Despite Mostly Non-Binding Term Sheet, Bombay HC Sends Realty Firms’ Exclusivity And Advisory-Fee Dispute To Arbitration

The Applicants sought appointment of a sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, relying on Clause 25 of a Term Sheet dated 15 December 2025.

The Term Sheet described itself as non-binding except for provisions concerning transaction costs, exclusivity and confidentiality; Clause 25 provided for arbitration of disputes relating to any binding provision.

An Advisory Fee Letter Agreement dated 18 December 2025 appointed Applicant No. 1 as Exclusive Advisor and recorded fees for the proposed financing.

After the Respondents decided to proceed with another investor and did not pay the claimed fees, the Applicants issued notices and invoked arbitration.

The Respondents disputed the existence and enforceability of the arbitration agreement, relying on the Term Sheet’s non-binding language, its alleged expiry, and the absence of execution by all parties.

Applicant No. 2 had also appointed a sole arbitrator under the disputed clause.

Section 7 of the Arbitration and Conciliation Act, 1996 requires a written agreement reflecting the parties’ common intention to refer disputes to arbitration; under Section 7(4)(b), that agreement may be evidenced by an exchange of communications.

At the Section 11 stage, the Court considers whether an arbitration agreement prima facie exists; it does not decide the merits of the underlying claims.

Bihar State Mineral Development Corporation v. Encon Builders, (2003) 7 SCC 418, requires an intention to submit disputes to a private tribunal, written agreement to be bound by its decision, and consensus between the parties.

Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1, permits the Court to consider conduct and participation in a transaction when assessing whether a non-signatory intended to be bound.

Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, describes a defined legal relationship as one giving rise to legal obligations, duties and rights.

MSEDCL v. R. Z. Malpani, 2026 SCC OnLine SC 553, distinguishes a concluded agreement from a mere promise to make a future agreement and confines “when in doubt, do refer” to cases where an arbitration agreement prima facie exists.

Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, 2026 INSC 4, establishes that an interested party’s unilateral appointment of a sole arbitrator is invalid, without necessarily invalidating the arbitration agreement itself.

Clause 25 applied to disputes concerning “any binding provision” of the Term Sheet, and the Closing Note expressly preserved the exclusivity provision as binding.

Read together, those provisions supplied prima facie evidence that disputes about exclusivity could be referred to arbitration, even though the proposed financing remained subject to definitive documents.

The Advisory Fee Letter referred to the same proposed financing, appointed Applicant No. 1 as Exclusive Advisor, and was followed by communications concerning payment; this provided prima facie support for treating the fee dispute as connected with the Term Sheet.

The alleged expiry and lack of signature by Applicant No. 2 did not negate the agreement at this stage, given the subsequent documents and communications; the final effect of those matters was left open.

The Court likewise left the merits and extent of the fee and exclusivity claims to the tribunal.

However, Applicant No. 2’s unilateral appointment could not stand, so an independent appointment was required.

It allowed the Section 11 application and appointed Justice Rohit B. Deo (Retired) as sole arbitrator; the application was dismissed as not pressed against Respondent No. 5.

The unilateral appointment made by Applicant No. 2 was not accepted, and all issues on the merits were left open for the tribunal.