Nisus Finance Services Co Limited vs Blisvins Realty Private Limited
- Court
- Bombay High Court
CNR No : HCBM020292782026
2026:BHC-OS:23526
carap620-2026-JF.doc
AGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION APPLICATION NO.620 OF 2026
1. Nisus Finance Services Co. Limited
ATUL
GANESH
KULKARNI
2. Nisus BCD Advisors LLP … Applicants
Vs.
Digitally signed by
ATUL GANESH
KULKARNI
Date: 2026.10.30
11:19:40 +0530
1. Blisvins Realty Private Limited
2. Triple A Construction Private Limited
3. Flexituff Technology International
Limited
4. Nestivo Realty LLP
5. Treasure Group
6. Vinayak Kalani
7. Karthikeya Kalani … Respondents
Mr. Shanay Shah with Mr. Sourasubha Ghosh and Mr.
Aditya Trivedi i/by Induslaw for the Applicants.
Mr. Mayur Khandeparkar with Mr. Aashish Darne, and
Mr. Parikshit Pania i/by Clove Legal for Respondent
Nos.1, 2, 4, 6 and 7.
CORAM : AMIT BORKAR, J.
RESERVED ON : OCTOBER 28, 2026.
PRONOUNCED ON : OCTOBER 30, 2026
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JUDGMENT:
1. By the present Application filed under Section 11 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as
“the Act”), the Applicants seek appointment of a sole arbitrator to
decide the disputes and differences between the Applicants and
the Respondents arising out of the Term Sheet dated 15 December
2025, read with the Advisory Fee Letter Agreement dated 18
December 2025.
2. According to the Applicants, the facts leading to the filing of
the present Application are as follows. In October 2025,
negotiations commenced between the Applicants and the
Respondents for arranging finance by way of structured debt
funding for the real estate project known as “Treasure Palms Phase
1”. On 15 December 2025, the parties entered into a Term Sheet.
Under the Term Sheet, Applicant No. 2, Nisus BCD Advisors LLP,
and/or its affiliates were to act as the Facility Agent for arranging
finance up to INR 65 Crores. Thereafter, on 18 December 2025, an
Advisory Fee Letter Agreement was executed, under which
Applicant No. 1, NiFCO, and/or its associates were appointed as
the Exclusive Advisor. The Respondents agreed to pay advisory fees
of INR 1,62,50,000/-, together with applicable taxes. According to
the Applicants, both documents formed part of one transaction and
involved both Applicants. Nisus BCD was to act as the Facility
Agent under the Term Sheet, whereas NiFCO was appointed as the
Exclusive Advisor under the Advisory Fee Letter Agreement. On 24
December 2025, the Respondents, through their Chartered
Accountant, Aditya Saraf, requested the Applicants to raise the
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invoice in the name of Flexituff Technology International Limited
(FTIL). They confirmed that FTIL would make the payment.
Accordingly, on 31 December 2025, the Applicants raised a
Proforma Invoice in the name of FTIL towards the advisory fees, as
instructed by the Respondents. Between 8 January 2026 and 16
January 2026, the Applicants sent reminders seeking payment of
the outstanding advisory fees. On 16 January 2026, the
Respondents informed the Applicants that they had decided to
proceed with another investor and would not pay the advisory
fees. According to the Applicants, the exclusivity period under
Clause 23 of the Term Sheet commenced on 15 December 2025
and continued until 13 February 2026. The Applicants allege that
the Respondents entered into a financing arrangement with
another investor during this period, in breach of the exclusivity
obligation under the Term Sheet. They contend that the
Respondents' email dated 16 January 2026, informing them of the
decision to proceed with another investor, amounts to a clear
breach of the binding terms of the Term Sheet.
3. On 11 June 2026, the Applicants issued a Claim Notice,
claiming a total amount of INR 16,94,81,200/-. This amount
included the unpaid advisory fees, interest, commitment fees and
damages claimed for breach of the exclusivity obligation. The
Claim Notice formally recorded the disputes between the parties
and stated that arbitration would be initiated if the amount was
not paid. On 29 June 2026, the Respondents, through their
advocates, replied to the Claim Notice and denied their liability to
pay the amount claimed. Thereafter, on 7 July 2026, the
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Applicants issued a Final/Rejoinder Notice, disputing the stand
taken by the Respondents and giving them one final opportunity to
make the payment.
4. On 16 July 2026, the Applicants invoked the arbitration
clause contained in Clause 25 of the Term Sheet. Applicant No. 2,
claiming to act as the Facility Agent, appointed Advocate, as the
sole arbitrator. On 30 July 2026, the Respondents replied to the
notice invoking arbitration. They disputed the existence and
enforceability of the arbitration agreement and did not act in
accordance with the procedure provided under Clause 25 of the
Term Sheet. In these circumstances, the Applicants have filed the
present Application seeking appointment of a sole arbitrator.
5. Mr. Shanay Shah, learned Advocate appearing for the
Applicants, submits that the Applicants are financial advisory
entities specialising in arranging finance for infrastructure projects.
They were engaged in connection with the proposed financing of a
project being developed by the Respondents. The terms of their
engagement were recorded in a Head of Terms/Term Sheet,
pursuant to which an Advisory Fee Letter Agreement was
executed. According to the Applicants, the Respondents breached
the binding exclusivity obligation under the Term Sheet by
approaching another investor. They failed to pay the agreed
advisory fees under the Advisory Fee Letter Agreement. These
disputes have given rise to the present Application seeking
appointment of an arbitrator.
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6. The first objection raised by the Respondents is that there is
no concluded or binding arbitration agreement between the
parties. According to the Respondents, the clauses identified as
binding in the Term Sheet do not include the arbitration clause
contained in Clause 25. They contend that Clause 25 cannot be
treated as a binding arbitration agreement. In reply, the Applicants
submit that the question whether particular clauses of the Term
Sheet are binding is a matter to be decided on merits by the
Arbitral Tribunal. They point out that Clause 25 provides for
arbitration in respect of disputes arising from any binding
provision of the Term Sheet, including the exclusivity obligation.
According to the Applicants, the interpretation suggested by the
Respondents would lead to an unreasonable result. Although the
Term Sheet contains certain binding obligations, the Respondents'
interpretation would make the arbitration clause ineffective in
respect of those very obligations. Such an interpretation would be
contrary to the language of Clause 25 and would overlook the fact
that an arbitration agreement is a separate and distinct agreement.
The Applicants submit that Clause 25 satisfies the requirements of
a valid arbitration agreement. They contend that the parties acted
upon the Term Sheet and treated it as final, as is evident from the
subsequent execution of the Advisory Fee Letter Agreement dated
18 December 2025. In support of this submission, they rely upon
the emails dated 30 and 31 December 2025. On these grounds, the
Applicants maintain that a valid and binding arbitration agreement
exists between the parties.
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7. The next objection raised by the Respondents is that the
Applicants have not signed or accepted the Term Sheet. In reply,
the Applicants submit that the Term Sheet was issued as an offer
by them and was accepted by signing it at the foot of the
document by all the Respondents, except Respondent No. 5. In
view of this position, the Applicants do not press the present
Application against Respondent No. 5. According to the Applicants,
the fact that they had made the offer is clear from the
Respondents' own statements in their Reply, wherein they admit
that the draft Term Sheet was circulated by Applicant No. 2. The
Applicants submit that Applicant No. 2 is described as the “Facility
Agent” in Clause 4 of the Term Sheet. Its role and participation in
the proposed financing arrangement are evident from the terms of
the document. They point out that Clause 23, which contains the
exclusivity obligation alleged to have been breached, is one of the
binding provisions of the Term Sheet. The Applicants contend that
the objection regarding their failure to sign the Term Sheet does
not answer the claim arising from the binding obligations recorded
in it.
8. As regards Applicant No. 1, the Applicants submit that
Clause 4 describes the Facility Agent as “Nisus BCD Advisors LLP
and or its affiliates”. According to them, there is no dispute that
Applicant Nos. 1 and 2 are not affiliates of each other. However, by
the Advisory Fee Letter Agreement dated 18 December 2025, the
Applicants were appointed as the Exclusive Advisor in connection
with the transaction contemplated under the Term Sheet. They
contend that Applicant No. 1's role must be considered in the light
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of the Advisory Fee Letter Agreement and the overall transaction
between the parties. In support of their submissions concerning the
existence and scope of the arbitration agreement and the
relationship between the parties, the Applicants rely upon the
decisions of the Supreme Court in Cox & Kings Ltd. v. SAP India
(P) Ltd., (2024) 4 SCC 1, and KKH Finvest (P) Ltd. v. Ashiesh
Shukla, 2026 SCC OnLine SC 1498 . According to the Applicants,
the principles laid down in these decisions support their case.
9. The next objection raised by the Respondents is that the
Advisory Fee Letter Agreement is not covered by the arbitration
clause contained in the Term Sheet. The Applicants dispute this
objection and submit that both documents form part of the same
transaction. The Applicants submit that the Advisory Fee Letter
Agreement was executed between Applicant No. 1, along with its
affiliates, and the Respondents pursuant to the Term Sheet.
According to them, the Advisory Fee Letter Agreement is an
integral part of the transaction contemplated under the Term
Sheet. In support of this submission, they rely upon the following
circumstances. First, the Advisory Fee Letter Agreement refers to
the Term Sheet. Secondly, the shortfall in the advisory fees is
linked to the Term Sheet by treating the amount as an outstanding
debenture. Thirdly, the Advisory Fee Letter Agreement is connected
with the exclusivity obligation under the Term Sheet, as it
describes the Applicant as the “Exclusive Advisor”. Fourthly, both
documents were negotiated and executed as part of a series of
documents relating to the same transaction. The Applicants submit
that this connection is evident from the emails dated 10 November
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2025 and 24 December 2025, and particularly from the
Respondents' email dated 30 December 2025.
10. On the basis of these circumstances, the Applicants contend
that the Advisory Fee Letter Agreement forms part of the same
transaction as the Term Sheet. They submit that a dispute arising
under the Advisory Fee Letter Agreement is a dispute arising “in
connection with the ... implementation” of the Term Sheet. In
support of this submission, they rely upon the decision in Cox &
Kings Ltd. v. SAP India (P) Ltd.
11. The Applicants submit that, in any event, the question
whether the disputes arising under the Advisory Fee Letter
Agreement fall within the scope of the arbitration clause in the
Term Sheet concerns the arbitrability of those disputes. According
to them, this question should be decided by the Arbitral Tribunal
and should not prevent the appointment of an arbitrator at this
stage.
12. The next objection raised by the Respondents is that the
Term Sheet had lapsed and cannot be relied upon for invoking
arbitration. According to the Respondents, the Term Sheet lapsed
on 22 December 2025 because it was not signed within seven days
from 15 December 2025, as required under Clause 27 of the Term
Sheet. On this basis, they contend that the Term Sheet, including
the arbitration clause contained in it, cannot be enforced. In reply,
the Applicants submit that the Respondents acted upon the Term
Sheet, as is evident from the subsequent execution and issuance of
the Advisory Fee Letter Agreement. They contend that the
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Respondents cannot now rely upon the alleged expiry of the Term
Sheet to deny the existence of the obligations arising from the
transaction.
13. The Applicants submit that the Respondents have admitted
that they signed the Term Sheet before 30 December 2025, after
the Applicants shared the final draft on 24 December 2025.
According to the Applicants, the Term Sheet was signed within the
period of seven days contemplated under Clause 27. They contend
that the objection based on the alleged expiry of the Term Sheet is
unsustainable even on this ground.
14. The next objection raised by the Respondents is that there is
no defined legal relationship between the parties within the
meaning of Section 7 of the Act. The Applicants submit that this
objection is based on an incorrect understanding of the law.
According to them, the fact that the Term Sheet describes certain
provisions as non-binding does not mean that there is no defined
legal relationship between the parties under Section 7(2) of the
Act. The Applicants rely upon the decision of the Supreme Court
in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 , wherein
a defined legal relationship is explained as one which “gives rise to
legal obligation and duties, and, therefore confers a right”. The
Applicants submit that the Term Sheet admittedly contains binding
obligations, including the exclusivity obligation under Clause 23.
According to them, the Respondents' breach of this obligation is
evident from the email dated 16 January 2026. They submit that
the Respondents have admitted that the entire fee payable under
the fee arrangement has not been paid. The Applicants contend
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that the Term Sheet and the Advisory Fee Letter Agreement create
legal rights and obligations between the parties, and that the
disputes arising from these obligations can be referred to
arbitration.
15. The Applicants rely upon the order passed by this Court in
Urban Infrastructure Trustees Limited v. Mr. Bhavik Bhimjyani &
Ors., Arbitration Application No. 14 of 2016, decided on 12 August
2026. According to the Applicants, this Court appointed an
arbitrator in that case in respect of disputes arising from a non-
binding Term Sheet. They rely upon this decision to support their
submission that the description of a document as non-binding does
not,, prevent the appointment of an arbitrator where the dispute
concerns binding obligations arising from the transaction.
16. The Applicants submit that the scope of enquiry under
Section 11 of the Act is limited to determining the existence of an
arbitration agreement. In support of this submission, they rely
upon Cox & Kings Ltd. v. SAP (India) (P) Ltd., (2025) 1 SCC 611.
According to the Applicants, the arbitration agreement exists in the
present case, and the objections raised by the Respondents do not
justify refusing the appointment of an arbitrator. They seek that
the present Application be allowed.
17. Mr. Mayur Khandeparkar, learned Advocate appearing for
Respondent Nos. 1, 2, 4, 6 and 7, submits that the Applicants rely
upon the Term Sheet dated 15 December 2025, exchanged
between Applicant No. 2 and the Respondents, and claim that it
contains an arbitration agreement under Clause 25, which deals
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with jurisdiction. However, the Closing Note of the Term Sheet
states that it is “for discussion purposes only” and is not binding,
except for the clauses relating to “Transaction Costs”, “Exclusivity”
and “Confidentiality”. It provides that no obligation would arise
“until the Transaction Document(s) have been signed by all
parties”. The Term Sheet remains subject to fulfilment of the
conditions precedent and execution of all necessary documents.
Learned Advocate submits that Clause 25 has not been included
among the provisions declared to be binding. He points out that
the Applicants rely upon only the three provisions mentioned
above as binding obligations. According to the Respondents, no
Transaction Document was ever signed by all the parties. Even the
Term Sheet was neither signed nor executed by the Applicants.
18. Learned Advocate for the Respondents submits that Clause
27 of the Term Sheet provides that it would remain valid for seven
days “unless executed by relevant parties”. Therefore, according to
the Respondents, the Term Sheet dated 15 December 2025 expired
on 22 December 2025. He submits that Applicant No. 2 never
signed the Term Sheet. The signed copies from the Respondents
were shared on 30 December 2025, that is, after the expiry of the
seven-day period. Learned Advocate relies upon the email dated
31 December 2025, which is on record. In that email, Applicant
No. 2 was called upon to execute the final documents, with the
statement that “The signed TS that has been shared is final from
our end. We expect to execute the final documents in the coming
week.” According to the Respondents, this email shows that
execution of the final documents by the Applicants was still
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awaited. They contend that the Term Sheet never became a
concluded and binding agreement between all the parties.
19. Learned Advocate for the Respondents submits that Section
7(1) of the Act requires the existence of a “defined legal
relationship” between the parties. According to him, a Term Sheet
which was never fully executed, had expired, and was expressly
stated to be non-binding cannot create such a legal relationship.
He submits that the essential terms were still to be recorded in the
final documents, but those documents were never signed.
Therefore, according to the Respondents, there was no concluded
agreement between the parties and, consequently, no arbitration
agreement within the meaning of Section 7 of the Act.
20. In support of his submissions, learned Advocate relies upon
the decision of the Supreme Court in Bihar State Mineral
Development Corporation v. Encon Builders, (2003) 7 SCC 418. He
submits that paragraph 13 of the said decision explains the
essential requirements of an arbitration agreement. These include
the intention of the parties to settle their disputes through a
private tribunal, a written agreement to be bound by the decision
of that tribunal, and an agreement between the parties on these
terms. He relies upon paragraph 17, which emphasises that there
must be a common understanding between the parties to refer
their disputes to an arbitral tribunal. According to the
Respondents, the Closing Note of the Term Sheet, Clause 27 and
the absence of execution by all the parties show that there was no
such common understanding. They contend that the parties never
agreed to refer their disputes to arbitration.
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21. Learned Advocate relies upon the decision of the Supreme
Court in MSEDCL v. R Z Malpani, 2026 SCC OnLine SC 553. He
submits that, in that case, the Supreme Court set aside an order
appointing a sole arbitrator under Section 11 of the Act after
examining whether an arbitration agreement prima facie existed
and whether the parties had agreed to refer their disputes to
arbitration. The Supreme Court treated a document which
contemplated execution of a final agreement, namely, a Letter of
Intent (LOI), as a mere “promise to make a promise”. As no
arbitration agreement was found to exist even at the initial stage,
the appointment of the arbitrator was set aside. Learned Advocate
submits that the principle of “when in doubt, do refer” can be
applied only where an arbitration agreement prima facie exists. It
cannot be applied when the very existence of such an agreement is
in dispute and the available material does not show that the
parties agreed to arbitration. On these grounds, learned Advocate
prays that the present Application be dismissed with exemplary
costs payable by the Applicants to the Respondents.
REASONS AND FINDINGS:
22. At this stage, it is necessary to see what this Court is required
to examine while deciding an Application under Section 11 of the
Act. At this stage, this Court is not required to decide whether the
Applicants will succeed in recovering the advisory fees or damages
claimed by them. The limited question is whether an arbitration
agreement prima facie exists between the parties and whether
there is sufficient material to send their disputes for arbitration. At
the same time, only because one party says in its notice that an
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arbitration agreement exists, this Court cannot appoint an
Arbitrator on that statement alone. There must be some material
showing that the parties had agreed to refer their disputes to
arbitration. If, even after looking at the documents at this initial
stage, no such agreement is found, this Court cannot make an
arbitration agreement on behalf of the parties.
23. In Bihar State Mineral Development Corporation , the
Supreme Court has explained the necessary requirements of an
arbitration agreement as follows:
“The essential elements of an arbitration agreement are as
follows:
(1) There must be a present or a future difference in
connection with some contemplated affair.
(2) There must be the intention of the parties to settle such
difference by a private tribunal.
(3) The parties must agree in writing to be bound by the
decision of such tribunal.
(4) The parties must be ad idem.”
24. In paragraph 17, the Supreme Court observed:
“There cannot be any doubt whatsoever that an arbitration
agreement must contain the broad consensus between the
parties that the disputes and differences should be referred
to a domestic tribunal.”
25. From what is stated above, it is clear that both sides must
have a common understanding that their disputes will be decided
by an Arbitral Tribunal. Such common understanding has to be
found from the agreement and the circumstances in which it was
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made. Only because an arbitration clause is written in a document,
it does not mean that the parties have agreed to go for arbitration.
The whole document will have to be read to understand whether
the parties really wanted to be bound by that clause.
26. In the present case, Clause 25 of the Term Sheet provides for
deciding disputes relating to the validity, interpretation,
implementation or enforcement of “any binding provision of this
Term Sheet or the Definitive Agreements”. It provides that such
disputes will be decided under the Arbitration and Conciliation
Act, 1996. The Term Sheet mentions Mumbai as the seat of
arbitration and provides for appointment of a sole Arbitrator. The
words used in Clause 25 are important. This clause does not say
that every term written in the Term Sheet will become binding
only because an arbitration provision is included in it. It refers to
disputes concerning “any binding provision”. Therefore, Clause 25
cannot be read. It will have to be read along with the Closing Note
and those provisions which the parties have agreed to keep
binding. The Closing Note says that the Term Sheet is “for
discussion purposes only” and is not binding, except the provisions
relating to “Transaction Costs”, “Exclusivity” and “Confidentiality”.
It states:
“There is no obligation on the part of any negotiating party
until the Transaction Document(s) have been signed by all
parties.”
27. The submission made by the Respondents on the basis of
these words will have to be considered. These words show that the
parties did not want every term of the proposed finance to become
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binding merely because the Term Sheet was prepared. The
proposed finance was subject to certain conditions and signing of
the necessary transaction documents. Therefore, this Court cannot
proceed on the footing that the proposed investment of INR 65
Crores had become a completed and enforceable financing
transaction. However, the matter does not end here. The Closing
Note keeps three types of provisions binding upon the parties. One
of them is Exclusivity. Clause 25 speaks about disputes relating to
any binding provision of the Term Sheet. Both these provisions will
have to be read together. Clause 25 does not create an obligation
to give finance or complete the real estate project. It only provides
the manner in which disputes arising from those provisions which
the parties have agreed to keep binding will be decided. If Clause
25 is considered as having no effect at all until the final financing
documents are signed, then there would be no way to decide
disputes relating to those very provisions which the Closing Note
has kept binding. The words “any binding provision” used in
Clause 25 cannot be ignored while reading the Term Sheet. These
words show that the arbitration provision was intended to apply to
those obligations which the parties had agreed would remain
binding. Therefore, at the prima facie stage, the reasonable
understanding is that the terms of the proposed finance were still
depending upon signing of the final documents. However, disputes
relating to those provisions which were kept binding could be
referred to arbitration under Clause 25. By taking this view, the
whole Term Sheet is not being treated as binding. Only the
arbitration provision is being given effect in respect of those
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obligations which the parties agreed to keep binding.
28. The difference between a non-binding proposal and a
binding arbitration agreement has been explained by the Supreme
Court. In Cox & Kings Ltd , paragraph 83, the Supreme Court
explained that an arbitration agreement can arise out of a legal
relationship which may be contractual or otherwise. The Supreme
Court held that it is not necessary in every case that a person must
sign the arbitration agreement to become bound by it. In the case
of a person who has not signed the agreement, the important
question is whether that person had intended or agreed, by his
conduct, to become bound by the arbitration agreement or the
underlying contract containing it. The judgment makes it clear that
the requirement of an arbitration agreement being in writing has
to be followed. However, the particular form in which the
agreement is written is not important. Therefore, only because a
party has not signed the Term Sheet, the enquiry cannot be
stopped there. This Court will have to see whether the written
document and the communications exchanged thereafter show
that there was a common understanding between the parties to
refer their disputes to arbitration.
29. It is necessary to consider the objection of the Respondents
based upon Clause 27. According to this clause, the indicative
Term Sheet would remain valid for seven days unless it was signed
by the concerned parties. The Respondents say that the Term Sheet
came to an end on 22 December 2025. On the other hand, the
Applicants say that the Respondents had signed the Term Sheet
and that the later correspondence shows that the parties continued
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to act on the same arrangement.
30. The documents show that the Advisory Fee Letter Agreement
is dated 18 December 2025. It refers to the Term Sheet dated 15
December 2025 and records that the Issuer had accepted the same
for a proposed investment up to INR 65 Crores. It confirms that
NiFCO and/or its associates were appointed as Exclusive Advisor
and were entitled to advisory fees of INR 1,62,50,000, together
with applicable taxes and levies. The letter mentions the dates on
which the advisory fees were required to be paid. It says that the
entire fee would be payable by the Issuer, co-obligors and/or the
promoters mentioned in the letter. This document is important for
understanding whether the parties wanted to proceed on the basis
of the Term Sheet. The Advisory Fee Letter was issued only three
days after the Term Sheet. It is not a separate document having no
connection with the proposed financing. It refers to the same
proposed investment of INR 65 Crores and appoints an Exclusive
Advisor for that transaction.
31. The email dated 24 December 2025 shows that the
Respondents requested that the processing fee should be paid
through FTIL and that the fee letter should be sent again without
GST. Thereafter, the Applicants issued the Proforma Invoice dated
31 December 2025. These communications show that the parties
continued their discussions and took steps regarding the advisory
fee even after 22 December 2025. The email dated 31 December
2025, on which the Respondents rely, needs to be considered. In
that email, it is stated that the signed Term Sheet shared by the
Respondents was final from their side and that the final documents
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were expected to be signed in the following week. This
communication certainly shows that the final documents were still
required to be signed. However, it does not necessarily mean that
the Respondents wanted to bring every obligation which they had
accepted or acted upon to an end. The statement about signing the
final documents is consistent with the Closing Note. The Closing
Note provides for documents in relation to the proposed financing,
while keeping certain obligations binding in the meantime. At this
stage, it is not necessary to decide whether the Term Sheet was
signed within the seven-day period mentioned in Clause 27. The
date of the Term Sheet, the date on which the signed copies were
exchanged and the later communications will have to be
considered for deciding the full effect of Clause 27.
32. For the present purpose, it is enough to notice that the
Advisory Fee Letter was issued on 18 December 2025 and that the
parties continued to deal with each other regarding the same
transaction even thereafter. Considering these facts, it would not
be proper to hold at this initial stage that the arbitration
agreement does not exist only because the Respondents are relying
upon the seven-day period. Further, even if the proposed financing
transaction was not completed, it does not mean that all the
provisions which were kept binding under the Term Sheet came to
an end. The effect of the exclusivity undertaking and its
connection with Clause 25 will have to be considered separately.
33. The decision of the Supreme Court in R Z Malpani , needs to
be considered. In paragraph 31, the Supreme Court observed:
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“It is settled law that a letter of intent does not, in and of,
create a legal relationship or contractual obligations until
there is a clear, unambiguous final acceptance by the
parties.”
34. The Supreme Court explained the difference between a
“promise” and a “promise to make a promise”. In paragraph 33,
the Supreme Court held that the Letter of Intent in that case was
only a promise to make a promise and that no final agreement had
come into existence between the parties. The Supreme Court
explained in paragraph 42 that the principle “When in doubt, do
refer” applies where an arbitration agreement prima facie exists.
However, where it is clear even without examining disputed facts
that no arbitration agreement exists, the Court can refuse to send
the parties to arbitration.
35. The Respondents are right in relying upon this judgment to
say that every preliminary document cannot be treated as a final
agreement. This judgment does not mean that whenever a Term
Sheet contains an arbitration clause, the parties must necessarily
be sent to arbitration. The actual words used in the document and
the intention of the parties will have to be seen in every case.
However, the facts of the present case will have to be considered
separately. In the present Term Sheet, the exclusivity provision is
kept binding. Clause 25 provides for deciding disputes relating to
any binding provision. The Advisory Fee Letter, which was issued
shortly after the Term Sheet, records acceptance of the proposed
investment and appointment of NiFCO as Exclusive Advisor. The
later correspondence relates to payment of the advisory fees and
the decision of the Respondents to proceed with another investor.
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These circumstances make the present case different, at least at the
prima facie stage, from a case where a Letter of Intent only records
an intention to enter into an agreement in future and does not
keep any present obligation binding. Therefore, the decision in R Z
Malpani does not require rejection of the present Application,
when the written documents and the later conduct of the parties
show a prima facie agreement to arbitrate disputes relating to the
specified binding obligations.
36. The Applicants have relied upon the decision in Urban
Infrastructure Trustees Limited decided by this Court. In that case,
this Court considered whether disputes arising out of a Term Sheet
could be sent to arbitration, even though the final agreements
which were to be made under the Term Sheet had not been signed.
In paragraph 20, this Court noticed that the applicant had invested
approximately Rs. 51.50 Crores and that such investment was
accepted in the communications of the Respondents. This Court
held that the parties had acted upon the Term Sheet and that
disputes arising from it were required to be decided under its
arbitration clause. In paragraph 22, this Court observed that the
Term Sheet was not merely a document recording terms for some
future agreement, because the working of the Term Sheet provided
for arbitration. Therefore, this Court sent the disputes to
arbitration, while keeping the contentions of the parties open for
decision by the Arbitrator.
37. The facts of the above case are not the same as the present
case. In that matter, the applicant had invested a substantial
amount under the Term Sheet. In the present matter, there is no
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material to show that the proposed finance of INR 65 Crores was
given. However, the principle that signing of every final agreement
mentioned in a Term Sheet is not necessary before the arbitration
clause can be invoked will have to be kept in mind. The real
question is whether the parties had created any binding rights
under the Term Sheet and had agreed that disputes relating to
those rights would be referred to arbitration. In the present matter,
the exclusivity provision is kept binding. Clause 25 refers to such
binding provisions. The Advisory Fee Letter and the
communications regarding processing fees are connected with the
same transaction. These documents provide sufficient prima facie
material to hold that Clause 25 can operate in relation to the
present disputes. Whether the Applicants will recover the entire
advisory fee or prove breach of exclusivity is a separate matter.
38. The decision in Welspun One Logistics Parks Fund , requires
consideration. In paragraph 18, the Delhi High Court held that an
arbitration agreement is separate from the main contract and that
the enquiry under Section 11 of the Act is limited. The Court
observed that a reference to arbitration should be refused only
when it is shown that the arbitration agreement does not exist, is
invalid or the dispute cannot be sent to arbitration. In paragraph
19, the Court considered a Term Sheet which stated that, though
the document was non-binding, the dispute resolution clause
would remain binding upon the parties. In paragraph 20, the Court
held that alleged illegality or non-enforceability of the other terms
would not affect the separate arbitration agreement.
39. The Respondents can point out that the present Term Sheet
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does not contain the same clear statement that the arbitration
clause will remain binding even though the document is described
as non-binding. This difference will have to be noticed. However,
Clause 25 of the present Term Sheet uses different but important
words. It provides for arbitration of disputes connected with the
implementation or enforcement of “any binding provision of this
Term Sheet”. Since the Closing Note keeps the exclusivity provision
binding, Clause 25 can prima facie apply to disputes arising from
that provision.
40. It is necessary to consider the reliance placed by the
Applicants upon Cox & Kings Ltd , particularly paragraphs 121 and
123. Paragraph 121 explains that where one transaction consists of
more than one agreement, the Court has to see whether the
different agreements are connected with the main agreement or
have been made as a step to it. There may be a composite
transaction when the agreements are so connected that the main
agreement cannot properly operate without the help or
performance of the other agreements. Paragraph 123 states that
the participation of a person who has not signed the arbitration
agreement in carrying out the underlying contract is the most
important factor. The Court may see the circumstances in which
such person took part in the negotiations, performance and
termination of the contract. The conduct of the parties may show
whether the person who has not signed the arbitration agreement
intended to become bound by it.
41. In KKH Finvest Pvt. Ltd , paragraph 19, the Supreme Court
has explained the principle of “veritable parties”. A person who has
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not signed the arbitration agreement may still be treated as a party
if the legal relationship and participation in the underlying
transaction show that such person was intended to be bound by it.
All the relevant circumstances will have to be seen together. Only
because a person has some connection with the transaction, that
alone is not enough to make that person a party to the arbitration
agreement.
42. These principles will have to be considered while examining
the position of Applicant No. 1. The Respondents are correct in
pointing out that Applicant Nos. 1 and 2 are separate legal entities
and there is no material to show that Applicant No. 1 is an affiliate
of Applicant No. 2. Only because both are connected with the same
transaction, they cannot be treated as one legal entity. However,
the claim of Applicant No. 1 is not based only upon its alleged
connection with Applicant No. 2. The Advisory Fee Letter dated 18
December 2025 identifies NiFCO and/or its associates as the
Exclusive Advisor. The letter mentions the fees payable for the said
work. The communications of the Respondents thereafter relate to
payment of those fees, including the request to issue the
processing fee document in the name of FTIL. Applicant No. 1
raised the invoice and communicated regarding payment. The
email dated 16 January 2026 refers to the efforts made by the
Nisus Finance team, records the decision of the Respondents to
proceed with another investor and states their inability to pay the
processing fees. These facts show that Applicant No. 1 had a direct
written relationship with the Respondents regarding the advisory
services. The Advisory Fee Letter is connected with the proposed
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financing mentioned in the Term Sheet. It refers to the fee as
forming part of secured financial obligations under the transaction
documents. Therefore, the connection between these two
documents is not only because both relate to the same project. The
Advisory Fee Letter refers to the proposed financing under the
Term Sheet and has been issued on that basis. At this stage, it is
not necessary to decide whether the entire Advisory Fee Letter
Agreement can be treated as a “Definitive Agreement” within the
meaning of Clause 25. For the present purpose, there is sufficient
prima facie material to consider the fee dispute as connected with
the implementation of the Term Sheet and the binding obligations
arising from the transaction. Whether every claim made under the
Advisory Fee Letter comes within the scope of Clause 25 will
remain open for decision by the Arbitral Tribunal.
43. The objection that Applicant No. 2 has not signed the Term
Sheet cannot,, be a reason to reject the present Application.
Section 7(4)(b) of the Act recognises an arbitration agreement
recorded through exchange of letters or other communications,
including electronic communications. Therefore, in every case, it is
not necessary that the signatures of all parties must appear on one
single document, if the exchange of communications otherwise
shows an agreement in writing. Applicant No. 2 is described as the
Facility Agent under Clause 4. According to the Applicants, the
draft Term Sheet was circulated by Applicant No. 2. Thereafter, the
Respondents signed and circulated their copies. They acted upon
the arrangement by executing the Advisory Fee Letter and
communicating regarding payment of the fees. These facts, when
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seen together, provide prima facie written material regarding the
participation of the Facility Agent in the transaction and its
reliance upon the arbitration clause. This does not mean that every
unsigned document becomes binding upon every person whose
name is mentioned in it. The consent of the parties is still
necessary. In the present case, the words used in Clause 25 and the
conduct of the parties provide sufficient prima facie material for
considering the present Application. The final question regarding
the rights and liabilities of each party under the documents will
remain open.
44. The submission of the Respondents that there is no defined
legal relationship between the parties within the meaning of
Section 7 cannot be accepted at this stage. In Vidya Drolia,
paragraph 24, the Supreme Court explained that a defined legal
relationship is one which “gives rise to legal obligation and duties,
and, therefore confers a right”. In the present matter, the Term
Sheet keeps the exclusivity obligation under Clause 23 binding.
The Advisory Fee Letter records the appointment of NiFCO as
Exclusive Advisor and mentions the fee payable for the work.
These provisions show identifiable rights and obligations between
the parties, though the complete financing transaction was still
subject to documents and conditions. Only because the proposed
finance was not taken from the Applicants, it cannot be said that
no legal relationship arose regarding the exclusivity undertaking or
the advisory fee arrangement.
45. The objection of the Respondents regarding expiry of the
Term Sheet will have to be considered in this background. The
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Advisory Fee Letter dated 18 December 2025 and the emails
exchanged thereafter show that the parties continued to deal with
each other regarding the same financing transaction. The email
dated 16 January 2026 records that the Respondents had decided
to proceed with another investor and were unable to pay the
processing fees. These communications are relevant for examining
whether the parties continued to act upon the arrangement and
whether any binding obligations continued between them.
However, this Court is not required at this stage to decide when
the exclusivity period started, whether Clause 27 affected that
period or whether the later correspondence created or confirmed
any particular obligation. These questions depend upon the
meaning of the documents and the evidence which may be
produced by the parties. Such questions cannot be decided in an
Application where the limited enquiry is regarding the existence of
an arbitration agreement. In the facts of the present case, the
objection regarding the period of validity does not show that the
arbitration agreement does not exist.
46. It is necessary to consider whether the email dated 16
January 2026 proves breach of the exclusivity provision. The email
states that the Respondents had received “a competitive proposal
from an investor with no financial obligations” and had “opted to
move forward with them for our financing needs”. This email is
certainly relevant material in support of the Applicants' allegation
that the Respondents decided to proceed with another investor
during the period of exclusivity. However, the email does not prove
all the requirements of the alleged breach. It will be necessary to
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examine when the exclusivity period started, how long it
continued, what were the terms of the arrangement with the other
investor and what was the effect of the conditions mentioned in
the Term Sheet. These questions will have to be decided by the
Arbitral Tribunal. While deciding whether an Arbitrator should be
appointed, this Court cannot treat the allegations of breach made
by the Applicants as proved.
47. In the same manner, this Court cannot decide at this stage
the actual amount of advisory fees, interest, commitment fees or
damages payable to the Applicants. The Proforma Invoice
mentions a claim for advisory fees of INR 1,62,50,000. The email
dated 16 January 2026 of the Respondents acknowledges the
processing fee arrangement and refers to forfeiture of the advance
amount of Rs. 15 Lakhs paid. This correspondence shows that a
dispute has taken place regarding the fee arrangement. However,,
it does not prove the entire amount claimed by the Applicants or
their right to recover the additional amounts mentioned in the
Claim Notice. Therefore, the claims regarding fees, interest and
damages will have to be examined by the Arbitral Tribunal on the
basis of the agreements, correspondence and evidence produced
by the parties. This Court is not giving any final finding regarding
the amount which may be payable.
48. From the above discussion and the decisions referred to, the
legal position is that the Court has to see whether an arbitration
agreement prima facie exists between the parties. An arbitration
agreement cannot be rejected only because there is a dispute
regarding the validity or enforceability of other terms. At the same
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time, parties cannot be sent to arbitration when the documents
show that they had never agreed to refer their disputes to
arbitration. In the present case, Clause 25 refers to disputes arising
in connection with “any binding provision” of the Term Sheet.
Clause 23, which relates to exclusivity, is one of the provisions
which the Closing Note keeps binding. The Advisory Fee Letter
records the appointment of Applicant No. 1 as Exclusive Advisor
and mentions the fee arrangement for the same proposed
financing. The later correspondence shows that the parties dealt
with each other in relation to that engagement and that a dispute
arose when the Respondents decided to proceed with another
investor and did not make payment.
49. When all these circumstances are seen together, there is
sufficient prima facie material to refer the disputes to arbitration.
This is not a case where the Court is being asked to create an
arbitration agreement without any written material showing the
consent of the parties. The arbitration clause is contained in the
written Term Sheet. The Respondents signed and circulated the
Term Sheet from their side. The later documents and
communications connect the parties with the transaction and the
disputes which have now arisen. Only because the Respondents
are disputing the binding nature of Clause 25, the present
Application cannot be rejected in the facts of this case. A difference
will have to be made between the existence of an agreement to
arbitrate disputes relating to binding provisions and the final
enforceability of every obligation mentioned in the transaction
documents. At this stage, this Court is satisfied that a prima facie
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arbitration agreement exists in relation to the disputes concerning
the binding exclusivity provision and the connected advisory fee
arrangement. This Court is not holding that the entire Term Sheet
is binding or that every amount claimed by the Applicants can be
recovered. These questions are kept open for consideration by the
Arbitral Tribunal.
50. Another question arises because Applicant No. 2 has
appointed Advocate, as the sole Arbitrator. Clause 25 gives the
Facility Agent a role in appointing the sole Arbitrator. However, the
existence of an arbitration agreement and the validity of the
procedure for appointment of an Arbitrator are two different
things. The arbitration agreement may continue to be valid even if
the method of appointment mentioned in it cannotbe followed.
The Supreme Court in Bhadra International (India) Pvt. Ltd. v.
Airports Authority of India, 2026 INSC 4, held that unilateral
appointment of a sole Arbitrator by a party having an interest in
the dispute is not valid. Such invalidity does not make the
underlying arbitration agreement invalid. Therefore, the earlier
appointment of Advocate, by Applicant No. 2 cannot be accepted
only because Clause 25 gives the Facility Agent a right to nominate
the Arbitrator. The appointment will have to take place through an
independent and permissible procedure. Since the Respondents
have disputed the invocation of arbitration, an independent sole
Arbitrator will have to be appointed under Section 11 of the Act.
51. In view of the above discussion, this Court finds that the
present Application deserves to be allowed. An independent sole
Arbitrator will be appointed under Section 11 of the Act through
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the appointment procedure of this Court. The Applicants have not
pressed the present Application against Respondent No. 5.
Therefore, the Application will stand dismissed as not pressed so
far as Respondent No. 5 is concerned.
52. In the aforesaid circumstances, the present Application under
Section 11 of the Act, is deserved to be disposed of in terms of the
following order:
A) Justice Rohit B. Deo (Retired) is hereby appointed as
the Sole Arbitrator to adjudicate upon in respect of disputes
relating to the binding exclusivity provision contained in
Clause 23 of the Term Sheet dated 15 December 2025 and
the connected advisory fee arrangement under the Advisory
Fee Letter Agreement dated 18 December 2025, including
the claims and counterclaims arising therefrom;
Contact: 93737 81249
Email: [email protected]
B) A copy of this Order will be communicated to the
Learned Sole Arbitrator by the Advocates for the Applicant
within a period of one week from today. The Applicant shall
provide the contact and communication particulars of the
parties to the Arbitral Tribunal along with a copy of this
Order;
C) The Learned Sole Arbitrator is requested to forward the
statutory Statement of Disclosure under Section 11(8) read
with Section 12(1) of the Act to the Advocates for the
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Applicant so as to enable them to file the same in the
Registry of this Court. The Registry of this Court shall retain
the said Statement on the file of this Applicant and a copy of
the same shall be furnished by the Advocates for the
Applicant to the Advocates for the Respondent;
D) The Learned Sole Arbitrator is requested to forward the
statutory Statement of Disclosure under Section 11(8) read
with Section 12(1) of the Act to the parties within a period
of two weeks from receipt of a copy of this Order;
E) The parties shall appear before the Learned Sole
Arbitrator on such date and at such place as indicated, to
obtain appropriate directions with regard to conduct of the
arbitration including fixing a schedule for pleadings,
examination of witnesses, if any, schedule of hearings etc. At
such meeting, the parties shall provide a valid and functional
email address along with mobile and landline numbers of the
respective Advocates of the parties to the Arbitral Tribunal.
Communications to such email addresses shall constitute
valid service of correspondence in connection with the
arbitration;
F) All arbitral costs and fees of the Arbitral Tribunal shall
be borne by the parties equally in the first instance, and shall
be subject to any final Award that may be passed by the
Tribunal in relation to costs.
53. All issues on merits are expressly kept open to be agitated
before the arbitral tribunal appointed hereby.
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54. All actions required to be taken pursuant to this order shall
be taken upon receipt of a downloaded copy as available on this
Court’s website.
55. The Application stands disposed of in the above terms.
(AMIT BORKAR, J.)
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