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TMI Blog2016 (10) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... Public Corporate Company/Government of India Enterprise. Defendant No.2 was a sole arbitrator appointed by defendant No.1 in the alleged adjudication of the dispute between the plaintiff and defendant No.1. Defendant No.1 floated a Notice Inviting Tenders dated 05.05.2011 for construction of Ash Pond-IV in NALCO District Angul, Orissa. [4]. In response to the notice inviting tenders, plaintiffrespondent No.1 sent its tender dated 06.06.2011. Plaintiff also deposited an amount of Rs. 25,00,000/- as earnest money as per terms and conditions of notice inviting tenders. [5]. Defendant No.1 vide letter dated 09.11.2011, sent work order in duplicate with some terms and conditions to the plaintiffrespondent No.1 for its acceptance by the plaintiff i.e. to be accepted or rejected by the plaintiff within seven days, failing which it would be presumed that work order has been accepted by the plaintiff. A request was made to return the duplicate copy of the work order to defendant No.1-petitioner duly signed by the various signatory holding of power of attorney or proprietor of the firm/plaintiff-respondent No.1 within 7 days as token of acceptance and acknowledgment. If the response was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plaintiff had refused to execute the work, therefore, defendant No.1 will take necessary action as per terms and conditions of the notice inviting tender. The earnest money deposited by the plaintiff was forfeited vide letter dated 17.12.2011. It was again informed by defendant No.1-petitioner vide letter dated 03.01.2012 that the earnest money deposited by plaintiff was converted into security deposit and was forfeited. Vide letter dated 30.01.2012, defendant No.1-petitioner informed plaintiffrespondent No.1 that since the plaintiff had refused to work, the work would be got carried out through some other agency at the risk and cost of the plaintiff. [10]. Plaintiff-respondent No.1 contested the claim of defendant No.1-petitioner vide letter dated 16.02.2012 on the ground that since there was no contract between them, question of getting the work executed at their risk and cost did not arise. Risk and cost was demanded by defendant No.1-pettiioner for nonexecution of Ash Pond-IV construction work by the plaintiff. A demand of Rs. 4,86,61,440/- was made towards risk and cost amount for non-execution of the work from defendant No.1-plaintiff vide letter dated 06.02.2015. Plainti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney was converted into security deposit and was forfeited. Again the cause of action arose on 02.09.2015, when sole arbitrator was appointed by defendant No.1-petitioner, even though there was no agreement signed between the parties. Lastly, it arose on 07.09.2015, when the sole arbitrator issued notice of appearance to the plaintiff. With this background, suit came to be filed by respondent No.1-plaintiff. [16]. Defendant No.1-petitioner appeared in the suit. Ad-interim injunction was sought by the plaintiff to restrain the sole arbitrator from proceeding with the arbitration proceedings. Since no contract came to be in existence between the parties, therefore, the plaintiff was not under legal obligation to work for defendant No.1- petitioner. The notice of the appearance issued by the sole arbitrator on 02.09.2015 requiring the plaintiff to participate in the arbitration proceedings was claimed to be bad in law. [17]. Civil Judge (Junior Division), Gurgaon vide order dated 07.10.2015 dismissed the application for interim injunction on the ground that plaintiff can address its grievances before the arbitrator. [18]. Feeling aggrieved against the order dated 07.10.2015, plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Conditions of the Contract. Learned counsel further submitted that respondent No.1 cannot say that the agreement was not binding between the parties as the offer given by the respondent was duly accepted by the petitioner and nothing was required thereafter as the same amounted to lawful contract. The petitioner invoked the arbitration clause and appointed Sh. C.R. Pradhan as sole arbitrator. [22]. On the strength of Govind Rubber Limited Vs. Louis Dreyfus Commodities Asia Private Limited, (2015 13 SCC 477, Kvaerner Cementation India Limited Vs. Bajranglal Agarwal and another, (2012) 5 SCC 214, Pappu Rice Mills Vs. Punjab State Cooperative Supply, AIR 2000 P&H 276, State of Uttar Pradesh and others Vs. Combined Chemicals Company Private Limited, (2011) 2 SCC 151, Hughes Communication India Ltd. and others Vs. East West Traders and another, (2013-3) PLR 258, CWP No.4046 of 2005 decided on 12.03.2005 titled as Maharshi Dayanand University and another Vs. The Anand Cooperative L/C Society Ltd. and another and Maharshi Dayanand University and another Vs. Anand Cooperative L/C Society Ltd. and another, AIR (2007) SC 2441, learned counsel contended that an arbitration agreement even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court will exercise jurisdiction without reference to provisions of the Arbitration and Conciliation Act itself. [26]. Learned counsel again emphasized that in view of Section 16 read with Sections 12 and 13 of the Act, issue was adjudicated by this Court in CWP No.4046 of 2005 vide order dated 12.03.2005. On the ratio of State of Orissa and Others Vs. Gokulnanda Jena, 2003 (4) Indian Civil Cases 79 and New India Assurance Co. Ltd Vs. Hanjer Fibres Ltd. 2003(3) RCR (Civil) 289, it was contended that Arbitrator has the power to rule on its own jurisdiction including any objection with regard to existence or validity of the arbitration agreement. Ultimately, it was held that all these grounds can be raised before the Arbitrator in the arbitration proceedings. The aforesaid judgment passed by this Court was upheld by the Apex Court in the year 2007 when Civil Appeal No.2133 of 2007 was decided in case titled Maharshi Dayanand University and another Vs. Anand Cooperative. L/C Society Ltd. and another. [27]. Per contra, learned counsel for respondent No.1 submitted that the contract was never a binding contract between the parties. For making a complete contract in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel further submitted that there was no absolute acceptance by the petitioner to the offer of respondent No.1 and no contract came into existence. Under the agreement as per Clause 13.0 of General Conditions of Contract, "instruction to bidders" was required to be executed by respondent No.1, therefore the same was not executed. No contract was required to be signed between respondent No.1 and the petitioner in terms of Clause 13.0 of General Conditions of Contract and therefore, the same was not signed. In the absence of any agreement entered into between the parties, there was no question of any arbitration which can only arise if there was any written agreement in view of Section 7 of the Arbitration Act. [31]. In support of his contention, learned counsel for respondent No.1 relied upon Indowind Energy Limited Vs. Wescare (I) Ltd. and another, 2010(5) SCC 306 in which a distinction was drawn between arbitration agreement and contract. A contract can be entered into even orally and can be spelt out from correspondence or conduct of the parties. An arbitration agreement is different from a contract. An arbitration agreement can come into existence only in the manner as prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lawful arbitration agreement. The legality of arbitration agreement has to be viewed from compliance of Sections 7 and 8 of the Arbitration Act. Reference can be made to P. Anand Gajapathi Raju and others Vs. P.V.G. Raju (died) and others, 2000 AIR SC 1886 and Atul Singh and others Vs. Sunil Kumar Singh and others, 2008 (2) Apex Court Judgments 217 (Supreme Court). Existence of arbitral dispute is sine quo non for adjudicating the same by an arbitrator. The judicial authority has to consider the objection objectively. The judicial authority is not supposed to act mechanically and refer the matter to arbitration simply because there is an arbitration clause in the agreement. [36]. Learned counsel stressed upon an issue that firstly there was a no signed agreement between the parties and secondly, the dispute was not worth an arbitral dispute as it was never part of a concluded contract. Learned counsel relied upon M/s S.B.P and Companies Vs. M/s Patel Engineering Ltd. and another, 2005(4) RCR (Civil) 747. [37]. Learned counsel further emphasized that in a question related to validity or otherwise of the arbitration agreement, judicial authority would have the jurisdiction to go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot accept the same and sent its refusal letter dated 02.12.2011 within 7 days of receipt of work order. In the intervening period from 09.11.2011 to 30.11.2011, petitioner also requested respondent No.1 to come forward for kick of meeting preferably on 18.11.2011 or 19.11.2011 and also to take necessary action for execution of agreement as per Clause 13.0 of the Contract Agreement under general instructions. [40]. On 21.11.2011, the petitioner also communicated respondent No.1 to come for kick of meeting and to submit master network of project schedule and execute the contract agreement by 26.11.2011, failing which NALCO may take suitable action as deemed fit as per terms and conditions of the subject contract. In response to the aforesaid letter dated 21.11.2011, respondent No.1 vide reply of even date communicated to the petitioner that respondent No.1 cannot give any firm programme unless the final specifications are adopted and conveyed to them. In case the specifications were not changed/revised, then respondent No.1 would not be interested to execute the work. Thereafter, petitioner again requested respondent No.1 to start activity of work order with immediate effect and me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om respondent No.1. Respondent No.1 was required to deposit the aforesaid amount in favour of NALCO payable at Angul, Orissa, failing which it was decided by the petitioner to invoke the arbitration clause under Clause 22.00 of NIT and WO and Clause 87 of General Conditions of Contract. CMD, NALCO would be requested to appoint arbitrator in the matter. Respondent No.1 communicated to the petitioner on 28.02.2015 to withdraw the recovery of Rs. 4,86,61,440/- being illegal and unjustified. Thereafter, Arbitrator was appointed who issued notice to the parties. [44]. Evidently, the proposal was merely a counter proposal as the condition was not executed by respondent No.1. In order to convert a contract into promise, acceptance must be absolute and unqualified. It must be accepted by the original proposer before a contract is made. The acceptance of the offer must be absolute. The variance was suggested by respondent No.1, but the same was not adhered to by the petitioner. The variance between offer and acceptance was in respect of material term and in the event of nonacceptance of the same, the acceptance cannot be said to be absolute and unqualified. Such an offer would not result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t booking on internet and in standard forms of contract, terms and conditions are agreed upon. In such agreements, if the identity of the parties is established, and there is a record of agreement it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the parties. Therefore, signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the Act. [46]. In the aforesaid judgment, the Hon'ble Apex Court held that in case of commercial document, it must be interpreted in such a manner so as to give efficacy to the contract, rather than to invalidate it. Reference was made to Union of India Vs. D.N. Revri and Co., (1976) 4 SCC 147. [47]. The view expressed in Govind Rubber Ltd. case (supra) was in respect of arbitration agreement, even though in writing need not be signed by the parties if the same was discernible from the conduct of the parties in support of existence of such agreement. If the parties were ad idem on the factum of agreement, then merely because one of the party did not sign the same was of no consequence. The ratio of aforesaid case does not apply to the facts and circumstances of the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings. No judicial authority can interfere except where so provided. The object of new act is to encourage resolution of disputes expeditiously and less expensively. When there is an arbitration agreement, the intervention of the Court should be minimal. The ratio laid down in P. Anand Gajapathi Raju and others case (supra) is applicable only in the event of an arbitration agreement. [51]. The entire controversy hinges upon a fact whether there was a lawful arbitration agreement between the parties or not. In the light of different precedents as discussed above, I am of the view that there was no arbitration agreement between the parties as provided under Section 7 of Arbitration and Conciliation Act, 1996, nor the arbitration agreement was in writing executed between the parties, therefore, a contract with regard to arbitration cannot be presumed. An Agreement which is enforceable in law is a contract. The alleged agreement between the parties is not enforceable in law being not a concluded agreement between the parties. It was not a case of acceptance with variance or a condition, but it was a case of counter proposal which was not adhered to or accepted and could not be co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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