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IN THE HIGH COURT OF ORISSA AT CUTTACK
S. Muralidhar, CJ.
Jhar Mining Infra Private Limited – Appellant
Versus
Cmd, Managing Coalfields Ltd. & Ors. – Respondents
ARBP No. 24 of 2022
Decided On : 27-09-2022
Arbitration - Appointment of Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11(6) - Clause 4(A).37 of the tender document - Clause 1.3.2.5 of the tender document
Fact of the Case:
The Petitioner filed a petition seeking the appointment of an arbitrator to adjudicate disputes arising from a tender document for setting up a coal washery. The Respondent contended that there was no concluded contract and no arbitration agreement, and therefore, the Petitioner cannot invoke Section 11(6) of the Act.
Finding of the Court:
The Court found that by accepting the Letter of Intimation (LoI), a contractual relationship came into existence between the parties. The Court also noted that the obligations of the selected bidder, as per the tender documents, were applicable even prior to the formal execution of the contract. The Court held that the Petitioner had an arguable case as regards the existence of an arbitration agreement and appointed an arbitrator to adjudicate the disputes.
Issues: The issues revolved around the existence of a concluded contract, the applicability of the arbitration agreement, and the obligations of the selected bidder prior to the formal execution of the contract.
Ratio Decidendi: The Court's decision was based on the interpretation of the tender documents, specifically Clause 1.3.2.5 and Clause 4(A).37, to establish the existence of a contractual relationship and an arbitration agreement, even prior to the formal execution of the contract.
Final Decision: The Court appointed an arbitrator to adjudicate the disputes between the parties, including their claims and counterclaims.
JUDGMENT
1. The Petitioner, M/s. Jhar Mining Infra Private Limited has filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 ('the Act') seeking the appointment of an arbitrator to adjudicate the disputes between the Petitioner and Opposite Party No.1 (Mahanadi Coalfields Ltd.) (MCL) arising out of a tender document.
2. The background facts are that the MCL published a notice inviting tender (NIT) dated 23rd March, 2018 and RFQ and RFP documents (hereafter 'Tender documents') for setting up of Hingula Washery at Hingula area, MCL on Build-Operate Maintain Basis. The Washery was to be set up with a proposed throughput capacity of 10 MTPA of raw coal (Dry basis). The Petitioner submitted its bid on 2nd July, 2018 and deposited a bid amount of Rs.50 lakh. On 7th February, 2019 MCL issued a Letter of Intimation (LOI) to the Petitioner informing the Petitioner that it had been identified as the lowest bidder for the project. The Petitioner was requested to return the signed LoI as a mark of acceptance. The LoI stated that a letter of award (LoA) would be issued to the Petitioner after receipt of environmental clearance (EC) in accordance with the terms and conditions of the tender document. By its letter dated 8th February, 2019 the Petitioner accepted the LoI. The Petitioner states that it thereafter provided assistance/support to MCL for obtaining the EC and other statutory clearances.
3. With there being a delay in procuring the EC, MCL requested the Petitioner to extendthe validity of the bid amount on several occasions. It is stated that while the Petitioner kept extending the validity of the bid amount from time to time, all of a sudden MCL by letter dated 14th June, 2021 cancelled the tender and the LoI issued to the Petitioner. By a letter dated 14th July, 2021 the Petitioner disputed the cancellation and requested MCL to resolve the dispute in terms of Clause 4(A).37 of the tender document.
4. An exchange of correspondence with MCL ensued. The Petitioner issued a notice dated 30th December, 2021 to MCL invoking the arbitration in terms of the aforementioned clause to the tender document and setting out a panel of four names. MCL was asked to choose from among them one person to act as the sole arbitrator. MCL by its letter dated 13th January, 2022 contended that the cancellation of the tender of the LoI was neither a dispute under Clause 4(A).37 of the tender document nor a subject to be settled under the provisions thereof. Thereafter the present petition has been filed.
5. This Court has heard the submission of Mr. Gautam Misra, learned Senior Counsel appearing for the Petitioner and Mr. Debaraj Mohanty, learned counsel appearing for the Opposite Parties (MCL).
6. In resisting the appointment of an arbitrator under the above clauses, the contention of Mr. Debaraj Mohanty, learned counsel for MCL is that there is no concluded contract between the parties and that the Petitioner cannot yet be considered 'a selected bidder'muchless the 'owner'. In other words, unless a formal contract, according to MCL, in the form of a LoA or an agreement is entered into, there is no contractual relationship between the parties. Further, it is submitted that Clause 4(A).37 of the general terms and conditions of the contract i.e. GTC states that 'to avoid litigation in dispute during the course of execution', efforts should be made to first to settle the dispute at the 'company level'. All of these are only applicable to a successful bidder after execution of an agreement between the parties. It is further contended that there is no arbitration agreement in terms of Section 7 of the Act and, therefore, the Petitioner cannot invoke Section 11(6) of the Act seeking the appointment of an arbitrator.
7. Reliance is placed by Mr. Mohanty on the decision in Dresser Rand S.A. v. Bindal Agro Chem Ltd. (2006) 1 SCC 751; Bharat Sanchar Nigam Limited v. Telephone Cables Ltd. (2010) 5 SCC 213; South Eastern Coalfields Lt
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....
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 arbitration clause becomes operative only when a concluded contract exists, and the absence of a concluded contract renders the application for appointment of an Arbitrator under Section 11 (6) o....
The main legal point established in the judgment is the existence of an arbitration agreement between the parties for resolution of disputes as per clause 13.5 of the tender document, and the determi....
A conditional Letter of Acceptance does not create a binding contract or arbitration agreement if its conditions remain unfulfilled.
The court's jurisdiction under Section 11 of the A&C Act is limited to determining the existence of an agreement with an arbitration clause and the presence of arbitral disputes.
Disputes arising before the parties enter into a contract are not arbitrable under the arbitration clause in the subsequent contract agreement.
The Court's limited jurisdiction under Section 11 of the Act does not allow for a detailed consideration of the disputes, which is to be determined by the arbitrator.
Parties with an arbitration clause must resolve disputes through arbitration, as established in the contract terms.
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