The main legal point established in the judgment is that once a contract is formed through absolute acceptance of an unconditional offer, any unilateral modification of the contract terms is impermissible.

VALMIKI J. MEHTA, J.

1. By this first appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act’), the appellant/tenderer impugns the judgment of the court below dated 16.12.2006 by which the court below has allowed the objections filed by the respondent herein and set aside the Award dated 28.1.2005 of the sole Arbitrator which had directed refund of Rs.11,10,000/- being the bid guarantee amount and which was with the respondent/objector on account of encashment of the bank guarantee given as bid guarantee.

2. The facts of the case are that the respondent had invited tenders for the purpose of interior and other allied works at its office complex. Tenderers were required to furnish a bid guarantee of Rs.11,10,000/- and which was to remain valid for a period of 30 days beyond the validity period of the bid. Appellant submitted its bid on 19.9.2001 along with the earnest money deposit in the form of bank guarantee for a sum of Rs.11,10,000/-. Bids were opened on the same date i.e 19.9.2001 and the appellant was found to be the successful bidder. Thereafter, negotiations took place between the parties, inasmuch as, as per the bid documents period of completion of the contract was 15 months but the respondent wanted to reduce this period to 12 months. Parties therefore entered into a written Memorandum of Meeting dated 5.12.2001 reducing the completion period as per the bid documents of 15 months to 12 months. Appellant however on 13.12.2001 sent its letter again seeking 15 months time instead of 12 months. Appellant also put two other conditions of rates being firm only for a stipulated period of 15 months and that the electrical work would not be carried out by the agency of the respondent but by the agency of the appellant. This letter dated 13.12.2001 of the appellant reads as under:-

“Chief Manager (Case taken up today-NR1)

M/s Power Grid Corporation of India Ltd.

B 9, Qutub Institutional Area,

Katwaria Sarai,

New Delhi 110016

Sub: Interior and other Allied works for proposed office Complex at Sector 29, Gurgaon,

Specification No:- Package-H (Part A) C-12204-C-902-3

Dear Sir,

Thanks for the discussion & negotiation held with you in the meeting on 05.12.2001 regarding the bid lastly in respect of the captured work, we wish to clarify certain points:

1. The period of completion 15 months is most suitable for the quantum of work assessed by us & also in line contemplated in the tender.

2. Rates will be firm only upto stipulated period of 15 months except statutory increase. The retention Money will be refunded on stipulated completion.

3. The electrician work will be executed by our agency as discussed for the better coordination as desired he particulars of the said agency are enclosed. If further clarification is required we can also submit the same immediately.

In these circumstances, we request you to arrange another meeting for further discussion & negotiation at early as possible.

Thanking you

Yours faithfully,

For Office Equipment

Sd/-

Managing Partner.”

3.(i) The respondent issued its Letter of Award on 19.12.2001 accepting the appellant’s bidding rate in conjunction with the agreement in terms of the Minutes of Meeting dated 5.12.2001 of reducing the contract performance period from 15 months to 12 months.

(ii) Appellant then wrote its letter dated 1.1.2002 stating that the Letter of the Award did not result in formation of a binding contract and the appellant placed reliance upon its modified offer dated 13.12.2001 that there cannot be a valid contract unless the contract is in accordance with the terms as stated by the appellant vide its letter dated 13.12.2001. This letter dated 1.1.2002 of the appellant to the respondent reads as under:-

“Chairman & Managing Director

M/s Power Grid Corporation of India Ltd.

B-9, Qutub Institutional Area

Katwaria Sarai

New Delhi-11006

Sub: Interior and other Allied works for proposed Office Complex at Sector 29, Gurgaon.

Specification No. Package-II (Part A) C 12204-C