1998 (11) TMI 684 - SC - Indian Laws

Summary

Issues Involved:
1. Whether there is a valid and subsisting agreement between the parties.
2. Relief.

Summary:

Issue 1: Validity and Subsistence of Agreement
The primary issue was whether a binding contract existed between the parties. The appellant argued that a binding contract was formed through contemporaneous correspondence, despite the Charter Party Agreement dated November 11, 1993, not being signed. The appellant contended that the agreement was operative and binding even without the parties having agreed on the format and terms of the standby letter of credit and the performance guarantee. However, the respondent, Indian Oil Corporation Ltd., maintained that no arbitration agreement had been executed and that the correspondence did not bring about any enforceable contract because the fundamental conditions of the terms of the bargain were neither agreed upon nor fulfilled by the parties.

The court examined various documents and correspondence exchanged between the parties. It was found that the terms of the standby letter of credit and performance guarantee were not accepted by the respective parties, indicating no meeting of minds. The correspondence showed that the parties were only negotiating and had not reached a binding contract. The court emphasized that it is not empowered to create a contract for the parties by going outside the clear language used in the correspondence.

Issue 2: Relief
The learned single Judge of the Delhi High Court had earlier restrained the appellant from proceeding with the arbitration, holding that no concluded, enforceable, and binding contract came into existence between the parties. Consequently, Clause 53 of the Charter Party "agreement" relating to arbitration had no existence in the eye of law. The Supreme Court upheld this decision, finding no merit in the appeal and dismissing it with costs.

Conclusion:
The Supreme Court concluded that no binding contract was formed between the parties due to the lack of agreement on the terms of the standby letter of credit and performance guarantee. Therefore, the arbitration clause had no legal standing, and the appeal was dismissed.