Delhi High Court Union Of India And Ors. vs N.K. (P) Ltd. And Ors. on 30 October, 1970 Equivalent citations: 7(1971)DLT406 JUDGMENT V.S. Deshpande, J. (1) This case is notable, firstly, because the present value of the goods involved runs into crores of rupees and, secondly, because of the interesting questions of law raised. (2) The facts are undisputed. In March 1968 the appellants (hereinafter called the "Government") issued a global tender for the sale of about eighty thousand tonnes of surplus released serviceable and scrap rails mainly for export. On May 21, 1968, the respondents (hereinlifter called the "Company") submitted an offer in terms of the tendciconditions for the purchase of the relayable and scrap rails. After obtaining some clarifications from the Company, the Government ultimately purported to accept the offer by the following letter : "GOVERNMENTOF India Ministry Of Railways (RAILWAY BOARD) New Delhi1. dated 15th July 1968 No. 68/RS(G),'709. M/s. N. K. Private Limited, 171C, defense Colony, New Delhi. Dear Sirs, SUB: Tender No. 1 of 1968 for Export sale of used re rollable and relayable steel rails. Ref : Your letter Nos. Nil dated 2151968, 15.6.1968. 29.6.1968, 8.7.1968, 10.7.1968 and 15.7.1968. Kindly be advised that your offer (at $ 39 per long ton F.O.B. Indian Port for export and Rs. 458.00 per long ton for indigenous consumption) with terms and conditions referred to in your above letters is hereby accepted. Formal contract will be issued shortly. 2. Kindly acknowledge receipt, Your faithfully, sd/ P. C. Oak, For Secretary, Railway Board." (3) Further discussions were held between the parties and a final draft of the contract was handed over to the Company by the Government on August 27, 1968. The Company confirmed on September 18. 1968 its agreement to a few further points embodied in the said final draft. On 27th September 1968, the Government issued a circular to the various Railways that the Board had finalised an exportcw/ninternal sale contract with the Company for a period of three years and the various Railways should make available to the Company the information and facilities for the inspection of the material available with the Railways for export by the Company. On 7th November 1968 and 23rd November 1968 the Company informed the Government that they proposed to take delivery first of 53807 tonnes and then of 19680 tonnes. The Company also complained that certain Railways were selling certain rails, though these rails had been the subject matter of the contract between the parties and requested that the said Railways should be told to stop such sales. But the Government perhaps reconsidered the matter and after seven weeks ultimately informed the Company on 15th January 1969 that the Government had indicated on 15th July 1968 an intention to enter into a contract with the Company but subsequently discussions had been held with the Company culminating in the Company's letter dated 18th September 1968. This would amply indicate that no agreement had been reached on vital terms and conditions and the question of the existence of a concluded contract did not arise. The Company promptly wrote to the Government on 25th January, 1969 that its offer had been accepted by the Government on 15th July 1968 and also by subsequent conduct and called upon the Government to perform the contract. The contract contained a provision that any dispute arising under it shall be referred to arbitration. The Company, therefore, after some fruitless discussions with the Government, filed a .petition under section 20 of the Arbitration Act, 1940 in this Court praying that the arbitration agreement be filed in Court and the dispute between the parties be referred to arbitration. (4) In defense, the reply of the Government was that letter dated 15th July 1968 only referred to certain matters relating to prices and some other proposed terms and conditions. Unless and until a formal instrument of contract was executed in the manner required by Article 299 of the Constitution of India, there could not be a contract binding on the Union of India. It is true that a list of quantities of the available material was supplied to the Company but it was only with a view to facilitate further negotiations. No agreement was reached on vital terms and conditions, the question of there being a concluded contract did not arise at all. Further, the Government did not admit that any draft of a formal contract embodying the agreement between the parties was handed over to the Company by any officer of the Union of India authorised to enter into a contract for and on behalf of the President of India. (5) The relevant issue before the learned Single Judge (V. D. Misra J.) was whether there was a duly executed agreement to refer the disputes arising out of the contract, if any, to arbitration. The Company examined its