LexMAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED (MSEDCL) & ORS. versus R Z MALPANI
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[2026] 5 S.C.R. 86 : 2026 INSC 342 Maharashtra State Electricity Distribution Company Limited (MSEDCL) & Ors. v. R Z Malpani (Civil Appeal No. 4307 of 2026) 09 April 2026 [J.K. Maheshwari* and Atul S. Chandurkar, JJ.] Issue for Consideration Whether, on a prima facie view, there exists an arbitration agreement between the parties and as such, whether the reference to arbitration u/s.11 by the High Court warrants interference by this Court. Headnotes† Arbitration and Conciliation Act, 1996 – s.7 – Arbitration Agreement – General reference in the letter of intent to an arbitration clause contained in the tender documents does not have the effect of ‘incorporation’ of the arbitration clause contained therein in the contract – High Court on application filed by the Respondent u/s.11, appointed a sole arbitrator to adjudicate upon the disputes between the parties – Respondent’s case is that the Letter of Intent (LOI) incorporated the arbitration agreement from the terms of the tender documents – It is the admitted case of the parties that pursuant to the LOI and in terms of the tender documents, neither any work order was issued to the Respondent nor any formal agreement was entered into between the parties – Appellant contended inter alia that even assuming that the LOI itself can be considered a source of binding legal relationship between the parties, the LOI made a general reference to the tender documents and such a general reference cannot have the effect of ‘incorporation’ of the arbitration clause contained therein, in light of s.7(5): Held: Impugned order set aside – Arbitration clause contained in some document may be incorporated in the contract between the parties only by a specific reference to the arbitration clause – The * Author [2026] 5 S.C.R. 87 Maharashtra State Electricity Distribution Company Limited (Msedcl) & Ors. v. R Z Malpani intent of the parties to incorporate the arbitration clause has to be explicitly clear and a mere general ‘reference’ to the tender conditions would not suffice – Present 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 – The scope of inquiry at the stage of s.11 is extremely limited and only pertains to an examination about prima facie existence of an arbitration agreement – 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 arbitration agreement between the parties, the Court can reject the application for appointment of an arbitrator and reference of the parties to arbitration – The instant case is a fit case where even without going into the disputed facts and merely on a prima facie view of the matter, there is no existence of arbitration agreement – Moreover, LOI in the instant case was indicative of a preliminary document in course of the contract and was not intended to be an end-all-be-all contract between the parties, it did not create contractual obligations or legal relationship between them. [Paras 38, 39, 41, 42] Letter of Intent (LOI) – Does not, in and of itself, create a legal relationship or contractual obligations until there is a clear, unambiguous final acceptance by parties – High Court inter alia found that the offer made by the Respondent in response to the Tender was accepted by the LOI which resulted in a duly concluded contract and; existence of arbitration agreement can be discerned from correspondence between the parties: Held: Finding of the High Court that Appellant in its reply to the Respondent’s arbitration notice ‘did not question the formation of arbitration agreement on any ground other than the fact that the project did not proceed further’ is prima facie erroneous and is set aside – Therefore, there is no admission of any concluded contract, 88 [2026] 5 S.C.R. Supreme Cour
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