Golden Agri International Private Limited Vs. Kundan Rice Mills Limited - Court Judgment

Excerpt:
- administrative law - government contract: [vijender jain, c.j., rajive bhalla & sury kant, jj] government contract rejection of highest bid challenge as to held, state has no dominus status to dictate unilateral terms and conditions when it enters into contract. its actions must be reasonable, fair and just in consonance with rule of law. as a necessary corollary thereto, state cannot refuse to confirm highest bid without assigning any valid reason and/or by giving erratic, irrational or irrelevant reasons. the state is free to enter into a contract just like any other individual and the contract shall not change its legal character merely because other party to contract is state. though no citizen possesses a legal right to compel state to enter into a contract, yet latter can neither pick and choose any person arbitrarily for entering into such agreement nor can it discriminate between persons similarly circumstanced. similarly, where breach of contract at hands of state violates fundamental rights of a citizen or its refusal to enter into a contract is contrary to statutory provisions or public duty, judicial review of such state action is inevitable. likewise, if state enters into a contract in consonance with article 299 rights of the parties shall be determined by terms of such contract irrespective of fact that one of the parties to it is a state or a statutory authority. for these precise reasons the equitable doctrine of promissory estoppel has been made applicable against the government, as against any other private individual, even in cases where no valid contract in terms of article 299 was entered into between the parties. hence, if government makes a representation or a promise and an individual alters his position by acting upon such promise, the government may be required to make good that promise and shall not be allowed to fall back upon the formal defect in the contract, though subject to well known limitations like larger public interest. the state, thus, has no dominus status to dictate unilateral terms and conditions when it enters into contract and its actions must be reasonable, fair and just and in consonance with rule of law. as a necessary corollary thereto state cannot refuse to confirm highest bid without assigning any valid reason and/or by giving erratic, irrational or irrelevant reasons. -- consumer protection act, 1986 [c.a. no. 68/1986]. articles 14 & 300a: government contract noon-acceptance of highest bid held, it does not result in taking away right to property of highest bidder highest bid, per se, unless it is accepted by competent authority, and consequential sale certificate is issued, does not grant the highest bidder right to property of type which is protected under article 300a right to property is limited to confer highest bidder the right to challenge action of appropriate authority in refusing to accept highest or other bids. [air 1984 p&h 282 (fb) explained] articles 14 & 226: government contract rejection of highest bid held, highest bidder has locus standi to maintain writ petition and assail action of state government or its authorities by contending that his bid has been turned down for arbitrary, illegal or perverse reasons however in such matters, heavy onus would like on petitioner bidder to establish his allegations as state action shall always be presumed to be in accordance with lawa.n. jindal, j.1. this is a petition under article 227 of constitution of india for setting aside the judgment dated 18.3.2009 (annexure p-11) passed by the additional civil judge (senior division), panipat.2. the plaintiff-respondent (herein refeired as 'the respondent') had challenged the existence and validity of the contract and had sought the injunction against defendant no. 1-petitioner from initiating the arbitration proceedings.3. i have gone through the observations made in the impugned order dated 18.3.2009. the court has deelined to act on the contracts dated 15.7.2008 and 6.8.2008 as referred by the defendant no. 1 for the reasons; firstly these dc not bear the signatures of the plaintiff-respondent (herein referred as 'the plaintiff) and the defendants have no explanation in not getting the signatures on the agreement, on the basis of which they assert for referring the matter to the arbitrator. secondly, the letter dated 19.8.2008 referred by the defendants allegedly written by the plaintiff has been seriously disputed by the plaintiff and it has no reference of the arbitration agreement. thirdly; there is no denial of the defendant that the agreement clause referred to by them is very much part and parcel of these disputed contracts dated 15.7.2008 and 6.8.2008 which by themselves are in serious dispute qua their existence. for the application of the terms of the agreement, it was essential that the party should sign the agreement. since the letter does not speak of any existence of the agreement, therefore, the same cannot be imposed upon the plaintiff to abide by the conditions as mentioned in the agreement. on the other hand, defendant has urged that to determine the existence or non existence of the arbitration agreement, was also the domain of the arbitrator. in this regard reliance has been placed on the judgment delivered by the apex court in case aurohill global commodities limited v. maharashtra stc ltd. : (2007)7 s.c.c. 120 wherein it was observed as under:.in the present case, therefore, the question as to whether the draft purchase order acquired the character of a concluded contract or not and the question as to whether the contract was non est can only be decided by the arbitrator....4. in the aforesaid case the argument was that the draft purchase order could be termed as the agreement but in this case, there is no such agreement. apparently, unsigned agreement could not be treated as concluded contract and the agreement sought to be placed reliance could be termed as incomplete contract between the parties for want of his signatures thereon.5. learned counsel for the plaintiff has further placed reliance on the judgment delivered by the apex court in case gas authority of india ltd. and anr. v. keti construction (i) ltd. and ors. : (2007)5 s.c.c. 38, wherein it was observed as under:.section 16 of the act says that the arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. in konkan riy. corpn. ltd. v. rani construction (p) ltd., in para 21 a constitution bench of 5 learned judges has ruled that if the arbitial tribunal has been improperly constituted, it would be open to the aggrieved party to require the arbitral tribunal to rule on its own jurisdiction in view of section 16 of the act. it was also observed that the expression used in sub-section (1) that the 'arbitral tribunal may rule on any objections with respect to the existence or validity of the arbitration agreement' shows that the arbitral tribunal's authority under section 16 is not confined to the width of its jurisdiction, but goes to the very root of its jurisdiction and there is no impediment in contending before the arbitral tribunal that it had been wrongly constituted. this decision has been partly overruled on another point by a larger bench of 7 judges in sbp & co. v. patel engg. ltd. but the atoresaid view has not been dissented from or reversed. this will be evident from the conclusions arrived at by the larger bench which have been summarized in para 47 of the report and sub-para (ix) thereof reads as under:(ix) in a case where an arbitral tribunal has been constituted by the parties without having recourse to section 11(6) of the act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by section 16 of the act.6. i have gone through the judgment and the same is not applicable to the facts of the present case. in order to refer the matter to the arbitrator, the first essential, necessarily is existence of contract between the parties, secondly, the requirement of section 8 to be complied with where it is mentioned that subject matter of the reference must be covered by the arbitration agreement but here in this case, the plaintiff has apparently challenged the existence of the agreement itself which apparently is clear from the record. notwithstanding the fact that arbitral tribunal is vested with powers to examine its constitution, the validity of the agreement and its jurisdiction after the matter is referred to it yet before the reference has been made, the court is not divested with powers to examine what matter is referable to the arbitrator and whether there was a valid agreement which is binding over the parties.7. learned counsel for the petitioner has also relied upon the judgment delivered in case secur industries ltd v. godrej & boyce mfg. co. ltd and anr. : (2004)3 supreme court cases 447, wherein it was observed as under:.the city civil court was right in its approach when it said that the court could only intervene in respect of matters expressly provided for in the year '996 act. the validity of the proceedings before the arbitral tribunal is an issue which the council, and not the court, could decide under section 16 of the 1996 act. sub-section (1) of section 16 opens with the words 'the arbitral tribunal may rub on its jurisdiction...'. has been held by this court that the arbitral tribunal's authority under section 16 is not confined to the width of its jurisdiction but goes to the very root of its jurisdiction. konkan rly. corpn. ltd. v. rani construction (p) ltd. therefore, the council can go into the question whether its authority had been wrongly invoked by the appellant and it is open to it to hold that it had no jurisdiction to proceed with the matter.8. the apex court in the aforesaid judgment further observed that there is- in this case, no question of dispute spilling into areas where the arbitral tribunal does not have jurisdiction. under the 1996 act, the arbitral tribunal has been given a very wide and deep area of operation and it is the court's power which have been statutorily curtailed.9. after going through the impugned judgment, there is no dispute with the fact that the arbitrator had been given wide powers to go into the dispute having arisen between the parties out of the contract but existence of the agreement was essential for referring the same to the arbitrator, where there is no such contract then the civil court could, in the absence of the contract, had jurisdiction to refuse to refer the same to the arbitrator.10. no other argument has been advanced.11. in view of the above, finding no merit in the petition, the same dismissed.