IMPORTANT POINT
Arbitration clause in draft agreement will not apply at the stage of LOA. Disputes art this stage have to be resolved by courts at Delhi.

JUDGMENT :

R.F. NARIMAN, J.

1. Leave granted.

2. The present case involves the question as to whether an arbitration clause would spring into being at the stage of Letter of Award (referred to as ‘LOA’ for brevity) acceptance, or whether it would be necessary to sign the ultimate agreement which would then bring in the arbitration clause contained therein.

3. The skeletal facts necessary to appreciate the controversy in the present case is that a Request for Proposal (referred to as ‘RFP’ for brevity) was sent out by the appellant for road construction in the State of Meghalaya. The LOA so far as the RFP is concerned, is by a letter dated 31.10.2014, in which the Government of India referred to the bid document and requested for return of a signed copy of duplicate LOA as its acknowledgment within seven days of the receipt of the LOA. It was clearly stated therein that “Thereafter, you are required to execute the Contract Agreement within 15 days from the date of issue of LOA as per clause 1.3 of the RFP……….”

4. In answer to this letter, on 05.11.2014, the respondent accepted the bid proposal and enclosed a copy of the LOA received by fax duly signed with an acknowledgment. By a further communication dated 08.11.2014, the respondent then wished to sign the contract agreement for the above work on 13.11.2014. Nothing happened until August, 2016, except that the guarantees that were required under the RFP were kept alive by the respondent. Finally, on 04.08.2016, the appellant decided to withdraw the LOA due to non-availability of No Objection Certificate from the Khasi Hill Autonomous District Council, which was a sine qua non for the land for the project. It is in this factual scenario that the controversy has arisen in this case, which is, as to whether the LOA is a binding contract, and further that, if it is found to be a binding contract, whether the arbitration clause of the draft agreement between the parties would kick in.

5. The Delhi High Court, by its judgment dated 26.10.2018, went through various clauses of the draft agreement which is part of the RFP, and after referring to this Court’s judgment in Inox Wind Ltd. v. Thermocables Ltd. (2018) 2 SCC 519 found that, contained in the standard form of the draft agreement, is an arbitration clause, and that a general reference to it is good enough, so that an arbitrator could be appointed. The Court then went on to appoint Justice Shiavax Jal Vazifdar, former Chief Justice, Punjab and Haryana High Court, after which two other arbitrators would then be appointed by the International Centre for Alternate Dispute Resolution.

6. According to Shri Debal Banerjee, learned senior counsel, events have overtaken the respondent. This Court’s judgment in PSA Mumbai Investments PTE. Limited v. Board of Trustees of the Jawaharlal Nehru Port Trust and Another (2018) 10 SCC 525 would squarely cover this case. He prepared for our perusal a chart in which he pointed out the similarity of this case with the facts in PSA Mumbai Investments PTE. Limited’s case -the disclaimer clause referred to by us in the said judgment; the schedule of bidding process; the signing of the LOA; and most importantly the fact that the entire bidding process shall be governed by and construed in accordance with the laws of India and that the Courts at Mumbai shall have exclusive jurisdiction over all disputes arising under, pursuant to or in connection with the bidding process; and the fact that the authority may, in its own discretion, cancel the bidding process at any stage prior to entering into the ultimate contract agreement.

7. According to him, the minor difference between the PSA Mumbai Investments PTE. Limited’ judgment containing a reference to the formation of a Special Purpose Vehicle, which is absent in the facts of this case, would be entirely immaterial for the purpose of discovery as to whether an agreement exists in this case and whether an arbitration clause contained in a standard form would, theref