Triveni Oil Field Service Ltd. vs Oil And Natural Gas Commission
2006 Latest Caselaw 69 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. This is a petition under Section 20 of the Arbitration Act, 1940 seeking a prayer that this court should make an order of reference to the Arbitrator. When this matter came up before this court on 18.08.1999, an objection was taken by the learned counsel for the respondent that this court would not have territorial jurisdiction to entertain the present petition. In view of the objection taken by the learned counsel for the respondent, the following preliminary issue was framed:-

Whether this court has territorial jurisdiction, if not to what effect?

2. The counsel for the parties have agreed that this issue be decided and if the issue is decided in favor of the petitioner meaning thereby that this court has territorial jurisdiction, then the application may also be disposed of on merits. The counsel for the parties have advanced arguments on this understanding.

3. The brief facts giving rise to this petition are that the respondent issued invitations to bid on 09.06.1992 for Charter-Hire of land rigs for onshore oil exploration in different parts of India for various quantities and types of rigs. I need not go into the details of the invitation. However, what is important is that the invitation to bid was issued on 09.06.1992 from Dehradun. The petitioner submitted its bid on 07.08.1992 at Dehradun. The respondent opened the bids at Dehradun on 10.08.1992 and the respondent, after examining the bids submitted by others, including the petitioner, accepted the offer made by the petitioner and issued a Letter of Intent from Dehradun on 25.02.1993 in the form of a telex message addressed to the petitioner at New Delhi. The said telex message indicating the acceptance of the respondent was received by the petitioner at its telex machine at New Delhi. It appears that thereafter the formal contract did not materialise. According to the petitioner, it did not materialise on account of the default of the respondent. However, it is the respondent's case that the petitioner defaulted in signing the formal contract within the time specified and also because the petitioner, in point of fact, withdrew from the offer which was not permitted under the bid conditions. Therefore, according to the respondent, they were compelled to invoke the Bid Bond Guarantee of Rs.30 lakhs on 31.05.1993 which was extended by the petitioner's bankers in favor of the respondent. It is also to be noted that the payment under the bank guarantee was made at New Delhi in favor of the respondent. It is under these circumstances that one has to consider the question of territorial jurisdiction.

4. The learned counsel for the respondent submitted that nothing has happened in Delhi. The invitation to bid was issued at Dehradun, the bids were submitted at Dehradun and were opened at Dehradun and the Letter of Intent was also issued from Dehradun. Therefore, no part of the cause of action has arisen within the territorial limits of this court. He also contended that, in point of fact, there is no question of reference to arbitration because the formal contract was not signed and there existed no contractual relationship between the petitioner and the respondent. He submitted that in view of the fact that the contract itself had not been signed, there was no arbitration agreement and the question of reference to arbitration did not arise. Therefore, the learned counsel for the respondent submitted arguments on two aspects: one that there does not exist any arbitration agreement and two, even if it is held that there was an arbitration agreement, this court did not have territorial jurisdiction to entertain the present petition.

5. The learned counsel for the petitioner, however, argued that part of the cause of action arose in Delhi. He submitted that the contract was concluded and made in Delhi and that the bank guarantee was invoked in Delhi and the payment under the bank guarantee was made at Delhi. Therefore, this court would have territorial jurisdiction. The learned counsel for the petitioner drew my attention to the bid documents for the subject tender. He referred to the invitation to bid and a particular portion of the same which reads as under:-

The Tender will be governed with the "Guidelines to bidders" as per Part-I, "General Terms of Contract" placed at Part-II, "Technical Specifications" at Part-III and "Bid Evaluation Criteria" at Part-IV.

He then referred to clauses 11, 27 and 28 of the Guidelines to Bidders. The said clauses read as under:-

11. SIGNING OF CONTRACT

11.1 The successful bidder shall be required to execute a formal contract in accordance with the requirements of ONGC within 15 (fifteen) days from the date of issue of Letter of Intent from ONGC or within such extended time as may be permitted by ONGC in this regard failing which bid bond shall be forfeited. For this purpose the bidder(s) shall depute their authorised representative (s) Along with Power of Attorney in favor of signatory. Main conditions of the proposed contract shall be as specified hereinafter under the title "General Terms & Conditions of Contract". These terms would apply for each rig separately.

27. ACCEPTANCE OF OFFER BY TLX/TELEGRAM:

Acceptance by the purchaser may be normally communicated by TLX/telegram. With the issue of telegram/TLX of acceptance the contract shall be deemed to have concluded. Contract shall mean and include the invitation to tender, instructions to tenderers, tender, acceptance of tender, contract particulars and the general and special conditions specified in the acceptance of tender.

28. BID BOND / EARNEST NONEY / SECURITY DEPOSIT / PERFORMANCE BOND:

28.1 EARNEST MONEY / BID BOND;

Bid bond on enclosed proforma (Annexure-I) from an Indian Nationalised / Scheduled Bank for US$ 1,00,000 US Dollars One lakh (for foreign bidders) and Rs.30,00,000 (Rs. Thirty Lakhs) for Indian bidders for each rig offered valid for 180 days shall be submitted with the technical bid. In case no Indian Bank is situated in foreign bidders' country then bank guarantee from one of the banks listed in enclosure to Annexure-I will be considered for acceptance. The successful bidders may be required to extend the validity of bid bond for further period as may be required by ONGC. Bid bond should be given on non judicial stamp paper of Rs.62.50 as per U.P. (India) Stamp Act.

28.2 Offers without earnest money / Bid Bond will be ignored.

28.2.1 The earnest money / Bid Bond shall be forfeited by the Commission in the following events;

(a) If tender is withdrawn during the validity period or any extension thereof.

(b) If tender is varied or modified in a manner not acceptable to ONGC during the validity period or any extension of the validity duly agreed by the bidder.

(c) If a tenderer, whose tender has been accepted fails to furnish Security Deposit / Performance Bank Guarantee within 30 days of LOI before the expiry of bank guarantee bid bond.

28.2.2 The Earnest Money / Bid Bond of un-successful bidders will be returned on finalisation of the tender. The Earnest Money / Bid Bond of successful binder will be returned on receipt of Security Deposit / Performance Bond.

29. SECURITY DEPOSIT / PERFORMANCE BOND;

The successful bidder, within 30 days of issue of Letter of Intent, will be required to send Performance bank guarantee in the format at Annexure-II.

6. He then referred to clause 33 of the General Terms of Contract which is the arbitration clause and which reads as under:-

33. ARBITRATION

If any dispute, difference, question or disagreement shall, at any time, hereafter arise between the parties hereto or the respective representatives or assigns in connection with or arising out of the Contract or in respect of meaning of specifications, designs, drawings, Estimates, schedules, annexures, order, instructions, the construction, interpretation of this Contract, application or provisions thereof or anything hereunder contained or arising hereunder or as to the rights, liabilities or duties of the said parties hereunder or any matter whatsoever incidental to this Contract whether arising before or after the completion of the work under this Contract, which cannot be mutually resolved by the parties, the same shall be referred to arbitration.

The reference to arbitration shall be two arbitrators and in case of disagreement on a point under reference, the arbitrators shall make a reference to the Umpire, who should be appointed by the arbitrators before proceeding with the arbitration proceedings. The decision of the Arbitrators and failing to an agreed decision by them, the decision of Umpire shall be final and binding on the parties.

The party desiring the settlement of dispute shall give notice of its intention to go in for arbitration clearly stating the points of dispute to be decided by arbitrators and appoint its own arbitrator and call upon the other party to appoint its own arbitrator within 30 days. If the other party fails to appoint its arbitrator within stipulated period or the two arbitrators fail to appoint the Umpire, the court having jurisdiction shall appoint the second arbitrator and / or the Umpire as the case may be.

It will be no objection to any such appointment that the arbitrator so appointed is an employee of ONGC or that he had to deal with the matters to which the Contract relates and that in the course of his duties as ONGC's employee he had expressed views on all or any of the matter in dispute or difference.

If the arbitrators or Umpire to whom the matter is originally referred dies or refuses to act or resign from the position of arbitrators or Umpire for any reasons, a new arbitrator / Umpire shall be appointed by the respective parties / arbitrators in the manner aforesaid. The new arbitrator / arbitrators or new Umpire shall be entitled to proceed with the reference from the stage at which it was left by his predecessor if both the parties consent to this effect, failing which they will be entitled to proceed denovo.

It is further term of the Contract that no person other than the person appointed as aforesaid shall act as an arbitrator / Umpire and that, if for any reason, that is not possible, the matter is not to be referred to the arbitration at all.

The arbitrators or the Umpire may, from time to time, with written consent of all the parties to the Contract, enlarge the time to make and publish their or his award.

It is also a term of the Contract that the Contractor shall not stop the work under this Contract and the work shall continue as expected to continue whether the arbitration proceedings have commenced or not.

The arbitrators or the Umpire, as the case may be, shall decide by whom and in what proportions the arbitrator's or Umpire's fees as well as cost incurred in arbitration shall be borne.

The arbitrators shall be deemed to have entered on the reference on the date they appoint an Umpire.

The arbitrators/umpire shall give reasoned award in respect of each dispute or difference referred to him. The award as aforesaid shall be final, conclusive and binding on all the parties of this Contract in accordance with the law.

The venue of the arbitration shall be at Dehradun, (U.P.), India.

Subject as aforesaid, the provisions of Indian Arbitration Act, 1940 and any statutory modifications of reenactments thereof and rules made there under for the time being in force shall apply to the arbitration proceedings under this clause.

After reading the aforesaid clauses conjunctively and with particular reference to the said clause 27 of the Guidelines to Bidders, it is clear that the contract is deemed to be concluded when the acceptance by the purchaser is communicated by telex / telegram to the offerer. The said clause 27 also makes it clear that the contract means and includes the invitation to tender, instructions to tenderers, tender, acceptance of tender, contract particulars and the general and special conditions specified in the acceptance of the tender. Upon a reading of these clauses, it becomes immediately clear that the moment the acceptance is communicated by telex / telegram to the offerer, then the contract comes into being and all the conditions contained in the various documents as referred to in the invitation to bid, i.e., Part-I, Part-II, Part-III and Part-IV are applicable. One of the clauses contained in these documents is the arbitration clause 33 which has been set out hereinabove.

7. Reference was made by the learned counsel for the petitioner to the decisions of the Supreme Court in the case of Bhagwandas Goverdhandas Kedia v. Girdharlal Parshottamdas and Co.: 1966 SCC 543 and A.B.C. Laminart Pvt. Ltd and Anr. 1989 SC 1239. These decisions were relied upon by the learned counsel for the petitioner for the purpose of showing that part of the cause of action has arisen in Delhi inasmuch as the contract came into being when the communication by telex was received by the petitioner at its office in New Delhi. The Supreme Court in the case of Bhagwandas (supra), after a detailed examination of the subject as to when a contract comes into being in cases where the communications are exchanged by post and communications are exchanged over the telephone or telex, came to the conclusion that the two stand on a different footing. In other words, the normal rule applicable to postal communications would not be applicable to communications which are instantaneous as in the case of a telephone conversation or a telex message. The normal rule for postal communications, as observed by the Supreme Court, is that the contract is completed the moment the acceptor posts his acceptance of the offer. Had the communication been by post in the present case and had the letter been posted at Dehradun, under the normal rule, the contract could have been said to have been completed and concluded at Dehradun and no part of cause of action would have arisen at New Delhi. But, in the present case, the communication of the acceptance was by way of a telex message and the principles applicable are different as pointed out by the Supreme Court in Bhagwandas (supra). The best explanation given for the difference is the one given by Lord Denning in the case of Entores Ltd v. Miles Far East Corporation: 1955 (2) QB 327 wherein he concluded as under:-

...that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offerer: and the contract is made at the place where the acceptance is received.

8. This conclusion was approved by the Supreme Court in the case of Bhagwandas (supra). That being the case, it can safely be said that the contract in the present situation was concluded at New Delhi, i.e., the place where the acceptance was received. A similar line of thought is discernible in the case of A.B.C. Laminart (supra) where the Supreme Court was of the view that the making of the contract constituted a part of the cause of action and that the acceptance of an offer and its intimation results in a contract and, therefore, a suit could be filed in a court within whose jurisdiction the acceptance was communicated. These two decisions of the Supreme Court which were cited by the learned counsel for the petitioner make it abundantly clear that the making of the contract constitutes a part of the cause of action and that the contract, in the present case, was made at Delhi. Therefore, this court would have jurisdiction to entertain the present petition.

9. The submissions of the learned counsel for the respondent to the contrary are not tenable. He also submitted that clause 33 itself provides for the venue of arbitration to be at Dehradun and, therefore, this court would not have jurisdiction. The venue of arbitration and jurisdiction under Section 30 of the Arbitration Act, 1940 are two entirely different aspects and the two should not be confused. While arbitration may be conducted at one place, the court entertaining a petition under Section 20 may be at a different place.

10. The learned counsel for the respondent further submitted that clause 27 should not be read in isolation and it should be read in conjunction with clause 11.1 and because there is no signed formal contract between the parties, therefore, there is no contract between the parties and the question of reference to arbitration does not arise. Having considered the arguments advanced by the counsel for the parties and also the aforesaid decisions of the Supreme Court, I am of the view that this argument is also not tenable inasmuch as the said clause 27 is quite clear in saying that the moment the acceptance is communicated to the offerer, the contract would be deemed to have come into being. Clause 27, it must be remembered, forms part of the "Guidelines to bidders" and it applies to the entire stage till the contract is formalised and clause 27 makes it explicit that the moment the acceptance is communicated, the contract is deemed to have come into being and the expression contract has also been specifically delineated in the sense that all the surrounding documents are said to constitute the contract. Therefore, I have no hesitation in accepting the contentions raised by the learned counsel for the petitioner and refusing those raised by the learned counsel for the respondent.

11. Accordingly, the preliminary issue with regard to territorial jurisdiction is decided in favor of the petitioner by holding that this court does have territorial jurisdiction to entertain the present petition. And, having examined the other aspects of the matter and finding that there exists an arbitration clause (the said clause 33), I direct that the said agreement be filed and the dispute between the parties be referred to arbitration as per the terms of the arbitration clause. The mechanism of appointment of an arbitrator as indicated in the said clause 33 shall be followed. This petition stands disposed of. No order as to costs.