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

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 India3. 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 SettlementIf 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, 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 themFailing 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 ArbitrationThe place of arbitration shall be the headquarters of the Concessioning Authority in India(c) English LanguageThe 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 hearingsThe 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 AwardAny 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 ExpensesThe fees and expenses of the arbitrators and all other expenses of the arbitration shall be initially 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 ArbitrationPending 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 award4. 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:1.3 Schedule Of Bidding ProcessThe authority shall endeavor to adhere to the following schedule:Ultimately, as the Consortiums 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 Consortium6. 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 Appellant7. 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 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 parties8. 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 clause26. 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 it27. 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 LOA28. 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 Act9. An appeal against the said order was filed before the High Court Under Section 37 of the Arbitration and Conciliation Act, 1996 in which the learned Arbitrators 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 v. Som Datt Builders Limited, (2009) 7 SCC 696.  This argument though noticed in the judgment was not, however, answered by the judgment.

Court's reasoning:
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