Orissa High Court
Forum Projects Private Limited vs Berhampur Development Authority on 2 December, 2020
Equivalent citations: AIRONLINE 2020 ORI 221
Author: K.R.Mohapatra
Bench: K.R. Mohapatra
HIGH COURT OF ORISSA: CUTTACK
ARBA NO.38 OF 2019
In the matter of an Appeal under Section 37 of the Arbitration and
Conciliation Act, 1996.
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Forum Projects Private Limited, ........ Appellant
Kolkata
-Versus-
Berhampur Development Authority, ....... Respondent
Berhampur, Ganjam
For Appellant : M/s. A.P.Bose, V.Kar, D.J.Sahoo,
S.K.Hota & A.Pattnaik
For Respondent : Mr.S.P. Mishra, Sr. Advocate
M/s Bhabani Shankar Panigrahi
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Date of Hearing by Virtual Mode on 17.11.2020
Judgment delivered by Virtual Mode on 02.12.2020
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P R E S E N T:
THE HONOURABLE SHRI JUSTICE K.R. MOHAPATRA
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K.R. Mohapatra, J This appeal under Section 37 of the Arbitration
Conciliation Act, 1996 (for short, the Arbitration Act') has been filed
assailing the order dated 18.10.2019 (Annexure-1) passed by
learned District Judge, Ganjam, Berhampur in Arbitration Petition
No.4 of 2018, whereby he dismissed a petition filed by the present
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Appellant-Company under Section 9 of the Arbitration Act holding
it to be not maintainable.
2. Short narration of facts necessary for proper
adjudication of this appeal are that pursuant to a 'Request for
Proposal' (RFP) by the Respondent - Berhampur Development
Authority (BDA) for development of Integrated Commercial - cum -
Residential Complex in Berhampur, the Appellant had participated
in the bid and became the highest bidder having quoted an amount
of Rs.9.40 crore. The project was decided to be undertaken on a
Public Private Partnership (PPP) basis. Upon compliance of initial
formalities and deposit of 25% of the bid amount, i.e., Rs.2.35
crore, the Respondent-BDA issued Letter of Intent (LOI) on
16.06.2008 in favour of the Appellant-Company requesting the
Appellant to deposit the balance contractual bid amount within a
period of 180 days and to execute the agreement. But, the
Appellant could not deposit the balance contractual bid amount of
Rs.7.05 crore within a stipulated period of 180 days. Hence, the
LOI issued in favour of the Appellant was cancelled vide Order
No.250/BeDA Berhampur dated 03.03.2015. Assailing the same,
the Appellant filed W.P.(C) No.8653 of 2015 before this Court. This
Court by order dated 11.05.2015, while issuing notice in the
matter, passed the following interim order.
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"The opposite parties shall not issue (sic) any work
order to anybody until further orders, subject to the
petitioners depositing of Rs.2.75 crores before the
Registrar (Judicial) of this Court in shape of A/C payee
bank draft within a period of two weeks hence. In the
event, the petitioners will not pay the same within the
time stipulated, this interim order will stand vacated."
However, the Appellant could not deposit the said amount.
Subsequently, the Appellant moved learned District Judge,
Berhampur in Arbitration Case No.04 of 2018 under Section 9 of
the Arbitration Act with the following prayer:-
"It is therefore prayed that your honour may
graciously be pleased
a. To preserve the entire premises and necessary
order in this regard be passed for its interim
custody;
b. Injunct the opp. party from creating any third
party interest over the schedule property and
obstructing the entry of the petitioner or his
representatives to the schedule premises;
c. Cost of the proceeding be awarded in favour of
the petitioner;
d. Any other relief as deem fit and proper be
awarded in favour of the petitioner."
2.1 Along with the petition under Section 9 of the
Arbitration Act, the Appellant had also filed an interim application
praying inter alia to direct the parties to maintain status quo in
respect of the property in question. Upon receipt of notice, the
Respondent (opp. party therein) appeared and filed a petition on
18.09.2018 raising an issue with regard to maintainability of the
petition under Section 9 of the Arbitration Act. Both the petitions,
namely, petition with regard to maintainability as well as
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injunction were heard and disposed of on 18.10.2019 by a common
order under Annexure-1, which is under challenge in this appeal.
3. Mr. Bose, learned counsel for the Appellant submitted
that the impugned order is an outcome of non-application of
judicial mind. The Respondent, accepting the initial deposit of
Rs.2.35 crore paid by the Appellant, issued the LOI as well as draft
Lease-cum-Development Agreement to the Appellant. It was
returned to BDA being signed by the authorized signatory of the
Appellant, which was accepted in a joint meeting held on
08.09.2009 as a token of acceptance of the proposal made by the
Respondent. Clause 32.2 of Part-II of the draft agreement contains
the Arbitration Clause, which reads as follows:
"32.2 Arbitration
In the event of Dispute arising out of or in
connection with this Agreement not being resolved
in accordance with the provisions of Article 32.1
above, either Party shall be entitled to, by notice in
writing ("Arbitration Notice") to the other Party,
refer such Dispute for final resolution by binding
arbitration in accordance with the Arbitration &
Conciliation Act, 1996:
xxx xxx xxx"
3.1 It his submission that since the project was
undertaken on Public Private Partnership (PPP) basis, signing of
the draft agreement by the Contractor, namely, the Appellant
makes it a concluded contract. He further submitted that the
Respondent, in paragraph 19 of their counter affidavit filed in
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W.P.(C) No.8653 of 2015 have categorically admitted that there is
an arbitration clause to resolve the dispute between the parties
arising out of the contract in question. Thus, there should be no
confusion with regard to existence of an arbitration clause in the
agreement. Accordingly, the petitioner in order to protect the lis
had filed the petition under Section 9 of the Arbitration Act.
3.2 The Respondent, after accepting the draft agreement
signed by the Appellant and issuance of LOI, is precluded from
raising an objection with regard to non-execution of the agreement.
3.3 The draft agreement was filed before learned District
Judge along with the petition under Section 9 of the Arbitration
Act. But, learned District Judge failed to take notice of the same
and made an erroneous observation to the effect that no written
argument was filed, which is an error apparent on the face of the
record.
4. W.P.(C) No.8653 of 2015 has been filed assailing the
action of the Respondent in cancelling the LOI unilaterally. Thus,
pendency of the writ petition does not affect in anyway the
maintainability of the petition under Section 9 of the Arbitration
Act, as the cause of action for filing of both the petitions is
completely different. Thus, learned District Judge failed to
appreciate the scope of petition filed under Section 9 of the
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Arbitration Act. As such, the impugned order being not
sustainable is liable to be set aside and a direction may be made to
adjudicate the petition filed under Section 9 of the Arbitration Act
afresh on merit by issuing necessary interim direction.
5. Mr. Mishra, learned Senior Advocate for the
Respondent refuting the submissions made by learned counsel for
the Appellant, submitted that after issuance of LOI, the Appellant
did not come forward to deposit the balance bid amount of Rs.7.05
crore within the stipulated period and also to execute the Lease-
cum-Development Agreement (LCDA). As such, there is no
concluded contract between the parties in the eyes of law. Due to
non-cooperation of the Appellant neither any agreement could be
executed between the parties nor could it be registered as required
under Section 17 of the Registration Act, 1908 in order to make the
draft agreement a concluded contract between the parties. As such,
the Clause- 32.2 of the Part-II of the draft agreement cannot confer
any right on the Appellant to invoke the arbitration clause.
6. Learned District Judge considering the rival
contentions of the parties as well as materials available on record,
has rightly come to a conclusion that the Appellant has not filed
any written agreement. The averments made by Respondent-BDA
at paragraph-19 of the counter affidavit filed in W.P.(C) No.8653 of
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2015 cannot confer any right on the parties to invoke the arbitral
clause in absence of any concluded contract to that effect. In
support of his case, he relied upon a decision in the case of M/s.
National Highways and Infrastructure Development
Corporation -v- BSPL Infrastructure Limited, reported in
(2019) 15 SCC 25.
7. Mr. Mishra, with reference to Section 7 of the Contract
Act, 1872 further submitted that in order to transform a proposal
into promise, the acceptance must be absolute. In absence of any
concluded contract between the parties the arbitration clause in
the draft agreement cannot be made operational. In support of his
contention, he relied upon the case of M/s P.S.A. Mumbai
Investments PTE. Limited -v- Jawaharlal Nehru Port Trust,
reported in (2018) 10 SCC 525.
8. Mr. Mishra, learned counsel for the petitioner further
submitted that although an interim protection was granted to the
Appellant, it did not comply with the same. As such, the interim
order becomes ineffective after lapse of the stipulated period of two
weeks within which the Appellant was required to deposit a sum of
Rs.2.75 crore before the Registrar (Judicial) of this Court in shape
of A/c payee bank draft.
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9. The object of Section 9 is to make interim arrangement
to protect the lis before or during arbitral proceeding or at any time
after making of the arbitral award. Since an interim protection has
already been granted by this Court on 11.05.2015 in W.P.(C)
No.8653 of 2015, a proceeding under Section 9 of the Arbitration
Act is not maintainable. It is a different issue that the Appellant did
not respect the interim protection granted by this Court, by
complying with the condition to make it operative. Even otherwise,
the demeanor of the Appellant does not entitle it to a protection
under Section 9 of the Arbitration Act. The Appellant instead of
complying with the condition imposed in the interim order passed
by this Court, waited for three years and filed the instant
proceeding under Section 9 of the Arbitration Act in the year 2019.
Thus, the intention of the Appellant is apparent to delay the matter
and drag the litigation. In view of the above, the impugned order
warrants no interference and the appeal is liable to be dismissed.
10. Upon hearing learned counsel for the parties and on
perusal of the record, it appears that the Appellant was the highest
bidder in the RFP by quoting the bid amount of Rs.9.40 crore. The
Appellant also made an initial deposit of 25% of the bid amounting
to Rs.2.35 crore and he was required to deposit the balance
amount of Rs.7.05 crore within a period of 180 days from the date
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of issuance of LOI dated 16.06.2008 in its favour. It did not
deposit the said amount for which the LOI was cancelled vide order
dated 03.03.2015 and the initial bid amount deposited by the
Appellant was forfeited as well. Assailing the same, W.P.(C)
No.8653 of 2015 was filed by the Appellant, which is sub-judice.
This Court also passed a conditional interim order on 24.01.2020
in Misc. Case No.78 of 2019 (supra). But the condition imposed
was not complied with within the stipulated period of two weeks for
which the protection granted in the interim order lapsed. It further
appears that the Respondent-BDA had sent a copy of Draft Lease-
cum-Development Agreement to the Appellant. Although the
Appellant claims to have signed and submitted the same to the
Respondent as token of its acceptance of the offer, but, Respondent
on the other hand, took a stand that the Appellant did not come
forward to execute the agreement by depositing the balance bid
amount. But, the fact remains that the Appellant never deposited
the balance bid amount of Rs.7.05 crore within the stipulated date,
which was a condition for execution of agreement.
11. The arbitration clause can only be made operational
/invoked, if there is a concluded contract between the parties.
Hon'ble Supreme Court in the case of M/s. P.S.A. Mumbai
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Investments PTE Ltd. (supra) at paragraphs 14, 19 and 20 held as
follows:
"14. Under Section 7 of the Indian Contract Act,
1872 in order to convert a proposal into a
promise, the acceptance must be absolute and
unqualified. It is clear on the facts of this case
that there is no absolute and unqualified
acceptance by the Letter of Award - two or three
very important steps have to be undergone
before there could be said to be an agreement
which would be enforceable in law as a contract
between the parties.
xxx xxx xxx
19. Mr. Dave also strongly relied upon the
judgment in INOX Wind Ltd v. Thermocables
Limited. This judgment in paras 17 to 19
thereafter made it clear that an exception to the
general rule laid down in M.R. Engineers and
Contractors Private Limited as to standard forms
of practice containing arbitration clauses would
be extended also to standard forms between
individual persons and not merely standard
forms of professional assessments.
20. We may hasten to add that this judgment in
INOX Wind Ltd v. Thermo cables Ltd. case would
have no manner of application on the facts of
this case for the reason that it has been found
by us that there is no agreement between the
parties at all in the facts of the present case,
making it clear, therefore, that the arbitration
clause contained in the draft Concession
Agreement would not apply. Further, even the
without prejudice argument of Mr. Sibal is
worthy of acceptance. Mr. Sibal argued, relying
strongly upon M.R. Engineers and Contractors
(P) Ltd., that assuming that there was an
arbitration clause which governs the parties, the
said clause would be wholly inapt as it would
only cover disputes between a Special Purpose
Vehicle and the Respondent No.1 arising from
the Concession Agreement not yet entered into,
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and not between the Respondent No.1 and the
appellant and Respondent No. 2. He is correct,
and we agree with this contention as well."
(emphasis supplied)
11.1 In the case of National Highway (supra) the Hon'ble
Supreme Court following the ratio decided in the case of M/s. P.S.A
Mumbai Investments PTE Ltd. (supra) at paragraph 16 held as
follows:
"16. It is not possible to say that a standard form
arbitration clause contained in a draft agreement
would then oust Clause 6.1 and disturb the entire
scheme of the schedule of bidding process. This
being the case, it is clear that even at the stage of
acceptance of LOA, if disputes arise between the
parties, they can only be resolved by the courts of
Delhi and not by arbitration. This being case, it is
clear that PSA Mumbai Investments Pte. Ltd.
judgment is, in fact, on all fours and would govern
the facts of the present case."
12. In view of the ratio decided by Hon'ble Supreme Court,
it is crystal clear that in order to invoke the arbitration clause and
make it operational, there must be a concluded contract between
the parties as envisaged under Section 7 of the Contract Act, 1872
which is conspicuously absent in the case at hand, in view of the
aforesaid reasons.
13. Although Mr. Bose, learned counsel for the Appellant
vehemently argued that an agreement in a project under PPP mode
is not required to be signed by the Principal, but he could not
produce any material in support of his contention.
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14. It is not clear as to why the Appellant preferred to file
writ petition in W.P.(C) No.8653 of 2015 assailing cancellation of
the LOI instead of invoking the arbitration clause, if at all it was
available to be invoked. It further appears that this Court
considering the case of the Appellant had also granted an interim
protection subject to compliance of certain conditions. The
Appellant did not comply with the said conditions. As such, the
interim protection granted by this Court lost its effect by efflux of
time. The averment at paragraph 19 of the counter affidavit filed by
the Respondent-BDA in W.P.(C) No.8653 of 2015 cannot confer a
right on the parties to invoke arbitration clause or confer
jurisdiction on the arbitrator to arbitrate the dispute, if at all it
was not there in the agreement itself. As has been discussed earlier
there is no concluded contract between the parties. Thus, the
Appellant could not have invoked the jurisdiction of learned
District Judge under Section 9 of the Arbitration Act, more
particularly when an interim protection in respect of the lis has
already been granted by this Court in W.P.(C) No.8653 of 2015.
15. In view of the discussions made above, this Court is of
the considered opinion that learned District Judge has committed
no error in holding the petition under Section 9 of the Arbitration
Act not maintainable. Accordingly, this appeal being devoid of any
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merit stands dismissed, but in the circumstances there shall be no
order as to costs.
15.1 Delink W.P. (C) No. 8653 of 2015 to be listed before the
assigned Bench.
15.2 LCR be sent back immediately.
15.3 Authenticated copy of this order downloaded from the
website of this Court shall be treated at par with the certified copy
of this order in the manner prescribed in this Court's Notice
No.4587 dated 25.03.2020.
.................................
K.R.MOHAPATRA, J.
Orissa High Court, Cuttack Dated the day of December, 2020/bct/ss