Madhya Pradesh High Court Refers Ethanol Offtake Dispute To Arbitration, Directs SCOPE To Appoint Arbitrator Within A Week

The Madhya Pradesh High Court has referred a contractual dispute between M/s Mahakaushal Sugar and Power Industries Limited and public sector oil marketing entities (Bharat Petroleum Corporation Ltd., Indian Oil Corporation Ltd. and Hindustan Petroleum Corporation Ltd.) to arbitration, underscoring that when parties consciously agree to a dispute resolution mechanism, courts must ordinarily give effect to that bargain.

The Division Bench of Chief Justice Sanjeev Sachdeva and Justice Vinay Saraf passed the order on February 19, 2026, while disposing of a writ petition that sought directions for amicable resolution under a long-term ethanol offtake agreement.

The petitioner company, which operates an 8000 tonnes per day sugar plant, had set up an ethanol facility in the same campus pursuant to the Union Government’s Ethanol Blended Petrol Programme. A long-term offtake agreement dated January 8, 2022 was executed with the respondents. When disputes arose in relation to the agreement, the company approached the High court seeking a writ of mandamus to direct the authorities to resolve the dispute “amicably through discussions in good faith expeditiously” in terms of Clause 22.1 of the contract.

The dispute resolution clause provided for a tiered mechanism: first, amicable discussions; failing which, conciliation under applicable OMC rules within prescribed timelines; and ultimately, reference to a sole arbitrator under the SCOPE Forum of Arbitration Rules, with the seat at Mumbai and proceedings in English. The clause also clarified that pendency of dispute resolution would not excuse performance of contractual obligations.

Appearing for the petitioner, Senior Advocate Vivek Tankha along with Senior Advocate Shashank Shekar and Advocate Bhoopesh Tiwari submitted that given the peculiar facts and the stands taken by the parties, the matter be directly referred to arbitration. Senior Advocate Aditya Adhikari with Advocate Kapil Jain, and Advocate Piyush Bhatnagar for the respondents, concurred with this course.

Recording the consensus, the bench observed that “in view of the peculiar facts and circumstances of the case, the matter be referred to arbitration bypassing the dispute resolution through amicable discussion and conciliation”. The court noted the submission that conciliation “may not be possible” and that direct arbitration would be more expeditious.

Disposing of the petition, the court requested the SCOPE Forum of Conciliation and Arbitration to appoint an arbitrator in accordance with the contractual clause and its governing rules. The petitioner has been directed to submit the necessary application and deposit the requisite fee within one week. The Secretary of SCOPE has been asked to “expeditiously commence the process of appointment of an arbitrator/arbitrators preferably within a period of one week of receipt of a valid request”.

Importantly, the bench clarified that it had “neither considered nor commented on the merits of the contention of either party” and that “all rights and contentions of the parties are reserved”. It also left it open to the petitioner to move the arbitral tribunal under Section 17 of the Arbitration and Conciliation Act for interim measures.

Case Title: M/S Mahakaushal Sugar and Power Industries Limited v. Union of India and Others

Date of Order: February 19, 2026

Bench: Chief Justice Sanjeev Sachdeva and Justice Vinay Saraf