M/s. Mechano Engineering Company vs M/s. Andritz Hydro Pvt. Ltd

Regard being had to the similitude of the questions involved,

both the applications were analogously heard on the joint request of the parties and are decided by this common order.

The facts are taken from A.C. No.65/2016.

The applicant contends that the Water Resources

Department of state government published a Notice Inviting

Tender (NIT) for disposal of machines Annexure A-1. The

applicant submitted the tender form along with the earnest

money and in turn, he was declared as successful bidder. The

respondents by order dated 3.10.2013 informed the applicant

to deposit Rs.40,72,930/- within 15 days so that the delivery

of material can be made. This document dated 30.10.2013 is

filed as Annexure A-2.

Shri V.R. Rao, learned Sr. Counsel placed heavy reliance

on this document and contended that the applicant''s tender is

duly accepted by issuing the order dated 3.10.2013 Annexure

A-2. Thus, this amounts to completion of agreement, as per

Section 7(4)(b) of the Arbitration and Conciliation Act, 1996

(for short, ''the Act'').

Learned Senior Counsel submits that the aforesaid tender

along with the another tender of the applicant was cancelled

by the respondents by order dated 5.11.2013 Annexure A-8

and A-9. The reliance is also placed on General Rules and

Direction (herein after referred to as ''General Rules'') for guidance of contractors, Annexure A-10. It is urged that

Clause 40 of the General Rules provides the method of

resolution of disputes and settlements. The respondents are

bound by these General Rules and as per these rules, the

direction to appoint arbitrator can be issued.

The stand of the applicant is that as per Clause 5 of the

General Rules, the conditional tenders can be rejected after

having received the amount as per the directions dated

3.10.2013. The applicant''s agreements was finalised and

respondents cannot be permitted to say that no agreement

was entered into between the parties.

Learned Senior Counsel submits that petitioner earlier

filed W.P.No.20996/2016. The said case was disposed of on

22.2.2014. Learned Single Judge reproduced Clause 40 of

General Rules in the order and opined that the petitioner has

an alternative efficacious remedy to settle the disputes. The

Court refrains itself to entertain the petition questioning the

cancellation of contract. It is contended that in

W.A.No.727/2014 decided on 12.7.2016, no interference was

made by the Division Bench on the order passed in

W.P.No.20999/2013.

Shri V.R. Rao, learned Sr. Counsel submits that in the writ petition, the stand of the government was that the petitioner

can invoke the arbitration Clause. He further submits that in

view of the categorical stand taken in the reply in the

aforesaid writ petition, the respondents are ''estopped'' from

taking a different stand in this round of litigation. The

attention of this Court is drawn to paragraph 5 of the return

filed in W.P.No.20996/2013.

In nutshell, the contention of the applicant is that in the

peculiar facts and circumstances of the case, it can be safely

concluded that after issuing the order dated 3.10.2013

Annexure A-2 and receiving the amount directed therein, the

agreement had taken place by implication. The said action

amounts to entering into an ???Arbitration Agreement??? as

envisaged in Section 7(4)(b) of the Act. As noticed, the second

contention is based on the principle of ''Estoppel''.

Learned Senior Counsel for the applicant placed reliance

on the judgments reported in (2015) 13 SCC 477 (Govind

Rubber Limited v. Louis Dreyfus Commodities Asia

Private Limited) and 2004 (2) MPLJ 228 (Prism Cement

Limited Vs. Delta Construction Systems Limited).

Per contra, Shri Aditya Pyasi, learned G.A. relied on the

averments of the reply. He submits that present application is not maintainable because no contract agreement had been

entered into between the parties. He further submits that in

view of the orders passed in W.P.No.20999/13 and

W.A.No.727/2014, the applicant can seek redressal under the

civil/common law. These applications under the Act of 2006

are not maintainable.

No other point is pressed by counsel for the parties.

The first contention of the applicant is that in view of

Section 7 of the Act, it is not necessary that an

arbitration agreement must contains signatures of both

the parties. In the opinion of this Court, there cannot be

any quarrel on this point. Curtains are finally drawn on

this issue by the Supreme Court in Govind Rubber

Limited (supra). Their Lordships held that the agreement

even if not signed by the parties, can be spelt out from

correspondence exchanged between the parties. The task

is to examine the correspondence with a view to arrive at

the conclusion whether there was any meeting of mind

between the parties which could create a binding

contract between them. Thus, when such a contention is raised, it is the duty of the Court to find out from the

correspondence as to whether the parties were ad idem to the terms of the contract.

In 1980 (4) SCC 556 (Rukmanibai Gupta Vs.

Collector, Jabalpur), the Apex Court opined that the

arbitration agreement is not required to be in any

particular form. What is required to be ascertained is

whether the parties have agreed that if dispute arises

between them in respect of the subject matter of

contract, such dispute shall be referred to arbitration,

then such an arrangement would spell out in arbitration

agreement. It is profitable to note that in Govind Rubber

Ltd. (supra), the Apex Court further held that ???in such

agreement, 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

item between the parties.??? Thus the Apex Court has

done away with the formal requirement of signature of

the parties etc.

There is no scintilla of doubt that the applicant''s

tender was duly accepted by the department by

communication dated 03.10.2013 and in turn, the

applicant deposited the requisite amount. Thus, as per

Clause 7(b), the agreement had taken place between the parties. The terms and conditions are mentioned in NIT

dated 13.07.2013. The said terms and conditions do not

contain any arbitration clause. There is no material

before this Court to connect the NIT (Annexure-A/6) and

(General Rules and Directions for Guidance of

Contractors).

Putting it differently, the applicant is unable to

establish that the aforesaid general rules and directions

became part of the agreement. In absence thereto, no

arbitration clause in the agreement exists which shows

that the parties were ad idem for the purpose of

resolution of dispute through arbitration. This is trite law

that in order to constitute a valid, binding and

enforceable arbitration agreement, the requirements

contained in Section 7 have to be applied strictly. These

requirements, apart from this, are - (1) there has to be an agreement; (2) it has to be in writing; (3) parties must

sign such agreement or the words the agreement must

bear signatures of the parties concerned and (4) such

agreement must contain an arbitration clause. The

aforesaid four conditions are sine qua non for

substituting a valid and enforceable arbitration agreement. Failure to specify any of the four conditions

would render the arbitration agreement invalid and

unforceable and in consequence would result in dismissal

of the application filed under Section 11 of the Act. [See:

2016 (8) SCC 788 (Vimal Kishor Shah and others Vs.

Jayesh Dinesh Shah and others)]. In the light of this

judgment of Supreme Court, the order of this Court

passed in the case of Prism Cement Limited (supra)

cannot be pressed into service.

The applicant has also contended that in view of the

stand taken in the reply in earlier writ petition, the

respondents are bound by principle of ''estoppel''. They

cannot take a different stand in the present case.

True it is that in W. P. No.20999/2013, the reliance is

placed on Clause 40 of the General Conditions. However,

in the said order passed by the writ Court, no finding was

given that said Clause 40 is part of the agreement

entered into between the parties. Pertinently, the

Division Bench while permitting withdrawal of W.P.

No.20999/2013 on 25.07.2016, observed that the petition

is permitted to be withdrawn with liberty to the

petitioner to avail remedy available under the common law or under the arbitration clause. This is well settled

that the jurisdiction to decide a dispute cannot be

assumed on the basis of consent or stand of the parties.

The jurisdiction of a Court or authority is to be traced

from the enabling statutory provision. The defect of the

jurisdiction whether it is pecuniary or territorial or

whether it is in respect of the subject matter of the

action, goes to the very authority of the Court/authority

to pass any order. Such defect cannot be cured even by

the consent of the parties. [See: AIR 1954 SC 340 (Kiran

Singh Vs. Chaman Paswan)]. This Court in 2011 (4)

MPLJ 683 (Goyolene Fibres (India) Pvt. Ltd. Vs. M.P.

State Electricity Board and another) held that

arbitration agreement must disclose in fair and specific

terms the intention of the parties entering into the

agreement that the parties intend to resolve all their

dispute by referring to an arbitral tribunal for

adjudication. Mere use of word ???arbitration??? or

???arbitrator??? will not be sufficient to hold that an

agreement exists between the parties. In this view of the

matter, in absence of arbitration clause in the agreement,

the powers under Section 11(6) of the Act cannot be exercised.

Consequentially, both the applications are not

rejected. Liberty is reserved to the applicants to avail the

remedy available under the civil/common law. The

applications are accordingly dismissed with the aforesaid

observation. No cost.