Supreme Court Refuses To Interfere With Arbitrator Appointment In Adani-GSECL Coal Mining Tender Dispute

The Supreme Court on Friday refused to interfere with the Gujarat High Court's judgment appointing a sole arbitrator to adjudicate disputes between Adani Enterprises Ltd. and Gujarat State Electricity Corporation Ltd. (GSECL) arising out of the cancellation of a coal mining tender.

A bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva dismissed GSECL's challenge to the Gujarat High Court's judgment of January 30, 2026, appointing Justice R.P. Dholaria (Retd.) as the sole arbitrator.

Appearing for GSECL, counsel argued that no arbitration agreement existed as the Coal Mining Services Agreement (CMSA) was never executed. He submitted that while the Request for Proposal (RFP) contained an arbitration clause, the contract itself never fructified.

"The contract never fructified... There is no contract as such. The RFP remains, but the RFP is not enough.", he submitted. 

Counsel contended that the arbitration clause in the RFP could not govern disputes arising from the failure to execute the CMSA. According to him, Adani's claims for damages, loss of profits, loss of opportunity, repeated extensions of the earnest money deposit (EMD) bank guarantees and wrongful retention of the guarantees fell outside Clauses 3.4 and 3.5 of the RFP.

"The Letter of Acceptance does not contain the arbitration clause; the arbitration clause is in the RFP.", counsel said. 

The bench, however, was unconvinced. Referring to the Supreme Court's earlier remand order, Justice Sanjay Kumar said:

"It would have completely misunderstood the order by which the Supreme Court remanded the matter."

When counsel repeatedly asserted that the absence of a concluded contract defeated the arbitration clause, the Bench pointed out that the arbitration clause was contained in the RFP itself. 

The court also referred to the correspondence exchanged after issuance of the Conditional Letter of Acceptance, observing, "Look at your letter... This is the Conditional Letter of Acceptance... He accepts it."

The Court was ultimately not persuaded by GSECL's submissions and declined to interfere with the Gujarat High Court's order appointing the arbitrator.

Background

The dispute arose from an international competitive bidding process initiated by Gujarat State Electricity Corporation Limited (GSECL) in 2016 for the development and operation of the Gare Pelma Sector-I Coal Block in Chhattisgarh.

Adani Enterprises, along with its consortium partner Sainik Mining and Allied Services Ltd emerged as the successful bidder after quoting a mining fee of ₹1,295 per tonne, later offering a further concession of ₹25 per tonne. GSECL issued a Conditional Letter of Acceptance (LoA) on 15 December 2018, but the parties never executed the Coal Mining Services Agreement (CMSA).

More than four years later, GSECL decided to surrender the coal block and, in January 2023, cancelled the tender process and the Conditional LoA. Adani contended that it had furnished ₹50 crore in earnest money bank guarantees, incurred substantial preparatory expenses, and invoked the arbitration clause contained in the Request for Proposal (RFP) after amicable settlement efforts failed.

After an earlier refusal to appoint an arbitrator was set aside by the Supreme Court and remanded for fresh consideration, the Gujarat High Court held that at the Section 11 stage, the court's inquiry is confined to examining the prima facie existence of an arbitration agreement. Observing that Clauses 3.4 and 3.5 of the RFP constituted a valid arbitration agreement and that issues relating to the extent of arbitrability were for the arbitral tribunal to decide, the Court allowed the petition and appointed Justice R.P. Dholaria (Retd.) as the sole arbitrator.