Raipur Alloys & Steel Ltd. And Anr. vs Union Of India And Ors.
1993 Latest Caselaw 171 Del

JUDGMENT

Arun Kumar, J.

(1) This is a petition under section 33 of the Arbitration Act. The petitioner has challenged the existence of any contract between the parties and therefore the case of the petitioner is that when there is no agreement between the parties, there could be no arbitration clause and the arbitration proceedings before Shri M.A. Cherian, Executive Director, Mechanical Engineering, Railway Board, Ministry of Railways, Union of India or any other nominee who may be nominated by the respondents are uncalled for.

(2) The petitioner company is engaged in the business of manufacture and distribution of various types of steel and processed steel products including steel ingots, steel billet springs, steel rounds and allied steel products. The petitioner company is a regular supplier of some of the items manufactured by it to the Railways under various contracts. Regarding the transaction forming subject matter of the present petition, it is case of the petitioner company that no concluded contract came into existence between the parties and, therefore, the reference to arbitration of certain claims of the respondent on account of risk purchase alleged to have been made by the respondent is uncalled for. The necessary facts in this connection are as under.

(3) By a letter dated 20th September 1984, the petitioner offered to supply certain material to the respondents. The material clause in the letter of offer is the clause regarding price. It is stated there:-

"PRICEVARIATION: Rates quoted are based as per Jpc announcement No.262, dated 21.6.84 of IS:226. Any increase in Price as per JPC/SAIL stockyard price, after the date of execution of the order will be borne by the purchaser."

(4) The respondent replied vide its letter dated 29th November 1984 by making a counter offer in which the price variation clause was different than the clause referred to hereinbefore which was contained in the petitioner's letter of offer. This was followed by respondent's letter dated 6th December 1984 in which the respondent signified its acceptance of petitioner's offer to the extent of quantities, specifications and prices shown in para 6 of the letter dated 6th December 1984. The main controversy in the present petition is regarding prices, therefore, I will make a reference only to the price clause contained in this letter. This reads as under:-

"THE prices are For Raipur/Nagpur dispatching station and inclusive of excise duty of Rs.220.00 per tonne and sales-tax will be charged extra. Any variation in the tax or duties on finished products or raw materials shall be to the buyer's account. The prices are based on the base price of Steel billets to Specification IS-2830 as announced by JPC/Steel Plant/any other authority nominated by the government as on 21st

(5) The petitioner referred to the above letter vide its letter dated 22nd December 1984. On the question of price the petitioner reiterated its position about the price variation clause contained in its original letter of offer. The main point of difference between the parties appears to be that whereas the petitioner pegged its price to the price of Is 226 of the Jpc dated 21.6.1984, the respondent was basing the price on Is 2830 of the Jpc dated 20th February 1985. The petitioner has clearly stated in its letter dated 22nd December 1984 that "as such justification of fixing the price as per Is 2830 is not acceptable to us and you are requested to kindly make the basis as Is 226 JPC/SAIL Stockyard price to claim price variation". It was further reiterated "our offer very clearly stipulates the increase effected in Is 226 JPC/SAIL stockyard and accordingly the same should be mentioned in the contract also, by issuing necessary amendment".

(6) At this stage it may also be mentioned that apart from the main point of difference between the parties regarding price variation clause there was another point of difference regarding quantity to be supplied. It appears that the respondent wanted variation in quantity to a larger extent to be permissible under the contract whereas the petitioner wanted to confine the variation in quantity to five per cent plus/minus. In its letter dated 24th December 1984 the petitioner made it very clear that the enhancement of quantity to be supplied as suggested by the respondent was on a higher side and the same was not acceptable to the petitioner. The petitioner invited attention to its letter dated 22nd December 1984 on the subject and reiterated that the quantity tolerance should be plus/minus five per cent only.

(7) The next letter in the chain of correspondence is the letter dated 28th December 1984 from the respondent to the petitioner in which the respondent clearly stated that price variation on the basis of Is 226 was not acceptable to the respondent. It was further mentioned by the respondent in the said letter that earlier contracts between the parties for similar material also provided for price variation based on Is 2830, therefore, the respondent wanted to stick to the price variation on the basis of Is 2830 and did not agree to the price variation on the basis of Is 226 as suggested by the petitioner. In the end the respondent has stated in the said letter that "copies of contract as well as its Conditions and General Conditions of Contract received Along with your letter No.074/171/7878 dated 22.12.84 are returned herewith with the request that the same may be signed and sent back in token of acceptance".

(8) On 7th January 1985 the petitioner wrote another letter to the respondent with reference to the respondent's acceptance dated 6th December 1984. The petitioner emphasised that it would not be able to supply the enhanced quantity, i.e. the petitioner was not at all agreeable to the increase in quantity as suggested by the respondent. On 15th/18th January 1985 the petitioner sent a conditional letter of acceptance. Both the parties have heavily relied on this letter, therefore, it may be worthwhile to refer to this letter in extenso. The first para of the letter reads:-

"WE thankfully acknowledge receipt of your letter under referenced, above and as desired therein we are returning here with the copies of contract as well as Irs conditions and General Conditions of Contract. duly signed as a token of acceptance, with a request you to incorporate the following amendments/modifications in the contract. (1) The price variation for any increase in prices should be as per JPC/SAIL stockyard price for IS: 226 since our quotation is based on Is 226 and not on IS: 2830 which you have provided in the contract."

(9) Other conditions are not very material for the present purpose. The concluding para is important and reads - "Our acceptance of the contract is subject to the above required amendments/modifications, which we request you to kindly incorporate early".

(10) To complete the sequence of correspondence exchanged between the parties I must notice the petitioner's letter dated 2nd April 1985 in which the petitioner has referred to the entire background on the basis of correspondence exchanged between the parties. Para Nos.4, 5 and 6 of the said letter are significant and are reproduced hereinafter.

"4. Since there was no acceptance of our offer and conditions indicated therein and you have been only informing us that our condition for Pvc cannot be agreed to and requesting for enhancement in supplies, we ave, vide our letter No.02/074/171/8591dt.l5/18.1.85 made it clear to you that the acceptance of the contract was subject to acceptance of price variation as per IS:226 and quantity tolerance+5% only, among other things, and sent the contract to you signed with a clear understanding that the acceptance of the contract was subject to the acceptance of he conditions mentioned in the said letter. We have again made these on its clear to you vide our letter No-02/074/171/9502 dated 16/18.2.85 in reply to you amendment No.2, dt. 24.1.85. 5. Vide your letter No.RS(S)/07/ 84/7718 Dt. 13.2.85, you have again expressed your inability to change the base of price variation clause from Is 2830 to Is 226. You have also not replied to our letter regarding tolerance of quantities at+5%. You have thus not communicated your unqualified acceptance of the conditions with regard to quantity tolerance and price variation which are the bone of contention for the acceptance of the offer. 6. In the facts and circumstances enumerated hereinabove, we are forced to withdraw our offer with effect from the date of receipt of this letter by you. The inconvenience caused to you in this matter is highly regretted."

(11) This shows that finally the petitioner has withdrawn its offer in view of the fact that the respondent did not agree to the basic conditions of the contract regarding price and quantity as suggested and offered by the petitioner. In response to the said letter the respondent merely stated vide its letter dated 6th June 1985 that in view of repudiation of the contract by the petitioner the contract was being cancelled at the risk and cost of the petitioner. The petitioner was also held liable to pay the extra expenditure incurred by the respondent.

(12) On the basis of the above facts the learned counsel for the petitioner has urged that no concluded contract came into existence between the parties and therefore there can be no occasion for the respondent to effect risk purchase at the cost of the petitioner and to claim the same by referring the matter to arbitration. The case of the petitioner is that right from the beginning the petitioner has been insisting on the price variation being pegged to IS226 of the Jpc dated 21st June 1984 and even the acceptance letter issued by the petitioner on 15th January 1985 contains a conditional acceptance because it is clearly stated in the said letter that acceptance of the document is subject to the amendment/modification suggested therein. In other words the acceptance itself is conditional and unless the conditions contained in the acceptance letter are met, there could be no concluded contract. It is further submitted by the learned counsel that since there was never any agreement between the parties on the questions of price variation and quantity tolerance, there was no consensus ad idam. Therefore, it cannot be said that a concluded contract came into existence. Learned counsel for the petitioner has relied on two judgments in support of his contention. One is a judgment of this court , entitled Union of India vs. Uttam Singh Duggal & Co. Pvt. Ltd. On the basis of the facts of the case it was held "it is therefore obvious that the counter-proposals contained in the letter dated 11th May 1961 (Ex.R-20) were never absolutely and unequivocally accepted by and on behalf of the respondent-contractor and no contract was formed on the basis of this letter". The emphasis thus is as to whether from the correspondence exchanged between the parties it can be found that there is unequivocal acceptance of an offer/counter offer. The intention of the parties has to be found on the basis of the material on record, i.e. the correspondence exchanged between the parties. In the present case I find that right from the first letter containing the offer from the side of the petitioner till the last letter dated 15th January 1985 or 2nd April 1985 the stand of the petitioner has been firm and unambiguous that the price variation has to be on the basis of Is 226 of the Jpc dated 21st June 1984. On the other hand the respondent has always been insisting upon the price variation on the basis of Is 2830 of the Jpc dated 20th February 1985. Therefore, at no stage the parties were ad idem regarding the price. The respective stand of both the parties on the question of price was quite firm and unambiguous. Therefore, it is difficult to say that there was any unequivocal acceptance of offer or counter offer. Nor can it be said that there was any consensus between the parties on the term relating to price. In these facts I am unable to hold that a concluded contract came into existence between the parties. The learned counsel for Union of India heavily relied on the petitioner's letter dated 15th January 1985 which contained the acceptance on behalf of the petitioner. It is the said letter in which the petitioner has, while signifying its acceptance, insisted on certain modifications in the counter offer of the respondent. Therefore, the acceptance is conditional and the contract can be said to come into existence only on the condition being satisfied. Learned counsel for the respondent has submitted that "the petitioner could have refused to issue the acceptance or sign the necessary documents in this connection. Once the petitioner signed the documents by way of acceptance, the contract became a concluded contract and it was no longer open to the petitioner to impose any conditions. In reply to this the learned counsel for the petitioner has submitted that the signing of the acceptance was a ministerial act and that itself was done subject to the conditions contained in the letter and, therefore, the same cannot be treated as unconditional acceptance. The acceptance being conditional, cannot be relied upon de hors the condition.

(13) Having considered submissions in this connection on both the sides I am of the view that the acceptance was a conditional acceptance and the same cannot be said to have given rise to a concluded contract as per the counter offer of the respondent. Had there been a gap between the acceptance and the imposition of conditions, there could be something in what is being canvassed on behalf of the respondent. In the present case in the same sentence of the same letter the acceptance and conditions of acceptance are recorded and.-therefore, it cannot be said that acceptance was without any conditions. I am unable to accept the submission on behalf of the respondent.

(14) Counsel for the petitioner has also relied on M/s Zodiac Electrical Pvt. Ltd. vs. Union of India, . In this decision the facts were much stronger to support the contention in favor of the contract being a concluded contract between the parties. Up to the High Court the contention in favor of a concluded contract had prevailed. However the Supreme Court allowed the appeal mainly on the principle that real intention of the parties has to be seen. It is not a matter of mere words used in the correspondence. What is important is to ascertain from the facts on record as to whether there was consensus ad idem between the parties on an important term of contract. The Supreme Court found that the same was missing and it was held that there was no concluded contract between the parties.

(15) In the present case I am of a considered view that there was no consensus ad idem between the parties on the price variation clause. Price clause is a very important clause of a contract and the absence of consensus on the same will lead to the inevitable conclusion that no concluded contract came into existence. Same is my conclusion regarding the clause regarding the quantity to be supplied. Both the parties throughout remained at variance on the question of variation in quantity. Parties held on to their respective stands. Therefore, there was no consensus or meeting of minds which is a pre-requisite for a valid contract.

(16) In these circumstances the petition is allowed and it is held that no contract came into existence between the parties. It follows that there was no arbitration clause between the parties so far as the subject matter of this petition is concerned and reference to arbitration of any claims by the respondent is. therefore, uncalled for and void abinitio. There will be no orders as to costs.