Gujarat High Court
Vms Engineering And Design Services (P) ... vs U.N. Mehta Institute Of Cardiology And ... on 11 July, 2014
Author: Akil Kureshi
Bench: Akil Kureshi
O/IAAP/15/2014 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
PETN. UNDER ARBITRATION ACT NO. 15 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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VMS ENGINEERING AND DESIGN SERVICES (P) LTD....Petitioner(s)
Versus
U.N. MEHTA INSTITUTE OF CARDIOLOGY AND RESEARCH
CENTRE....Respondent(s)
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Appearance:
MR SANJAY A MEHTA, ADVOCATE for the Petitioner(s) No. 1
MR PS CHARI, ADVOCATE for the Respondent(s) No. 1
MR SACHIN D VASAVADA, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
Date : 11/07/2014
Page 1 of 7
O/IAAP/15/2014 JUDGMENT
ORAL JUDGMENT
1. The petitioner seeks appointment of an arbitrator to resolve the dispute between the petitioner and respondent.
2. Brief facts are that the petitioner is a company registered under the Companies Act and is in business of Architectural Consultancy. The respondent is a Medical Research centre and runs a hospital in the city of Ahmedabad. Respondent desired to create certain facilities in its hospital. A tender was therefore, published inviting interested parties to apply for providing their bids. The petitioner was one of the persons who made a bid in response to such tender notice dated 22.9.2012. The tender notice contained detailed terms and conditions upon which the contract would be awarded. The nature of work, the method of execution of work and payment schedule were part of such notice. The notice also contained an arbitration clause, relevant portion of which reads as under :
"a. The Contracting Authority and the Consultant shall make every effort to settle amicably and dispute relating to the contract which may arise between them, or between the Engineer and the Consultant.
b. Once a dispute has arisen, the parties to this contract shall notify each other in writing of their positions on the dispute as well as of any solution which they envisage possible. If either of the parties to this contract Page 2 of 7 O/IAAP/15/2014 JUDGMENT deems it useful, the parties shall meet and try to settle the dispute. Each party shall respond to a request for amicable settlement within 30 days of such request. The period to reach an amicable settlement shall be 120 days from the date of the request. Should the attempt to reach an amicable settlement be unsuccessful or should a party not respond in time to any requests for settlement, each party shall be free to proceed to the next stage in reaching a settlement by notifying the other party.
c In absence of an amicable settlement, the parties may agree to the settlement of the dispute by conciliation. If no settlement is achieved within 120 days of the start of the conciliation process, each party to the contract has the right to proceed to the next stage in the dispute settlement procedure.
d In the absence of an amicable settlement or settlement by conciliation within 120 days of the start of one of these procedures, each party may refer the dispute to either the decision of a national jurisdiction or arbitration as specified below:"
3. On 21.12.2012, the respondent issued a communication in favour of the petitioner. The document was titled as work order but in the body of the document, it was also referred to as letter of intent(LOI). Since such document was not part of the record, learned counsel Shri Mehta for the petitioner produced a copy thereof. Respondent does not question the contents of the said document. I would refer to terms of this letter more minutely at a later stage.
4. It is not in dispute that subsequent to the said letter dated 21.12.2012, no agreement was signed between the parties. The petitioner contends that upon issuance of the said Page 3 of 7 O/IAAP/15/2014 JUDGMENT work order, the petitioner awaiting signing of the formal agreement and in anticipation thereof started the work making substantial investment. These averments the respondent hotly disputes.
5. Be that as it may, the dispute arose between the parties, primarily, since the petitioner and respondent were unable to work out the precise terms of the agreement that may be signed. The petitioner sought resolution of such disputes through arbitration. The petitioner desires to fall back on abovenoted arbitration clause contained in the tender notice. The respondent contends that no binding contract having been entered into between the parties, the arbitration clause cannot be activated. This is the central question required to be decided in this arbitration petition.
6. It is settled position of law that only if there is a valid arbitration agreement between the parties that reference to an arbitrator in terms of section 11(6) of the Arbitration and Conciliation Act, 1996 can be made by the Chief Justice or his designate. Entire discussion of this order therefore, would be on single point of dispute namely, whether there was a binding contract between the petitioner and the respondent which contained an arbitration clause.
7. In this context, we may peruse the document more minutely. In the tender notice dated 21.9.2012, one of the terms of disclaimer clause was as under :
"2. This bid document and subsequent submissions of Page 4 of 7 O/IAAP/15/2014 JUDGMENT the bidders are not an agreement. These will subsequently form a part of agreement between the successful bidder and the Director, U.N. Mehta Institute of Cardiology & Research Centre after modifications/additions/alterations as mutually agreed to."
8. Communication dated 21.12.2012 specified the scope of work and also contained details of some of the aspects of assignment of the work namely, the contract value, time schedule, payment terms etc. In all such clauses, there was a reference to "other details are as per tender terms and conditions". Para.5 of the said communication was however, significant, It read as under :
"5) Contract Document You have to submit the detailed work planning within 7 working days from the date of issue of work order. The name of the Officer/Officers who shall be in charge of the work to be carried out by you along with the letter of authority to sign on your behalf for all intents and purposes in matters relating to this work as per scope of work, may please be intimated within 7 days from the date of issue of this LOI.
You will kindly depute your representative to attend this office for signing the contract agreement, within 7 days of intimation from UNMICRC."
9. Counsel fore the petitioner strenuously urged that upon issuance of the said work order, the agreement between the parties came into existence since the same culminated into acceptance of offer by the petitioner which was in response Page 5 of 7 O/IAAP/15/2014 JUDGMENT to the tender notice. Work order also recorded that all conditions contained in the tender notice shall apply. Such tender notice contained an arbitration clause and hence the prayer for appointment of arbitrator should be granted.
10. It is true that said communication is titled as work order. Nevertheless, in para.5 it is also referred to as the Letter of Intent. As per the said paragraph, as noted above, the petitioner was to submit detailed work planning within 7 days from the date of issue of work order. The petitioner had also to give different names of the officers who would be in charge of the work along with letter of authority given to them by the company to sign documents and to act on behalf of the company in relation to the work. In the last sentence it was further pointed out that the company should depute representative to attend the office of the respondent for signing the contract agreement within specified time. Admittedly these formalities could not be completed. It is not my brief to decide who was at fault for break down of relations between the petitioner and respondent. Fact remains that pursuant to communication dated 21.12.2012 no agreement was signed, no contract was brought into existence.
11. In my opinion, mere publication of a tender notice and issuance of the communication dated 21.12.2012 did not bring about contractual relations between the respondent and the petitioner. The said document was for all intent and purpose a letter of intent though titled as work order. Mere title would not decide the nature of the document. What would be decisive is contents thereof.
Page 6 of 7O/IAAP/15/2014 JUDGMENT Para.5 of the said document was significant and required the petitioner to provide further details including the deputation of officers with full authority to act on behalf of the company in relation to the work. It also required the petitioner to send an authroised representative to sign the contract between the parties. This not having been done, mere issuance of communication dated 21.12.2012 would not amount to execution of a binding contract between the petitioner and the respondent. In absence of any contract having been brought into existence, the question of implementation of arbitration clause contained in tender notice would not arise. Such arbitration clause would have been ofcourse binding to the respondent if the contract had been brought into existence between the respondent and the petitioner containing such arbitration clause either directly or incorporation through reference. In the present case, the relations between the parties remained at the stage of letter of intent.
12. Under the circumstances, the request for appointment of arbitrator is declined. Arbitration Petition is dismissed.
(AKIL KURESHI, J.) raghu Page 7 of 7