The main legal point established in the judgment is that the existence of a binding contract must be unequivocally and clearly established from the correspondence and conduct of the parties in order to create a mutually binding contract.

GITA MITTAL, J.

( 1 ) BY this judgement, I propose to dispose of the present appeal which has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 by the food Corporation of India assailing the arbitral award dated 31st January, 2002. Inasmuch as there is no dispute to the factual matrix, the same is briefly noticed hereinafter.

( 2 ) THE respondent M/s. Garg Rice Mill is running a business of custom milling of paddy. During the year 1995, the appellant had decided that paddy from Panjab would be offered for the milling-cum-storage to rice millers. For this purpose, it had convened a meeting at the Regional Office of the appellant at Chandigarh on 13th January, 1995, for the purposes of explaining the terms and conditions for the milling-cum-storage of the paddy. The terms and conditions on which the paddy would be given for milling-cum-storage to the millers were put before the rice millers in this meeting.

( 3 ) THE respondent no. 1 purportedly made an offer dated 2nd February, 1995 to store and mill 3000 MTs of Punjab Paddy in their mill premises without charging any storage charges for providing the space. While the appellant had contended that this offer was a confirmation of the acceptance of terms and conditions for milling and storage of the paddy which were communicated in the meeting on 13th January, 1995, the respondent has repudiated the fact that this offer made by it was ever accepted by the appellant herein.

( 4 ) THE respondent No. 1 also deposited a draft of Rs. 10,000/- drawn on canara Bank, Yamuna Nagar, dated 2nd February, 1995. There is also no dispute that thereafter the respondent no. 1 started sending paddy for milling to the respondent no. 1, who according to the appellant received the same inter alia, on 12th, 13th, 14th, 15th, 16th, 17th, 19th, 20th and 21st February, 1995, after weighing stock, checking quality and issuing quantity receipts. The appellant has asserted that this act of delivering paddy to respondent no. 1 was made on acceptance by it the offer of the proposal of respondent no. 1. According to the appellant this established that there was a concluded contract for the purposes of milling of the appellant"s paddy.

( 5 ) IT is the respondent no. 1"s case that the respondent no. 1 defaulted in carrying out the milling and in order to minimise loss, out of the 40,407 bags of paddy weighing 25793,6800 quintals of superfine paddy, the appellant was compelled to shift 26,485 bags weighing 16304. 05 quintals of paddy to other mills for milling. The appellant also suffered a loss of 8789 bags weighing 6085. 73 quintals of paddy due to deterioration. In these circumstances, the appellant demanded a sum of Rs. 41,53,001. 54p by a registered legal notice dated 15th January, 1998 from the respondent no. 1. The appellant also demanded interest on this amount. The amount was based on the losses suffered by the appellant due to the alleged negligence on the part of respondent no. 1.

( 6 ) THE respondent no. 1 failed to comply with the notice of demand. Consequently, vide a letter dated 5th February, 1998 the appellant invoked the arbitration clause containing the agreement between the parties and sought consent of respondent no. 1 for reference of the dispute to arbitration.

( 7 ) RESPONDENT no. 1 responded to this notice disputing the agreement between the parties. It was contended that the Food Corporation of India had never accepted the offer of the respondent no. 1 even upto 31st March, 1995 and that it had never accepted the paddy for storage and milling. This communication, however, contained the following sentence :-"however, in case, FCI wants to appoint the arbitrator, we have no objection to refer the matter to Arbitrator. " at the bottom of the communication, the respondent further stated:-

"it is intimated that alongwith the notice served by the Distt. Manager, fci, Karnal with regard to an amount of Rs. 1,41,49,441. 50/- are wrong and cannot be claimed by the c