An arbitration agreement requires parties to be ad idem on the issue, and a party cannot pick out an arbitration clause from a draft agreement and seek to enforce it if the draft agreement as a whole was not accepted.

Sanjib Banerjee

1. THE petitioner has applied under section 11(6) of the Arbitration and Conciliation Act, 1996 with a request for necessary measures to be taken for constituting an arbitral tribunal to adjudicate upon the disputes covered by the arbitration agreement that the petitioner sets up. The respondent has denied the existence of the arbitration agreement.

2. THERE is no dispute that following a notice inviting tender and the petitioner's offer thereupon, a work order was issued in favour of the petitioner for handling and despatch of iron ore fines from Thakurani/Barbil siding to the ports of Paradip, Haldia and Gopalpur by rail and by road. The work included port handling, stacking and stevedoring operations. The work order contemplated a formal agreement being executed. The work order was to remain valid for the period upto December, 2008 with a provision for extension thereof based on the performance of the petitioner. The performance was to be reviewed every three months. Clause 17 of the work order dated January 22, 2008 provided as follows:

"17. CONTRACT: A written Agreement will be executed between OSL and OMDC within 7 (seven) days of issuance of the Work Order recording the fact of conclusion of contract between OSL and OMDC."

It is not in dispute that a draft agreement was forwarded by the respondent to the petitioner on January 22, 2008 itself. The same will be evident from a letter dated February 8, 2008 issued by the respondent, a copy whereof appears as annexure "R-1" to the respondent's affidavit in opposition. Under cover of such letter, a copy of the draft agreement was forwarded again with a request that it "may please be finalised immediately for execution in the stamp paper." The draft agreement contained the following, which the petitioner claims to be an arbitration clause:

"ARBITRATION: In case of any conflict between the terms and conditions contained in the contract documents, the provisions contained herein shall prevail over those contained in the documents referred above. All disputes and differences of any kind whatsoever arising out of the Second Part shall referred to the sole arbitrator namely of the First Part, On any reference the learned arbitrator will decide the dispute in accordance with the Arbitration and Conciliation Act, 1996. The decision and/or award of the arbitrators will be final and binding upon both the parties."

3. BY February 14, 2008 the petitioner had commenced operations under the work order. The petitioner cited a number of logistic and operational difficulties in its letter of February 14, 2008 and urged the respondent to take remedial steps. The last paragraph of the letter needs to be specifically noticed:

"We urge upon OMDC to bear all the statutory charges including plot rent and amend the work order/contract suitably keeping in view of all the above uncertaintity (sic, uncertainty) for export of Iron Ore Fines within a period of one year."

4. THE petitioner says that the work order has not been cancelled though the petitioner has not been required to undertake any further work there under since the respondent cancelled the railway indents by a letter dated March 19, 2008, a copy whereof appears at page 35 of the petition. The petitioner says that the tender documents contained a reference to a written contract which was to be entered into within seven days of the issuance of the work order. The petitioner insists that upon the petitioner undertaking the work under the work order there was an acceptance of the agreement by performance which would entitle the petitioner to invoke the arbitration clause contained therein. The petitioner seeks to demonstrate that the respondent has been arbitrary and unreasonable in its conduct. The petitioner complains of the respondent failing to make payment in respect of the bills raised by the petitioner on the respondent. The petitioner refers to a letter dated September 8, 2008 issued by the respondent, a few paragra