Katari Engineers & Consultants vs National Airport Authority & Anr.
1999 Latest Caselaw 1084 Del

ORDER

Manmohan Sarin, J.

1. This is a petition under Section 20 of the Arbitration Act filed by the petitioner, seeking the appointment of an arbitrator in terms of Clause-25 of the tender document to adjudicate upon disputes/claims set out in para 9 of the petition. Reply to the petition duly filed. Following issues were framed on 10.11.1995:-

(i) "Whether the petition has been instituted and signed and verified by an authorised person on behalf of the plaintiff? OPP

(ii) Whether any contract was executed between the parties containing arbitration agreement, if so, to what effect? OPP

(iii) In case, issue No. 2 is proved in affirmative, whether the disputes are still not liable to be referred for arbitration? OPD

(iv) Relief."

2. Evidence by way of affidavit was also filed. With the consent of the parties the case is taken up for disposal today.

3. The admitted facts leading to the filing of the petition may briefly be noted.

The Petitioner Company is an interior decorator carrying on the business of furnishing and supply of furniture fixtures, lighting, well panell-

ing and air conditioning etc. The respondents vide an advertisement dated 18.1.1992 in the Newspaper "Hindustan Times" invited tenders for the work of furnishing of operational complex, Block-B at Safdarjung Air Port, New Delhi. Petitioner company deposited the cost of tender of Rs. 500/- by a demand draft, but the said draft was returned by the respondent authority on the ground that work has been suspended. However, subsequently the respondent authority sent a letter dated 9.12.1992 seeking information and documents mentioned in its letter.

4. A term of tender was that it had to be submitted in two parts, one marked as envelope No. 1 and the second marked as envelope No. 2. The first was to contain the earnest money and the tenderers undertaking to comply with the terms and conditions in its entirely. The petitioner deposited the earnest money of Rs. 20,000/-. The second envelope was to contain the bid containing the rates for items as laid down by the respondent authority. The tenders were opened in the presence of the parties. The grievance of the petitioner emanates from the fact that the petitioner was the lowest bidder and yet the work was awarded to the second lowest bidder. The contention of the petitioner is that once the petitioner had complied with the requirement of envelope No. 1 and its bid was in accordance with the terms and conditions and the respondents had no right to reject its tender when it was found to be the lowest bidder as per the rates given in envelope No. 2. The respondents on the other hand contend that while petitioner complied with the requirement of the undertaking to comply with the terms and conditions of the tender as required under envelope No. 1, it failed to abide by the conditions for the bid. The respondent allege breach of Clauses 3.5 and 3.6 of the supplementary condition of the notice inviting tenders, which is reproduced as under :-

"3.5 Once the tenderer has given an unconditional acceptance to NAA's tender conditions in its entirely, he is not permitted to put any remark(s)/condition(s) (except unconditional rebate on price, if any) to/along with the tender enclosed in `cover 2'.

3.6 In case the condition 3.5 mentioned above is found violated after opening 'cover No. 2' the tender shall be liable to be rejected and NAA shall, without prejudice to any other right or remedy, be at liberty to forfeit the full said earnest money absolutely."

5. The respondents contend that the petitioner in view of Clause 3.5 and 3.6 reproduced above, could not have put a condition of requirement of mobilisation advance vide its letter bearing No. KEC/Inter./NAA/93 dated 20.1.1993 in the second cover. The petitioner rendered himself disqualified in view of the breach of condition No. 3.6 and as such the tender and bid of the petitioner did not require any further consideration and was rejected. The respondents thus seek to justify their action on the basis of the terms and conditions of the tendered document.

6. In the light of the foregoing factual position, let us consider the case of the petitioner. The petition has been signed, verified and insti-

tuted by a principal officer. Respondent does not press the objection in this regard. As such issue No. 1 is decided in favour of the petitioner.

7. The issues requiring consideration are issues No. 2 and 3. Learned counsel for the petitioner Mr. Ahluwalia submitted that the tender document is described as tender-cum-contract and it contains all the terms and conditions of the contract. His submission is that it is not merely a tender but it is a tender-cum-contract. Counsel for the petitioner urged that once envelope No.1 was found to be in order and the petitioner was found to be the lowest, respondents have no option but to accept his bid and a concluded contract came into being as per the tender-cum-contract, which contained an arbitration agreement. Accordingly, the disputes between the parties are liable to be referred to arbitration in view of the arbitration agreement contained in Clause 25 of the tender cum contract.

8. The crux of the controversy thus is whether a concluded contract came into being or not? This is a case where the petitioner's bid or tender is sought to be rejected on the ground of non-compliance with the terms and conditions of the tender. Once the bid is rejected, it cannot be said that a concluded contract had come into being and the disputes relating to the said contract are referable to arbitration. It may be that the petitioner may have his independent remedies against wrongful rejection of his bid or may lay his claim for damages for wrongful rejection of the bid, but that is a separate matter and the said claim would then be founded not on a concluded contract, but rather on the arbitrary or illegal rejection of his bid. I am not persuaded to accept that simply because the document is titled tender-cum-contract, it should be regarded as a concluded contract, the moment the bid of the petitioner is found to be the lowest. The bid could be rejected for a variety of reasons including not meeting the eligibility criteria and not being in accordance with the provisions of the tender.

9. Learned counsel for the petitioner sought to place reliance on J.K. Jain and Others Vs. Delhi Development Authority and Others, .

The cited case is completely distinguishable and would not advance the petitioner's case. In the cited case, the tender submitted along with the covering letter was duly accepted after negotiations for reduced quantity of supply. A formal agreement was also executed. The Apex Court held that though the arbitration agreement was not itself there in the formal contract executed, the terms and conditions of the tender were agreed to be part of the said contract and binding between the parties. Since the tender document contained the arbitration agreement, which was part of the formal contract, disputes were referable to arbitration. It would be seen that admittedly this was a case of a concluded contract, where a formal contract had been executed. In the present case the existence of a concluded contract is itself challenged. Learned counsel for the respondent next relied on M/s. India Meters Ltd., Madras Vs. Punjab State Electricity Board and Others, where after considering the correspondence, the Apex Court came to the conclusion that there was no concluded contract between the parties and as such respondent was not entitled to enforce arbitration.

10. In view of the foregoing discussion, I am of the view that the petitioner has failed to prove that there was a concluded contract between the parties. In the absence of a concluded contract the petition under Section 20 of the Arbitration Act fails. The petition is accordingly dismissed with no orders as to costs.