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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SUNITA AGARWAL, CJ.
Adani Enterprises Limited – Petitioner
Versus
Gujarat State Electricity Corporation Limited – Respondent
R/Petn. Under Arbitration Act No. 22 Of 2024
Decided On : 05-07-2024
Arbitration - Conditional Letter of Acceptance - Arbitration and Conciliation Act, 1996, Section 11(6) - The court interpreted the arbitration clause in the RFP document, concluding that the conditional LOA did not create a binding contract or arbitration agreement, thus rejecting the petition for arbitration.
Fact of the Case:
The petitioner sought arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996, claiming disputes arose from a conditional Letter of Acceptance (LOA) issued by the respondent regarding a coal mining project. The respondent contended that the LOA did not confer any rights or obligations, as it was conditional upon approvals that were never obtained.
Finding of the Court:
The court found that the conditional LOA did not create a binding contract or an arbitration agreement, as the necessary conditions for executing the Coal Mining Services Agreement (CMSA) were not fulfilled, and thus, the claims were deemed meritless.
Issues: Whether the conditional LOA constituted a binding contract that included an arbitration agreement under the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court held that the conditional LOA did not incorporate the arbitration clause from the RFP document, as it was contingent upon unfulfilled conditions, and thus, no valid arbitration agreement existed.
Result: The petition for appointment of an arbitrator was rejected.
JUDGMENT :
(Sunita Agarwal, CJ.) :
1. The instant petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (in short as "the Act, 1996) raises a question with regard to the applicability of the Arbitration Clause 3.4 contained in the Request for Proposal (RFP) document for selection of Mine Developer and Operator (MDO) for development and operation of Gare Palma Sector-I, Coal Block, Mand Raigarh Coalfield, Dist. Raigarh, Chhattisgarh. The claim of the petitioner is against the Gujarat State Electricity Corporation Ltd. (GSECL), incorporated under the provisions of the Companies Act, 1956.
2. Upon a notice under Section 21 of the Act, 1996 received by the respondent GSECL, they have taken a stand that no Letter of Acceptance (LOA) was issued to the petitioner and the conditional LOA does not create any right or liabilities of the parties. The claim of the petitioner to refer the dispute under Section 11 of the Act, 1996 is, thus, unacceptable.
3. The petitioner is claiming reference of the dispute arising out of the conditional Letter of Acceptance (LOA), issued by the respondent GSECL dated 15.12.2018, which was issued with reference to RFP bid document, as noted hereinabove.
4. To deal with this controversy, certain facts are relevant to be noted hereunder :-
5. The petitioner M/s. Adani Enterprises Limited is a Company incorporated under the Companies Act, which is engaged in generation of power from Coal, Lignite, Gas, Solar and Wind. The respondent GSECL had entered into an agreement with the Ministry of Coal, Government of India for allocation of the Gare Palma Sector-I (Phase I), Coal Block, Mand Raigarh Coalfields, Dist. Raigarh, Chhattisgarh, for production and utilisation of the coal from the Coalmine. The respondent issued a Request for Qualification (RFQ) on 22.01.2016 for selection of Mine Developer and Operator for the development and operation of the said Coalmine through international competitive bidding, an RFP document was issued on 23.02.2017 to RFQ stage qualified bidders.
6. The petitioner Company entered into a Consortium agreement dated 29.03.2016 and formed a Consortium with Sainik Mining and Allied Services Limited (SMASL) for the purpose of submission of bid for the project including planning, engineering, financing, construction, development, operation and maintenance, etc. It is stated in the petition that the petitioner had duly authorised SMASL to initiate arbitration proceedings by filing the present proceeding for and on behalf of the Consortium.
7. As per the facts disclosed in the writ petition, the consortium participated in the bidding process and submitted its proposal for development and operation of the the Coalmine on 27.03.2017. It emerged as a successful bidder. A Bank Guarantee worth Rs. 37 crores was submitted by the petitioner M/s. Adani Enterprises Limited and the Bank Guarantee of Rs. 13 crores had been submitted by SMASL with the respondent as Earnest Money Deposit on 30.03.2016 and 29.03.2016, respectively.
8. Several discussions and meetings for negotiation had taken place between the parties. It is stated that during the said period, from selection of the petitioner as a successful bidder, till the respondent had decided to surrender the Coal block to the concerned Ministry, an intimation in this regard has been given to the petitioner on 09.09.2021. The petitioner had extended the bid validity and the validity of the EMD, Bank guarantee from time to time on the request letters given by the respondent. Further, after a lapse of more than 19 months from the date on which the Consortium emerged as successful bidder, a conditional LOA was issued only on 15.12.2018, which talks of certain approvals from the concerned authorities. It is contended by the petitioner that it was an obligation of the respondent to procure the approvals as mentioned in the conditional LOA and in anticipation that such approvals will be obtained by the respondent, the petitioner, on beha
A conditional Letter of Acceptance does not create a binding contract or arbitration agreement if its conditions remain unfulfilled.
The existence of an arbitration agreement under Section 11 requires clear indication of a binding contract, which was absent in this case; the Letter of Intent was merely a precursor to an actual con....
The main legal point established in the judgment is that the acceptance of a Letter of Intimation (LoI) can create a contractual relationship, and the obligations of the selected bidder, as per the t....
Appointment of Sole Arbitrator – When there is a reference in second contract to terms and conditions of first contract, arbitration clause would not ipso facto be applicable to second contract unles....
Court affirmed that the existence of an arbitration agreement can be inferred from parties' conduct and correspondence, even absent formal signing of the contract, emphasizing the binding nature of a....
The judgment establishes the requirement of a written agreement for arbitration, the interpretation of settlement of disputes clauses, and the significance of party conduct in determining the existen....
The absence of a concluded contract precludes the invocation of arbitration under the Arbitration and Conciliation Act, affirming the need for absolute acceptance in contract formation.
Point of Law : In terms of Section 11(6A) of the A&C Act, the scope of examination under Section 11 of the A&C Act is limited to the existence of the arbitration agreement
Arbitration – Appointment of Arbitrator - Parties though had agreed to submit the jurisdiction of the High Court of Gujarat, they had not agreed to the procedure for the appointment of an Arbitrator.....
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