Abhay Transport (M/s.) vs M.P. State Mining Corporation Ltd.

Dhirendra Mishra, J.—The applicant by this petition u/s 11 of the Arbitration and Conciliation Act, 1996 (for brevity the ''Act of 1996''), has prayed for appointment of Arbitrator and to refer the dispute arising out of the work namely crushing, transportation & wagon loading of dolomite from Baraduar Mines site to the Arbitrator so appointed for adjudication.

Case of the applicant is that the non-applicant issued notice inviting tender for crushing, transportation and wagon loading of dolomite from Baraduar mines in Bilaspur, District-Bilaspur vide NIT of Annexure A-1. The applicant submitted his tender along with earnest money of Rs. 1,50,000/-. The tenders were opened on 22nd June 1996. The offer of the applicant was lowest, however the tenders were not finalized. The applicant further extended validity of his offer for a period of 3 months as the earlier offer was valid only for a period of three months. His revised offer was accepted by the non-applicant vide letter dated 29.10.1996 of Annexure A-2. Applicant was granted permission to commence the work of transportation & wagon loading of dolomite vide letter dated 30.11.1996 of Annexure A-4 with a copy to the General Manager, Mines vide Annexure A-5. For reasons detailed in the petition, applicant could not commence crushing work and requested the Corporation to divide the work into two parts i.e.-(i) Transportation & Wagon loading, and (ii) Crushing. He expressed his inability to commence the work of crushing immediately vide communication dated 13.12.1996 of Annexure A-6. His request was accepted by the Corporation vide their reply dated 10.01.1997 of Annexure A-7. Thereafter request was made for execution of formal agreement with respect to the above contract work vide application dated 4th January 1997 of Annexure A-8. On request of the Corporation, the applicant started transportation & wagon loading work and dispatched two racks load of dolomite on 6th February & 13th February 1997. However the applicant was verbally directed on 23rd February 1996 to immediately stop the work without assigning any reason. The request of the applicant for refund of earnest money and payment in respect of the work already done vide Annexure A-10 & A-11 were also ignored. He was informed by the General Manager vide letter dated 9.5.1997 of Annexure A-12 that because of the forest conservation rules the mines at Baraduar has been closed. Deductions were made from payment to be made towards the dispatch first rack. The payment against the second dispatch of rack was not made on the ground that they have not received payment from the Steel Plant.

Ultimately the applicant submitted a claim for a sum of Rs. 97,55,733.00/- against various heads vide his letter dated 1.11.1998 of Annexure A-15 and when his claim did not invoke any response, he applied for appointment of Arbitrator in accordance with Clause 13 of the tender notice vide his letter dated 25.12.1998 of Annexure A-18. However the non-applicant rejected the request for appointment of Arbitrator vide their letter dated 27.1.1999 of Annexure A-19 on the ground that the agreement has not been executed between the Corporation and the applicant and therefore question of appointment of Arbitrator does not arise.

Learned Counsel for the applicant submits that Clause 13 of the Notice Inviting Tender of Annexure A-1 specifically provides for reference of dispute to the Arbitrator. From perusal of the correspondences between the parties, it is clear that the parties have entered into a concluded contract. The applicant had already commenced the work in accordance with the work order issued by the non-applicant. The request of the applicant for appointment of Arbitrator as per procedure prescribed in Clause 13 has been rejected by the non-applicant and hence this petition has been filed.

On the other hand, learned Counsel for the Corporation argued that the instant application for appointment of Arbitrator is not maintainable as no arbitration agreement has been entered into between the parties and therefore, in the absence of legal execution of agreement, Clause 13 of the NIT is not attracted. Reliance has been placed in the matter of Jagdish Chander Vs. Ramesh Chander and Others, .

6.I have heard learned Counsel for the parties.

From the averments in the application and the documents annexed with this petition, it is evident that the Corporation invited tenders vide document of Annexure A-1. The applicant submitted his offer and extended validity of his offer vide his letter dated 1.8.1996 and revised offer was accepted by the Corporation vide Annexure A-2. In the reply, it was mentioned that the applicant should execute agreement within a month and should also deposit bank guarantee or a sum of Rs. 10 lacs as per terms and conditions of the tender notice. However, the non-applicant/Corporation vide letter dated 30th November 1996 of Annexure A-4 permitted the applicant to commence the work and directed that he should obtain bank guarantee and also execute agreement and it was reiterated that the agreement would be controlled as per terms and conditions of the tender notice and accordingly the applicant commenced the work and transported two wagon loads of dolomite. There is no dispute that till date no formal arbitration agreement has been executed between the parties and the dispute raised by the applicant pertains to the work already done by the applicant as per his offer in response to the tender notice of Annexure A-1. It is also not in dispute that the claim of the applicant was not considered by the Corporation and his prayer for appointment of Arbitrator under the terms of Clause 13 of tender notice of Annexure A-1 has been rejected on the ground that no formal agreement has been entered into between the parties and therefore question of invoking Clause 13 does not arise.

Clause 13 of the Notice Inviting Tender is reproduced as under:

DISPUTE:

(a) In case of any dispute regarding this contract the matter shall be referred for Arbitration under Arbitration Act. Arbitrator shall be nominated by the Managing Director of this Corporation whose decision shall be final and binding on both the parties. Venue of Arbitrator will be at Bhopal and his fee shall be shared by both the parties equally.

(b) Fee of Arbitrator shall be 5% of the total disputed amount. However it will be Rs. 2,500/- minimum and shall not exceed Rs. 10,000/-. This fee shall not include misc.-expenditure like secretarial expenses etc. During the pendency of the arbitration

under Arbitration Act no party shall move the case in the court.

(c) Arbitrator shall decide the case in 4(Four) months. However this time limit may be extended with the consent of both the parties.

Section 7 of the Act of 1996 defines arbitration agreement which reads as under:

7 Arbitration agreement- (1) In this part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in-

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

In the matter of Jagdish Chander (supra), the Hon''ble Apex Court while considering as to what constitutes arbitration agreement has held thus:

8 (i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration where these is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration there is no valid and binding arbitration agreement. (ii) Even if the words "arbitration" and "Arbitral Tribunal (or arbitrator)" are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are (a) The agreement should be in writing. (b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal, (c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them.

(iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where these is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement of contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement.

(iv) But mere use of the word: "arbitration" or "arbitrator" in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as "parties can, if they so desire, refer their disputes to arbitration" or "in the event of any dispute, the parties may also agree to refer the same to arbitration or "if any disputes arise between the parties, they should consider settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that "if the parties so decide, the disputes shall be referred to arbitration" or "any disputes between parties, if they so agree, shall be referred to arbitration" is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.

In the matter of J.K. Jain and others Vs. Delhi Development Authority and others, , it is held in paragraph 11 that where the terms and conditions of the tender form including terms about reference of disputes to arbitration, agreed to be made part of main agreement and binding between the parties, it cannot be contended that there was no arbitration agreement between the parties even if an arbitration clause is not included in the agreement itself. Further the stand of the Appellant that the said clause shall not deemed to be a part of the agreement, inasmuch as it is only part of the tender form which is issued to every contractor intending to supply materials to the Respondents was not accepted.

In the matter of M/s. Aurohill Global Commodities Ltd. v. M/s. M.S.T.C. Ltd., AIR 2007 SCW 4891 in paragraph 13, it has been held that the question as to whether draft purchase order acquired character of concluded contract or not and the question as to whether the contract was non est can only be decided by the arbitrator therefore the aforesaid question have got to be decided by arbitration proceedings. In my view, therefore, there is no merit in the contention advanced on behalf of M/s. M.S.T.C. Ltd. that the arbitration petition was misconceived and not maintainable in law.

Thus, from the plain reading of Section 7 of the Act of 1996, it is clear that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement and it has been further provided in Sub-Section 4 of Section 7 of the Act that an arbitration agreement is in writing if it is contained; in a document signed by the parties or an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by other. Therefore following the principles of law laid down in the above cited judgments and considering the undisputed fact that the notice inviting tender contained Clause-13, which provides for resolution of dispute through arbitration and the decision of the arbitrator has been given finality and that through exchange of letters the parties have asserted that the terms and conditions of Clause 13 of the Arbitration Agreement would govern the contract between the parties, I am of the considered opinion that the objection of the non-applicant regarding maintainability of the instant petition is without any substance. In any case, the fact whether acceptance of the offer of applicant given in response to tender notice of Annexure A-1 constitutes a concluded contract or not is a matter that can be considered by the arbitrator during the arbitration proceedings and the instant petition cannot be dismissed at the threshold on the ground of maintainability.

In the result, I am of the opinion that a case for appointment of arbitrator is made out.

Accordingly, with the consent of the parties, I hereby appoint Hon''ble Mr. Justice Vijay Kumar Shrivastava, Retired Judge, High Court of Chhattisgarh as Sole Arbitrator in the matter, subject to his consent.

The Hon''ble Arbitrator may settle his terms and conditions and remuneration.

Registry to intimate Hon''ble Mr. Justice Vijay Kumar Shrivastava, Retired Judge, High Court of Chhattisgarh about his appointment as Sole Arbitrator and to send all the papers along with addresses of the parties.

Parties are also directed to approach Hon''ble Mr. Justice Vijay Kumar Shrivastava, Retired Judge, who is presently residing in front of office of State Legal Aid Services, Ware House Road, Bilaspur and to submit papers and take part in the arbitration proceedings.