Ruling Details
Urban Infrastructure Trustees Limited v. Bhavik Bhimjiyani & Ors., Commercial Arbitration Application No. 14 of 2016, Bombay High Court. Arun R. Pednekar, J., reserved 3 August 2026 and pronounced 12 August 2026. Corporate Lawyer would note the arbitration implications.
Note: Unless otherwise indicated, paragraph references in square brackets are to the present Bombay High Court judgment; racketed paragraph references are to the judgment being discussed.
A section 11 application was filed in 2016 and decided in 2026.
It has the peculiar quality of outliving the law it was filed under.
This one did not merely wait its turn.
The proceedings were stayed by the Supreme Court from 14 January 2019 until 9 April 2024.
Special leave petitions were disposed of on 9 April 2024.
SC Record of Proceedings, SLP (C) Nos. 391–392 of 2019, is cited.
The entire line of authority that ultimately governed the application was handed down after the stay began.
First, the seven-Judge Bench addressed arbitration agreements under the Arbitration Act and the Indian Stamp Act.
Then three-Judge clarifications followed in two decisions.
These include SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 12 SCC 1.
Aslam Ismail Khan Deshmukh v. Asap Fluids Pvt. Ltd., (2025) 1 SCC 502.
What returned to the Bombay High Court in April 2024 was the same application.
It faced a materially narrower referral jurisdiction than the one it was filed under.
The result is that parties referred, a former Judge of the Court, was appointed sole arbitrator.
The reasoning matters more.
It takes up the four objections, a respondent typically raises at the referral stage.
It disposes of each at a different level of restraint.
A Corporate Lawyer Mumbai would consider the strategic implications.
The dispute
Neelkanth Township and Construction Pvt. Ltd. was incorporated in August 2006. It was to develop a bungalow scheme at Kihim, Alibaug. In February 2007, the applicant’s fund executed a Term Sheet recording the key terms of its proposed investment. Corporate Lawyer Mumbai advised on the matter. Definitive agreements were to follow within thirty days, extended by two Amendment Notes to 30 April 2008. They were never executed. The investor nonetheless put in ₹51.50 crore, and Neelkanth acquired roughly 82 acres. Development stalled. Arbitration was invoked on 27 February 2016 under Clause 41, and the application followed on 14 June 2016.
By then the company had gone into insolvency on the applicant’s own section 7 petition and been ordered into liquidation on 20 August 2018 [¶2, ¶4]. Respondent No. 1 had meanwhile carried the matter to the Supreme Court. In SLP (C) Nos. 391–392 of 2019, Bhavik Bhimjiyani v. Urban Infrastructure Trustees Ltd., filed on 3 January 2019, the Court directed on 14 January 2019 that “[t]here shall be stay of further proceedings pending before the High Court in Commercial Arbitration Application No.14 of 2016, in the meanwhile” [SC Record of Proceedings]. Those petitions were disposed of as withdrawn on 9 April 2024, once the applicant stated that the company was being dropped from the arbitration application and the petitioners said their grievance no longer survived; the Court left all contentions open and requested the High Court to dispose of the 2016 application expeditiously [SC Record of Proceedings, order dd. 09.04.2024]. What survived was a claim against four promoters, only one of whom had signed anything.
Locus: enough to cross the threshold, no more
The named investor was a scheme — Urban Infrastructure Opportunities Fund — of a SEBI-registered venture capital fund, wound up with effect from 31 January 2023 [¶18]. The applicant sued as sole trustee of the parent fund; the respondents said a trustee of the parent cannot claim a wound-up scheme’s rights [¶19]. The Court’s answer is a model of referral-stage economy: prima facie the trustee may invoke the arbitration agreement, but “this finding is only limited for the purpose of deciding the Section 11 Application” [¶19]. The answer to a scheme-level winding up must sit in the trust deed, not the pleadings.
A term sheet that never ripened — and an arbitration clause that did
The respondents’ strongest structural point was that the Term Sheet was a prelude, not a contract: it contemplated definitive agreements, was subject to due diligence and further negotiation, and expired by efflux of time [¶4, ¶6]. They relied on PSA Mumbai Investments Pte. Ltd. v. Board of Trustees of the Jawaharlal Nehru Port Trust, 2018 INSC 806, and through it Dresser Rand S.A., for the proposition that no arbitration clause becomes enforceable until the contract itself does [¶21].
The Court distinguished it on performance. ₹51.50 crore was actually invested and repeatedly acknowledged in the correspondence; the parties “acted upon the Term Sheet to an extent as provided in the Term Sheet” [¶20, ¶22]. In PSA Mumbai the purchase order was never placed and nothing came alive; here money moved. “The Term Sheet is not merely the terms of future agreement that would come into existence, but the working of the Term Sheet itself provides for arbitration” [¶22].
The lesson is direct: once performance has begun, an arbitration clause in a term sheet survives the non-execution of the definitive agreements it contemplates. Where a term sheet is meant to be non-binding, the stipulation must address the dispute resolution clause specifically — and money should not move first.
Limitation: the part worth arguing about
Here the judgment takes its firmest position. Arif Azim Co. Ltd. v. Aptech Ltd., (2024) 5 SCC 313 had given referral courts a two-pronged test — is the section 11 petition itself time-barred, and are the claims ex facie dead? Krish Spinning then clarified at ¶136 of that Judgment, reproduced at ¶24 of the present judgment, that the inquiry must be confined to the first prong, with no intricate evidentiary examination of whether the claims are time-barred; Asap Fluids applied that and left limitation to the tribunal as a preliminary issue [¶25]. Against this line the respondents relied on State of West Bengal v. BBM Enterprises, 2026 INSC 358, where the Supreme Court declined a reference on a claim slept on for twenty-one years [¶7, ¶26].
Pednekar, J. holds that the limited inquiry permitted in Arif Azim “has been specifically foreclosed” by the later decisions, and that “intricate evidentiary inquiry” must not be read as leaving the referral court room to examine limitation wherever a claim looks prima facie barred [¶27]. BBM Enterprises, on this reading, turned on facts requiring no evidentiary inquiry at all and did not disturb the larger-Bench line [¶27]. The Court draws on its own earlier decision in Palwinder Singh Samra v. Sukhvinder Singh Samra, [Arbitration Application.(L) No. 15700 of 2026, decided on 02 July 2026], to the same effect [¶24].
Whether that reconciliation holds is contestable — BBM Enterprises did, after all, refuse a reference on limitation — and respondent-side counsel should expect it to be tested. The Court also need not have gone this far: the applicant asserted acknowledgments of liability up to 2014, so no dead-wood claim was squarely presented [¶28]. The consequence in Bombay is nonetheless clear: a respondent resisting section 11 on limitation now has one surviving argument at the referral stage — that the application was filed more than three years after the section 21 notice and the other side’s refusal [¶24].
Non-signatories: the paper trail decides
Respondent No. 1 had signed the Term Sheet twice — once as Director and once, independently, under the heading “Promoters” [¶17, ¶30]. His plea that he signed only in a representative capacity was therefore “prima facie misconceived” [¶30].
The other three were genuine non-signatories, and the Court reasoned entirely from conduct. It set out nine items of correspondence between 2008 and 2012 [¶31]: the promoters’ group acknowledging a ₹15.05 crore shortfall in its own 30% contribution; demand letters addressed to named individuals as “Promoter”; and settlement correspondence conducted expressly between “Neelkanth Group (Promoters)” and “Urban Group (Investors)”. The answer that “we as a Group” merely described the family’s aggregate exposure across several companies [¶9, ¶34] did not survive the prima facie test. Applying Cox and Kings Ltd. v. SAP India Pvt. Ltd., (2024) 4 SCC 1 at ¶¶73–74 thereof, reproduced at ¶31 of the present judgment, and KKH Finvest Pvt. Ltd. v. Ashiesh Shukla, 2026 INSC 803, which restates the “veritable party” principle and the ONGC v. Discovery Enterprises, (2022) 8 SCC 42 factors [¶32], the Court held the promoters had participated in negotiation and performance sufficiently to be referred [¶34].
What this changes in advisory work
For funds and investors, the correspondence file is a substantive asset: letters that name promoters as promoters and record their obligations in that capacity are what carry a claim past the corporate veil and past a liquidation. For promoters, the mirror discipline applies — police the capacity in which every letter is signed, and avoid group-level language in settlement correspondence where the exposure sits in separate companies.
For respondents, limitation has migrated: it is a preliminary issue for the tribunal, not a gateway defense — with the costs jurisdiction recognized in Asap Fluids as the counterweight for a party dragged into an arbitration it should not have faced.
And an insolvency footnote: the corporate debtor was in liquidation and stood deleted, yet the reference proceeds against the individuals behind it. Promoter-level obligations recorded in investment documentation do not dissolve with the company.
A closing word on route. Section 37 of the 1996 Act allows appeals from the orders it enumerates “and from no others”, and an order appointing an arbitrator under section 11 is not among them. As Deep Industries Ltd. v. ONGC, 2019 INSC1299, records, the way from such an order to the Supreme Court lies under Article 136 — special leave in the Court’s discretion, not an appeal as of right. The options open to the Bhimjiyani respondents are correspondingly narrow.
