1. A party sought appointment of an arbitrator following the cancellation of a tender, despite no work order having been issued or formal agreement executed after the letter of intent. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 )
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2026 Supreme(SC) 370
SUPREME COURT OF INDIA
J.K. MAHESHWARI, ATUL S. CHANDURKAR, JJ.
Maharashtra State Electricity Distribution Company Limited and Others – Appellants
Versus
R.Z. Malpani – Respondent
Civil Appeal No. 4307 of 2026 [Arising Out of SLP (C) No. 36889 of 2025]
Decided On : 09-04-2026
Advocates Appeared:
For the Appellants : Mr. Vikas Singh, Sr. Adv. Mr. Samir Malik, Adv. Mr. Tushar Mathur, Adv. Mr. Mahip Singh Sikarwar, Adv. Ms. Snehal Kaila, Adv. Ms. Yachana Gupta, Adv. Ms. Deepeika Kalia, Adv. Mr. Deepanshu Shakargaye, Adv. Mr. Sudeep Chandra, Adv. Ms. Khushi, Adv. Mr. Samir Malik, AOR
For the Respondents: Mr. Abhijit A. Desai, Adv. Mr. Satyajit A. Desai, Adv. Mr. Parth Johari, Adv. Mr. Parth Kumar Singh, Adv. Mr. Satya Kam Sharma, AOR
For the Appellants : Mr. Vikas Singh, Sr. Adv. Mr. Samir Malik, Adv. Mr. Tushar Mathur, Adv. Mr. Mahip Singh Sikarwar, Adv. Ms. Snehal Kaila, Adv. Ms. Yachana Gupta, Adv. Ms. Deepeika Kalia, Adv. Mr. Deepanshu Shakargaye, Adv. Mr. Sudeep Chandra, Adv. Ms. Khushi, Adv. Mr. Samir Malik, AOR
For the Respondents: Mr. Abhijit A. Desai, Adv. Mr. Satyajit A. Desai, Adv. Mr. Parth Johari, Adv. Mr. Parth Kumar Singh, Adv. Mr. Satya Kam Sharma, AOR
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.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11 - Existence of arbitration agreement - High Court appointed sole arbitrator based on purported arbitration agreement derived from tender documents - Appellant disputed the existence of a concluded contract and arbitration agreement, asserting that the Letter of Intent (LOI) did not bind them as no work order was issued and many conditions remained unfulfilled - The Court held that a binding legal relationship was never established by the LOI, viewing it as a mere precursor to a contract, which does not automatically incorporate the arbitration clause from the tender documents without explicit reference - The High Court's findings were erroneous as the Appellant clearly contested the existence of the arbitration agreement. (Paras 3, 14, 29, 40)
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2. The appellant contended that no concluded contract or arbitration agreement existed, while the respondent argued that the tender documents and letter of intent established a valid arbitration agreement. (Para 15 , 16 , 17 , 18 )
3. A letter of intent is generally a precursor to a contract and does not create binding obligations unless specifically intended, nor does general reference incorporate an arbitration clause. (Para 30 , 31 , 32 , 33 , 34 , 35 , 36 , 39 , 40 , 41 , 42 )
4. A general reference in a letter of intent to tender conditions is insufficient to incorporate an arbitration clause; specific incorporation is required under Section 7(5), Arbitration Act. (Para 28 , 37 , 38 , 39 )
5. The impugned order appointing an arbitrator was set aside, as no prima facie arbitration agreement existed, with liberty granted to the respondent to pursue other legal remedies. (Para 43 )
6. What is the legal nature of a letter of intent in the context of contract formation?
A letter of intent is typically a precursor to a contract, acting as a statement of intent to enter into one, and does not create vested contractual rights or binding legal relationships unless it contains clear, final, and unconditional acceptance of terms. (Para 30 , 31 , 32 , 35 , 36 )
7. What test applies to the court's scrutiny during Section 11 arbitration appointment proceedings?
The court's enquiry is limited to the prima facie existence of an arbitration agreement. It should avoid conducting mini-trials on contested facts and should lean towards referring matters to arbitration unless, on a clear prima facie view, the agreement is manifesty non-existent. (Para 20 , 21 , 42 )
8. When is an arbitration clause from a referenced document considered incorporated into a contract?
Under Section 7(5), a general reference to another document containing an arbitration clause is insufficient for incorporation. The reference must explicitly show an intention to incorporate the arbitration clause itself as part of the contract between the parties. (Para 28 , 37 , 38 , 39 )
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:
| Particulars | Date/Time |
| Bid Start Date | 15.07.2011, 13:00 |
| Bid End Date | 06.08.2021, 11:30 |
| Techno-commercial Bid opening | 18.08.2021, 15:00 |
| Price Bid opening on | Will be declared later |
| Winner Selection Date | 18.08.2021, 15:30 |
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 made by the Respondent, the Work Order was not issued by the Appellant and ultimately, on 05.08.2024, the Respondent terminated the contract, citing Appellant’s failure to hand over the sites for the work to begin. Thereafter, on 30.08.2024, the Respondent issued a notice under Clause 23 of the Special Conditions of Contract in the Tender documents, seeking reference of the disputes to arbitration and seeking compensation to the tune of Rs. 4,89,85,500.
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