Bombay HC sends a discussion-only term sheet to arbitration: its exclusivity clause had been kept binding
Justice Amit Borkar appointed a retired judge as sole arbitrator over Nisus Finance claims of Rs 16.94 crore against the developers of the Treasure Palms project, holding that an arbitration clause covering any binding provision of a non-binding term sheet prima facie reaches the exclusivity undertaking and the connected Rs 1.62 crore advisory fee, while leaving every question on merits open.
Nisus Finance Services Co Ltd and Nisus BCD Advisors LLP have secured an arbitrator against the companies behind the Treasure Palms Phase 1 project, although the term sheet they rely on calls itself a discussion document. Justice Amit Borkar of the Bombay High Court held on 30 October 2026 that its arbitration clause survived because exclusivity had been kept binding.
The court appointed Justice Rohit B. Deo, a retired judge, as sole arbitrator. His mandate is confined to disputes over the binding exclusivity provision in Clause 23 of the term sheet dated 15 December 2025 and the connected advisory fee arrangement of 18 December 2025, including claims and counterclaims.
A Rs 65 crore facility that never closed
Negotiations began in October 2025 for structured debt funding of the real estate project. On 15 December 2025 the parties drew up a term sheet under which Nisus BCD Advisors, or its affiliates, would act as facility agent for finance of up to Rs 65 crore.
Three days later came an Advisory Fee Letter Agreement. It appointed Nisus Finance Services Co Ltd, called NiFCO in the judgment, as exclusive advisor, and the respondents agreed to pay advisory fees of Rs 1,62,50,000 plus taxes. The applicants treated both documents as a single transaction.
On 24 December 2025 the respondents, through their chartered accountant, asked for the invoice to be raised on Flexituff Technology International Ltd, which would pay. A proforma invoice followed on 31 December. Reminders went out between 8 and 16 January 2026.
On 16 January 2026 the respondents wrote that they had decided to proceed with another investor and would not pay. The applicants say the exclusivity period under Clause 23 ran from 15 December 2025 to 13 February 2026, and that the switch breached it.
Rs 16.94 crore claim, disputed nominee
A claim notice of 11 June 2026 demanded Rs 16,94,81,200, covering unpaid advisory fees, interest, commitment fees and damages for breach of exclusivity. The respondents denied liability through their advocates on 29 June. A final notice followed on 7 July.
On 16 July 2026 the applicants invoked Clause 25 of the term sheet, and Nisus BCD, acting as facility agent, named an advocate as sole arbitrator. The respondents replied on 30 July disputing that any enforceable arbitration agreement existed. The Section 11 application followed.
Mr Shanay Shah, instructed by Induslaw, argued for the applicants. Mr Mayur Khandeparkar, instructed by Clove Legal, appeared for respondents 1, 2, 4, 6 and 7: Blisvins Realty, Triple A Construction, Nestivo Realty LLP, Vinayak Kalani and Karthikeya Kalani.
Five objections to a single clause
The respondents said the Closing Note of the term sheet declared it to be for discussion purposes only and non-binding, except for the clauses on transaction costs, exclusivity and confidentiality. Clause 25, the arbitration clause, was not on that list. No transaction document was ever signed by all parties.
Next, the applicants had never signed the term sheet. Under Clause 27 it remained valid for seven days unless executed, so it lapsed on 22 December 2025, and the signed copies from the respondents came only on 30 December. An email of 31 December said final documents were still expected.
Mr Khandeparkar also argued that Section 7 of the Arbitration and Conciliation Act, 1996 requires a defined legal relationship, which an expired, unsigned and expressly non-binding document could not create. He relied on Bihar State Mineral Development Corporation v. Encon Builders, (2003) 7 SCC 418, on the essentials of an arbitration agreement.
His strongest authority was MSEDCL v. R Z Malpani, 2026 SCC OnLine SC 553, where the Supreme Court set aside a Section 11 appointment because a letter of intent was only a promise to make a promise. The maxim when in doubt, do refer applies only where an agreement prima facie exists, he said, seeking dismissal with exemplary costs.
For the applicants, Mr Shah answered that Clause 25 covers disputes about any binding provision of the term sheet, and exclusivity was binding. Reading the clause as inert until final documents were signed would leave those very obligations without a forum. The respondents had signed the term sheet and then acted on it.
He relied on Cox and Kings Ltd v. SAP India (P) Ltd, (2024) 4 SCC 1, KKH Finvest (P) Ltd v. Ashiesh Shukla, 2026 SCC OnLine SC 1498, and Vidya Drolia v. Durga Trading Corpn, (2021) 2 SCC 1, and on this court's order of 12 August 2026 in Urban Infrastructure Trustees Ltd v. Bhavik Bhimjyani.
The application was not pressed against respondent 5, Treasure Group, the one respondent that had not signed at the foot of the term sheet.
What a Section 11 court may ask
Justice Borkar began with the limits of his task. The court was not deciding whether the applicants would recover their fees or damages. The only question was whether an arbitration agreement prima facie existed and whether there was enough material to send the disputes to arbitration.
That cut both ways. A party's assertion in a notice is not enough, the judge said, because “this Court cannot make an arbitration agreement on behalf of the parties” (para 22). Following Bihar State Mineral Development Corporation, both sides must share a common understanding that disputes will go to a tribunal, read from the whole document.
Clause 25 read with the Closing Note
Clause 25 provides for arbitration under the 1996 Act, seated in Mumbai before a sole arbitrator, of disputes over the validity, interpretation, implementation or enforcement of “any binding provision” of the term sheet or the definitive agreements (para 26). The judge said those words could not be ignored.
The Closing Note described the document as being “for discussion purposes only” (para 26) and said no obligation arose until transaction documents were signed by all parties. The court accepted that this meant the Rs 65 crore facility never became an enforceable financing transaction.
But the same note kept three kinds of provision binding, exclusivity among them. Clause 25 does not oblige anyone to lend or to build; it only fixes how disputes over the binding provisions are decided. Treating it as dormant until final documents were signed would leave the exclusivity undertaking with no forum at all.
The judge therefore read the two together. The terms of the finance still depended on final documents, but disputes about provisions kept binding could go to arbitration under Clause 25. He stressed that this did not make the whole term sheet binding; only the arbitration provision was being given effect for those obligations.
Lapse, missing signature and the second applicant
On the seven-day lapse under Clause 27, the court looked at conduct. The Advisory Fee Letter of 18 December 2025 referred to the term sheet, recorded acceptance of the proposed Rs 65 crore investment and appointed NiFCO as exclusive advisor. Issued three days after the term sheet, it was not a stand-alone document.
The email of 24 December 2025 asking for the fee to be routed through FTIL without GST, and the proforma invoice of 31 December, showed the parties still dealing after 22 December. The 31 December email about signing final documents was consistent with the Closing Note, not a withdrawal of every accepted obligation.
Whether the term sheet was signed within seven days was left undecided. It was enough that the parties kept dealing on the same transaction. Even if the financing never completed, the provisions kept binding did not necessarily end with it.
The missing signature of Nisus BCD was answered through Section 7(4)(b), which recognises an arbitration agreement in an exchange of letters or electronic communications. Nisus BCD was named facility agent in Clause 4, circulated the draft, and the respondents signed and returned it before acting on the fee letter. That was prima facie written material of its participation.
NiFCO was harder, because it is not an affiliate of Nisus BCD and the respondents were right that the two are separate entities. The judge applied Cox and Kings on composite transactions and KKH Finvest on veritable parties.
On that footing NiFCO had a direct written relationship with the respondents: the fee letter named it exclusive advisor, it raised the invoice, and the 16 January email referred to the efforts of the Nisus Finance team.
Whether the fee letter is a definitive agreement under Clause 25, and whether every claim under it falls within the clause, was left to the tribunal. On Section 7, the Vidya Drolia test of a relationship that creates obligations and confers rights was met by the exclusivity clause and the fee appointment.
Malpani distinguished, Urban Infrastructure confined
The judge accepted the core point in R Z Malpani: not every preliminary document is a final agreement, and a term sheet with an arbitration clause does not automatically send parties to arbitration. The words used and the intention of the parties must be examined in each case.
But this term sheet kept exclusivity binding, Clause 25 reached binding provisions, the fee letter recorded an appointment, and later correspondence dealt with payment and the switch to another investor. That distinguished it, at the prima facie stage, from a letter of intent that records only an intention to contract in future.
Urban Infrastructure Trustees was also kept in its place. There the applicant had invested about Rs 51.50 crore under the term sheet; here no part of the Rs 65 crore was advanced. The surviving principle was narrower: every final agreement contemplated by a term sheet need not be signed before its arbitration clause can be invoked.
The court also noted the Delhi High Court ruling in Welspun One Logistics Parks Fund, where the term sheet expressly kept its dispute clause binding. This term sheet had no such statement, a difference the judge acknowledged, but the words any binding provision did similar work for the exclusivity clause.
What the court would not do was treat the breach as proved. The 16 January email, which spoke of a competitive proposal from an investor with no financial obligations, was relevant material. But when exclusivity began, how long it ran and what the rival deal involved were questions for the tribunal.
So was the money. The proforma invoice showed a claim of Rs 1,62,50,000, and the respondents' email referred to forfeiting an advance of Rs 15 lakh, which proved a dispute over the fee arrangement but not the Rs 16.94 crore demanded. The court gave no finding on any amount payable.
Unilateral nominee cannot stand
Clause 25 gave the facility agent a role in appointing the sole arbitrator, and Nisus BCD had used it. Citing Bhadra International (India) Pvt Ltd v. Airports Authority of India, 2026 INSC 4, the judge held that a unilateral appointment by an interested party is invalid, though the arbitration agreement itself survives.
Since the respondents disputed the invocation, the nominee could not be accepted merely because Clause 25 named the facility agent. An independent sole arbitrator had to be appointed under Section 11 through the court's own procedure.
Order
The application was allowed. Justice Rohit B. Deo (Retired) was appointed sole arbitrator for disputes relating to the binding exclusivity provision in Clause 23 of the term sheet of 15 December 2025 and the connected advisory fee arrangement under the letter of 18 December 2025, including claims and counterclaims.
The applicants must send the order to the arbitrator within a week, with the contact particulars of the parties. The arbitrator is requested to forward his disclosure under Section 11(8) read with Section 12(1) within two weeks of receipt. Arbitral costs and fees are to be borne equally at first, subject to the final award.
The application was dismissed as not pressed against respondent 5. All issues on merits were kept open for the tribunal. The judgment was reserved on 28 October 2026 and pronounced on 30 October 2026.