The existence of an arbitration agreement under Section 11 requires clear indication of a binding contract, which was absent in this case; the Letter of Intent was merely a precursor to an actual contract.

JUDGMENT :

J.K. MAHESHWARI, J.

1. Leave granted.

2. The instant appeal is directed against the judgment dated 01.10.2025 of the Bombay High Court (hereinafter referred to as “High Court”) in Arbitration Application (L) No. 1417 of 2025.

3. By the impugned order, the High Court disposed of the application filed by the Respondent under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “1996 Act”) and appointed a sole arbitrator to adjudicate upon the disputes and differences between the parties.

FACTS

4. The Appellant, Maharashtra State Electricity Distribution Company Limited (MSEDCL) is a State Government company, which is a fully-owned corporate entity owned by the Government of Maharashtra. It is an electricity distribution utility which distributes electricity throughout Maharashtra including a few suburbs of Mumbai. The Respondent is a partnership firm engaged in civil construction and other allied businesses.

5. The Appellant floated a Tender dated 11.08.2021 bearing Code EEC/BND/TECH/42/21-22 for ‘Civil & Interior work-Providing/renovating 134 CFC Centres at various O&M Divisions of SEDCL throughout the State’. (hereinafter referred to as the “Tender”) Total estimated cost of the tender was Rs. 17,41,37,020. The Tender document contained four different constituents, being (i) Instructions to Tenderers & Qualifying Criteria (ii) General Specifications (iii) Technical Specifications (iv) Special Conditions of Contract. (collectively referred to as “Tender documents”) The Tender documents also contained an agreement pro-forma. The timeline for the tender process as per the Tender documents was as follows:

6. The Respondent participated in the tender process and submitted a bank guarantee of Rs. 17,45,100 valid up to 06.03.2022. Respondent then submitted its bid/quotation against the said Tender with a validity of 120 days on 03.09.2021. Upon opening of the techno-commercial and price bids, the Appellant, vide letter bearing No. CEC/CCO/Tech/350 dated 16.11.2022 (hereinafter referred to as “LOI”) accepted the bid of the Respondent and entrusted the work under the said tender process to the Respondent for a value of Rs. 17,76,19,699.

7. On 29.11.2022, the Respondent furnished a further bank guarantee to the tune of Rs. 44,40,500 as security deposit valid up to 27.05.2023. The Appellant wrote to the Respondent on 13.12.2022 requesting that bank guarantee be furnished on stamp paper of Rs. 500 value instead of Rs.100 and sent a reminder in that respect on 31.12.2022. The Respondent submitted revised bank guarantee on stamp paper with value of Rs.500 on 31.01.2023.

8. On 02.02.2023, the Holding Company of the Appellant wrote to the Executive Engineer of the Appellant seeking correction in the forwarding letter of the bank guarantees. Pursuant thereto, the Respondent sent a corrected forwarding letter with the bank guarantees on 06.02.2023.

9. Thereafter, the Respondent sent various letters and representations to the Appellant seeking issuance of a Work Order in terms of the LOI, but no Work Order was issued by the Appellant. On 08.08.2023, the Respondent submitted revised/renewed bank guarantees as security deposit.

10. Despite repeated requests being mad