Judgment:
S.C. Dharmadhikari, J.
1. Heard Mr. Pochkhanawala, learned Senior Advocate for the applicants and Mr. V.B. Nadkarni, learned Senior Advocate for the respondents.
2. The prayer in the present application under Section 11 of the Arbitration and Conciliation Act is to appoint an Arbitrator.
3. The application presented on 18.4.2007 states that the respondent advertised by a public notice that it intends to invite bids for establishing a liquid storage and handling terminal. The parties interested were required to send their offers. The applicants approached and requested for supply of a Tender Form which was forwarded to it.
4. The applicants filled up the tender document alongwith an undertaking that it was agreeable to comply with the terms and conditions in the tender document. The applicants rely upon Section 4(6) and Section 5(17) of the terms and conditions.
5. By letter dated 12/01/1999 the respondent approved the tender/bid and allotted the land admeasuring 20,000 sq. mtrs. in the MPT for constructing tanks for storing liquid cargo. The applicants also made payment of advance and one year lease rents towards security deposit. The payment was acknowledged by the respondent.
6. Thereafter a lease deed dated 14.02.2000 was executed between the applicant No. 1 and the respondent. After execution of the sale, the respondent was handed over possession of the land more particularly described in the Lease Deed and it is contended that the lease is in force for 30 years.
7. It is the case of the applicants that after the work of construction of tanks, they suddenly received a letter dated 13/06/2002, directing them to restrict their activities within an area of 11, 200 sq. mtrs. The applicants were allegedly called upon to remove their structures on the balance land of 8,800 sq. mtrs. The dispute in this behalf is set out at pages 5 to 7 of the petition. Thereafter the nature of correspondence between the parties has been set out.
8. According to the applicants, since a dispute arose between them and the respondents, and that dispute arises out of the Tender and the terms and conditions therein so also the work commenced under the Lease Deed, initially attempt was made to resolve it amicably but thereafter they could not cope up with certain demands which are termed as illegal and untenable and that is how the applicants invoked the Arbitration clause by a letter dated 03/03/2007. The applicants requested that a sole arbitrator be appointed so that the disputes can be adjudicated upon. However, the respondents by their letter dated 10.4.2007 did not comply with their request and requisition contained in the applicants' letter dated 03.03.2007 and that is how the applicants have approached this Court under Section 11 of the Arbitration and Conciliation Act, 1996.
9. Mr. Pochkhanawala, learned Senior Counsel appearing for the applicants contended that tender document and Lease Deed are part and parcel of each other. That apart, the tender document itself is a concluded contract. The respondent is a 'State within the meaning of Article 12 of the Constitution of India' and therefore it cannot part with its property and/or create any interest therein unless it invites bids by public offer. Therefore, the tender document was issued, which is comprehensive document. It can be termed as a contract by itself. He submits that arbitration clause is one of the terms and conditions of the tender. Clause 16 of the tender document and Clause 21 of the lease agreement taken together would demonstrate that there is an agreement to refer the matters to arbitrator. In any event, Clause 17 is an Arbitration clause. He invites my attention to the terms 'lessor and lessee' appearing in the Lease Deed and submits that the lease document cannot be read as a distinct transaction. In any event, Clause 38(h) thereof does not exclude Arbitration and therefore merely because the lease agreement is silent in that behalf does not mean that the application is not maintainable. For all these reasons, he submits that the application be allowed.
10. Shri Pochkhanawala has relied upon the following decisions in support of above contentions. (1) Progressive Constructions Ltd. v. Bharat Hydro Power Corporation Ltd. : AIR1996Delhi92 , (2) Lal Chand v. Dev Raj AIR 1951 Pep 115, (3) Maharshi Dayanand University and Anr. v. Anand Co-op L/C Society Ltd. and Anr. : AIR2007SC2441 and Union of India v. Rallia Ram : [1964]3SCR164 ).
11. On the other hand, Shri Nadkarni, learned Senior Counsel appearing for the respondent has contended that the respondents have pointed out in their Affidavit-in-reply as to how there is no arbitration agreement. Inviting my attention to the Affidavit it is urged by Shri Nadkarni that by its letter dated 12.1.1999 (Exhibit - B), the respondent informed the applicants that the Ministry of Surface Transport, Government of India has approved the lease of 20,000 sq. mtrs. of land subject to the conditions appearing in their letter dated 23.12.1998.
12. Inviting my attention to the letter dated 23.12.1998 and more particularly Clause 2 thereof Shri Nadkarni contended that a lease agreement was to be entered into and the said letter contemplates the execution of such an agreement. The terms and conditions of the lease were to be approved by the Legal and Finance Department of respondent. That is how it was executed on 14.2.2000. There is no arbitration agreement, leave alone arbitration clause in the Lease Deed. Therefore, it is not proper to urge that either there is arbitration clause in the contract and/or there is a separate Arbitration agreement. He submitted that it is well settled that existence of a valid arbitration agreement is a prerequisite for this Court to exercise its powers under Section 11(6) of the Arbitration and Conciliation Act. There is no arbitration agreement and therefore the application should be dismissed. Mr. Nadkarni has relied upon the following decisions in support of the above contentions. (1) Dresser Rand S.A. v. Bindal Agro Chemicals Ltd. : AIR2006SC871 (2) J.K. Jain v. Delhi Development Authority : AIR1996SC318 ) (3) Bomanji Ardeshir Wadia and Ors. v. Secretary of State AIR 1929 P.C. 34 Anil Kumar Srivastave v. State of U.P. : AIR2004SC4299 , and (5) Wellington Associates Ltd v. Kirit Mehta AIR 2000 SCW 1165.
13. With the able assistance of the learned Senior Counsel appearing for the parties, I have perused the application and annexures thereto so also the Affidavits filed. I have also perused the relevant statutory provisions and the decisions brought to my notice.
14. In my view, there is much substance in the contention of Shri Nadkarni that neither is there any arbitration clause in the contract nor is there a arbitration agreement between the parties.
15. The undisputed facts are that the applicants collected the tender form and thereafter submitted the tender. The tender form is divided into several sections. Section 1 is the nature of the offer. Section 2 contains general information. Section 3 is not material for our purpose. Section 4 contains instructions to applicants. These instructions are clear inasmuch as the offerer/bidder has to give an undertaking to the effect that they are agreeable to the terms and conditions as prescribed in the entire tender document. It very clearly states that the lease area will be allotted to the successful bidder only after the same is approved by the Board and Central Government. Section 5 contains terms and conditions for the lease of rent. In that itself, it is very clearly stated that the successful bidder has to execute a lease agreement with the Port Trust. In such circumstances, no assistance can be derived from Clause 17 of the terms and conditions of the lease of land.
16. In the peculiar facts of this case, it is clear that mere undertaking by the applicants to abide by the terms and conditions of the tender does not mean that stipulation with regard to arbitration (clause 17) would automatically govern the lease between the parties. Mr. Pochkhanawala does not dispute that the tender was submitted by the applicants and thereafter the applicants received a letter dated 12.1.1999 that the offer is approved subject to the conditions of the letter dated 23.12.1998 and the terms and conditions of the lease have been set out in the said letter. The condition is that the Port Trust will enter into a lease agreement with the applicants incorporating the conditions mentioned in this letter after the same is vetted by the Legal and Finance Department of the Board so also is in accordance with the guidelines dated 11.3.1998. It is not possible for me to uphold the contention of Shri Pochkhanawala that condition XVI of this letter would include a Arbitration clause or contemplates an arbitration agreement. Admittedly, in these terms and conditions there is no reference to arbitration or any clause stipulating arbitration. Further, the lease agreement executed does not contain any arbitration clause but Clause 38(h) thereof is relied upon by Shri Pochkhanawala to mean that it is an arbitration clause. Clause 38(h) reads thus:
Clause 38(h) In case of any dispute/difference arises between the parties and which may be the subject matter of any action in the Court of law, subject to the provisions herein before, shall be referred only to the Courts having local jurisdiction over the State of Goa.
17. A bare perusal of the same would indicate that all that the parties have agreed is to approach a Court of law having local jurisdiction over the State of Goa, in case of any dispute or difference arising between them. By no stretch of imagination can it be said to be an arbitration clause. This is a clause under which the parties have agreed to submit themselves to the jurisdiction of a Court at Goa in case there is any dispute or difference arising between them. This clause together with condition XVI of the terms and conditions in the letter dated 23.12.1998 is not an arbitration agreement between the parties.
18. It is, therefore, that Mr. Pochkhanawala contended that the tender document is a concluded contract by itself or that the tender document must be read as part and parcel of the lease agreement. I find no substance in this contention either. The tender has been forwarded with the terms and conditions of the tender may be speaking of a lease, but nonetheless the tender itself contemplates execution of a Lease Agreement. Once the tender contemplates execution of a Lease Agreement and that the tender was forwarded for acceptance, itself would mean parties proceeded on the basis that there is no concluded contract at that stage. The bid/offer had to be accepted and the acceptance to be conveyed by the respondent in writing. That is how parties proceeded and that is how letter dated 12.1.1999 was addressed. In any event, the acceptance was conveyed subject to the terms and conditions of the letter dated 23.12.1998. That pursuant to the terms and conditions of this letter, the lease agreement was entered into and executed. The lease agreement does not provide for any arbitration and by interpretative process one cannot read into it an arbitration agreement. In the peculiar facts of this case, it will not be possible to uphold the above argument of Shri Pochkhanawala. That the tender is neither a Arbitration Agreement nor is the Arbitration clause therein a part and parcel of the lease agreement, as contended by him.
19. Shri Nadkarni therefore is right in relying upon the decisions of the Supreme Court in the case of Dresser Rand S.A. v. Bindal Agro. The Supreme Court was considering somewhat identical controversy. The Supreme Court held that:
Parties agreeing upon the terms subject to which a contract will be governed, when made, is not the same as entering into the contract itself. Similarly, agreeing upon the terms which will govern a purchase when a purchase order is placed, is not the same as placing a purchase order. A prelude to a contract should not be confused with the contract itself. The purpose of Revision 4 dated 10.6.1991 was that if and when a purchase order was placed by BINDAL, that would be governed by the 'General Conditions of Purchase' of BINDAL, as modified by Revision 4. But when no purchase order was placed, neither the 'General Conditions of Purchase' nor the arbitration clause in the 'General Conditions of Purchase' became effective or enforceable. Therefore, initialling of 'Revision 4' by DR and BINDAL on 10.6.1991 containing the modifications to the General Conditions of Purchase, did not bring into existence any arbitration agreement to settle disputes between the parties.
20. It reiterated the principle in J. K. Jain v. D.D.A. Reported in : AIR1996SC318 . This is what observed in paras 7 and 12 of this judgment.
7. It is true that there must be an arbitration agreement, to confer jurisdiction on the arbitrator to hear and decide the dispute. Where there is no such agreement there is an initial want of jurisdiction. That is why it has been impressed by courts that one of the essential ingredients of submission to arbitration is that the parties should agree that the dispute should be determined by an arbitrator. Where there is an arbitration clause in a contract, it amounts to two contracts into one, one relating to the execution of the work entrusted in the manner prescribed and the other how to resolve the dispute in event any such dispute arises in respect of the said contract. Whenever one party to the dispute asserts that there is an arbitration agreement by which the parties had agreed to refer the dispute to an arbitrator which is disputed and challenged by the other party to the agreement, it has to be examined and determined. To constitute 'an arbitration agreement' it is not necessary that there should be a formal agreement or that the terms should all be contained in one document. All that is necessary is that from documents it must appear that the parties had agreed to submit present or future differences to arbitration.
12. As already pointed out above, so far as the present case is concerned, the arbitration clause has not been included in the agreement itself. But it shall be deemed to be part of the agreement because the agreement specifically says that the terms and conditions contained in the tender form shall be binding between the parties which obviously will include Clause 14 of the tender form, which admittedly requires any dispute between the parties to be referred to an arbitration. The other special feature of the present case is that each page of the tender form which forms part of the agreement has been signed by the appellant, on behalf of the firm and the Executive Engineer on behalf of the respondent. A mere denial of the existence of the contract of arbitration by one party does not denude the arbitrator of jurisdiction. The arbitrator gets jurisdiction to decide the disputes on basis of the agreement to refer such disputes and not by its acceptance or denial. The objection on behalf of the appellants, that there was no condition in the main agreement to refer the disputes to arbitration can be accepted only if it is held that the different terms and conditions mentioned in the tender form are not binding on the parties, because the parties never agreed to those terms and conditions, while entering into a contract. But the fact about which there is no dispute, is that both the parties had signed the tender form in token of having accepted the terms and conditions mentioned therein including about reference of disputes, if any, to an arbitrator. They had also agreed in the main agreement, that the terms and conditions contained in the tender form shall be binding between the parties. In this background, it is difficult for us to comprehend as to how it an be held that the appellants had never agreed to refer any dispute arising between the parties to an arbitrator in terms of Clause 14 of the tender form.
Thus, the statement of law in Bindal Agro (paras 27 & 32) read with the above paras in J.K. Jain, would make it abundantly clear that an invitation to tender is neither an agreement nor a contract for the purposes of appointing an Arbitrator.
21. In the present case the lease is entered consequent upon the terms and conditions mentioned in the letter dated 12.1.1999. The lease is not referring to all the tender terms and conditions, leave alone making them part and parcel thereof. Clause 17 of the terms and conditions of the lease of land appearing in Section (5) of the tender document, if at all can be construed an arbitration agreement, has not been made part of the lease agreement admittedly. The lease agreement only refers to the forum or Court which would be approached by the parties in case of dispute. That is not the same thing as an arbitration clause in an agreement or an arbitration agreement itself. In these circumstances the prerequisite for exercising jurisdiction under Section 11(6) of the Act being not satisfied, this application cannot be entertained. It is accordingly dismissed. There will be no order as to costs.
22. In view that I have taken, it is not necessary to go into any larger issue or whether usage of the word 'may' in Clause 17 of the Terms and Conditions of lease as appearing in the Tender document would mean a mandate to refer the matter to the arbitration or not. That aspect can be gone into an appropriate case. Application dismissed. Rule discharged.