JUDGMENT
Madan B. Lokur, J.
Page 1388
1. This is a petition under Section 11 of the Arbitration and Conciliation Act, 1996 (the Act) for the appointment of an Arbitrator.
2. It is stated that Respondent No. 1 was desirous of certain works being executed, namely, design, construction and commissioning of dry-cum-wet intake wells of various capacities as detailed in the notice inviting tender. The work was in different localities in Bhopal and included supply, erection, installation of electrical and mechanical equipment and other allied works described as Package No. V as per scope of work of the tender.
3. The Petitioner says that its bid was accepted at the prices quoted by the Petitioner by a letter of acceptance dated 17th January, 2000, which was communicated to the Petitioner in New Delhi. Thereafter, a formal agreement was entered into between the parties being agreement 6/99-2000 dated 31st January, 2000.
4. The Petitioner commenced work on 5th February, 2000 and during the process of completing the work under the contract the Petitioner submitted bills for payment. Unfortunately, Respondent No. 1 made frequent changes in the drawings of the work and did not release the payment in time. One thing led to another with the result that disputes arose between the parties. According to the Petitioner a sum of Rs. 57,91,861/- was long overdue to it, but instead of making the payment Respondent No. 1 terminated the contract and expelled the Petitioner from the site without releasing any payments. To make matters worse, Respondent No. 1 illegally invoked the bank guarantees given by the Petitioner, with the result that the Petitioner filed a petition in this Court for an interim measure under Section 9 of the Act being Arbitration Petition No. 256/2003, in which an ex parte ad interim injunction was granted.
5. On these broad facts, the Petitioner sought arbitration of the disputes under Clause 67 of the agreement entered into between the parties. Since Respondent No. 1 did not appoint an Arbitrator, the present petition was filed.
6. In response, the Respondents have raised two preliminary objections. The first preliminary objection is that this Court has no territorial jurisdiction to entertain the petition since no part of the cause of action arose within the territorial jurisdiction of this Court. The agreement between the parties was executed in Bhopal and it is only the Courts in Madhya Pradesh that have jurisdiction in the matter. The second Page 1389 preliminary objection taken was that in terms of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, (the Adhiniyam) any dispute to which the State Government or a Public Undertaking wholly or substantially owned or controlled by the State Government is a party will be referred to an Arbitral Tribunal constituted under the Adhiniyam. It is stated that Respondent No. 1 is a Public Undertaking that is either wholly or substantially owned or controlled by the State Government and, therefore, by virtue of the provisions of the Adhiniyam, arbitration has to take place under the provisions thereof.
7. The principal contention of learned Counsel for the Petitioner for invoking the territorial jurisdiction of this Court is based on the letter of acceptance dated 17th January, 2000. It is contended that since this letter was received in Delhi, a part of the cause of action arose in Delhi and, therefore, this Court has territorial jurisdiction to entertain the present petition.
8. Learned counsel for the Petitioner cited several decisions in support of her contention that the cause of action would arise where the letter of acceptance is received. In particular she referred to Bhagwandas Goverdhandas Kedia v. Girdhar Lal Parshottam Das and Co. and Ors. , Matanhella Brothers and Ors. v. Shri Mahabir Industries Pvt. Ltd. and State of Maharashtra and Ors. v. Ranjeet Construction .
9. In Bhagwandas Goverdhandas Kedia the contract was accepted over telephone. The Supreme Court observed that the Contract Act does not expressly deal with the place where a contract is made. Ordinarily, it is the acceptance of offer and intimation of that acceptance which results in a contract. It was held that though the acceptance of offer was made at Khamgaon, but since it was telephonically conveyed and acceptance received in Ahmedabad, a part of the cause of action arose in Ahmedabad because the contract then stood concluded.
10. In so far as Matanhella Brothers is concerned, I do not see the relevance of that decision because in that case the contract was completed at Gorakhpur when the telegram of acceptance was dispatched. The question whether a part of cause of action arose in the place where the telegram was received was not adjudicated upon.
11. Finally, in so far as Ranjeet Construction is concerned the letter of acceptance was received at Pune but the contract was formally executed between the parties at Kolhapur. In these circumstances, it was held that the Courts in Pune had territorial jurisdiction to entertain any dispute between the parties. What transpires from a reading of this decision and Bhagwandas Goverdhandas is that no other steps were required to be taken by any of the parties between the receipt of acceptance and formal execution of the contract. On dispatch of the acceptance by post or by telephone, the contract between the parties stood concluded. This, to my mind, is vital because if Page 1390 there is something that is still required to be done before the contract is concluded, then the mere receipt of acceptance is not enough.
12. For a contract to be concluded, the acceptance must be absolute and unqualified as per Section 7 of the Contract Act. Until then, the correspondence between the parties is only at the stage of negotiations.
13. The letter dated 17th January, 2000 conveyed acceptance of the proposal given by the Petitioner and it clearly stated that something more was required to be done before the contract between the parties could be executed. As such, the acceptance was not absolute and unqualified. What more was required to be done is mentioned in the final paragraph of the letter dated 17th January, 2000. This reads as follows:
With reference to the above N.I.T. your Quoted lump sum price of Rs. 8,37,09,000/- (Rs. Eight crore thirty seven lakhs nine thousand only) is accepted. Kindly deposit Performance Security @ 2% of the estimated contract amount Rs. 8,37,09,000/- which is Rs. 16,74,180/- within 15 days of issue of this letter. The earnest money of Rs. 3,15,000/- submitted by you earlier may be adjusted and performance security of balance amount of Rs. 13,59,180/- may be deposited. After deposition of performance security the agreement shall be entered into.
14. The above makes it clear that an agreement between the parties would stand concluded only after the performance security was deposited by the Petitioner. Till that time the Petitioner had an option of not depositing the performance security and, therefore, not entering into an agreement with Respondent No. 1. Consequently, the contract between the parties was not concluded by virtue of the letter dated 17th January, 2000 since something more was required to be done thereafter. It is this fact that distinguishes the present case from Bhagwandas Goverdhandas and Ranjeet Construction.
15. This is further clear from the fact that subsequently the parties did enter into a formal contract on 31st January, 2000. This contract was not entered into in Delhi. As per the reply filed by the Respondents, the formal agreement was executed in Bhopal and this is not denied by the Petitioner in its rejoinder.
16. Under the circumstances, no part of the cause of action arose within the territorial jurisdiction of this Court. Consequently, I am of the view that the contention of learned Counsel for the Petitioner deserves to be rejected.
17. It was then contended by learned Counsel that since this Court had entertained the petition filed under Section 9 of the Act, then in view of Section 42 thereof, the Petitioner had no option but to file the Section 11 petition in this Court. In other words, this Court has territorial jurisdiction to entertain this petition because it entertained the Section 9 petition. I am afraid this argument is fallacious. It may well be that a Court erroneously exercises territorial jurisdiction under Section 9 of the Act, but that does not preclude that Court from correcting its error at a subsequent stage. This Court entertained the petition under Section 9 of the Act only at an interim stage. On the substantive dispute between the parties, I have already held that this Court has no territorial jurisdiction. Merely because it exercised power at an interim stage cannot confer territorial jurisdiction over the substantivePage 1391 dispute between the parties. This is like saying that the suit is not maintainable in Delhi, but the injunction application filed therein is; or conversely, because the injunction application is maintainable in Delhi, therefore the suit must also be maintainable in Delhi. One has to see whether the larger relief is available in Delhi or not, and I have already answered that in the negative.
18. Learned counsel for the Petitioner sought to buttress her contention by relying upon Damayanti Builders v. Union of India 2003(3) Arb.LR 530 (Delhi). In that case this Court had appointed an Arbitrator by exercising jurisdiction under Section 11(6) of the Act. Subsequently the Award passed by the Arbitrator was challenged before the Additional District Judge. The decision of the Additional District Judge setting aside the Award was challenged in this Court and it was held that since the appointment of an Arbitrator had been made by this Court, objections under Section 34 of the Act could be filed only in this Court and not before the Additional District Judge. I am afraid this decision does not at all help learned Counsel for the Petitioner inasmuch as the petition under Section 11(6) of the Act is the one in which this decision is being rendered and no Arbitrator has been appointed as yet. The analogy that learned Counsel for the Petitioner seeks to draw between this case and exercise of power under Section 9 of the Act is, with respect, misplaced.
19. Finally, learned Counsel for the Petitioner relied upon Section 2(1)(e) of the Act to contend that the Court as defined therein must have reference only to this Court. This argument is also unacceptable and it is only a minor variation of the principal argument urged by learned Counsel for the Petitioner invoking the territorial jurisdiction of this Court. The Court which has territorial jurisdiction to decide questions forming the subject matter of the disputes in the present case is not this Court because, as held above the parties had entered into an agreement in Bhopal and, therefore, the appropriate Court in Madhya Pradesh would have territorial jurisdiction in the matter. If the claims of the Petitioner are converted into a civil suit, the jurisdiction to adjudicate those disputes would be with the Court in Madhya Pradesh and not Delhi. Therefore, the provisions of Section 2(1)(e) do not come to the aid of the Petitioner.
20. In view of the fact that this Court does not have the territorial jurisdiction to entertain the petition, it is not necessary or appropriate to consider the second preliminary objection raised by the Respondents.
21. Under the circumstances, the petition is dismissed. No costs.