ORDER
R.S. Mongia, J.
1. This revision petition has been placed before us on a reference made by a learned single Judge. Briefly the facts of the case are that a dispute having arisen between the parties i.e. M/s. Mittal Pipe Manufacturing Company (Petitioner) and State of Haryana (Respondent), the same was referred for arbitration to an arbitrator namely Shri R.K. Garg, Superintending Engineer, Haryana P. W.D. (B & R). The said arbitrator made a reference to the Court of learned Sub Judge, Jind vide his letter dated May 6, 1987 and sought an opinion on the following questions :–
1) Whether a valid agreement exists between the parties to the dispute, particularly when the contractor has submitted his tender on form No. Stereo B & R 30 and Arbitration Clause 13-A appears on the tender form where the contractor has given his offer?
2) Whether the Arbitrator has got jurisdiction to decide the dispute?
2. Learned Sr. Sub Judge found that there was no valid agreement between the parties, inter alia, on the ground that the tender was not signed by the Executive Engineer on behalf of the Governor and further there was no separate agreement of arbitration and further in order to have valid arbitration agreement binding between the parties, the same should have been signed by both the parties. According to the trial Court,
the arbitrator had no jurisdiction to decide the dispute between the parties.
3. The appellate Court, however, reversed the findings. It found that a duly signed tender in Form No. Stereo B & R 30 with arbitration clause 13-A, for reference of the dispute to the Arbitrator was submitted by the contractor (Petitioner). It was accepted on behalf of the Governor of the State subject to the conditions in the tender form. Thus, according to the appellate Court, though there was no separate agreement but a binding contract had come into being, when the tender was accepted on behalf of the Governor of the State of Haryana. There was a valid and binding agreement between the parties for reference to arbitration. It was also noticed that there was no objection on behalf of the petitioner that the tender had not been accepted by an authorised person. The petitioner dissatisfied with the judgment of the appellate Court came up in the present revision petition.
4. Before the learned single Judge, who heard the revision petition, learned counsel for the petitioner impugned the order of the appellate Court solely on the ground that there was no agreement between the parties complying with the provisions of Article 299 of the Constitution of India. The finding of fact, to the effect that a duly signed tender with an arbitration clause and other terms and conditions, was submitted by the contractor (Petitioner) and was accepted by a duly authorised person on behalf of the Governor was not challenged. Primary reliance was placed on a judgment of the learned single Judge of this Court in State of Haryana v. M/s. O.P. Singhal and Co., AIR 1984 Punj & Har 358, in which it was held that by merely submission of the tender and acceptance thereof, no binding contract as envisaged by Article 299 of the Constitution of India, can come into existence, In the reference order, Ld. single Judge has noticed a judgment of the Supreme Court in Union of India v. N.K. Private Ltd., AIR 1972 SC 915, wherein it was held that a binding contract by tender and acceptance can come into existence if the acceptance is by a person
duly authorised in this behalf by the Governor of the State or by the President of India, as the case may be. The said Supreme Court judgment was not brought to the notice of the learned Judge in M/s. O.P. Singhal’s case supra. After noticing few other authorities, learned single Judge was of the view that various questions are involved in this case which require determination by a larger Bench and that is how the matter has been placed before us.
5. In the reference order, learned single Judge has formulated the questions as follows :-
“Various questions involved in this case are whether all the essential terms and conditions of the contract have to be agreed to or mere letter of acceptance results in a binding agreement or a contract; whether a formal contract should be entered into between the parties in order to bind the parties is a must; whether the State can enter into an oral agreement or contract or can enter into the same by correspondence; whether a tender containing conditions offender with an arbitration clause, accepted by an Executive Engineer duly authorised, constitutes a valid arbitration agreement?”
6. As far as the contracts entered into by the State Government or Union Govt. are concerned, a special provision has been made in the Constitution of India as to how these contracts are to be entered into. Article 299 of the Constitution of India (which is equivalent to Section 175(3) of the Government of India Act, 1935) may be noticed here :–
299. (1) All contracts made in the exercise of the executive power of the Union or of a State shall be expressed to be made by the President, or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise.
2. Neither the President nor the Governor shall be personally liable in respect of any contract or assurance made or executed for
the purposes of this Constitution, or for the purposes of any enactment relating to the Government of India heretofore in force nor shall any person making or executing any such contract or assurance on behalf of any of them be personally liable in respect thereof.
7. It has been held by Supreme Court in The Bihar Eastern Gangetic Fishermen Cooperative Society Ltd. v. Sipahi Singh, AIR 1977 SC 2149 that provisions of Article 299 of Constitution of India are mandatory in character and require that a contract made in the exercise of the executive power of the Union or of a State must satisfy three conditions viz :
i. It must be expressed to be made by the President or by the Governor of the State, as the case may be; (ii) it must be executed on behalf of President or the Governor, as the case may be and (iii) its execution must be by such person and in such manner as the President or Governor may direct or authorise. Failure to comply with these conditions nullifies the contract and renders it void and unenforceable.
7A. Section 2(a) of the Indian Arbitration Act, 1940 defines ‘arbitration agreement’ thus :–
“An arbitration agreement’ means a written agreement to submit the present or future differences to the arbitration, whether an arbitrator is named therein or not.”
There is no specific form of an arbitration agreement. The only requirement is that there should be an agreement in writing containing arbitration clause. However, when an arbitration agreement or a contract, is with the State Government or with the Union Govt. then such an agreement must conform to the provisions of Article 299 of the Constitution of India. While dealing with Section 2(a) of the Arbitration Act regarding Arbitration agreement with State Govt. Supreme Court held in Union of India v. A.L. Rallia Ram, AIR 1963 SC 1685, that to constitute such an agreement a binding agreement it must conform to the requirements of Section 175(3) of the Government of India Act 1935 (which is equivalent to Article 299 of the Constitution
of India). Supreme Court observed as
under:–
“In order to constitute an arbitration agreement within the meaning of S. 2(a) Arbitration Act, there must be a valid agreement to submit present or future differences to arbitration and the agreement must be in writing and must be accepted by the parties. It is however not a condition of an effective arbitration agreement that it must be incorporated in a formal agreement executed by both the parties thereto, nor is it required to be signed by the parties. But where the Dominion of India was a party to the arbitration agreement, which is a contract within the meaning of S. 175(3) of the Government of India, Act, 1935, it must, to bind the Dominion of India, be made in the form prescribed by the Section.
In Rallia Ram’s case supra. Supreme Court further held that while entering into a contract with Government, execution of a formal document is not absolutely essential. A valid contract may result from correspondence. It observed as under:–
“Section 175(3) does not in terms require that a formal document executed on behalf of the Dominion of India, and the other contracting party, alone is effective. In the absence of any direction by the Governor General under S. 175(3) of the Government of India Act prescribing the manner, a valid contract may result from correspondence if the requisite conditions are fulfilled. It is true that S. 175(3) uses the expression “executed” but that does not by itself contemplate execution of a formal contract by the contracting parties. A tender for purchase of goods in pursuance of an invitation issued by or on behalf of the Governor General of India and acceptance in writing which is expressed to be made in the name of the Governor General and is executed on his behalf by a person authorised in that behalf would conform to the requirements of Section 175(3).”
The question whether before a binding contract comes into being with the State Government, there should be a deed or a formal written contract or a mere acceptance of a tender constitutes a valid contract was answered by Supreme Court in Union of India v. N.K. Private Ltd., AIR 1972 SC 915 in the following terms at page 919 :–
“The crucial question which arises for determination is whether there was a concluded contract, and if there was one, whether the mandatory requirements of Article 299 of the Constitution for entering into a valid and binding contract have been satisfied? It is now settled by this Court that though the words ‘expressed’ and executed in Article 299(1) might suggest that it should be by a deed or by a formal written contract, a binding contract by tender and acceptance can also come into existence if the acceptance is by a person duly authorised on this behalf by the President of India. A contract whether by a formal deed or otherwise by persons not authorised by the President cannot be binding and is absolutely void.”
8. From the ratio of the judgments of the Supreme Court noticed above, it is apparent that in normal circumstances it is not a condition of an effective arbitration clause that it must be incorporated in a formal agreement executed by both the parties thereto nor it is required to be signed by the parties. However, if there is such an agreement with the State Government or Union Government, it must satisfy the requirements of Article 299 of the Constitution of India which have already been culled out from the judgments of Supreme Court in Sipahi Singh’s case supra. In accordance with the judgment of Supreme Court in N.K. Private Ltd.’s case supra, a binding contract by tender and acceptance can come into existence if such a tender is accepted by a person duly authorised in this behalf by a Governor, President of India and it has to be expressed to be made in the name of President of India or Governor of the State. Such a contract would be in conformity with the provisions of Article 299 of the Constitution of India. We are of the considered view that the observations made by a learned single Judge of this Court in O.P. Singhal’s case supra to the effect that merely because of submission of a tender and acceptance thereof no binding contract as
envisaged by Article 299 of the Constitution can come into existence run conlrary to the law laid down by Supreme Court in N.K. Private Ltd. case supra. As noticed earlier the judgment of Supreme Court in N.K. Private Ltd.’s case was not brought to the notice of the learned single Judge in O.P. Singhal’s case supra. Accordingly, we hold that proposition as enunciated by the learned single Judge in O.P. Singhal’s case does not lay down correct law and hereby overrule the same.
9. In view of the law laid down by the Supreme Court in the abovementioned authorities, it is not necessary to notice any other authorities of different High Courts.
10. Consequently our answer to the questions posed by the learned single Judge, which have been noticed in the earlier part of the judgment, is that the contract with the Government must conform to the provisions of Article 299 of the Constitution of India, which are mandatory and if there is a tender or a letter of officer containing certain terms and conditions of offer, a letter of acceptance would be sufficient to bring into existence a binding agreement or a contract. There is no requirement that a formal contract in any particular form should be entered into between the parties in order to bind the parties. The State cannot enter into an oral agreement but the terms of the contract can be negotiated by correspondence and even accepted by correspondence. A tender containing terms and conditions of tender with an Arbitration Clause accepted by the Executive Engineer or any duly authorised person by the Governor would constitute a valid arbitration agreement.
11. In view of the answer to the questions referred to above nothing else survives in this revision petition, which is hereby dismissed with no order as to costs. The parties will submit themselves before the Arbitrator, who will proceed to give his award in accordance with law.
12. Order accordingly.