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Delhi High Court
R.K. Sharma vs N.D.M.C. on 1 January, 1800
Author: R Lahoti
Bench: R Lahoti


JUDGMENT

R.C. Lahoti, J.

1. By this petition under Section 20 of the Arbitration Act, the petitioner seeks appointment of an Arbitrator and reference of disputes set out in para 5 of the petition for adjudication by the Arbitrator arising out of the agreement No. 8/OM/P/89-90 for the improvements of roads in Connaught Place. The prayer for appointment of Arbitrator has been contested by the respondent mainly on the ground that there was no agreement/contract entered into between the parties and executed as per Section 47 of the Punjab Municipal Act, 1911 and so neither the contract, nor the arbitration clause contained in the said contract can be enforced.

2. It is not in dispute that the petitioner’s tender was accepted and consistently therewith he had executed the contract and submitted the same in the office of the respondent for execution by the letter.

3. It is also not disputed that on 28.7.1989. Shri V. K. Saluja, Project Manager, Civil Engineering Department, NDMC wrote a letter to the petitioner to the following effect :

“Your item rate tender for the above mentioned work has been accepted by the Committee vide resolution : No. 53 dated 20.7.1989 at your negotiated tendered amount of Rs. 7,87,038.58 which works out to overall 53.77% above the estimated cost of Rs. 5,11,840.00. The time of completion is four months.

Your are requested to attend this office to complete the formal agreement within seven days from the receipt of this letter. You are also directed to start the work atonce. Please note that the time allowed for carrying out the work in tender shall be reckoned from the 10th day after the date of this order to commence work”.

4. On 12.10.1990, the same Mr. V. K. Saluja wrote a letter to the petitioner referring to certain negotiations held on 26.6.1990 in the chamber of the Financial Advisor of NDMC and the same having failed. The letter proceeds to state :

“The work awarded to you vide this office letter No. PM (CP)/2204/D dated 28.7.1989 is withdrawn with immediate effect and the contract entered into for this is hereby closed under the orders of Administrator, NDMC New Delhi.

5. Section 47 of the Punjab Municipal Act, 1911 provides as under :

“47. Mode of executing contracts and transfer of property :-

(1) Every contract made by or on behalf of the committee of any municipality of the first class whereof the value or amount exceeds one hundred rupees, and every contract made by or on behalf of the committee of any municipality of the second (and third class) whereof the value or amount exceeds fifty rupees, shall be in writing and must be signed by two members of whom the president or a vice-president shall be one, and countersigned by the Secretary.

6. No particular form or set of words is required for an arbitration agreement. It must be in writing. It is not necessary that it must be signed by the parties. It is sufficient if the terms are reduced into writing and agreement of the parties thereto is established. However, the contract with the Government must conform to the provisions of Article 299 of the Constitution which are mandatory. So also the contracts with the semi Government bodies or Corporation must conform to the provisions of any law governing the making of the contracts by such authorities or Corporation. In Union of India v. A. M. Rallia Ram , their Lordships have held (in the context of Section 175(3) of the Government of India Act, 1935) : LM 2″

“In order to constitute an ‘arbitration agreement’ within the meaning of Section 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 Section 175(3) of the Government of India Act, 1935, it must, to bind the Dominion of India, be made in the form prescribed by that Section.”

“Section 173(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 Section 175(3) of the Government of India Act prescribing the manner, a valid contract may result from correspondence if the requisite conditions are fulfillled. It is true that Section 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).

7. In Union of India v. N.K. Pvt. Ltd. , their Lordships have held by reference to Article 299 of the Constitution and Sections 2(a) and 20 of the Arbitration Act, 1940 :

“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. It is true that a formal contract in respect of the work, tender whereof was submitted by the petitioner and was accepted by the respondent, was not executed in the manner contemplated by Section 47 of the Punjab Municipal Act 1911. Still the two documents dated 28.7.1989 and 12.10.1990 clearly show : (i) the petitioner’s tender was accepted by the Municipal Committee vide resolution No. 53 dated 20.7.1989; (ii) the petitioner was required to attend the office of the respondent to complete the formal agreement and the petitioner did submit a contract in writing containing the arbitration clause duly executed on its behalf; (ii) the petitioner was directed to start the work at once; (iv) the work was awarded to the petitioner which was deemed to be a contract entered into and then withdrawn.

9. It is not the case of the respondent that the tender was not accepted by the Municipal Committee or that Mr. V. K. Saluja was not competent to make the correspondence which he did.

10. In such circumstances in spite of a formal written contract having not been executed between the parties, a binding contract by tender and its acceptance had come into existence inasmuch as the acceptance was by Municipal Committee which was competent under the contract to accept the tender and to enter into the contract. The contract was also reduced into writing. It was signed by the petitioner though it had remained to be signed on behalf of the respondent in the manner contemplated by Section 47 of the Punjab Municipal Act. The Arbitration clause containing in any such contract would satisfy the requirement of written agreement within the meaning of Section 2(a) of the Arbitration Act.

11. For the foregoing reasons the petition is allowed. Consistently with the arbitration clause, the President or the Administrative Head of the NDMC, as the case may be is directed to appoint an arbitrator within six weeks from the date of communication of this order and refer the disputes raised by the petitioner for adjudication by the arbitrator.

12. The petition stands disposed of.


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