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High Court Of Delhi
PROGRESSIVE CONSTRUCTIONS LIMITED - Appellant
Versus
BHARAT HYDRO POWER CORPORATION LIMITED - Respondent
Suit 2782 of 1995
Decided On : 07/11/1995
ARBITRATION - CONTRACT - JURISDICTION - CONTRACTUAL DISPUTE - ARBITRATION CLAUSE - VENUE OF ARBITRATION - JURISDICTION OF COURTS - INTERPRETATION OF CONTRACTUAL PROVISIONS - COMMUNICATION OF ACCEPTANCE - PLACE OF CONTRACT FORMATION - TERRITORIAL JURISDICTION.
Fact of the Case:
A construction company (petitioner) submitted a tender for the construction of a dam project in Assam. The respondent, a company based in Calcutta, accepted the tender and issued a letter of intent. However, the parties could not finalize the formal contract due to discrepancies in the tender documents. The petitioner claimed a concluded contract and sought arbitration. The respondent contested the jurisdiction of the Delhi Court, arguing that the contract was not concluded and that the arbitration clause specified Guwahati/Calcutta as the venue of arbitration.
Finding of the Court:
The court held that a concluded contract existed between the parties, as evidenced by the letter of intent and the exchange of correspondence. The arbitration clause was binding on the parties, and the venue of arbitration was Guwahati/Calcutta. However, the court found that it lacked territorial jurisdiction to hear the petition since the contract was entered into in Calcutta and the cause of action arose there. The court directed the petitioner to file the petition in the appropriate court.
Issues: 1. Whether a concluded contract existed between the parties. 2. Whether the arbitration clause was binding on the parties. 3. Whether the Delhi Court had territorial jurisdiction to hear the petition.
Ratio Decidendi: 1. The court relied on the tender documents, the letter of intent, and the exchange of correspondence to conclude that a binding contract existed between the parties. 2. The court held that the arbitration clause was part of the tender documents and was binding on the parties. 3. The court interpreted Section 4 of the Contract Act, 1872, and the principles of contract formation to determine that the contract was entered into in Calcutta, where the acceptance of the tender was communicated. Therefore, the court lacked territorial jurisdiction to hear the petition.
Final Decision: The court dismissed the petition for lack of territorial jurisdiction and directed the petitioner to file the petition in the appropriate court.
( 1 ) THIS is a petition under Section 20 of the Arbitration Act. The petitioner is a construction company having its registered office at Hyderabad, Andhra Pradesh and administrative office at New Delhi. The respondent is a company having its head office at Calcutta. On 27. 5. 1993, the respondent published an notice inviting tenders for the construction of balance work of concrete gravity dam at Karvi-Langpi for 2 X 50 MW Lower Borpani Project Assam . The petitioner submitted its tender in the respondent s office at Calcutta accompanied by earnest money of Rs. 10. 00 lakhs by way of a Bank guarantee. Then commenced an exchange of letters between the parties seeking variations, negotiations and review of the terms and conditions of the contract. A final discussion was held on 31. 3. 1994 at Calcutta and the respondent agreed to issue a letter of intent for the construction of the concrete gravity dam and the associated works to the petitioner. Vide this letter of intent dated 6. 5. 1994, the respondent awarded the work to the petitioner.
( 2 ) ACCORDING to the petitioner a binding contract had come into existence between the parties on 6. 5. 94 with the issuance of the letter of intent Annexure-14. However, the letter of intent requested the petitioner to reach Calcutta on 20. 3. 1994 for finalising and signing the formal contract. On 16. 5. 94, the respondent sent updated version of Volume-1 of the tender documents stated to be incorporating all the changes agreed upon between the parties. The petitioner found some minor discrepancies therein to which the attention of the respondent was invited vide petitioner s letter dated 28. 5. 1994. Again a few letters were exchanged. The contract documents could not be signed as the discrepancies left over could not be sorted out between the parties. On 29. 7. 94 the respondent has cancelled the contract.
( 3 ) ACCORDING to the petitioner, there was a concluded contract between the parties. The respondent is guilty of committing a breach of the contract. The claims and disputes raised by the petitioner are therefore liable to be referred for arbitration consistently with the arbitration clause.
( 4 ) THE arbitration clause, which is Clause 67 contained in Vol-I of the tender document, is the usual arbitration clause for settlement of disputes. It also provides that the venue of arbitration shall be at Guwahati/calcutta. It further provides:- "if any dispute is referred to Court, the jurisdiction will be the Court within the State of Assam. "
( 5 ) THE petitioner relies for his contention of the contract between the parties having been concluded, on the following factors:- (1) It was one of the conditions of the tender document that acceptance of bid will be intimated to the successful bidder through an award and this award has concluded the contract. (2) It was also the condition of the tender document that unless and until a formal contract was prepared and executed the bid together with the award thereof shall constitute a binding contract between the parties.
( 6 ) THE award dated 6. 5. 1994 is Annexure-14. The opening part thereof refers to respondent s invitation to tender, the tender document Volume I and II, the petitioner s offer dated 27. 5. 93, several letters exchanged between the parties between 27. 5. 93 and 18. 3. 94 and the minutes and discussions in meetings held at Calcutta on 30. 11. 1993 and 31. 3. 94. It then proceeds to state :- "based on the abovementioned documents we have the pleasure in issuing this letter of intent to you for placing on item rate order on you for construction of. . . . . . . . " "next week we shall be sending you the update version of tender documents incorporating all changes as agreed so far. These documents duly signed by both the parties shall constitute the contract agreement. We would request you to kindly come to Calcutta on 23. 5. 94 for finalising and signing the contract agreement. "
( 7 ) ON behalf of the respond
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