Case: PSA Mumbai Investments Pte. Limited Vs. The Board of Trustees of the Jawaharlal Nehru Port Trust and Ors

Conditions of Contract (Section III) and Clause 20 therein providing for arbitration, will not apply in regard to any dispute in regard to the tender or bid, or non-placing of a purchase order, but will apply only in regard to any contract awarded by BSNL by placing a purchase order. xxx 27. It is also very significant that Section II (Instructions to Bidders) and Section IV (Special Conditions) which are relevant at the bid stage do not contain any arbitration Clause providing that if there is any dispute between BSNL and a bidder in regard to the bid/tender process, the dispute will be settled by arbitration. On the other hand, the Instruction to Bidders contains a specific provision that if there is a dispute or claim arising out of the tender till (issue of authorization for) placement of the purchase order, only courts will have jurisdiction. Of course, as and when Appellant placed a purchase order on a bidder, the purchase order contained a term that the General conditions of contract, forming part of the bid documents would be a part of the contract documents, and consequently the arbitration Clause applied to the contracts entered between BSNL and the bidders. xxx 29. Therefore, only when a purchase order was placed, a contract would be entered; and only when a contract was entered into, the General Conditions of Contract including the arbitration Clause would become a part of the contract. If a purchase order was not placed, and consequently the general conditions of contract (Section III) did not become a part of the contract, the conditions in Section III which included the arbitration agreement, would not at all come into existence or operation. In other words, the arbitration Clause in Section III was not an arbitration agreement in praesenti, during the bidding process, but a provision that was to come into existence in future, if a purchase order was placed. 18. However, Mr. Dave, strongly relied upon the judgment in Kollipara Sriramulu (Dead) by his LR (supra). This judgment did indeed state that it is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties if, in fact, there is such a bargain. The judgment then went on to state that "there are, however, cases whether the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed." 19. We are of the view that the facts of the present case would be governed by the ratio contained in the aforesaid sentence. Insofar as the judgment in Unissi (India) Private Limited (supra) is concerned, it is important to note that, in para 15 of the said judgment, it is stated that the tender of the Appellant was accepted by PGI for supply of 41 pulse oximeters. Since the tender document contained an arbitration clause, and since it was found on facts that a binding contract had been entered into by acceptance of the tender, the parties therein would be bound by the aforesaid clause. It was also stated that, in addition, performance by way of supply of material by the Appellant and acceptance thereof by PGI had also taken place, which would show that the tender of the Appellant, containing an arbitration clause, was admittedly accepted by the Respondent. It is clear that this case is wholly distinguishable, and does not apply on facts as has been stated by us herein above. It is clear that there was no concluded contract at the Letter of Award stage and this judgment would, therefore, not apply. 20. Mr. Dave also strongly relied upon the judgment in Inox Wind Limited v. Thermocables Limited, (2018) 2 SCC 519 . This judgment in paras 17-19 thereafter made it clear that an exception to the general Rule laid down in M.R. Engineers and Contractors Private Limited (supra) as to standard forms of practice containing arbitration clauses would be extended also to standard forms between individual persons and not merely standard forms of professional assessments. 21. We may hasten to add that this judgment would have no manner of application on the facts of this case for the reason that it has been found by us that there is no agreement between the parties at all in the facts of the present case, making it clear, therefore, that the arbitration Clause contained in the draft Concession Agreement would not apply. Further, even the without prejudice argument of Mr. Sibal is worthy of acceptance. Mr. Sibal argued, relying strongly upon M.R. Engineers and Contractors Private Limited (supra), that assuming that there was an arbitration Clause which governs the parties, the said Clause would be wholly inapt as it would only cover disputes between a Special Purpose Vehicle and the Respondent No. 1 arising from the Concession Agreement not yet entered into, and not between the Respondent No. 1 and the Appellant and Respondent No. 2. He is correct, and we agree with this contention as well. 22. We now come to the last argument of Mr. Dave that, on the assumption that the High Court judgment is incorrect, yet we should not, in our discretionary jurisdiction Under Article 136 of the Constitution of India, interfere. 23. Mr. Dave relies upon the fact that a subsequent tender has been accepted, causing great financial loss to the Respondent No. 1. Mr. Sibal has replied by saying that the subsequent tender contained different tender conditions and, in any case, insofar as that subsequent tender was concerned, his bid was considered the best amongst six other bidders. Apart from this, we are of the view that the High Court judgment is wholly incorrect in holding that the Letter of Award would constitute a binding contract between the parties for the reasons given above. It would be a travesty of justice, in the facts of the case, if we were not to interfere and set aside the same.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. On a conjoint reading of the aforesaid clauses, a few things become clear - (i) first and foremost a Disclaimer at the forefront of the RFP makes it clear that there is only a bid process that is going on between the parties and that there is no concluded contract between the same (ii) it is equally clear that such bid process would subsume a Letter of Award to be issued by the Respondent No. 1 with two further steps under the Schedule to be gone into before the draft Concession Agreement finally becomes an agreement between Respondent No. 1 and the Special Purpose Vehicle that is constituted by the Consortium for this purpose (iii) that throughout the stage of the bid process, the forum for dispute resolution is exclusively with the Courts at Mumbai and (iv) that right up till the stage of the entering into the Concession Agreement, the bid process may be annulled without giving any reason whatsoever by the Respondent No. 1This judgment did indeed state that it is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties if, in fact, there is such a bargain. The judgment then went on to state that "there are, however, cases whether the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed."19. We are of the view that the facts of the present case would be governed by the ratio contained in the aforesaid sentence. Insofar as the judgment in Unissi (India) Private Limited (supra) is concerned, it is important to note that, in para 15 of the said judgment, it is stated that the tender of the Appellant was accepted by PGI for supply of 41 pulse oximeters. Since the tender document contained an arbitration clause, and since it was found on facts that a binding contract had been entered into by acceptance of the tender, the parties therein would be bound by the aforesaid clause. It was also stated that, in addition, performance by way of supply of material by the Appellant and acceptance thereof by PGI had also taken place, which would show that the tender of the Appellant, containing an arbitration clause, was admittedly accepted by the Respondent. It is clear that this case is wholly distinguishable, and does not apply on facts as has been stated by us herein above. It is clear that there was no concluded contract at the Letter of Award stage and this judgment would, therefore, not apply21. We may hasten to add that this judgment would have no manner of application on the facts of this case for the reason that it has been found by us that there is no agreement between the parties at all in the facts of the present case, making it clear, therefore, that the arbitration Clause contained in the draft Concession Agreement would not apply. Further, even the without prejudice argument of Mr. Sibal is worthy of acceptanceHe is correct, and we agree with this contention as well22. We now come tothe last argument of Mr. Dave that, on the assumption that the High Court judgment is incorrect, yet we should not, in our discretionary jurisdiction Under Article 136 of the Constitution of India, interfereApart from this, we are of the view that the High Court judgment is wholly incorrect in holding that the Letter of Award would constitute a binding contract between the parties for the reasons given above. It would be a travesty of justice, in the facts of the case, if we were not to interfere and set aside the same