arbitration clause. Therefore, the Court was justified in interfering. (Para 42)

9. Critical Analysis of the Judgment

Strengths

• Clarity on the legal effect of LOIs: The judgment provides a clear and practical test for determining when an LOI creates a binding contract. It emphasises that the language of the LOI and the tender documents must be examined to see if the parties intended to be bound immediately or only upon issuance of a work order/agreement. This will be useful in countless tender disputes.

• Correct application of incorporation principles: The judgment correctly follows NBCC (India) Ltd. and M.R. Engineers & Contractors on the need for specific reference to incorporate an arbitration clause. This prevents parties from being bound by arbitration clauses buried in referenced documents without their clear consent.

• Reining in ex-parte Section 11 orders: The High Court passed an ex-parte order appointing an arbitrator despite the Appellant having filed a reply denying the existence of a contract. The Supreme Court corrected this, emphasising that referral courts must examine the record properly, even if one party does not appear.

• Balancing pro-arbitration approach with jurisdictional limits: The Court acknowledged the pro-arbitration bias but correctly held that it cannot override the fundamental requirement of an arbitration agreement. This is a necessary check on referral courts.

Potential Concerns / Critiques

• Strict approach may defeat legitimate expectations: The Respondent had submitted bank guarantees and security deposits, which were accepted and renewed by the Appellant. The Respondent arguably relied on the LOI to its detriment. The Court’s strict holding that no contract existed may be seen as harsh, especially since the Appellant’s own conduct (requesting revised bank guarantees, accepting renewals) suggested that it was treating the Respondent as the successful bidder. However, the Court’s reasoning is legally sound – preliminary steps do not equal performance of the contract.

• No discussion of promissory estoppel or legitimate expectation: The Respondent could have argued that the Appellant was estopped from denying the existence of a contract after accepting bank guarantees and corresponding for months. The Court did not address this argument, possibly because it was not raised or because the Court considered that the doctrine cannot create an arbitration agreement where none exists.

• The “prima facie” standard – how much enquiry is permissible? The Court held that the scope under Section 11(6A) is limited to finding a prima facie existence of an arbitration agreement. Yet, the Court engaged in a detailed analysis of the LOI, the tender documents, and the conduct of the parties to conclude that no contract existed. This could be seen as crossing into merits. However, the Court was careful to note that it was examining only the existence of an agreement, not its validity or performance.

• Single Judge bench: The judgment is delivered by a Single Judge of the Supreme Court. While binding, a Division Bench ruling would have greater authority. However, the principles are well-settled, and the judgment primarily applies existing precedents.

Impact

• Tender disputes and LOIs: This judgment will be cited extensively in disputes arising from Letters of Intent. Parties issuing LOIs should be careful to state clearly whether the LOI is intended to be binding or merely a preliminary step. If a work order or formal agreement is required, the LOI will not create a contract.

• Arbitration clause incorporation: Referral courts will apply the strict test of specific reference. A general reference to “terms and conditions” will not be sufficient to incorporate an arbitration clause. Drafters of LOIs and tender documents should specifically mention the arbitration clause if they intend it to apply.

• Section 11 proceedings: The judgment reinforces that referral courts must examine the record, even ex-parte, to ensure that an arbitration agreement prima facie exists. Ex-parte orders without such examination are vulnerable to being set aside.

10. Final Outcome

The Supreme Court allowed the appeal. The operative directions were:

1. The impugned judgment and order dated 01.10.2025 passed by the Bombay High Court in Arbitration Application (L) No. 1417 of 2025 was set aside.

2. The High Court’s appointment of a sole arbitrator was quashed.

3. The Respondent was given liberty to pursue other alternative remedies in accordance with law, if any available to it.

4. Pending applications were disposed of.

11. Practical Application, Court Lines, and Legal Strategy

Use in Court (Practical Application)

• For an employer/contractor (party issuing LOI): If you issue an LOI that states that a formal work order or agreement will follow, and no such work order/agreement is ever issued, you can argue that no concluded contract exists. The other party cannot invoke an arbitration clause contained in the tender documents by a general reference. Cite this judgment and OASYS Cybernatics.

• For a bidder/contractor (party receiving LOI): If you receive an LOI and you start performing (e.g., mobilising resources, purchasing materials), ensure that the LOI itself is unambiguous about creating a binding contract. If the LOI says “work order to follow,” you are taking a risk. To protect yourself, seek a written confirmation that the LOI is binding, or insist on a work order before incurring substantial expenses. If you have performed the contract (e.g., supplied goods or commenced work), you may be able to argue that a contract was concluded by conduct, even without a formal work order (as in UNISSI).

• For a referral court (Section 11 application): Before appointing an arbitrator, examine whether there is a prima facie arbitration agreement. If the dispute arises from an LOI, examine the language of the LOI and the tender documents. If the LOI makes only a general reference to the tender documents and does not specifically refer to the arbitration clause, the arbitration clause is not incorporated. If the LOI itself states that a work order/agreement is required, and none was issued, there may be no concluded contract. In such cases, decline to appoint an arbitrator.

• For a party opposing arbitration (in Section 11 proceedings): File a detailed reply denying the existence of any arbitration agreement. Do not merely appear and argue on merits. Specifically point out: (i) the LOI was conditional; (ii) no work order/agreement was ever issued; (iii) the LOI made only a general reference to the tender documents; (iv) the arbitration clause was not specifically incorporated. Cite this judgment.

Court Lines

“It is settled law that a letter of intent does not, in and of itself, create a legal relationship or contractual obligations until there is a clear, unambiguous final acceptance by the parties. It is an expression of one party’s intent to enter into a contract with the other party in the forthcoming future.” (Para 31)

“When the intent of the parties can be evinced from the letter of intent or the tender specifications and it is clear that the letter of intent is to be followed by a final award or a concluded agreement, it cannot be said that the letter of intent itself binds the parties to the terms of the tender.” (Para 31)

“The LOI in the instant case was a promise to make a promise and not a promise itself and no agreement had concluded between the parties.” (Para 33)

“In our view, this is a case of ‘reference’ and not ‘incorporation’. There is no mention of any arbitration or dispute resolution clause in the LOI itself, neither does it purport specific incorporation thereof from the tender documents. As such, the arbitration clause contained in the Tender documents could not be said to have been incorporated in the LOI to evince the existence of an arbitration agreement between the parties on its conjoint reading with the Tender documents.” (Para 39)

“The Courts should follow the principle of ‘When in doubt, do refer’ and lean towards referring matters to arbitration when the arbitration agreement is prima facie existent. However, it is only in the rarest of rare cases where even on a prima facie view, without going into disputed facts between the parties, there appears to be no existence of an arbitration agreement, that the referral court must decline to make a reference.” (Para 42)

Legal Strategy Insight

For the Party Seeking Arbitration (Claimant/Bidder):

• Step 1 – Ensure the LOI or acceptance letter clearly incorporates the arbitration clause: Do not rely on a general reference. If the other party’s LOI makes only a general reference, ask for a specific confirmation that the arbitration clause applies. Get it in writing.

• Step 2 – Act on the contract: If you have performed the contract (e.g., supplied goods, commenced work), you have a stronger argument that a contract was concluded by conduct, even if no formal work order was issued. Document all performance.

• Step 3 – In Section 11 proceedings, argue that the LOI is a binding contract: Point to any language in the LOI that indicates immediate binding effect (e.g., “we hereby award the contract,” “you are required to commence work immediately”). Distinguish this case from OASYS Cybernatics by showing that there were no conditions precedent left to be fulfilled.

• Step 4 – If the LOI states “work order to follow,” argue that the work order was merely a formal document and that the LOI itself created a binding obligation: However, this argument is weak after this judgment. Better to seek a work order before incurring costs.

For the Party Opposing Arbitration (Respondent/Employer):

• Step 1 – In your LOI, use clear conditional language: State that the LOI is “subject to the execution of a formal agreement” or “is issued to enable you to start preliminaries pending issuance of a work order.” Avoid language that suggests immediate acceptance (e.g., “we hereby award the contract”).

• Step 2 – If the other party invokes arbitration, file a detailed reply denying the existence of any arbitration agreement: Specifically state that: (i) no concluded contract exists because the LOI was conditional and no work order/agreement was issued; (ii) the LOI made only a general reference to the tender documents, which is insufficient to incorporate the arbitration clause.

• Step 3 – In Section 11 proceedings, appear and argue: Do not default, as the High Court may pass an ex-parte order. File a counter-affidavit. Cite this judgment and NBCC (India) Ltd.

• Step 4 – If the High Court still appoints an arbitrator, appeal to the Supreme Court: The Supreme Court in this case set aside the ex-parte order. However, note that the Supreme Court’s intervention is discretionary.

For the Referral Court (High Court – Section 11):

• Step 1 – Examine the LOI and tender documents carefully: Do not merely look for a clause titled “arbitration.” Examine whether the LOI itself is a concluded contract or merely a preliminary document.

• Step 2 – If the LOI states that a work order or formal agreement is required, and none was issued, prima facie there is no concluded contract. Decline to appoint an arbitrator unless the other party shows that the contract was performed by conduct.

• Step 3 – If the LOI makes a general reference to the tender documents, check whether the LOI specifically mentions the arbitration clause. If not, the arbitration clause is not incorporated. This is a question of law that can be decided at the referral stage without going into evidence.

• Step 4 – If the other party (Respondent) does not appear, do not pass an ex-parte order without examining the record. The Supreme Court in this case set aside the ex-parte order because the High Court had misread the Appellant’s reply. Always consider the written submissions on record.