Rajendera Sethia vs Gail (India) Limited
2009 Latest Caselaw 1766 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                    Date of Reserve: April 29, 2009
                                                       Date of Order: April 30, 2009

+ OMP 234/2009
%                                                             30.04.2009
    Rajendera Sethia                                          ...Petitioner
    Through : Mr. Jayant Bhushan, Sr. Adv. with Ms. Preeti, Advocates

       Versus

       Gail (India) Limited                        ...Respondent
       Through: Mr. Rakesh Munjal with Ms. Rakhi Ray and Mr. S.S. Ray,
       Advocates


       JUSTICE SHIV NARAYAN DHINGRA

1.     Whether reporters of local papers may be allowed to see the judgment?

2.     To be referred to the reporter or not?

3.     Whether judgment should be reported in Digest?


       JUDGMENT

1. By this application under Section 9 of the Arbitration & Conciliation Act,

1996 (for short, "the Act"), the petitioner has made a prayer that the

respondent should be restrained from acting any further in receiving of

tender No.GAIL/ND/BD/C&P/PW8004/2002234 1 (Bid Invitation

No.8000001069) dated 3rd April 2009, inviting Bids for "Transportation of

Polymer from Gail‟s Petrochemical Complex Pata to various Zones across the

Country", particularly with regard to inviting of Bid in respect of Zones West-1

and West-2. The contention of the petitioner is that the petitioner was a

successful bidder in respect of these Zones in the previous tender invited by

the respondent and as per the terms and conditions contained in bid

documents dated 12th August 2008, the petitioner was required to submit

bank guarantee towards earnest money/ bid security. The petitioner had

OMP 234/2009 Rajendra Sethia v. Gail (India) Ltd. Page 1 Of 5 submitted the bank guarantee and the petitioner was duly awarded the

contract pursuant to bid of document dated 12th August 2008 for Region

West-1 and West-2. The respondent had issued a fax of intent dated 16 th

December 2008 awarding the contract for Zones West-I and West-II for an

estimated value of approximately Rs.19.49 crore and in accordance with the

terms and conditions of the contract; the petitioner was required to furnish

the performance bank guarantee. The petitioner was already having contract

vide acceptance letter dated 19th May 2008 in respect of regions Daman and

Maharashtra, falling in the said two zones. Only additional contract was to be

awarded to the petitioner for regions Madhya Pradesh, Silvasa and Goa. The

petitioner wrote a letter that since he was already having the contract for two

regions, he should be allowed to furnish the bank guarantee only in respect of

remaining three regions viz Madhya Pradesh, Silvasa and Goa and sought

clarification regarding this from the respondent. The respondent should have

clarified this and asked the petitioner to give performance bank guarantee

only for three regions but instead the respondent insisted on contract

performance bank guarantee for the entire zones and threatened that in case

of failure, the respondent would be constrained to initiate actions as per the

provisions of the contract. After this threat, the petitioner approached this

Court under Section 9 of the Act and sought an injunction against

encashment of the bank guarantee towards earnest money for a sum of

Rs.21,50,000/-. Since the respondent had retendered the same region again

for which the letter of intent was issued to the petitioner, the petitioner has

approached this Court with this second application under Section 9 of the

Arbitration & Conciliation Act, 1996.

2. Counsel for the respondent submitted that there was no concluded

OMP 234/2009 Rajendra Sethia v. Gail (India) Ltd. Page 2 Of 5 contract between the petitioner and the respondent. Issuance of letter of

intent does not amount to conclusion of contract in terms of clause 1.1.1.0.

The tender documents very categorically provided that the contract shall

mean the agreement between the employer and the contractor for execution

of work including therein all contract documents. The contract documents

have been defined as collective tender document designs, drawings,

specifications, schedule of quantity, rates, letter of acceptance and agreed

variations, if any and such other documents constituting the tender and

acceptance thereof. It is submitted that pursuant to acceptance of tender, no

agreement was executed between the parties as required under the tender

document and mere acceptance of tender does not tantamount to a

concluded contract. Counsel for the petitioner rebutted this argument by

stating that the tender invitation amounted to an offer on behalf of the

petitioner and once this offer was accepted by sending an acceptance letter,

a concluded contract came into force and therefore there was a concluded

contract.

3. Counsel for the respondent further submitted that the tender document

specifically provided that this tender was for „zero deviation‟ tender as

provided in clause 16.2. and the offer was to be made by the parties based on

terms and conditions as specified in the tender document, general conditions

of contract, special condition of contract and instructions to bidder, scope of

work, technical specifications etc. It was also provided that no commercial

clarification or technical clarification will be sought by the bidder after receipt

of bid and in case of any deviation/ non-confirming, the bid was liable to be

rejected. It is submitted that the petitioner‟s non giving of performance bank

guarantee in respect of zones for which he gave bid, amounted to non

OMP 234/2009 Rajendra Sethia v. Gail (India) Ltd. Page 3 Of 5 conformity to the conditions of the tender and the bid therefore stood

rejected despite letter of intent given by the respondent. The acceptance

letter was an indication to the petitioner that if he fulfils all the conditions as

given in the bid, then only the contract will become concluded contract and

the contract will come into force. No concluded contract can come into force

without fulfilling all the conditions.

4. An application under Section 9 of the Act can be made by a party to the

contract where there is an arbitration clause, in the event of a dispute having

arisen and the party intends to refer the dispute to arbitration. The dispute

sought to be referred to the Arbitrator therefore must be specified in the

application. In the present case, the petitioner has not stated as to what

dispute is sought to be referred to the arbitrator.

5. However, the dispute seems to be made out by the petitioner is that

the retendering was bad and was contrary to the contract and amounted to

breach of contract. If, the petitioner‟s contention that there was a concluded

contract is accepted, at the most petitioner would be entitled to the damages

from the respondent for not awarding the contract to be performed despite

alleged fulfilling of the conditions by the petitioner. The petitioner cannot

come to the Court and say that the respondent should be stopped from giving

the contract to anyone else because the petitioner considers that the

respondent had breached the contract with the petitioner. The purpose of

Section 9 is not to keep the broken contract surviving. The intent and purport

of Section 9 is to preserve the interim custody of any goods or order sale of

any goods which are the subject matter of the contract or to secure amount

of the dispute in the arbitration or detention or preservation or inspection of

OMP 234/2009 Rajendra Sethia v. Gail (India) Ltd. Page 4 Of 5 any property which is the subject matter of the disputes or appointment of a

receiver etc. The Court cannot stop a party from breaching the contract nor

can give directions under Section 9 to the Respondent not to breach the

contract. Breaching a contract is a cause which gives rise to arbitration and it

is the arbitrator who has to decide which of the parties is at fault and what

compensation/ damages are to be given.

6. The application filed by the petitioner seeking a relief that the

respondent should be given directions to keep the contract of the petitioner

surviving, presuming that the petitioner had fulfilled all the conditions, is

misconceived. The respondent is at liberty to float tenders in respect of any

services that the respondent requires. If the petitioner considers that its

earlier contract has been breached, the petitioner would be at liberty to raise

this dispute before the Arbitrator and claim compensation. The petitioner

itself pleaded that even the earlier regions for which the petitioner was

having the contract were retendered and the petitioner had participated in

the retendering of the earlier tender on August 2008. The documents filed by

the petitioner show that even in the present tendering process, the petitioner

is participating and has taken part in the conference of the contractors.

7. In view of foregoing facts, I consider that the present application under

Section 9 is not maintainable and is hereby dismissed. No orders as to costs.

April 30, 2009                                      SHIV NARAYAN DHINGRA J.
rd




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