M/S PSA MUMBAI INVESTMENTS PTE. LIMITED versus THE BOARD OF TRUSTEES OF THE JAWAHARLAL NEHRU PORT TRUST AND ANR.
[2018] 13 S.C.R. 352, Supreme Court of India, 2018
Outcome: Leave Granted & Allowed (Granted)
Segment: Arguments
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M/S PSA MUMBAI INVESTMENTS PTE. LIMITED
v.
THE BOARD OF TRUSTEES OF THE JAWAHARLAL
NEHRU PORT TRUST AND ANR.
(Civil Appeal No.9352 of 2018)
SEPTEMBER 11, 2018
[R. F. NARIMAN AND INDU MALHOTRA, JJ.]
Arbitration and Conciliation Act, 1996 – Arbitration clause
– Activation of –Respondent No.1 issued Global invitation of
Request for Qualification (RFQ) for development of a container
terminal project – The bid was divided into two stages- first, the
stage of eligibility and second, the Request for Proposal (RFP) –
Appellant and Respondent No.2, as a consortium qualified the first
stage – Letter of Award given by the Respondent No.1 to the
Consortium – Respondent No.2 opted out of the bid process – Show-
cause notice issued by the respondent no.1 to consortium to perform
the bid – Since same was not done, the Letter of Award accorded
and acknowledged by the appellant was withdrawn by Respondent
No.1 – Consequent to this, arbitration notice was sent by the
respondent no.1 – Appellant contended that no arbitration clause
was entered into by way of agreement between the parties and the
arbitration clause relied upon by respondent no.1 would not fit the
bill as the disputes that were to be adjudicated under that clause
related only to a Concession Agreement which was not entered into
– High Court held that there was a concluded contract between the
parties as the Letter of Award had been accepted by the appellant
and that
since the arbitration clause forms a part of the bid document
between the parties, the arbitration clause would govern the parties
– On appeal, held: On perusal of the RFP clauses, a disclaimer at
the forefront of the RFP makes it clear that there was only a bid
process that was going on between the parties and there was no
concluded contract between them – Such a 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 was
[2018] 13 S.C.R. 352
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constituted by the Consortium – In instant case, there was no absolute
and unqualified acceptance by Letter of Award – Some very
important steps had to be undergone before there could be an
agreement enforceable in law as a contract – Furthermore, even
assuming that there was an arbitration clause which governs the
parties, the said clause would wholly be inapt as it would only cover
the 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 – Thus, impugned judgment of the High Court set
aside – Contract Act, 1872 – s.7.
Allowing the appeal, the Court
HELD: 1. On a conjoint reading of the Request For Proposal
(RFP) 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 through out the stage of
the bid process, the forum for dispute resolution is exclusively
with the
Courts at Mumbai and (iv) that right uptil the stage of
the entering into the Concession Agreement, the bid process
may be annulled without giving any reason whatsoever by the
Respondent No.1.  [Para 13] [372-G-H; 373-A-B]
2. Under Section 7 of the Indian Contract Act, 1872 in order
to convert a proposal into a promise, the acceptance must be
absolute and unqualified.  It is clear on the facts of this case that
there is no absolute and unqualified acceptance by the Letter of
Award – two or three very important steps have to be undergone
before there could be said to be an agreement which would be
enforceable in law as a contract between the parties.
[Para 15] [373-G-H]
M/S PSA MUMBAI INVESTMENTS PTE. LTD v.  BOARD OF TRUSTEES
OF THE JAWAHARLAL NEHRU PORT TRUST
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3.  Appellant correctly relied upon both Dresser Rand S.A.
and Bharat Sanchar Nigam Limited.  In Dresser Rand S.A. it was
found, on the facts, that unless a purchase order was placed, there
would be no agreement between the parties.  Everything that
took place before such purchase order was placed would only be
a prelude to a contract which cannot be confused with the contract
itself.  [Para 16] [374-A-B]
4. Dresser Rand S.A. judgment was followed in Bharat
Sanchar Nigam Limited, which is very similar to the facts of the
present case.  In Clause 30 of the instructions to the bidders in
that case, it is stated that the Courts in Delhi will have jurisdiction
to entertain disputes or claims arising out of the tender till issue
of authorization letters to circles for placement of purchase
orders.  It is only thereafter that Clause 20 of the General
Conditions of Contract, providing for an arbitration, could kick
in.  [Para 17] [374-F-G]
5. Appellant rightly contended 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.
[Para 21] [377-D-F]
M.R. Engineers and Contractors Private Limited  v.
Som Datt Builders Limited (2009) 7 SCC 696 :
[2009] 10 SCR 373 ; Dresser Rand S.A. v. Bindal Agro
Chem Ltd. And Anr. (2006) 1 SCC 751 : [2006] 1 SCR
308 ; Bharat Sanchar Nigam Limited v. Telephone
Cables Limited (2010) 5 SCC 213 : [2010] 3 SCR 291
– relied on.
Unissi (India) Private Limited v. Post Graduate Institute
of Medical Education and Research (2009) 1 SCC
107 : [2008] 14 SCR 108 ; Kollipara Sriramulu (Dead)
by his LR v. T. Aswatha Narayana (Dead) by his LRs &
Others (1968) 3 SCR 387 ; Inox Wind Limited v.
Thermocables Limited (2018) 2 SCC 519 : [2018] 1
SCR 86 – referred to.
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Case Law Reference
[2006] 1 SCR 308
    relied on
Para 10
[2010] 3 SCR 291
    relied on
Para 10
[2008] 14 SCR 108           referred to
Para 11
[1968] 3 SCR 387
    referred to
Para 11
[2018] 1 SCR 86
    referred to
Para 20
[2009] 10 SCR 373
    relied on
Para 21
CIVIL APPELLATE JURISDICTION :  Civil Appeal No. 9352
of 2018.
From the Judgment and Order dated 01.03.2018 of the High Court
of Judicature at Bombay in Arbitration Petition No. 1227 of 2016.
Dr. Abhishek Manu Singhvi, Sr. Adv., Amit Sibal, Dushyant Dave,
Sr. Advs.,  Rajendra Barot, Ms. Liz Mathew, Rohan Rajadhyaksha,
Ms. Oehri Neogi,  Dhiraj Totala, Vinay Tripathi, Abhinav Jaganathan,
M.F. Philip, Abhishek Puri, Yasharth Misra, Ms. Bharti Indulkar, Santosh
Krishnan, Senthil Jagadeesan, Ms. Sonakshi Malhan, Ms. Suriti
Chowdhary, Ms. Mrinal Kanwar, Advs. for the appearing parties.
The Judgment of the Court was delivered by
 R. F. NARIMAN, J. 1. Leave granted.
2. The factual matrix in which the present matter arises is that the
Respondent No.1 issued a Global Invitation of Request for Qualification
(hereinafter referred to as “RFQ”) in March, 2009 inviting applications
from interested persons for the development of the  4th Container Terminal
Project on Design, Build, Finance, Operate and Transfer Basis at
Jawaharlal Nehru Port.  The RFQ document of 02.03.2009 expressly
contained a clause by which the bidder could be a Single Entity or a
Consortium.  On facts, the appellant and the Respondent
No.2 before us
together formed a Consortium with the appellant as the Lead Member,
Technical Member and Financial Member of the Consortium.  It may be
pointed out at this stage that the appellant is a Company registered in
Singapore, whereas Respondent No.2 is a Company registered
in India.
M/S PSA MUMBAI INVESTMENTS PTE. LTD. v.  BOARD OF TRUSTEES
OF THE JAWAHARLAL NEHRU PORT TRUST
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3. Some of the salient features of the RFQ is that the RFQ itself,
at the forefront, states by way of a Disclaimer that nothing in the RFQ
will be construed to make the RFQ an Agreement between the parties.
Whatever is stated in the RFQ Clauses would only be by way of
information to a prospective bidder as to the work to be performed.  The
bid itself was in two stages – the first being at the stage of eligibility, and
the second being at the stage of the Request for Proposal (hereinafter
referred to as “RFP”).  Since the Consortium between the appellant and
the Respondent No.2 qualified in the first stage, they were entitled to be
considered under an RFP document floated by the Respondent No.1
dated 07.06.2010. Under this document, what was made clear was, like
the RFQ, that nothing in the RFP should be construed as forming an
agreement between the parties.  The only idea of the RFP was that the
Consortium, in making its financial bid, would know what exactly was
required of it during performance of an agreement to be entered into in
future.  What is interesting to note is that though there is no agreement
at the stage of an elaborate bid process set out in a schedule to the RFP,
yet, right until a Concession Agreement is to be signed between a Special
Purpose Vehicle set up for the purpose by the Consortium and the
Respondent No.1, the bid process will be governed by Indian law and
the Courts at Mumbai shall have
exclusive jurisdiction over the disputes
that may arise under or in connection with the said process.  Another
important clause is that the Jawaharlal Nehru Port Trust (Respondent
No. 1) can annul the bid process without assigning any reason right up to
the stage that a Concession Agreement is actually entered into, as stated
here-in-before, between the Special Purpose Vehicle and the Respondent
No.1.  Equally, what is of great importance is a draft Concession
Agreement, which forms part of the RFP document and is, therefore,
deemed to be a part of the Consortium bid itself.  This draft Concession
Agreement contained an arbitration clause in the following terms:
“19.1 Amicable Settlement
      If any dispute or difference or claims of any kind arises
between the Concessioning Authority and the Concessionaire in
connection with construction, interpretation or application of any
terms and conditions or any matter or thing in any way connected
with or in connection with or arising out of this Agreement or the
rights, duties or liabilities of any Party under this Agreement,
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whether before or after the termination of this Agreement, then
the parties shall meet together promptly, at the request of any
Party, in an effort to resolve such dispute, difference or claim by
discussion between them.
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19.3    Arbitration
(a)      Arbitrators
Failing amicable settlement and/or settlement with the assistance
of Expert appointed by the Parties by mutual consent, the dispute
or differences or claims as the case may be, shall be finally settled
by binding arbitration under the Arbitration and Conciliation Act,
1996.  Unless the Parties mutually agree otherwise, within 30
(thirty) days of invocation of the arbitration as mentioned below,
the rules of arbitration prescribed by the International Centre for
Alternative Dispute Resolution, New Delhi shall apply to the
arbitration.  The arbitration shall be by a panel of three Arbitrators,
one to be appointed by each party and the third, who shall act as
presiding arbitrator, to be appointed by the two arbitrators appointed
by the parties.  The Arbitration shall be invoked by one party
issuing to the other a notice in writing invoking the arbitration and
appointing an arbitrator.  Upon receipt of the notice, the other
Party shall appoint the second Arbitrator.  The two Arbitrators so
appointed shall appoint the third Arbitrator who shall act as the
‘Presiding Arbitrator’.  If the other Party fails to appoint a second
Arbitrator within 30 (thirty) days from the receipt of the request
to do so,
then the Arbitrator so appointed by the first party shall
adjudicate the disputes as ‘Sole Arbitrator’.
(b)     Place of Arbitration
The place of arbitration shall be the headquarters of the
Concessioning Authority in India.
 (c)     English Language
The request for arbitration, the answer to the request, the terms
of reference, any written submissions, any orders and rulings shall
be in English and, if oral hearings take place, English shall be the
language to be used in the hearings.
M/S PSA MUMBAI INVESTMENTS PTE. LTD. v.  BOARD OF TRUSTEES
OF THE JAWAHARLAL NEHRU PORT TRUST  [R. F. NARIMAN. J.]
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(d)      Procedure
The procedure to be followed within the arbitration, including
appointment of arbitrator/arbitral tribunal, the rules of evidence
which are to apply shall be in accordance with the Arbitration and
Conciliation Act, 1996.
(e)      Enforcement of Award
Any decision or award resulting from arbitration shall be final
and binding upon the parties.  The parties hereto agree that the
arbitral award may be enforced against the parties to the arbitration
proceeding or their assets wherever they may be found and that a
judgment upon the arbitral award may be entered in any court
having jurisdiction thereof.
(f)       Fees and Expenses
The fees and expenses of the arbitrators and all other expenses
of the arbitration shall be intially borne and paid equally by
respective parties subject to determination by the arbitrators.  The
arbitrators may provide in the arbitral award for the reimbursement
to the successful party of its costs and expenses in bringing or
defending the arbitration claim, including legal fees and expenses
incurred by the party.
(g)       Performance during Arbitration
Pending the submission of and/or decision on a dispute, difference
or claim or until the arbitral award is published, the parties shall
continue to perform all of their obligations under this Agreement
without prejudice to a final adjustment in accordance with such
award.”
4.  Equally of importance is to notice that if there
is any discrepancy
between the RFP and the draft Concession Agreement, the draft
Concession Agreement will override the RFP.  The RFP also speaks of
a Letter of Award to be given in case the financial bid of the Consortium
is accepted.  What is important to notice is that under the schedule that
is annexed to both the RFQ as well as RFP indicating the bid process,
the signing of the Concession Agreement comes after the Letter of Award
as the last stage in the bid process.  Since this schedule is of importance
and has been relied upon by learned counsel for both parties, the schedule
to the RFQ is set out herein below:
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1.3 Schedule Of Bidding Process
The authority shall endeavor to adhere to the following
schedule :-
Event Description
 Date
Qualification Stage
1.   Last date for receiving queries     30th March, 2009
2.   Pre-Application conference
      15th April 2009
3.   Application due date
      30th April 2009
4.   Announcement of short list
      Will be announced later
   Bid Stage
                  Estimated Date
1.   Sale of Bid Documents
      To be Specified
2.   Last date for receiving
     queries
      To be Specified
3.  Pre-bid meeting – 1
                  To be Specified
4.  Authority response to queries
     latest by
                  To be Specified
5.  Pre-bid meeting – 2
                  To be Specified
6.  Bid Due Date (s)
       To be Specified
7.  Opening of Bids
       On Bid Due Date
8.  Letter of Award (LOA)
       Within 30 days of Bid
       Due Date
9.  Validity of Bids
       120 days of Bid Due
       Date
10. Signing of Concession
       Within 30 days of award
      Agreement
       of LOA
5. Ultimately, as the Consortium’s bid dated 15.10.2010 was found
to be the most favourable from a financial point of view, a Letter of
Award dated 26.09.2011 was given by the Respondent No.1 to the
Consortium, which was duly acknowledged by the Consortium.
M/S PSA MUMBAI INVESTMENTS PTE. LTD. v.  BOARD OF TRUSTEES
OF THE JAWAHARLAL NEHRU PORT TRUST  [R. F. NARIMAN. J.]
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6. Meanwhile, some problems as to the exact stamp duty between
the parties cropped up, and since there was delay in signing the Concession
Agreement, Respondent No.2 decided to opt out of the bid process.
This was apprised to the Respondent No.1 by the appellant by a letter
dated 02.04.2012.  By a letter dated 30.04.2012, the Respondent No.1
indicated that the appellant, who would now be left as the sole bidder
should be ready to indicate a Special Purpose Vehicle for entering into
and executing the contract in the form of the draft Concession Agreement.
However, the letter made this conditional upon the Ministry of Shipping
according approval.  In anticipation of such approval, by a letter dated
30.05.2012, the appellant wrote to Respondent No.1 stating that it had,
in fact, incorporated another Special Purpose Vehicle to execute and
perform the Concession Agreement.  Meanwhile, the appellant was
informed by a letter dated 30.08.2012 that the Ministry of Shipping had
not accorded approval to the change from consortium to single entity as
requested by the appellant.
7. This being the case, on 18.09.2012, the bid security that was
given by the Consortium was encashed by Respondent No.1 for the
recovery of which, a Suit has been filed on 21.09.2015, which is still
pending.  At this stage, by a show-cause notice dated 12.09.2012 by
Respondent No.1, the Consortium was called upon to perform its part of
the bid as
originally agreed to.  Since this was not done, by a letter dated
16.10.2012, the Letter of Award that was accorded and acknowledged
by the appellant on 26.09.2011 was “withdrawn” by the Respondent
No.1.  Consequent to this, Respondent No.1, in a letter dated 26.11.2014,
claimed a sum of Rs.446.28 Crores by way of damages against the
Consortium, and sent an arbitration notice dated 18.02.2015 stating that,
according to it, Clause 19 of the draft Concession Agreement would be
the arbitration clause governing the parties, and that they were appointing
Retired Justice V.G. Palshikar of the Bombay High Court as their
Arbitrator.  The appellant and Respondent No.2 were called upon to
appoint their Arbitrator within 30 days of receipt of this letter.  By a
reply dated 29.04.2015, the appellant stated that as no agreement was
entered into between the parties, Clause 19 of the draft Concession
Agreement would not govern the parties and indicated that if the
Respondent No.1 agreed, an Arbitration Agreement could be entered
into between the parties to sort out the disputes arising on various scores.
By their reply to this letter dated 04.07.2015, the Respondent No.1
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continued to reiterate that it was governed by the arbitration clause in
the draft Concession Agreement and that as 30 days had elapsed and no
arbitrator was appointed by the Appellant, and as the said clause provided
that the Arbitrator appointed by the Respondent No.1 would now be the
sole Arbitrator to decide the disputes between the parties, called upon
Justice Palshikar to adjudicate the disputes between the parties.
8. An application under Section 16 of the Arbitration and
Conciliation Act, 1996 was then filed before the sole Arbitrator by the
appellant and Respondent No. 2, in which they argued that there was no
arbitration clause entered into by way of agreement between the parties
and that, in any case, the arbitration clause relied upon by Respondent
No.1 would not fit the bill as the disputes that were to be adjudicated
under that clause related only to a Concession Agreement which had
not yet been entered into, the parties to which would be Respondent
No.1 and a Special Purpose Vehicle, and not the Respondent No.1 and
the appellant and Respondent No.2.  The learned Arbitrator agreed with
the appellant and held:
“25. The request for qualification is a request and not a Contract.
Similarly request for proposal is also request for and not a contract.
Both are requests made by the Claimant to the Respondents asking
for their qualification and proposal.  It cannot and does not have
any reference to any arbitration clause.  Similarly there is no
such
reference in the LOA and therefore there is no contract in which
there is a reference to a document incorporating an arbitration
clause.  In fact, clause 6(1) of both RFQ and RFP provide that
the Courts at Mumbai shall have exclusive jurisdiction for all
disputes arising under, pursuant to or in connection with the bidding
process, this cannot be read to mean it is a document mentioning
any arbitration clause.
26.  It would also be necessary to consider the fact that the Letter
of Acceptance was factually withdrawn by the Claimant by its
communication dated 16th October 2012.  In this letter it is observed
in paragraph 4 thus:
“The Consortium has failed to abide by the provisions of the
Letter of Award and has failed to sign the Concession
Agreement within the time granted to it.”
M/S PSA MUMBAI INVESTMENTS PTE. LTD. v.  BOARD OF TRUSTEES
OF THE JAWAHARLAL NEHRU PORT TRUST  [R. F. NARIMAN. J.]
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27. Then in paragraph 6 it is stated as under:
“The said change constitutes a change in the offer and also
constitutes a change in the Draft Concession Agreement proposed
to be executed.  The said deviation in the Draft Concession
Agreement is not accepted by JNPT.  The bid stage is over with
the issue of Letter of Award and no further modification can be
acceded to after issue of LOA.”
28. Then paragraph 9 says that in view of the delay and defaults
by the Respondents the Letter of Award rendered null and void
and is hereby withdrawal.  It is therefore obvious that after such
withdrawal there cannot exist any document or even request which
can be said to have been incorporated in a contract, factually also
the Concession Agreement is not signed by either of the parties
and therefore there is no document or reference to a document or
contract, the existence of which can fulfill the requirement of
Section 7(5) of the Act.”
9. An appeal against the said order was filed before the High
Court under Section 37of the Arbitration and Conciliation Act, 1996
in which the learned Arbitrator’s order was set aside.  The High Court
held that there is a concluded contract between the parties as the
Letter of Award had been accepted by the appellant, and that since
the arbitration clause forms a part of the bid document between the
parties, the arbitration clause would govern the parties.  It may be pointed
out   that an
alternative argument was made on behalf of the appellant
that even if it was said that the parties were governed by the arbitration
clause in question, yet, the clause was “inapt” in the
language of our judgment in M.R. Engineers and Contractors
Private Limited vs. Som Datt Builders Limited, (2009) 7
SCC 696.  This argument though noticed in the judgment was not, however,
answered by the judgment.
10. Mr. Amit Sibal, learned Senior Advocate, appearing on behalf
of the appellant has made detailed submissions before us.  According to
him, on a detailed reading of the RFQ and RFP, the first thing that strikes
one is that there is a disclaimer in both the documents which clearly
states that neither document will be construed to be an agreement between
the parties.  Secondly, he strongly relies upon the schedule and the
definition of “bid process” in both the RFQ and RFP showing that at
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least insofar as the present tender is concerned, the Letter of Award is
not an unqualified acceptance of an offer made but has to await a contract
to be signed in the form of a Concession Agreement between the
Respondent No.1 and another entity, namely, the Special Purpose Vehicle
set up for the purpose.  Equally, according to the learned Senior Advocate,
it is important to bear in mind that the bid process begins with the RFQ
and ends with the ultimate signing of the Concession Agreement.
According to the learned Senior Advocate, until such Concession
Agreement is signed, Courts in Mumbai alone will have exclusive
jurisdiction to decide the disputes that may arise between the parties
both under the RFQ as well as the RFP.  It is only thereafter that if a
Concession Agreement is entered into between the Respondent No.1
and the Special Purpose Vehicle that the arbitration clause will kick in
and will govern the disputes that will arise post the Concession Agreement
in the performance of the contract between those two parties. He also
strongly relied upon a clause in the RFP document which further made
this clear, as the Respondent No.1 could annul the bid process right till
the stage of the entering into the Concession Agreement but not thereafter.
He also strongly relied upon the letter dated 16.10.2012, by which the
Letter of Award that was granted earlier was “withdrawn” showing
thereby that there was no agreement that had been entered into between
the
parties, as otherwise the expression used would have been
“terminated”.  He strongly relied upon this Court’s judgment in Dresser
Rand S.A. vs. Bindal Agro Chem Ltd. And Anr., (2006) 1 SCC 751 as
followed in Bharat Sanchar Nigam Limited vs. Telephone Cables
Limited, (2010) 5 SCC 213 and stated that in a near identical fact situation,
this Court has twice held that as there was no concluded contract between
the parties, no arbitration clause could be said to be contained which
would bind the parties.  He also strongly relied upon the RFP document
to show that the bid could be by a single entity or a Consortium, and then
showed us a clause in the RFP document by which a change in the
Consortium could be made provided the appellant remained as lead
Member thereof.  According to him, relying on this clause, the Respondent
No.1, left to itself, would have accepted the change from Consortium to
single entity, but, de hors the bid document, the Respondent No.1 went
for confirmation to the Ministry of Shipping, which refused to confirm
the same.  Shri Sibal also made a without prejudice argument, on the
assumption that the arbitration clause were to apply, that the said clause
would be wholly “inapt” as held in M.R. Engineers and Contractors
M/S PSA MUMBAI INVESTMENTS PTE. LTD. v.  BOARD OF TRUSTEES
OF THE JAWAHARLAL NEHRU PORT TRUST  [R. F. NARIMAN. J.]
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Private Limited (supra) as it was to decide only questions that may
arise under a Concession Agreement never entered into, and between
the Respondent No.1 and the Special Purpose Vehicle and not the
Respondent No.1 and the appellant and Respondent No.2.  He also
pointed out that though this argument had been made before the High
Court, the High Court has not adverted to or answered this contention.
11. Mr. Dushant Dave, learned Senior Advocate, appearing on
behalf of the Respondent No.1 took us through the RFQ and RFP and
relied upon various clauses of the same. He also took us through the
Joint Bidding Agreement dated 21.08.2009 that was entered into between
the appellant and the Respondent No.2.  According to him, one very
important part of the RFP is that the draft Concession Agreement would
override the RFP in the case of inconsistency between the two.  He,
therefore, argued that since an arbitration clause between the parties
governs them, the inconsistent clause of Courts at Mumbai having
exclusive jurisdiction would, therefore, go out of harm’s way.  He also
argued that the bidder had, in the present case, not only acknowledged
the Letter of Award in his favour, which was a binding contract between
the parties, but had signed each page of the draft Concession Agreement
signifying that they would, therefore, be governed by the arbitration clause
contained therein. He relied strongly upon the fact that it could
never
have been conceived that if disputes arose during the bid process, the
Respondent No.1 would have to be driven to a Court of law instead of
an arbitral process and asked us to look at the agreement both in
accordance with its object and as a man of commerce would look at the
same.  He went on to state that a direct judgment of this Court in Unissi
(India) Private Limited vs. Post Graduate Institute of Medical
Education and Research, (2009) 1 SCC 107 would govern the facts of
this case being very similar thereto.  He also strongly relied upon para
24(v) of the M.R. Engineers and Contractors Private Limited (supra)
judgment to indicate that, on facts, he would fall within the ratio set out
in this sub-para.  He also relied strongly upon this Court’s judgment in
Kollipara Sriramulu (Dead) by his LR vs. T. Aswatha Narayana
(Dead) by his LRs & Others, (1968) 3 SCR 387 to state that merely
because a future formal contract may have to be entered into between
the parties, this does not mean that if such future formal contract is not
entered into, then an agreement could not otherwise be established on
facts.  According to him, the facts of the present case fall within the
ratio of this judgment. He ended by stating that even assuming that the
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High Court judgment were wrong, we should not exercise our
discretionary jurisdiction under Article 136 of the Constitution of India
given the fact that, as a result of the appellant’s conduct, there has been
a huge revenue loss discerned by the fact that a revenue sharing ratio of
50.8:49.2 has now been reduced, in a fresh tender between the appellant
and Respondent No. 1, to 35:65.
12. Having heard learned counsel on behalf of both parties, it is
important to set out some of the important provisions of the RFP.
    “DISCLAIMER
The information contained in this Request for proposal document
(the “RFP”) or subsequently provided to Bidder(s), whether
verbally or in documentary or any other form by or on behalf of
the Authority or any of their employees or advisors, is provided to
Bidder(s) on the terms and conditions set out in this RFP and such
other terms and conditions subject to which such information is
provided.
This RFP is not an agreement and is neither an offer nor invitation
by the Authority to the prospective Bidders or any other person.
The purpose of this RFP is to provide interested parties with
information that may be useful to them in making their financial
offers pursuant to this RFP (the “Bid”).  This RFP includes
statements, which reflect various assumptions and assessments
arrived at by the Authority in relation to the Project.  Such
assumptions, assessments and statements do not purport to contain
all the information that each Bidder
may require.  This RFP may
not be appropriate for all persons, and it is not possible for the
Authority, its employees or advisors to consider the investment
objectives, financial situation and particular needs of each party
who reads or uses this RFP.  The assumptions, assessments,
statements and information contained in this RFP, especially the
{Feasibility Report}, may not be complete, accurate, adequate or
correct.  Each Bidder should, therefore, conduct its own
investigations and analysis and should check the accuracy,
adequacy, correctness, reliability and completeness of the
assumptions, assessments, statements and information contained
in this RFP and obtain independent advice from appropriate
sources.
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Information provided in this RFP to the Bidder(s) is on a wide
range of matters, some of which depends upon interpretation of
law.  The information given is not an exhaustive account of
statutory requirements and should not be regarded as a complete
or authoritative statement of law.  The Authority accepts no
responsibility for the accuracy or otherwise for any interpretation
or opinion on law expressed herein.
The Authority, its employees and advisors make no representation
or warranty and shall have no liability to any person, including any
Applicant or Bidder under any law, statute, rules or regulations or
tort, principles of restitution or unjust enrichment or otherwise for
any loss, damages, cost or expense which may may arise from or
be incurred or suffered on account of anything contained in this
RFP or otherwise, including the accuracy, adequacy, correctness,
completeness or reliability of the RFP and any assessment,
assumption, statement or information contained therein or deemed
to form part of this RFP or arising in any way in this Bid Stage.
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The Authority also accepts no liability of any nature whether
resulting from negligence or otherwise howsoever caused arising
from reliance of any Bidder upon the statements  contained in this
RFP.
The issue of this RFP does not imply that the Authority is bound to
select a Bidder or to appoint the Selected Bidder or Concessionaire,
as the case may be, for the
Project and the Authority reserves the
right to reject all or any of the Bidders or Bids without assigning
any reason whatsoever.
The Bidder shall bear all its costs associated with or relating to
the preparation and submission of its Bid including but not limited
to preparation, copying, postage, delivery fees, expenses associated
with any demonstrations or presentations which may be required
by the Authority or any other costs incurred in connection with or
relating to its Bid.  All such costs and expenses will remain with
the Bidder and the Authority shall not be liable in any manner
whatsoever for the same or for any other costs or other expenses
incurred by a Bidder in preparation or submission of the Bid,
regardless of the conduct or outcome of the Bidding Process.”
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“1.1.2  The selected Bidder, who is either a company incorporated
under the Companies Act, 1956 or undertakes to incorporate itself
as such prior to execution of the Concession agreement (the
“Concessionaire”), shall be responsible for (Designing,
engineering), financing, procurement, construction, operating and
maintenance of the Project under and in accordance with the
provisions of a long term Concession agreement (the “Concession
Agreement”) to be entered into between the selected Bidder and
the Authority in the form provided by the Authority as Part of the
Bidding Documents pursuant hereto.
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1.1.5  The Concession Agreement sets forth the detailed terms
and conditions for grant of the concession to the Concessionaire,
including the scope of the Concessionaire’s services and obligations
(the “Concession”).
1.1.6  The statements and explanations contained in this RFP are
intended to provide a proper understanding to the Bidders about
the subject matter of this RFP and should not be construed or
interpreted as limiting in any way or manner the scope of services
and obligations of the Concessionaire set forth in the Concession
Agreement or the Authority’s rights to amend, alter, change,
supplement or clarify the scope of work, the concession to be
awarded pursuant to this RFP or the terms thereof or herein
contained.  Consequently, any omissions, conflicts or contradictions
in the Bidding Documents including this RFP are to be noted,
interpreted
and applied appropriately to give effect to this intent,
and no claims on that account shall be entertained by Authority.
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1.2.3 The Bidding Documents include the draft Concession
Agreement for the Project.  The Feasibility Report prepared by
the Authority/consultants of the Authority (the “Feasibility Report”)
is also included.  Subject to the provisions of Clause 2.1.3, the
aforesaid documents and any addenda issued subsequent to this
RFP Document, but before the Bid Due Date, will be deemed to
form part of the Bidding Documents.
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1.2.6 During the Bid Stage, Bidders are invited to examine the
Project in greater detail, and to carry out, at their cost, such studies
as may be required for submitting their respective Bids for award
of the Concession including implementation of the Project.
1.2.7 Bids are inviting for the Project on the basis of percentage
of revenue to be shared with Authority by a Bidder for implementing
the Project.  The Concession Period is pre-determined, as indicated
in the Concession Agreement.  The revenue share shall constitute
the sole criteria for evaluation of Bids.  Subject to Clause 2.16,
the Project will be awarded to the Bidder quoting the highest
revenue share.
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1.3 Schedule of Bidding Process
The Authority shall endeavour to adhere to the following schedule:
Event Description
     Date
1. Last date of receiving queries
           To be specified
2. Authority response to queries
           To be specified
 latest by
3. Pre-bid meeting – 1
           To be specified
4. Pre-bid meeting – 2
           To be specified
5. Bid Due Date(s)
22nd July 2010
6. Opening of Bids
On Bid Due Date
7. Letter of Award (LOA)
Within 30 days of Bid
            Due Date
8. Validity of Bids
            120 Days of Bid Due
            Date
9. Signing of Concession
            Within 30 days of
  Agreement
 award of LOA
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2.1.4 Notwithstanding anything to the contrary contained in this
RFP, the detailed terms specified in the draft Concession
Agreement shall have overrriding effect; provided, however, that
any conditions or obligations imposed on the Bidder hereunder
shall continue to have effect in addition to its obligations under the
Concession Agreement.
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2.2.1 Where the Bidder is a Consortium, change in composition
of the Consortium may be permitted by the Authority during the
Bid Stage only where:
a) the Lead Member continues to be the Lead Member of the
Consortium;
b) the substitute is at least equal, in terms of Technical Capacity
and Financial Capacity, to the Consortium Member who is sought
to be substituted and the modified Consortium shall continue to
meet the pre-qualification and short-listing criteria for Applicants;
and
c) the new Member(s) expressly adopt(s) the Application already
made on behalf of the Consortium as if it were a party to it
originally, and is not an Applicant/Member of any other Consortium
bidding for this Project.
2.2.2 Approval for change in the composition of a Consortium
shall be at the sole discretion of the Authority and must be approved
by the Authority in writing.
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2.5.2 It shall be deemed that by submitting a Bid, the Bidder has:
a.   made a complete and careful examination of the Bidding
Documents;
b.     received all relevant information requested from the Authority;
c.    acknowledged and accepted the risk of inadequacy,
error or
mistake in the information provided in the Bidding documents or
furnished by or on behlaf of the Authority relating to any of the
matters referred to in Clause 2.5.1 above;
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d.     satisfied itself about all matters, things and information including
matters referred to in Clause 2.5.1 hereinabove necessary and
required for submitting an informed Bid, execution of the Project
in accordance with the Bidding Documents and performance of
all of its obligations thereunder;
e.  acknowledged and agreed that inadequacy, lack of
completeness or incorrectness of information provided in the
Bidding Documents or ignorance of any of the matters referred
to in Clause 2.5.1 hereinabove shall not be a basis for any claim
for compensation, damages, extension of time for performance
of its obligations, loss of profits etc. from the Authority; or a ground
for termination of the Concession Agreement; and,
f.      agreed to be bound by the undertakings provided by it under
and in terms hereof.
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2.6.1  Notwithstanding anything contained in this RFP, the Authority
reserves the right to accept or reject any Bid and to annul the
Bidding Process and reject all Bids at any time without any liability
or any obligation for such acceptance, rejection or annulment,
and without assigning any reasons therefor.
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2.7.2  The draft Concession Agreement to be provided by the
Authority as part of the Bid Documents shall be deemed part of
this RFP.
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2.11.2  The documents accompanying the Bid shall be placed in a
separate envelope and marked as “Enclosures of the Bid”.  The
documents shall include:
i.      Bid Security
in the prescribed format (Appendix – II);
ii .    in the prescribed format (Appendix – IV); and
iii.     A copy of the Concession Agreement with each page initialled
by the person signing – b) Power of Attorney for signing of Bid in
the prescribed format (Appendix – III);
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iv. If applicable, the Power of Attorney for Lead Member of
Consortium the Bid in pursuance of the Power of Attorney referred
to in Clause (b) hereinabove.
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2.14    Contents of the Bid
2.14.1 The Bid shall be furnished in the format at Appendix – I
and shall consist of a revenue share to be quoted by the Bidder.
The Bidder shall specify (in Indian Rupees) the revenue share
offered by him to undertake the Project in accordance with this
RFP and the provisions of the Concession Agreement.
2.14.2  The Project will be awarded to the Bidder quoting the
highest revenue share.
2.14.3  The opening of Bids and acceptance thereof shall be
substantially in accordance with this RFP.
2.14.4   The proposed Concession Agreement shall be deemed to
be part of the Bid.
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2.20.7 The Bid Security shall be forfeited and appropriated by the
Authority as mutually agreed genuine pre-estimated compensation
and damages payable to the Authority for, inter alia, time, cost
and effort of the Authority without prejudice to any other right or
remedy that may be available to the Authority hereunder or
otherwise, under the following conditions:
a)     If a Bidder submits a non-responsive Bid;
b)      If a Bidder engages in a corrupt practice, fraudulent practice,
coercive practice, undesirable practice or restrictive practice as
specified in Clause 4 of this RFP;
(c)    If a Bidder withdraws its Bid during the period of Bid validity
as specified in this RFP and as extended by the
Bidder from time
to time;
d)     in the case of Selected Bidder, if it fails within the specified
time limit -
i.      to sign the Concession Agreement and/or
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ii.   to furnish the Performance Security within the period
prescribed therefor in the Concession Agreement; or
e)    in case the Selected Bidder, having signed the Concession
Agreement, commits any breach thereof prior to furnishing the
Performance Security.
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3.3.5  After selection, a Letter of Award (the “LOA”) shall be
issued, in duplicate, by the Authority to the Selected Bidder and
the Selected Bidder shall, within 7 (seven) days of the receipt of
the LOA, sign and return the duplicate copy of the LOA in
acknowledgement thereof.  In the event the duplicate copy of the
LOA  duly signed by the Selected Bidder is not received by the
stipulated date, the Authority may, unless it consents to extension
of time for submission thereof, appropriate the Bid Security of
such Bidder as mutually agreed genuine pre-estimated loss and
damage suffered by the Authority on account of failure of the
Selected Bidder to acknowledge the LOA, and the next eligible
Bidder may be considered.
3.3.6  After acknowledgement of the LOA as aforesaid by the
Selected Bidder, it shall execute the Concession Agreement within
the period prescribed in Clause 1.3.  The Selected Bidder shall
not be entitled to seek any deviation in the Concession Agreement.
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6.1 The Bidding Process shall be governed by, and construed in
accordance with, the laws of India and the Courts at Mumbai
shall have exclusive jurisdiction over all disputes arising
under,
pursuant to and/or in connection with the Bidding Process.”
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
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Purpose Vehicle that is constituted by the Consortium for this purpose
(iii) that through out the stage of the bid process, the forum for dispute
resolution is exclusively with the Courts at Mumbai and (iv) that right
uptil the stage of the entering into the Concession Agreement, the bid
process may be annulled without giving any reason whatsoever by the
Respondent No.1
14. In addition, it may also be pointed out, on a reading of the
Letter of Award itself dated 26.09.2011, as acknowledged by the appellant,
that:
“3. You are required to incorporate a Special Purpose Vehicle
solely for the purpose of implementing the project (the
‘Concessionarie”)  as per Clause 2.2.6 of RFQ document.
4. As per Clause 2.20.5 of RFP document, your Bid Security shall
remain   in   force  and   effect  till   the Concessionarie  furnishes
the Performance Guarantee of a  sum  equal  to  Rs.3350  million
(Rupees Three Thousand Three Hundred Fifty million), not later
than 90 days from the date of signing of the Concession
Agreement.
6.  Please note that the Concession Agreement is expected to be
signed within 30 days of the issue of this Letter of Award.”
This would show that even after the Letter of Award, a Special
Purpose Vehicle solely for the purpose of implementing the project would
have to be set up, and that this Special Purpose Vehicle would be called
the Concessionarie.  Further, the bid security given by the appellant shall
remain in force till the Special Purpose
Vehicle furnishes the Performance
Guarantee for a sum equal to Rs. 3350 million, and that the Concession
Agreement is expected to be signed within 30 days of the issue of this
Letter of Award.
15. Under Section 7 of the Indian Contract Act, 1872 in order to
convert a proposal into a promise, the acceptance must be absolute and
unqualified.  It is clear on the facts of this case that there is no absolute
and unqualified acceptance by the Letter of Award – two or three very
important steps have to be undergone before there could be said to be
an agreement which would be enforceable in law as a contract between
the parties.
M/S PSA MUMBAI INVESTMENTS PTE. LTD. v.  BOARD OF TRUSTEES
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16. Mr. Amit Sibal, learned Senior Advocate, is wholly correct in
relying upon both Dresser Rand S.A. (supra) and Bharat Sanchar
Nigam Limited (supra).  In Dresser Rand S.A. (supra) it was found,on
the facts, that unless a purchase order was placed, there would be no
agreement between the parties.  Everything that took place before such
purchase order was placed would only be a prelude to a contract which
cannot be confused with the contract itself.  This was set out in para 32
of the judgment as follows:-
“32. 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.”
17. This judgment was followed in Bharat Sanchar Nigam
Limited (supra), which is very similar to the facts of the present case.
In Clause 30 of the instructions to the bidders in that case, it is stated
that the Courts in Delhi will have jurisdiction to entertain disputes or
claims arising out of the tender till issue of authorization letters to circles
for placement of purchase orders.  It is only thereafter that Clause 20 of
the General Conditions of Contract, providing for an arbitration, could
kick in.  This being the case, this Court held:
“23. On the other hand, Section III had nothing to do with the
bidding process or selection of suppliers, but contained provisions
which would govern the performance, that is, the terms and
conditions of the contract, if and when contracts were entered by
placing purchase orders. The arbitration clause (clause 20) is a
part of Section III of the bid documents.
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24. As per the scheme of bid documents, there is a clear division
of the terms that will govern the tender process, and the terms
that will govern the contract, when the bids are accepted. One
part regulated the tender process that led to placing of purchase
orders. That part contained a provision as to what should be the
forum of dispute resolution, if there was a dispute at the tender or
bidding stage. The other part stipulated the terms and conditions
which will govern the contract, if and when purchase orders were
placed. That part also contained a provision as to what should be
the forum if there was a dispute after the contract was entered
into Clause 30 of Instructions to Bidders makes it clear that in
regard to tender-stage disputes, the forum will be Civil Courts.
Clause 20 of General Conditions on the other hand was intended
to operate when contracts were made and it specified that if
disputes arose in regard to the contracts, the forum for dispute
resolution will be the Arbitral Tribunal.
25.  Clause 1 of the General Conditions of Contract (Section III)
makes it clear that the General Conditions of Contract contained
in Section III of the document shall apply in contracts made by
the purchaser for the procurement of  goods. Clause 20 of
Section III, that is the arbitration clause makes it clear that
arbitration is available in regard to “any question, dispute or
difference arising under this agreement or in connection
therewith”. Therefore, it
is evident that the General 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.
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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
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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.
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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
oxymeters.  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
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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 vs. 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
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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.  Consequently, the impugned judgment
of the High Court is set aside and the order of the learned Arbitrator is
reinstated.
24. The appeal is allowed in the aforesaid terms.
25. It would be open for the Respondent No.1 to pursue its claim
of Rs. 436 Crores plus in an appropriate forum, which will decide the
same on its own merits in accordance with law.
Ankit Gyan
  Appeal allowed.