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2011 (1) Supreme 99
SUPREME COURT OF INDIA
G.S. Singhvi and Chandramauli Kr. Prasad, JJ.
State of U.P. and Others — Appellants
versus
M/s Combined Chemicals Company Private Limited — Respondent
Civil Appeal No.5236 of 2007
Decided on : 4-1-2011
(b) Arbitration and Conciliation Act, 1996 – Section 20 – Tender accepted by competent authority subject to the terms and conditions specified in the tender notice and the acceptance letter – Clause 16 of tender form providing for reference of any dispute arising out of or concerning the agreement to the arbitration of an Arbitrator nominated by appellant No.2 and an Arbitrator nominated by the respondent – Respondent entitled to invoke the arbitration clause. (Para 19)
(c) Judicial Review – Natural Justice – Arbitrator granting one adjournment in view of pendency of appeal before High Court – In view of no order by the High Court as to stay of the proceedings, Arbitrator rightly proceeded with the proceedings – Appellants cannot complain of denial of opportunity. (Para 21)
(d) Arbitration and Conciliation Act, 1996 – Section 31 – Arbitrator making the award relying upon a statement by respondent’s M.D. without giving any reason – Not sustainable. (Para 23)
Facts of the case:
The following questions arise for determination in this appeal :
1. Whether letter dated 16.11.1985 issued by the Director of Industries, Uttar Pradesh conveying acceptance of the bid given by the respondent could be treated as an agreement executed by the parties,
2. Whether the respondent could invoke the arbitration clause contained in the tender document, on that basis, and
3. Whether the Arbitrator appointed by Civil Judge (Senior Division), Lucknow acted in violation of the rules of natural justice by declining the appellants’ prayer for adjournment and whether the award passed by the Arbitrator is vitiated by patent error of law.
Finding of the Court:
Contract was duly executed and arbitration clause was validly invoked.
Result : Appeal partly allowed.
JUDGMENT
G.S. Singhvi, J. —
1. Whether letter dated 16.11.1985 issued by the Director of Industries, Uttar Pradesh (appellant No.2) conveying acceptance of the bid given by the respondent for supply of 200 metric tonnes Zinc Sulphate, Agriculture Grade, could be treated as an agreement executed by the parties, whether the respondent could invoke the arbitration clause contained in the tender document, whether the Arbitrator appointed by Civil Judge (Senior Division), Lucknow (hereinafter referred to as ‘the trial Court’) acted in violation of the rules of natural justice by declining the appellants’ prayer for adjournment and whether the award passed by the Arbitrator is vitiated by patent error of law are the questions which arise for consideration in this appeal filed by the State of U.P. and two others against the judgment of the Division Bench of the Allahabad High Court, which dismissed the appeal preferred by the appellants against the order passed by the trial Court making award of the Arbitrator rule of the Court.
2. By an advertisement dated 19.8.1985, appellant No.2 invited bids for supply of 2000 metric tonnes Zinc Sulphate of Agriculture Grade on quantity basis to meet the requirement of the Agriculture Department. Clause 16 of the tender form, which has bearing on this case, reads thus:
Tender Form:
“16. In the event of any dispute arising out of or concerning this Agreement (except as to any matters the decision of which is specifically provided for in this Agreement), the same shall be referred to the arbitration of an arbitrator nominated by the Director of Industries, Uttar Pradesh and an arbitrator nominated by the contractor, or in the case of the contractor or the said Director failing to nominate an arbitrator within the time fixed in the notice to be served on him by the said Director or the contractor, as the case may be by the arbitrator, nominated by the said Director or the contractor, or in case of disagreement between the said arbitrators to an umpire appointed by them and the decision of such arbitrators/arbitrator/umpire as the case may be, shall be final and binding on the parties. The arbitrators/arbitrator/umpire may from time to time with the consent of the parties enlarge the time for making and publishing the award.”
3. The bid given by the respondent (Rs.5,451/- per metric tonne) was found to be the lowest. The purchase committee of the Directorate of Industries approved the same. Thereafter, appellant No.2 issued acceptance letter dated 16.11.1985 to the respondent for supply of 200 metric tonnes of Zinc Sulphate to the Directorate of Agriculture. The relevant portions of that letter are extracted below:
“ACCEPTANCE LETTER
From Value: Rs.10,90,200/-
(Rupees Ten Lacs Ninety Thousand Two Hundred only)
The Director of Industries, Stores Purchase Department, Uttar Pradesh, Kanpur.
To,
M/s. Combined Chemicals Pvt. Ltd. 15/1, 2 & 5, Industrial Estate Vidisha-464002.
Ref. No. SPS/VII-T.NO.272(G)/85 Dated:
a) This office tender notice / enquiry No. 272(G)/85 dated 19.8.1985
b) Contractor’s tender quotation No.A-4242/A80/4GP/ZS dated 08.08.1985
c) Indentor’s Indent No. Dated
d) Designation and full address of the indentor Director of Agriculture, U.P.
e) If rate contract - All Government Department and quasi-Government Departments.
Dear Sir,
On behalf of the Governor of Uttar Pradesh, I accept your tender/quotation referred to above for the supply of stores as per details given in Schedule ‘A’ hereafter subject to the terms and conditions specified in the tender notice/enquiry referred to above and in this acceptance letter.
2. The supply order shall be placed on you by the indenting officer/officers direct giving full instruction regarding dispatch, insurance of goods, name of consignee, destination, railway station, payment of bills, etc.
4. Period of Contract - Until the supply is satisfactorily completed inaccordance with the aforesaid terms and conditions.
7. Inspection - For the purpose of this cont
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