Delhi HC: Mere Contemplation of Future Collaboration Agreement Does Not Make Heads of Terms Non-Binding

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 01.10.2026

Delhi HC: Mere Contemplation of Future Collaboration Agreement Does Not Make Heads of Terms Non-Binding

The Delhi High Court has granted interim protection in favour of Conscient Infrastructure Pvt. Ltd. in a dispute arising from a real-estate development arrangement concerning approximately 6.76 acres of land at Aya Nagar, Mehrauli, Delhi, known as the “Jhankar Banquet” property.

The Court restrained the landowners, Mahesh Kapoor and Usha Kapoor, from creating third-party rights, alienating, encumbering, transferring or otherwise dealing with the collaboration land in a manner prejudicial to the rights claimed by Conscient under the parties’ Binding Heads of Terms (Binding HoT), pending consideration of the matter by the Arbitral Tribunal.

Importantly, the High Court made it clear that its findings are prima facie and do not finally determine whether the Binding HoT is specifically enforceable or whether Conscient is ultimately entitled to specific performance.

Dispute Arises From Binding Heads of Terms for Aya Nagar Project

• The parties executed the “Binding Heads of Terms of the Proposed Collaboration for Development” dated 17 May 2023 concerning approximately 6.76 acres at Aya Nagar, Mehrauli.
• Under the arrangement, the respondents were to contribute the land, while Conscient was to undertake development of a Residential Group Housing Project/Mixed Land Use Project or another permissible project. Conscient was also responsible for securing the necessary sanctions and approvals.
• The commercial arrangement provided for distribution of revenue in the ratio of 42.3% to the landowners and 57.7% to Conscient, while project costs were to be borne by Conscient. The Binding HoT also contemplated execution of a definitive Collaboration Agreement after receipt of sanctioned layout plans and contained an arbitration clause providing for arbitration seated in Delhi.

Multiple Extensions and Continued Performance

• After execution of the Binding HoT, Conscient proceeded with steps for development and statutory approvals. Layout plans signed by the respondents were submitted to the Municipal Corporation of Delhi on 3 July 2023. Further approvals from the Airports Authority of India and the Ministry of Defence became relevant because of the land’s proximity to an Air Force Station.
• The parties subsequently executed multiple addenda extending the arrangement. The First Addendum dated 6 May 2024 extended the Binding HoT until 17 August 2024. A Second Addendum dated 18 May 2025 extended it until 17 August 2025 and contemplated further monthly payments of ₹25 lakh. A Third Addendum dated 5 August 2025 extended the arrangement until 17 December 2025.
• Conscient contended that, even after 17 December 2025, both parties continued acting in furtherance of the arrangement, including pursuing approvals with statutory authorities. According to the company, by February 2026, sanction of the layout plans had substantially progressed, with final approval of the Standing Committee remaining.

Landowners Claim HoT Had Expired

• On 10 March 2026, the respondents informed Conscient that the Binding HoT had expired on 17 December 2025 and called upon the company to reconcile the financial aspects of the transaction.
• On 25 March 2026, the respondents remitted ₹2.80 crore to Conscient and reiterated their stand that the Binding HoT had lapsed.
• Conscient, however, asserted that it had paid approximately ₹8 crore under the Binding HoT and its addenda, apart from expenditure incurred on consultants, professional fees, surveys and statutory approvals over approximately two-and-a-half years.
• Fearing that third-party rights might be created in the land, Conscient approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996 seeking preservation of the property pending arbitration.

Landowners: Binding HoT Was Merely an “Agreement to Agree”

• A central defence of the respondents was that the Binding HoT was neither a concluded nor a specifically enforceable contract.
• They argued that the document merely recorded a preliminary commercial understanding and expressly contemplated execution of a subsequent definitive Collaboration Agreement. According to them, several important aspects relating to development, regulatory compliance, commercial structure and implementation remained to be negotiated.
• The respondents therefore characterised the arrangement as an “agreement to agree” and contended that Section 9 could not be used to indirectly obtain specific performance of an agreement that was itself incapable of enforcement.
• They also relied upon Sections 14 and 41 of the Specific Relief Act, 1963, arguing that the proposed development involved continuing obligations and would require ongoing supervision.

Conscient: Subsequent Formal Agreement Did Not Destroy Binding Character

• Conscient argued that the nomenclature “Binding Heads of Terms” reflected the parties’ intention and that the document itself contained the essential commercial framework.
• It pointed to identification of the land, revenue-sharing terms, financial obligations, security arrangements, exclusivity provisions and timelines.
• Conscient further relied heavily on the parties’ conduct—multiple extensions, substantial payments, pursuit of approvals, continued meetings with statutory authorities and negotiations concerning further documentation—to contend that both sides had consistently treated the Binding HoT as operative.

Section 9 Is Protective, Not Final Adjudication

• The High Court emphasised that proceedings under Section 9 are interim and protective in nature. Their purpose is to preserve the subject matter of arbitration and ensure that the arbitral process remains effective.
• Relying on ArcelorMittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712, the Court reiterated that interim protection is tested against the familiar requirements of a prima facie case, balance of convenience and irreparable injury.
• The Court therefore clarified that it was not deciding finally whether the Binding HoT was enforceable or whether Conscient would ultimately obtain specific performance. Those issues were left to the Arbitral Tribunal.

Future Formal Agreement Does Not Automatically Make Existing Arrangement Non-Binding

• A particularly important aspect of the judgment concerns the legal effect of contemplating a subsequent formal agreement.
• The Court found, prima facie, that the Binding HoT identified the collaboration land, development framework, reciprocal obligations, financial commitments, security arrangements, exclusivity obligations and implementation structure. It therefore could not, at the interim stage, simply be reduced to an exploratory arrangement or expression of future intent.
• The Court observed that large-scale commercial real-estate transactions frequently contemplate further technical and operational documentation. The mere existence of a future Collaboration Agreement does not ipso facto eliminate obligations that may already have crystallised between the parties.

Supreme Court’s Trimex International Principle Applied

• The High Court relied upon Trimex International FZE Ltd., Dubai v. Vedanta Aluminium Ltd., India, (2010) 3 SCC 1.
• The Supreme Court in Trimex International had recognised that the contemplation of subsequent formal documentation does not necessarily prevent the formation of a binding commercial arrangement where essential terms have crystallised and the parties’ conduct demonstrates consensus.
• Applying that principle, the Delhi High Court found support for Conscient’s prima facie case that the Binding HoT could constitute a binding commercial arrangement despite the proposed future Collaboration Agreement.

Parties’ Conduct Became Crucial

• The Court attached substantial significance to what the parties actually did after signing the Binding HoT.
• Multiple extensions were executed, substantial payments were made, meetings with statutory authorities continued, and documents and draft addenda were exchanged even close to the alleged termination.
• The Court found such prolonged conduct difficult to reconcile, at least prima facie, with the respondents’ argument that the arrangement had always been merely exploratory or non-binding.
• It distinguished authorities relied upon by the respondents involving vague, incomplete or otherwise unenforceable agreements, noting that the present dispute involved identified land, a stated development framework, revenue-sharing terms, financial commitments, reciprocal obligations and prolonged performance by both sides.

Specific Relief Act, 2018 Amendment Also Considered

• The Court also discussed the legislative shift brought about by the Specific Relief (Amendment) Act, 2018.
• Referring to Global Music Junction Pvt. Ltd. v. Shatrughan Kumar @ Khesari Lal Yadav, 2023 SCC OnLine Del 5479, the Court noted the post-2018 shift towards stronger enforcement of contractual obligations, subject to statutory exceptions.
• Accordingly, mere invocation of Sections 14 and 41 of the Specific Relief Act could not, at the threshold Section 9 stage, compel refusal of interim protection unless it was clearly demonstrated that the agreement fell within the statutory prohibitions.
• The Court stressed, however, that the ultimate question of specific enforceability remained open for the Arbitral Tribunal.

Expiry of Timeline Did Not Automatically Extinguish Arrangement

• The respondents also argued that time was of the essence and that the Binding HoT automatically ceased upon expiry of the stipulated period.
• The High Court was not prepared to accept that proposition at the interim stage.
• It found that repeated addenda, continued negotiations, pursuit of statutory approvals and exchange of further drafts after earlier expiry dates prima facie indicated that the parties themselves had treated the timelines as capable of extension.
• The Court also noted that the Binding HoT did not appear, on its face, to contain an automatic termination or forfeiture mechanism immediately extinguishing rights upon expiry of the timeline.
• Whether time ultimately constituted the essence of the contract was therefore left for fuller examination by the Arbitral Tribunal.

Strong Prima Facie Arbitral Claim Established

• After considering the contractual documents and conduct of the parties, the High Court found that Conscient had established a strong prima facie arbitral claim warranting preservation of the subject matter.
• The Court held that the claims could not at this stage be characterised as illusory, speculative, vexatious or wholly devoid of an enforceable legal basis. Rather, substantial factual and legal issues required adjudication in arbitration.
• It further found that allowing creation of irreversible third-party rights or alteration of the project’s commercial character could seriously prejudice the arbitration and potentially render any eventual award ineffective. Conversely, maintaining protection would preserve the existing state of affairs without finally deciding the parties’ substantive rights.

Development Rights May Not Be Adequately Compensated by Damages

• The Court considered the nature of the dispute particularly relevant. It concerned development rights in immovable property and a unique commercial opportunity.
• The Court reasoned that creation of third-party rights or irreversible changes to the property could produce consequences not capable of complete restitution through monetary compensation alone.
• Even if Conscient ultimately succeeded in arbitration, an award could lose practical effectiveness if the property or development rights had meanwhile been fundamentally altered.

Final Decision: Landowners Restrained From Creating Third-Party Rights

The Delhi High Court ultimately granted interim protection in favour of Conscient.

The respondents were restrained from:

• creating third-party rights; alienating the property; encumbering it; transferring it; or otherwise dealing with the Collaboration Land in a manner prejudicial to the rights claimed by Conscient under the Binding HoT.
• The protection will continue until such stage as may be considered appropriate upon an application by either party before the Arbitral Tribunal.
• The Court expressly clarified that all observations in the judgment are purely prima facie, confined to the Section 9 proceedings, and will not prejudice either party before the Arbitral Tribunal. The Tribunal is required to adjudicate the disputes independently. The petition was disposed of with no order as to costs.

Why This Judgment Matters

• The judgment is significant for commercial contracting and arbitration because it demonstrates that a document styled as a Heads of Terms cannot automatically be treated as legally insignificant merely because a more detailed agreement was contemplated for the future.
• At the Section 9 stage, courts may examine not only the terminology of the document but also its commercial terms and, importantly, the subsequent conduct and performance of the parties.
• At the same time, the ruling does not establish that every Heads of Terms is specifically enforceable. The Delhi High Court carefully confined its findings to the interim stage and left the ultimate enforceability of this particular Binding HoT to arbitration.

Key Takeaway

Where parties have identified the subject property and commercial framework, undertaken reciprocal obligations, made substantial payments, repeatedly extended the arrangement and acted upon it over a prolonged period, the mere contemplation of a later formal agreement may not be sufficient to defeat a request for interim protection under Section 9 of the Arbitration and Conciliation Act.

In Conscient Infrastructure v. Mahesh Kapoor, the Delhi High Court therefore preserved the 6.76-acre collaboration land against third-party dealings while leaving the final contractual rights and specific-performance claims to the Arbitral Tribunal.

Connected Matter

Delhi High Court: Arbitrator Must Give Reasons While Rejecting Section 17 Interim Relief

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Source: Delhi High Court

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