The Bombay High Court has held that an invalid procedure for appointing an arbitrator does not invalidate the underlying arbitration agreement, which may remain enforceable even if the agreed appointment mechanism cannot be followed.
A Single Bench of Justice Amit Borkar made the observation while allowing an application filed by Nisus Finance Services Co. Limited and Nisus BCD Advisors LLP seeking the appointment of an arbitrator to resolve their disputes with Blisvins Realty Private Limited and others.
The court ruled that the unilateral appointment of an arbitrator by a party interested in the dispute was invalid, but this did not affect the underlying arbitration agreement.
“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 cannot be followed,” the court held.
The dispute arose from negotiations initiated in October 2025 for structured debt funding of up to ₹65 crore for the Treasure Palms Phase 1 real estate project.
Under a December 15, 2025 Term Sheet, Nisus BCD Advisors LLP was to arrange financing of up to ₹65 crore. A separate agreement appointed Nisus Finance Services Co. Limited as Exclusive Advisor for ₹1.625 crore plus taxes.
The deal fell through after the companies opted for another investor and refused to pay the fees. Nisus claimed ₹16.94 crore in unpaid fees, interest and damages. After the companies denied liability, Nisus invoked arbitration. The companies challenged the agreement's enforceability, arguing that the Term Sheet had expired and no final financing documents were signed
The court observed that although the proposed financing remained subject to definitive agreements, the Term Sheet expressly preserved transaction costs, exclusivity and confidentiality as binding obligations.
Clause 25 provided for arbitration of disputes connected with the implementation or enforcement of any binding provision of the Term Sheet. Since the exclusivity obligation was expressly preserved as binding, the court found that the arbitration clause could prima facie cover disputes arising from it.
“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 court observed.
The court found sufficient preliminary material to establish the existence of an arbitration agreement covering disputes concerning the binding exclusivity provision and the connected advisory fee arrangement.
Relying on the Supreme Court's decision in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, the court reiterated that a party interested in a dispute cannot unilaterally appoint a sole arbitrator. Such an invalid appointment does not, by itself, invalidate the arbitration agreement.
Justice Rohit B. Deo (Retired) was accordingly appointed sole arbitrator to adjudicate disputes relating to the exclusivity provision under Clause 23 of the Term Sheet dated December 15, 2025, and the connected advisory fee arrangement under the Advisory Fee Letter Agreement dated December 18, 2025, including claims and counterclaims.
The application against Treasure Group was dismissed as not pressed. The court left all questions on the merits, including breach of exclusivity, liability and the amounts recoverable, open for determination by the arbitral tribunal.
For Petitioner (Nisus Finance Services Co. Limited & Nisus BCD Advisors LLP): Advocates Shanay Shah, Sourasubha Ghosh and Aditya Trivedi, instructed by IndusLaw.
For Respondent (Blisvins Realty Private Limited & Ors.): Advocates Mayur Khandeparkar, Aashish Darne and Parikshit Pania, instructed by Clove Legal, for Respondent Nos. 1, 2, 4, 6 and 7.