JUDGMENT
Ashim Kumar Banerjee, J.
1. By a memo dated April 7, 1999 the petitioner accepted the tender submitted by the respondent for certain works of renovation at the Central Store Building Survey of India at 15, Wood Street, Calcutta. Clauses 5 and 7 of the letter of acceptance of Tender being relevant herein are quoted below :
“……………………………………………………………………………….
……………………………………………………………………………….
(5) You are requested to attend this office to complete the formal agreement within 7 (seven) days of the receipt of this letter.
(7) You are also requested to please obtain a valid licence under the Labour (R&A) Act, 1970 and the Contract Labour (Regulation and Abolition) Central Rules, 1971 before the commencement of the work and continue to have a valid licence till the completion of the work.
……………………………………………………………………………….
……………………………………………………………………………….”
2. Despite repeated requests and reminders the respondent neither commenced work nor executed the formal agreement in terms of Clause 5 of the said memo of acceptance of tender. Under the proposed contract any dispute between the parties under the contract was to be referred to Arbitration under Clause 25 thereof. The respondent raised disputes and demanded Arbitration. The petitioner accordingly referred the matter to the Sole Arbitrator, Shri A.K. Bhatnagar.
3. Before the Arbitrator, the petitioner contended that since agreement was not signed contract was not concluded between the parties and as such there could not have been any dispute which could be referred to Arbitration. The Arbitrator relying on a decision of Delhi High Court , negated the argument of the petitioner and proceeded with the reference on merits. The Arbitrator ultimately published his Award for a sum of Rs. 1,14,566 in favour of the respondent. Hence, this application for setting aside.
4. The decision of the Arbitrator on the question of maintainability
“The respondents have taken the plea that since the agreement was not signed, no contract was concluded and hence the disputes were not arbitrable. The claimants on the other hand have contended that in terms of Section 4 of the Indian Contract Act, the contract stood concluded as soon as the letter of acceptance wsa despatched by the respondents and the disputes were, therefore, arbitrable. The claimants have also relied on Case Law 2001(1) Arb. LR 269 (Del.). I find myself unable to agree with the contention of the respondents. It is held that the disputes are arbitrable as a valid contract existed between the parties, which included Clause 25 as Arbitration agreement, even though the formal agreement was not signed. In arriving at this conclusion I also rely on the case of Progressive Constructions Ltd. v. Bharat Hydro Power Corporation Ltd. .”
5. Points urged before me by the petitioner
Mr. Samir Sengupta, learned counsel for the petitioner, urged the following issues :
(i) The respondent submitted tender which was accepted by the petitioner conditional upon the execution of the formal agreement. Since no formal agreement was executed there was no concluded contract.
(ii) Since there was no concluded contract the Arbitration clause embodied in the proposed contract could not be invoked.
(iii) Even from the facts of the case it would appear that the parties did not arrive at a concluded contract even by conduct which could give rise to a cause of action for the respondent to make a claim under the said contract.
6. Elaborating his argument Mr. Sengupta submitted that the acceptance of tender conditional upon execution of the agreement could not be said to be a concluded contract. According to him this would at best amount to “invitation to treat”. Under the provision of Section 16 of Arbitration and Conciliation Act, 1996 the Arbitrator was to rule on his jurisdiction whereas under the Section 31 of the said Act of 1996 the Arbitrator was to give reasons in the said Award. The decision of the Arbitrator in the present case on the issue quoted (supra) would ex facie show that no reason had been assigned by the Arbitrator on the subject issue. Hence the Award was liable to be set aside on the ground alone.
7. Points urged before me by the respondent
Mr. Hiranmoy Dutta, learned counsel for the respondent, submitted that by the letter of acceptance of tender there had been a concluded contract between the parties. Mr. Dutta further submitted that Clause 5 of the memo of acceptance of tender could not be said to be condition precedent. Mr. Dutta further submitted that the facts and circumstances would show that there had been a concluded contract between the parties under Section 4 of the Contract Act and as such the respondent was entitled to raise disputes which had been rightly referred to Arbitration. He lastly contended that assuming that there was no dispute by referring the said dispute to Arbitration the petitioner accepted the existence of the disputes and arbitrability thereof and the petitioner was precluded to raise such issue.
8. In support of his contention Mr. Dutta relied on two decisions of the Apex Court being [Dodsal Pvt. Ltd. v. Delhi Electric Supply Undertaking of the Municipal Corporation of Delhi]. And [Nimet Resources INC. and Anr. v. Essar Steels Ltd.]. Relying on the aforesaid two decisions Mr. Dutta submitted that the issue raised by the petitioner was not tenable in law and the application was liable to be dismissed.
9. Decisions of the Apex Court
In the case of Dodsal Pvt. Ltd. the respondent authority approached the High Court for setting aside of the Award on the ground that the contract was void in view of Sections 201 and 203 of the Delhi Municipal Corporation Act. It was contended on behalf of the respondent that the contract being void the Arbitration clause embodied in the agreement could not be invoked and the Arbitrator had no jurisdiction to publish the Award. Since the contract was void the question of participation in the Arbitration proceeding do not alter the situation in view of the decision of the Apex Court in the case of Waverly Jute Mills . The Apex Court considered the situation and referred the matter to a larger Bench.
10. In the case of Nimet Resources INC. and Anr. (supra), the Apex Court was of the view that the Arbitrator was competent to decide the question as to the existence of the Arbitration agreement which was not clear from the correspondence exchanged between the parties.
11. My decision
The petitioner invited the tender from the intending contractors. The respondent was successful in the tender process and its offer was accepted by the petitioner by issuance of the letter of acceptance of tender. In normal circumstances on the issuance of the said letter of acceptances of the tender the contract could have been concluded. However, in the instant case it was specifically provided in the said letter of acceptance that a formal agreement was to be entered into and a copy of the proposed agreement was also forwarded along with the said letter of acceptance which incorporated the Arbitration clause. Hence, for a concluded contract the petitioner performed its obligation by issuing the letter of acceptance and it was then the obligation of the respondent to complete the said process by executing the formal contract. It was an admitted fact that the formal contract was never executed by the petitioner. It was also an admitted fact that the petitioner did not commence its work. However, question of commencement of work did not arise in view of non-execution of the contract. It was sought to be contended on behalf of the respondent that since the copy of the contract was sent along with the letter of acceptance the Arbitration clause incorporated therein was a part of the letter of acceptance and as such the same was valid for its invocation. In my view such contention is falicious in view of the fact that the letter of acceptance was a conditional one and unless and until that pre-condition was fulfilled it could not be said that there had been concluded contract. Since there had been no concluded contract the Arbitration clause embodied therein could not be invoked.
12. It is true that when the respondent demanded Arbitration by lodging its claim the petitioner acted thereupon and appointed Arbitrator and allowed the Arbitrator to decide the issue.
13. Under the present law being 1996 Act a party challenging the authority and propriety of the Arbitrator by contending that there was no Arbitration agreement would have to approach the Arbitrator to decide on the said issue. In the instant case the one and only question raised by the petitioner before the Arbitrator was that there had been no valid Arbitration agreement and there could not have been any arbitrable dispute. Hence, the Arbitrator was obliged to decide the issue in accordance with Section 16 and the situation had not altered by the conduct of the petitioner while allowing the respondent to invoke the Arbitration agreement. My decision gains support from the 5 Judges’ Bench decision of the Apex Court in the case of Konkan Railways . In the case of Konkan Railways (supra), the Apex Court discussed the said Act of 1996 for giving a harmonious construction. The Apex Court was of the view that all issues including the question of arbitrability are to be decided by the Arbitrator and when the Court is approached for appointment of Arbitrator the Court is not empowered to go into those questions and should leave them open to be decided by the Arbitrator. Hence, the plea of waiver in my view is not tenable as waiver if any, in the instant case had not altered the situation.
14. From the paragraph quoted (supra) it would appear that the Arbitrator while deciding such issue had failed to disclose any reason (at least the reasons, if any, are not clear to me). It appears that the Arbitrator had relied on the Delhi High Court decision in the case of Progressive Constructions (supra). In the said case the learned Single Judge of the Delhi High Court considered the issue of territorial jurisdiction. While considering the issue of territorial jurisdiction, His Lordship was of the view that the plea that merely by placing reliance on the delivery of the letter of acceptance of offer proceeding could not be filed at such place as it was not a part of the cause of action. I have carefully examined the said judgment and I do not find any relevance in the instant case. In my view, the Arbitrator had completely overlooked the laws of land while deciding such plea of jurisdiction. The laws of land as well settled by the Apex Court on the subject is that a contract cannot be said to be a concluded one unless and until the prerequisites are completed by both parties. When the parties intended that a formal contract would be entered into, so long the same is not entered mere letter of acceptance could not be said to be concluded contract. This principle of law had been overlooked by the Arbitrator while deciding the said issue.
15. Moreover, the Arbitrator was obliged to assign reasons on the issues brought before him under Section 31 of the said Act of 1996. From the paragraph quoted (supra) I do not find any reason given by the Arbitrator while rejecting the arguments of the petitioner.
16. In the result the application succeeds. The subject Award is set aside. This order of setting aside would, however, not preclude the respondent from taking appropriate steps by initiating appropriate proceeding against the petitioner for protection of its interest in accordance with law.
17. There would be, however, no order as to costs.
18. Urgent xerox certified copy will be given to the parties, if applied for.