Arbitration and Conciliation Act, 1996 – Arbitration clause – Activation of –Respondent No.1 issued Global invitation of Request for Qualification (RFQ) for development of a container terminal project – The bid was divided into two stages- first, the stage of eligibility and second, the Request for Proposal (RFP) – Appellant and Respondent No.2, as a consortium qualified the first stage – Letter of Award given by the Respondent No.1 to the Consortium – Respondent No.2 opted out of the bid process – Showcause notice issued by the respondent no.1 to consortium to perform the bid – Since same was not done, the Letter of Award accorded and acknowledged by the appellant was withdrawn by Respondent No.1 – Consequent to this, arbitration notice was sent by the respondent no.1 – Appellant contended that no arbitration clause was entered into by way of agreement between the parties and the arbitration clause relied upon by respondent no.1 would not fit the bill as the disputes that were to be adjudicated under that clause related only to a Concession Agreement which was not entered into – High Court held that there was a concluded contract between the parties as the Letter of Award had been accepted by the appellant and that since the arbitration clause forms a part of the bid document between the parties, the arbitration clause would govern the parties – On appeal, held: On perusal of the RFP clauses, a disclaimer at the forefront of the RFP makes it clear that there was only a bid process that was going on between the parties and there was no concluded contract between them – Such a bid process would subsume a Letter of Award to be issued by the Respondent No.1 with two further steps under the schedule to be gone into before the draft Concession agreement finally becomes an agreement between Respondent No.1 and the Special Purpose Vehicle that was constituted by the Consortium – In instant case, there was no absolute and unqualified acceptance by Letter of Award – Some very important steps had to be undergone before there could be an agreement enforceable in law as a contract – Furthermore, even assuming that there was an arbitration clause which governs the parties, the said clause would wholly be inapt as it would only cover the disputes between a Special Purpose Vehicle and the Respondent No.1 arising from the Concession agreement not yet entered into, and not between the Respondent No.1 and the appellant and Respondent No.2 – Thus, impugned judgment of the High Court set aside – Contract Act, 1872 – s.7.
Allowing the appeal, the Court
HELD: 1. On a conjoint reading of the Request For Proposal (RFP) clauses, a few things become clear - (i) first and foremost a Disclaimer at the forefront of the RFP makes it clear that there is only a bid process that is going on between the parties and that there is no concluded contract between the same (ii) it is equally clear that such bid process would subsume a Letter of Award to be issued by the Respondent No.1 with two further steps under the schedule to be gone into before the draft Concession Agreement finally becomes an agreement between Respondent No.1 and the Special Purpose Vehicle that is constituted by the Consortium for this purpose (iii) that through out the stage of the bid process, the forum for dispute resolution is exclusively with the Courts at Mumbai and (iv) that right uptil the stage of the entering into the Concession Agreement, the bid process may be annulled without giving any reason whatsoever by the Respondent No.1. [Para 13] [372-G-H; 373-A-B]
2. Under Section 7 of the Indian Contract Act, 1872 in order to convert a proposal into a promise, the acceptance must be absolute and unqualified. It is clear on the facts of this case that there is no absolute and unqualified acceptance by the Letter of Award – two or three very important steps have to be undergone before there could be said to be an agreement which would be enforceable in law as a contract between the parties. [Para 15] [373-G-H]
3. Appellant correctly relied upon both Dresser Rand S.A. and Bharat Sanchar Nigam Limited. In Dresser Rand S.A. it was found, on the facts, that unless a purchase order was placed, there would be no agreement between the parties. Everything that took place before such purchase order was placed would only be a prelude to a contract which cannot be confused with the contract itself. [Para 16] [374-A-B]
4. Dresser Rand S.A. judgment was followed in Bharat Sanchar Nigam Limited, which is very similar to the facts of the present case. In Clause 30 of the instructions to the bidders in that case, it is stated that the Courts in Delhi will have jurisdiction to entertain disputes or claims arising out of the tender till issue of authorization letters to circles for placement of purchase orders. It is only thereafter that Clause 20 of the General Conditions of Contract, providing for an arbitration, could kick in. [Para 17] [374-F-G]
5. Appellant rightly contended that assuming that there was an arbitration clause which governs the parties, the said clause would be wholly inapt as it would only cover disputes between a Special Purpose Vehicle and the Respondent No.1 arising from the Concession Agreement not yet entered into, and not between the Respondent No.1 and the appellant and Respondent No. 2. [Para 21] [377-D-F]
M.R. Engineers and Contractors Private Limited v. Som Datt Builders Limited (2009) 7 SCC 696 :
[2009] 10 SCR 373 ; Dresser Rand S.A. v. Bindal Agro Chem Ltd. And Anr. (2006) 1 SCC 751 : [2006] 1 SCR
308 ; Bharat Sanchar Nigam Limited v. Telephone Cables Limited (2010) 5 SCC 213 : [2010] 3 SCR 291 – relied on.
Unissi (India) Private Limited v. Post Graduate Institute of Medical Education and Research (2009) 1 SCC
107 : [2008] 14 SCR 108 ; Kollipara Sriramulu (Dead) by his LR v. T. Aswatha Narayana (Dead) by his LRs & Others (1968) 3 SCR 387 ; Inox Wind Limited v. Thermocables Limited (2018) 2 SCC 519 : [2018] 1 SCR 86 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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