M/S PSA MUMBAI INVESTMENTS PTE. LIMITED versus THE BOARD OF TRUSTEES OF THE JAWAHARLAL NEHRU PORT TRUST AND ANR. on 11 September 2018

352

SUPREME COURT REPORTS

[2018] 13 S.C.R.

AM/S PSA MUMBAI INVESTMENTS PTE. LIMITED

v.

THE BOARD OF TRUSTEES OF THE JAWAHARLAL

NEHRU PORT TRUST AND ANR.

B(Civil Appeal No.9352 of 2018)

SEPTEMBER 11, 2018

[R. F. NARIMAN AND INDU MALHOTRA, JJ.]

Arbitration and Conciliation Act, 1996 – Arbitration clause– Activation of –Respondent No.1 issued Global invitation ofCRequest for Qualification (RFQ) for development of a containerterminal project – The bid was divided into two stages- first, thestage of eligibility and second, the Request for Proposal (RFP) –Appellant and Respondent No.2, as a consortium qualified the firststage – Letter of Award given by the Respondent No.1 to theDConsortium – Respondent No.2 opted out of the bid process – Show-cause notice issued by the respondent no.1 to consortium to performthe bid – Since same was not done, the Letter of Award accordedand acknowledged by the appellant was withdrawn by RespondentNo.1 – Consequent to this, arbitration notice was sent by therespondent no.1 – Appellant contended that no arbitration clauseEwas entered into by way of agreement between the parties and thearbitration clause relied upon by respondent no.1 would not fit thebill as the disputes that were to be adjudicated under that clauserelated only to a Concession Agreement which was not entered into– High Court held that there was a concluded contract between theFparties as the Letter of Award had been accepted by the appellantand that since the arbitration clause forms a part of the bid documentbetween the parties, the arbitration clause would govern the parties– On appeal, held: On perusal of the RFP clauses, a disclaimer atthe forefront of the RFP makes it clear that there was only a bidprocess that was going on between the parties and there was noGconcluded contract between them – Such a bid process wouldsubsume a Letter of Award to be issued by the Respondent No.1with two further steps under the schedule to be gone into before thedraft Concession agreement finally becomes an agreement betweenRespondent No.1 and the Special Purpose Vehicle that was H

constituted by the Consortium – In instant case, there was no absoluteand unqualified acceptance by Letter of Award – Some veryimportant steps had to be undergone before there could be anagreement enforceable in law as a contract – Furthermore, evenassuming that there was an arbitration clause which governs theparties, the said clause would wholly be inapt as it would only coverthe disputes between a Special Purpose Vehicle and the RespondentNo.1 arising from the Concession agreement not yet entered into,and not between the Respondent No.1 and the appellant andRespondent No.2 – Thus, impugned judgment of the High Court setaside – Contract Act, 1872 – s.7.

Allowing the appeal, the Court

HELD: 1. On a conjoint reading of the Request For Proposal(RFP) clauses, a few things become clear - (i) first and foremosta Disclaimer at the forefront of the RFP makes it clear that thereis only a bid process that is going on between the parties and thatthere is no concluded contract between the same (ii) it is equallyclear that such bid process would subsume a Letter of Award tobe issued by the Respondent No.1 with two further steps underthe schedule to be gone into before the draft ConcessionAgreement finally becomes an agreement between RespondentNo.1 and the Special Purpose Vehicle that is constituted by theConsortium for this purpose (iii) that through out the stage ofthe bid process, the forum for dispute resolution is exclusivelywith the Courts at Mumbai and (iv) that right uptil the stage ofthe entering into the Concession Agreement, the bid processmay be annulled without giving any reason whatsoever by theRespondent No.1. [Para 13] [372-G-H; 373-A-B]

2. Under Section 7 of the Indian Contract Act, 1872 in orderto convert a proposal into a promise, the acceptance must beabsolute and unqualified. It is clear on the facts of this case thatthere is no absolute and unqualified acceptance by the Letter ofAward – two or three very important steps have to be undergonebefore there could be said to be an agreement which would beenforceable in law as a contract between the parties.[Para 15] [373-G-H]

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A3. Appellant correctly relied upon both Dresser Rand S.A.and Bharat Sanchar Nigam Limited. In Dresser Rand S.A. it wasfound, on the facts, that unless a purchase order was placed, therewould be no agreement between the parties. Everything thattook place before such purchase order was placed would only bea prelude to a contract which cannot be confused with the contractBitself. [Para 16] [374-A-B]

4. Dresser Rand S.A. judgment was followed in BharatSanchar Nigam Limited, which is very similar to the facts of thepresent case. In Clause 30 of the instructions to the bidders inthat case, it is stated that the Courts in Delhi will have jurisdictionto entertain disputes or claims arising out of the tender till issueof authorization letters to circles for placement of purchaseorders. It is only thereafter that Clause 20 of the GeneralConditions of Contract, providing for an arbitration, could kickin. [Para 17] [374-F-G]

C

D

5. Appellant rightly contended that assuming that there wasan arbitration clause which governs the parties, the said clausewould be wholly inapt as it would only cover disputes between aSpecial Purpose Vehicle and the Respondent No.1 arising fromthe Concession Agreement not yet entered into, and not betweenthe Respondent No.1 and the appellant and Respondent No. 2.E[Para 21] [377-D-F]

M.R. Engineers and Contractors Private Limited v.Som Datt Builders Limited (2009) 7 SCC 696 :[2009] 10 SCR 373 ; Dresser Rand S.A. v. Bindal AgroChem Ltd. And Anr. (2006) 1 SCC 751 : [2006] 1 SCRF308 ; Bharat Sanchar Nigam Limited v. TelephoneCables Limited (2010) 5 SCC 213 : [2010] 3 SCR 291– relied on.

Unissi (India) Private Limited v. Post Graduate Instituteof Medical Education and Research (2009) 1 SCCG107 : [2008] 14 SCR 108 ; Kollipara Sriramulu (Dead)by his LR v. T. Aswatha Narayana (Dead) by his LRs &Others (1968) 3 SCR 387 ; Inox Wind Limited v.Thermocables Limited (2018) 2 SCC 519 : [2018] 1SCR 86 – referred to.

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9352of 2018.

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From the Judgment and Order dated 01.03.2018 of the High Courtof Judicature at Bombay in Arbitration Petition No. 1227 of 2016.

Dr. Abhishek Manu Singhvi, Sr. Adv., Amit Sibal, Dushyant Dave,Sr. Advs., Rajendra Barot, Ms. Liz Mathew, Rohan Rajadhyaksha,Ms. Oehri Neogi, Dhiraj Totala, Vinay Tripathi, Abhinav Jaganathan,M.F. Philip, Abhishek Puri, Yasharth Misra, Ms. Bharti Indulkar, SantoshKrishnan, Senthil Jagadeesan, Ms. Sonakshi Malhan, Ms. SuritiChowdhary, Ms. Mrinal Kanwar, Advs. for the appearing parties.

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The Judgment of the Court was delivered by E

R. F. NARIMAN, J. 1. Leave granted.

2. The factual matrix in which the present matter arises is that theRespondent No.1 issued a Global Invitation of Request for Qualification(hereinafter referred to as “RFQ”) in March, 2009 inviting applicationsfrom interested persons for the development of the 4[th] Container TerminalFProject on Design, Build, Finance, Operate and Transfer Basis atJawaharlal Nehru Port. The RFQ document of 02.03.2009 expresslycontained a clause by which the bidder could be a Single Entity or aConsortium. On facts, the appellant and the Respondent No.2 before ustogether formed a Consortium with the appellant as the Lead Member,Technical Member and Financial Member of the Consortium. It may beGpointed out at this stage that the appellant is a Company registered inSingapore, whereas Respondent No.2 is a Company registeredin India.

A3. Some of the salient features of the RFQ is that the RFQ itself,at the forefront, states by way of a Disclaimer that nothing in the RFQwill be construed to make the RFQ an Agreement between the parties.Whatever is stated in the RFQ Clauses would only be by way ofinformation to a prospective bidder as to the work to be performed. Thebid itself was in two stages – the first being at the stage of eligibility, andBthe second being at the stage of the Request for Proposal (hereinafterreferred to as “RFP”). Since the Consortium between the appellant andthe Respondent No.2 qualified in the first stage, they were entitled to beconsidered under an RFP document floated by the Respondent No.1dated 07.06.2010. Under this document, what was made clear was, likeCthe RFQ, that nothing in the RFP should be construed as forming anagreement between the parties. The only idea of the RFP was that theConsortium, in making its financial bid, would know what exactly wasrequired of it during performance of an agreement to be entered into infuture. What is interesting to note is that though there is no agreementat the stage of an elaborate bid process set out in a schedule to the RFP,Dyet, right until a Concession Agreement is to be signed between a SpecialPurpose Vehicle set up for the purpose by the Consortium and theRespondent No.1, the bid process will be governed by Indian law andthe Courts at Mumbai shall have exclusive jurisdiction over the disputesthat may arise under or in connection with the said process. AnotherEimportant clause is that the Jawaharlal Nehru Port Trust (RespondentNo. 1) can annul the bid process without assigning any reason right up tothe stage that a Concession Agreement is actually entered into, as statedhere-in-before, between the Special Purpose Vehicle and the RespondentNo.1. Equally, what is of great importance is a draft ConcessionAgreement, which forms part of the RFP document and is, therefore,Fdeemed to be a part of the Consortium bid itself. This draft ConcessionAgreement contained an arbitration clause in the following terms:

“19.1 Amicable Settlement

If any dispute or difference or claims of any kind arisesGbetween the Concessioning Authority and the Concessionaire inconnection with construction, interpretation or application of anyterms and conditions or any matter or thing in any way connectedwith or in connection with or arising out of this Agreement or therights, duties or liabilities of any Party under this Agreement, H

whether before or after the termination of this Agreement, thenthe parties shall meet together promptly, at the request of anyParty, in an effort to resolve such dispute, difference or claim bydiscussion between them.

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19.3 Arbitration

(a) Arbitrators

Failing amicable settlement and/or settlement with the assistanceof Expert appointed by the Parties by mutual consent, the disputeor differences or claims as the case may be, shall be finally settledby binding arbitration under the Arbitration and Conciliation Act,1996. Unless the Parties mutually agree otherwise, within 30(thirty) days of invocation of the arbitration as mentioned below,the rules of arbitration prescribed by the International Centre forAlternative Dispute Resolution, New Delhi shall apply to thearbitration. The arbitration shall be by a panel of three Arbitrators,one to be appointed by each party and the third, who shall act aspresiding arbitrator, to be appointed by the two arbitrators appointedby the parties. The Arbitration shall be invoked by one partyissuing to the other a notice in writing invoking the arbitration andappointing an arbitrator. Upon receipt of the notice, the otherParty shall appoint the second Arbitrator. The two Arbitrators soappointed shall appoint the third Arbitrator who shall act as the‘Presiding Arbitrator’. If the other Party fails to appoint a secondArbitrator within 30 (thirty) days from the receipt of the requestto do so, then the Arbitrator so appointed by the first party shalladjudicate the disputes as ‘Sole Arbitrator’.

(b) Place of Arbitration

The place of arbitration shall be the headquarters of theConcessioning Authority in India.

(c) English Language

The request for arbitration, the answer to the request, the termsof reference, any written submissions, any orders and rulings shallbe in English and, if oral hearings take place, English shall be thelanguage to be used in the hearings.

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A(d) Procedure

The procedure to be followed within the arbitration, includingappointment of arbitrator/arbitral tribunal, the rules of evidencewhich are to apply shall be in accordance with the Arbitration andConciliation Act, 1996.

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(e) Enforcement of Award

Any decision or award resulting from arbitration shall be finaland binding upon the parties. The parties hereto agree that thearbitral award may be enforced against the parties to the arbitrationproceeding or their assets wherever they may be found and that ajudgment upon the arbitral award may be entered in any courthaving jurisdiction thereof.

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(f) Fees and Expenses

The fees and expenses of the arbitrators and all other expensesof the arbitration shall be intially borne and paid equally byrespective parties subject to determination by the arbitrators. Thearbitrators may provide in the arbitral award for the reimbursementto the successful party of its costs and expenses in bringing ordefending the arbitration claim, including legal fees and expensesincurred by the party.

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(g) Performance during Arbitration

Pending the submission of and/or decision on a dispute, differenceor claim or until the arbitral award is published, the parties shallcontinue to perform all of their obligations under this Agreementwithout prejudice to a final adjustment in accordance with suchaward.”

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4. Equally of importance is to notice that if there is any discrepancybetween the RFP and the draft Concession Agreement, the draftConcession Agreement will override the RFP. The RFP also speaks ofa Letter of Award to be given in case the financial bid of the ConsortiumGis accepted. What is important to notice is that under the schedule thatis annexed to both the RFQ as well as RFP indicating the bid process,the signing of the Concession Agreement comes after the Letter of Awardas the last stage in the bid process. Since this schedule is of importanceand has been relied upon by learned counsel for both parties, the scheduleHto the RFQ is set out herein below:

M/S PSA MUMBAI INVESTMENTS PTE. LTD. v. BOARD OF TRUSTEESOF THE JAWAHARLAL NEHRU PORT TRUST [R. F. NARIMAN. J.]

A

1.3 Schedule Of Bidding Process

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Will be announced laterC

1. Sale of Bid Documents To be Specified

2. Last date for receiving

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queries

To be Specified

3. Pre-bid meeting – 1 To be Specified

4. Authority response to queries

5. Ultimately, as the Consortium’s bid dated 15.10.2010 was foundto be the most favourable from a financial point of view, a Letter ofAward dated 26.09.2011 was given by the Respondent No.1 to theConsortium, which was duly acknowledged by the Consortium.

A

A6. Meanwhile, some problems as to the exact stamp duty betweenthe parties cropped up, and since there was delay in signing the ConcessionAgreement, Respondent No.2 decided to opt out of the bid process.This was apprised to the Respondent No.1 by the appellant by a letterdated 02.04.2012. By a letter dated 30.04.2012, the Respondent No.1indicated that the appellant, who would now be left as the sole bidderBshould be ready to indicate a Special Purpose Vehicle for entering intoand executing the contract in the form of the draft Concession Agreement.However, the letter made this conditional upon the Ministry of Shippingaccording approval. In anticipation of such approval, by a letter dated30.05.2012, the appellant wrote to Respondent No.1 stating that it had,Cin fact, incorporated another Special Purpose Vehicle to execute andperform the Concession Agreement. Meanwhile, the appellant wasinformed by a letter dated 30.08.2012 that the Ministry of Shipping hadnot accorded approval to the change from consortium to single entity asrequested by the appellant.

D7. This being the case, on 18.09.2012, the bid security that wasgiven by the Consortium was encashed by Respondent No.1 for therecovery of which, a Suit has been filed on 21.09.2015, which is stillpending. At this stage, by a show-cause notice dated 12.09.2012 byRespondent No.1, the Consortium was called upon to perform its part ofthe bid as originally agreed to. Since this was not done, by a letter datedE16.10.2012, the Letter of Award that was accorded and acknowledgedby the appellant on 26.09.2011 was “withdrawn” by the RespondentNo.1. Consequent to this, Respondent No.1, in a letter dated 26.11.2014,claimed a sum of Rs.446.28 Crores by way of damages against theConsortium, and sent an arbitration notice dated 18.02.2015 stating that,Faccording to it, Clause 19 of the draft Concession Agreement would bethe arbitration clause governing the parties, and that they were appointingRetired Justice V.G. Palshikar of the Bombay High Court as theirArbitrator. The appellant and Respondent No.2 were called upon toappoint their Arbitrator within 30 days of receipt of this letter. By areply dated 29.04.2015, the appellant stated that as no agreement wasGentered into between the parties, Clause 19 of the draft ConcessionAgreement would not govern the parties and indicated that if theRespondent No.1 agreed, an Arbitration Agreement could be enteredinto between the parties to sort out the disputes arising on various scores.By their reply to this letter dated 04.07.2015, the Respondent No.1H

continued to reiterate that it was governed by the arbitration clause inthe draft Concession Agreement and that as 30 days had elapsed and noarbitrator was appointed by the Appellant, and as the said clause providedthat the Arbitrator appointed by the Respondent No.1 would now be thesole Arbitrator to decide the disputes between the parties, called uponJustice Palshikar to adjudicate the disputes between the parties.

8. An application under Section 16 of the Arbitration andConciliation Act, 1996 was then filed before the sole Arbitrator by theappellant and Respondent No. 2, in which they argued that there was noarbitration clause entered into by way of agreement between the partiesand that, in any case, the arbitration clause relied upon by RespondentNo.1 would not fit the bill as the disputes that were to be adjudicatedunder that clause related only to a Concession Agreement which hadnot yet been entered into, the parties to which would be RespondentNo.1 and a Special Purpose Vehicle, and not the Respondent No.1 andthe appellant and Respondent No.2. The learned Arbitrator agreed withthe appellant and held:

“25. The request for qualification is a request and not a Contract.Similarly request for proposal is also request for and not a contract.Both are requests made by the Claimant to the Respondents askingfor their qualification and proposal. It cannot and does not haveany reference to any arbitration clause. Similarly there is no suchreference in the LOA and therefore there is no contract in whichthere is a reference to a document incorporating an arbitrationclause. In fact, clause 6(1) of both RFQ and RFP provide thatthe Courts at Mumbai shall have exclusive jurisdiction for alldisputes arising under, pursuant to or in connection with the biddingprocess, this cannot be read to mean it is a document mentioningany arbitration clause.

26. It would also be necessary to consider the fact that the Letterof Acceptance was factually withdrawn by the Claimant by itscommunication dated 16[th] October 2012. In this letter it is observedin paragraph 4 thus:

“The Consortium has failed to abide by the provisions of theLetter of Award and has failed to sign the ConcessionAgreement within the time granted to it.”

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27. Then in paragraph 6 it is stated as under:

“The said change constitutes a change in the offer and alsoconstitutes a change in the Draft Concession Agreement proposedto be executed. The said deviation in the Draft ConcessionAgreement is not accepted by JNPT. The bid stage is over withBthe issue of Letter of Award and no further modification can beacceded to after issue of LOA.”

28. Then paragraph 9 says that in view of the delay and defaultsby the Respondents the Letter of Award rendered null and voidand is hereby withdrawal. It is therefore obvious that after suchCwithdrawal there cannot exist any document or even request whichcan be said to have been incorporated in a contract, factually alsothe Concession Agreement is not signed by either of the partiesand therefore there is no document or reference to a document orcontract, the existence of which can fulfill the requirement ofSection 7(5) of the Act.”D

9. An appeal against the said order was filed before the HighCourt under Section 37of the Arbitration and Conciliation Act, 1996in which the learned Arbitrator’s order was set aside. The High Courtheld that there is a concluded contract between the parties as theLetter of Award had been accepted by the appellant, and that sinceEthe arbitration clause forms a part of the bid document between theparties, the arbitration clause would govern the parties. It may be pointedout that an alternative argument was made on behalf of the appellantthat even if it was said that the parties were governed by the arbitrationclause in question, yet, the clause was “inapt” in theFlanguage of our judgment in M.R. Engineers and ContractorsPrivate Limited vs. Som Datt Builders Limited, (2009) 7SCC 696. This argument though noticed in the judgment was not, however,answered by the judgment.

10. Mr. Amit Sibal, learned Senior Advocate, appearing on behalfGof the appellant has made detailed submissions before us. According tohim, on a detailed reading of the RFQ and RFP, the first thing that strikesone is that there is a disclaimer in both the documents which clearlystates that neither document will be construed to be an agreement betweenthe parties. Secondly, he strongly relies upon the schedule and thedefinition of “bid process” in both the RFQ and RFP showing that at H

least insofar as the present tender is concerned, the Letter of Award isnot an unqualified acceptance of an offer made but has to await a contractto be signed in the form of a Concession Agreement between theRespondent No.1 and another entity, namely, the Special Purpose Vehicleset up for the purpose. Equally, according to the learned Senior Advocate,it is important to bear in mind that the bid process begins with the RFQand ends with the ultimate signing of the Concession Agreement.According to the learned Senior Advocate, until such ConcessionAgreement is signed, Courts in Mumbai alone will have exclusivejurisdiction to decide the disputes that may arise between the partiesboth under the RFQ as well as the RFP. It is only thereafter that if aConcession Agreement is entered into between the Respondent No.1and the Special Purpose Vehicle that the arbitration clause will kick inand will govern the disputes that will arise post the Concession Agreementin the performance of the contract between those two parties. He alsostrongly relied upon a clause in the RFP document which further madethis clear, as the Respondent No.1 could annul the bid process right tillthe stage of the entering into the Concession Agreement but not thereafter.He also strongly relied upon the letter dated 16.10.2012, by which theLetter of Award that was granted earlier was “withdrawn” showingthereby that there was no agreement that had been entered into betweenthe parties, as otherwise the expression used would have been“terminated”. He strongly relied upon this Court’s judgment in DresserRand S.A. vs. Bindal Agro Chem Ltd. And Anr., (2006) 1 SCC 751 asfollowed in Bharat Sanchar Nigam Limited vs. Telephone CablesLimited, (2010) 5 SCC 213 and stated that in a near identical fact situation,this Court has twice held that as there was no concluded contract betweenthe parties, no arbitration clause could be said to be contained whichwould bind the parties. He also strongly relied upon the RFP documentto show that the bid could be by a single entity or a Consortium, and thenshowed us a clause in the RFP document by which a change in theConsortium could be made provided the appellant remained as leadMember thereof. According to him, relying on this clause, the RespondentNo.1, left to itself, would have accepted the change from Consortium tosingle entity, but, de hors the bid document, the Respondent No.1 wentfor confirmation to the Ministry of Shipping, which refused to confirmthe same. Shri Sibal also made a without prejudice argument, on theassumption that the arbitration clause were to apply, that the said clausewould be wholly “inapt” as held in M.R. Engineers and Contractors AB

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APrivate Limited (supra) as it was to decide only questions that mayarise under a Concession Agreement never entered into, and betweenthe Respondent No.1 and the Special Purpose Vehicle and not theRespondent No.1 and the appellant and Respondent No.2. He alsopointed out that though this argument had been made before the HighCourt, the High Court has not adverted to or answered this contention.B

11. Mr. Dushant Dave, learned Senior Advocate, appearing onbehalf of the Respondent No.1 took us through the RFQ and RFP andrelied upon various clauses of the same. He also took us through theJoint Bidding Agreement dated 21.08.2009 that was entered into betweenthe appellant and the Respondent No.2. According to him, one veryCimportant part of the RFP is that the draft Concession Agreement wouldoverride the RFP in the case of inconsistency between the two. He,therefore, argued that since an arbitration clause between the partiesgoverns them, the inconsistent clause of Courts at Mumbai havingexclusive jurisdiction would, therefore, go out of harm’s way. He alsoDargued that the bidder had, in the present case, not only acknowledgedthe Letter of Award in his favour, which was a binding contract betweenthe parties, but had signed each page of the draft Concession Agreementsignifying that they would, therefore, be governed by the arbitration clausecontained therein. He relied strongly upon the fact that it could neverhave been conceived that if disputes arose during the bid process, theERespondent No.1 would have to be driven to a Court of law instead ofan arbitral process and asked us to look at the agreement both inaccordance with its object and as a man of commerce would look at thesame. He went on to state that a direct judgment of this Court in Unissi(India) Private Limited vs. Post Graduate Institute of MedicalFEducation and Research, (2009) 1 SCC 107 would govern the facts ofthis case being very similar thereto. He also strongly relied upon para24(v) of the M.R. Engineers and Contractors Private Limited (supra)judgment to indicate that, on facts, he would fall within the ratio set outin this sub-para. He also relied strongly upon this Court’s judgment in Kollipara Sriramulu (Dead) by his LR vs. T. Aswatha NarayanaG(Dead) by his LRs & Others, (1968) 3 SCR 387 to state that merelybecause a future formal contract may have to be entered into betweenthe parties, this does not mean that if such future formal contract is notentered into, then an agreement could not otherwise be established onfacts. According to him, the facts of the present case fall within theHratio of this judgment. He ended by stating that even assuming that the High Court judgment were wrong, we should not exercise ourdiscretionary jurisdiction under Article 136 of the Constitution of Indiagiven the fact that, as a result of the appellant’s conduct, there has beena huge revenue loss discerned by the fact that a revenue sharing ratio of50.8:49.2 has now been reduced, in a fresh tender between the appellantand Respondent No. 1, to 35:65.

12. Having heard learned counsel on behalf of both parties, it isimportant to set out some of the important provisions of the RFP.

“DISCLAIMER

The information contained in this Request for proposal document(the “RFP”) or subsequently provided to Bidder(s), whetherverbally or in documentary or any other form by or on behalf ofthe Authority or any of their employees or advisors, is provided toBidder(s) on the terms and conditions set out in this RFP and suchother terms and conditions subject to which such information isprovided.

This RFP is not an agreement and is neither an offer nor invitationby the Authority to the prospective Bidders or any other person.The purpose of this RFP is to provide interested parties withinformation that may be useful to them in making their financialoffers pursuant to this RFP (the “Bid”). This RFP includesstatements, which reflect various assumptions and assessmentsarrived at by the Authority in relation to the Project. Suchassumptions, assessments and statements do not purport to containall the information that each Bidder may require. This RFP maynot be appropriate for all persons, and it is not possible for theAuthority, its employees or advisors to consider the investmentobjectives, financial situation and particular needs of each partywho reads or uses this RFP. The assumptions, assessments,statements and information contained in this RFP, especially the{Feasibility Report}, may not be complete, accurate, adequate orcorrect. Each Bidder should, therefore, conduct its owninvestigations and analysis and should check the accuracy,adequacy, correctness, reliability and completeness of theassumptions, assessments, statements and information containedin this RFP and obtain independent advice from appropriatesources.

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Information provided in this RFP to the Bidder(s) is on a widerange of matters, some of which depends upon interpretation oflaw. The information given is not an exhaustive account ofstatutory requirements and should not be regarded as a completeor authoritative statement of law. The Authority accepts noresponsibility for the accuracy or otherwise for any interpretationor opinion on law expressed herein.

The Authority, its employees and advisors make no representationor warranty and shall have no liability to any person, including anyApplicant or Bidder under any law, statute, rules or regulations ortort, principles of restitution or unjust enrichment or otherwise forany loss, damages, cost or expense which may may arise from orbe incurred or suffered on account of anything contained in thisRFP or otherwise, including the accuracy, adequacy, correctness,completeness or reliability of the RFP and any assessment,assumption, statement or information contained therein or deemedto form part of this RFP or arising in any way in this Bid Stage.

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The Authority also accepts no liability of any nature whetherresulting from negligence or otherwise howsoever caused arisingfrom reliance of any Bidder upon the statements contained in thisRFP.

The issue of this RFP does not imply that the Authority is bound toselect a Bidder or to appoint the Selected Bidder or Concessionaire,as the case may be, for the Project and the Authority reserves theright to reject all or any of the Bidders or Bids without assigningany reason whatsoever.

The Bidder shall bear all its costs associated with or relating tothe preparation and submission of its Bid including but not limitedto preparation, copying, postage, delivery fees, expenses associatedwith any demonstrations or presentations which may be requiredby the Authority or any other costs incurred in connection with orrelating to its Bid. All such costs and expenses will remain withthe Bidder and the Authority shall not be liable in any mannerwhatsoever for the same or for any other costs or other expensesincurred by a Bidder in preparation or submission of the Bid,regardless of the conduct or outcome of the Bidding Process.”

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“1.1.2 The selected Bidder, who is either a company incorporatedunder the Companies Act, 1956 or undertakes to incorporate itselfas such prior to execution of the Concession agreement (the“Concessionaire”), shall be responsible for (Designing,engineering), financing, procurement, construction, operating andmaintenance of the Project under and in accordance with theprovisions of a long term Concession agreement (the “ConcessionAgreement”) to be entered into between the selected Bidder andthe Authority in the form provided by the Authority as Part of theBidding Documents pursuant hereto.

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1.1.5 The Concession Agreement sets forth the detailed termsand conditions for grant of the concession to the Concessionaire,including the scope of the Concessionaire’s services and obligations(the “Concession”).

1.1.6 The statements and explanations contained in this RFP areintended to provide a proper understanding to the Bidders aboutthe subject matter of this RFP and should not be construed orinterpreted as limiting in any way or manner the scope of servicesand obligations of the Concessionaire set forth in the ConcessionAgreement or the Authority’s rights to amend, alter, change,supplement or clarify the scope of work, the concession to beawarded pursuant to this RFP or the terms thereof or hereincontained. Consequently, any omissions, conflicts or contradictionsin the Bidding Documents including this RFP are to be noted,interpreted and applied appropriately to give effect to this intent,and no claims on that account shall be entertained by Authority.

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1.2.3 The Bidding Documents include the draft ConcessionAgreement for the Project. The Feasibility Report prepared bythe Authority/consultants of the Authority (the “Feasibility Report”)is also included. Subject to the provisions of Clause 2.1.3, theaforesaid documents and any addenda issued subsequent to thisRFP Document, but before the Bid Due Date, will be deemed toform part of the Bidding Documents.

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1.2.6 During the Bid Stage, Bidders are invited to examine theProject in greater detail, and to carry out, at their cost, such studiesas may be required for submitting their respective Bids for awardof the Concession including implementation of the Project.

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1.2.7 Bids are inviting for the Project on the basis of percentageof revenue to be shared with Authority by a Bidder for implementingthe Project. The Concession Period is pre-determined, as indicatedin the Concession Agreement. The revenue share shall constitutethe sole criteria for evaluation of Bids. Subject to Clause 2.16,the Project will be awarded to the Bidder quoting the highestrevenue share.

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1.3 Schedule of Bidding Process

The Authority shall endeavour to adhere to the following schedule:

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Event Description Date

1. Last date of receiving queries

To be specified To be specified

2. Authority response to queries latest by E

3. Pre-bid meeting – 1

To be specified To be specified22[nd] July 2010

4. Pre-bid meeting – 2

5. Bid Due Date(s)

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6. Opening of Bids

On Bid Due Date

7. Letter of Award (LOA)

Within 30 days of Bid

Due Date

8. Validity of Bids

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9. Signing of Concession Agreement

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award of LOA

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2.1.4 Notwithstanding anything to the contrary contained in thisRFP, the detailed terms specified in the draft ConcessionAgreement shall have overrriding effect; provided, however, thatany conditions or obligations imposed on the Bidder hereundershall continue to have effect in addition to its obligations under theConcession Agreement.

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2.2.1 Where the Bidder is a Consortium, change in compositionof the Consortium may be permitted by the Authority during theBid Stage only where:

a) the Lead Member continues to be the Lead Member of theConsortium;

b) the substitute is at least equal, in terms of Technical Capacityand Financial Capacity, to the Consortium Member who is soughtto be substituted and the modified Consortium shall continue tomeet the pre-qualification and short-listing criteria for Applicants;and

c) the new Member(s) expressly adopt(s) the Application alreadymade on behalf of the Consortium as if it were a party to itoriginally, and is not an Applicant/Member of any other Consortiumbidding for this Project.

2.2.2 Approval for change in the composition of a Consortiumshall be at the sole discretion of the Authority and must be approvedby the Authority in writing.

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2.5.2 It shall be deemed that by submitting a Bid, the Bidder has:

a. made a complete and careful examination of the BiddingDocuments;

b. received all relevant information requested from the Authority;

c. acknowledged and accepted the risk of inadequacy, error ormistake in the information provided in the Bidding documents orfurnished by or on behlaf of the Authority relating to any of thematters referred to in Clause 2.5.1 above; A

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d. satisfied itself about all matters, things and information includingmatters referred to in Clause 2.5.1 hereinabove necessary andrequired for submitting an informed Bid, execution of the Projectin accordance with the Bidding Documents and performance ofall of its obligations thereunder; e. acknowledged and agreed that inadequacy, lack ofcompleteness or incorrectness of information provided in theBidding Documents or ignorance of any of the matters referredto in Clause 2.5.1 hereinabove shall not be a basis for any claimfor compensation, damages, extension of time for performanceof its obligations, loss of profits etc. from the Authority; or a groundfor termination of the Concession Agreement; and,

f. agreed to be bound by the undertakings provided by it underand in terms hereof.

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2.6.1 Notwithstanding anything contained in this RFP, the Authorityreserves the right to accept or reject any Bid and to annul theBidding Process and reject all Bids at any time without any liabilityor any obligation for such acceptance, rejection or annulment,and without assigning any reasons therefor.

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2.7.2 The draft Concession Agreement to be provided by theAuthority as part of the Bid Documents shall be deemed part ofthis RFP.

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2.11.2 The documents accompanying the Bid shall be placed in aseparate envelope and marked as “Enclosures of the Bid”. Thedocuments shall include:

i. Bid Security in the prescribed format (Appendix – II); ii . in the prescribed format (Appendix – IV); and

iii. A copy of the Concession Agreement with each page initialledby the person signing – b) Power of Attorney for signing of Bid inthe prescribed format (Appendix – III);

iv. If applicable, the Power of Attorney for Lead Member ofConsortium the Bid in pursuance of the Power of Attorney referredto in Clause (b) hereinabove.

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2.14 Contents of the Bid

2.14.1 The Bid shall be furnished in the format at Appendix – Iand shall consist of a revenue share to be quoted by the Bidder.The Bidder shall specify (in Indian Rupees) the revenue shareoffered by him to undertake the Project in accordance with thisRFP and the provisions of the Concession Agreement.

2.14.2 The Project will be awarded to the Bidder quoting thehighest revenue share.

2.14.3 The opening of Bids and acceptance thereof shall besubstantially in accordance with this RFP.

2.14.4 The proposed Concession Agreement shall be deemed tobe part of the Bid.

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2.20.7 The Bid Security shall be forfeited and appropriated by theAuthority as mutually agreed genuine pre-estimated compensationand damages payable to the Authority for, inter alia, time, costand effort of the Authority without prejudice to any other right orremedy that may be available to the Authority hereunder orotherwise, under the following conditions:

a) If a Bidder submits a non-responsive Bid;

b) If a Bidder engages in a corrupt practice, fraudulent practice,coercive practice, undesirable practice or restrictive practice asspecified in Clause 4 of this RFP;

(c) If a Bidder withdraws its Bid during the period of Bid validityas specified in this RFP and as extended by the Bidder from timeto time;

d) in the case of Selected Bidder, if it fails within the specifiedtime limit -

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ii. to furnish the Performance Security within the periodprescribed therefor in the Concession Agreement; or

e) in case the Selected Bidder, having signed the ConcessionAgreement, commits any breach thereof prior to furnishing thePerformance Security.

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3.3.5 After selection, a Letter of Award (the “LOA”) shall beissued, in duplicate, by the Authority to the Selected Bidder andthe Selected Bidder shall, within 7 (seven) days of the receipt ofthe LOA, sign and return the duplicate copy of the LOA inacknowledgement thereof. In the event the duplicate copy of theLOA duly signed by the Selected Bidder is not received by thestipulated date, the Authority may, unless it consents to extensionof time for submission thereof, appropriate the Bid Security ofsuch Bidder as mutually agreed genuine pre-estimated loss anddamage suffered by the Authority on account of failure of theSelected Bidder to acknowledge the LOA, and the next eligibleBidder may be considered.

3.3.6 After acknowledgement of the LOA as aforesaid by theSelected Bidder, it shall execute the Concession Agreement withinthe period prescribed in Clause 1.3. The Selected Bidder shallnot be entitled to seek any deviation in the Concession Agreement.

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6.1 The Bidding Process shall be governed by, and construed inaccordance with, the laws of India and the Courts at Mumbaishall have exclusive jurisdiction over all disputes arising under,pursuant to and/or in connection with the Bidding Process.”

13. On a conjoint reading of the aforesaid clauses, a few thingsbecome clear - (i) first and foremost a Disclaimer at the forefront of theRFP makes it clear that there is only a bid process that is going onbetween the parties and that there is no concluded contract between thesame (ii) it is equally clear that such bid process would subsume a Letterof Award to be issued by the Respondent No.1 with two further stepsunder the schedule to be gone into before the draft Concession Agreementfinally becomes an agreement between Respondent No.1 and the Special Purpose Vehicle that is constituted by the Consortium for this purpose(iii) that through out the stage of the bid process, the forum for disputeresolution is exclusively with the Courts at Mumbai and (iv) that rightuptil the stage of the entering into the Concession Agreement, the bidprocess may be annulled without giving any reason whatsoever by theRespondent No.1

14. In addition, it may also be pointed out, on a reading of theLetter of Award itself dated 26.09.2011, as acknowledged by the appellant,that:

“3. You are required to incorporate a Special Purpose Vehiclesolely for the purpose of implementing the project (the‘Concessionarie”) as per Clause 2.2.6 of RFQ document.

4. As per Clause 2.20.5 of RFP document, your Bid Security shallremain in force and effect till the Concessionarie furnishesthe Performance Guarantee of a sum equal to Rs.3350 million(Rupees Three Thousand Three Hundred Fifty million), not laterthan 90 days from the date of signing of the ConcessionAgreement.

6. Please note that the Concession Agreement is expected to besigned within 30 days of the issue of this Letter of Award.”

This would show that even after the Letter of Award, a SpecialPurpose Vehicle solely for the purpose of implementing the project wouldhave to be set up, and that this Special Purpose Vehicle would be calledthe Concessionarie. Further, the bid security given by the appellant shallremain in force till the Special Purpose Vehicle furnishes the PerformanceGuarantee for a sum equal to Rs. 3350 million, and that the ConcessionAgreement is expected to be signed within 30 days of the issue of thisLetter of Award.

15. Under Section 7 of the Indian Contract Act, 1872 in order toconvert a proposal into a promise, the acceptance must be absolute andunqualified. It is clear on the facts of this case that there is no absoluteand unqualified acceptance by the Letter of Award – two or three veryimportant steps have to be undergone before there could be said to bean agreement which would be enforceable in law as a contract betweenthe parties.

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A16. Mr. Amit Sibal, learned Senior Advocate, is wholly correct inrelying upon both Dresser Rand S.A. (supra) and Bharat SancharNigam Limited (supra). In Dresser Rand S.A. (supra) it was found,onthe facts, that unless a purchase order was placed, there would be noagreement between the parties. Everything that took place before suchpurchase order was placed would only be a prelude to a contract whichBcannot be confused with the contract itself. This was set out in para 32of the judgment as follows:- “32. Parties agreeing upon the terms subject to which a contractwill be governed, when made, is not the same as entering into thecontract itself. Similarly, agreeing upon the terms which will governCa purchase when a purchase order is placed, is not the same asplacing a purchase order. A prelude to a contract should not beconfused with the contract itself. The purpose of Revision 4 dated10-6-1991 was that if and when a purchase order was placed byBINDAL, that would be governed by the “General Conditions ofDPurchase” of BINDAL, as modified by Revision 4. But when nopurchase order was placed, neither the “General Conditions ofPurchase” nor the arbitration clause in the “General Conditionsof Purchase” became effective or enforceable. Therefore,initialling of “Revision 4” by DR and BINDAL on 10-6-1991containing the modifications to the General Conditions of Purchase,Edid not bring into existence any arbitration agreement to settledisputes between the parties.”

17. This judgment was followed in Bharat Sanchar NigamLimited (supra), which is very similar to the facts of the present case.In Clause 30 of the instructions to the bidders in that case, it is statedFthat the Courts in Delhi will have jurisdiction to entertain disputes orclaims arising out of the tender till issue of authorization letters to circlesfor placement of purchase orders. It is only thereafter that Clause 20 ofthe General Conditions of Contract, providing for an arbitration, couldkick in. This being the case, this Court held:G“23. On the other hand, Section III had nothing to do with thebidding process or selection of suppliers, but contained provisionswhich would govern the performance, that is, the terms andconditions of the contract, if and when contracts were entered byplacing purchase orders. The arbitration clause (clause 20) is aHpart of Section III of the bid documents.

24. As per the scheme of bid documents, there is a clear divisionof the terms that will govern the tender process, and the termsthat will govern the contract, when the bids are accepted. Onepart regulated the tender process that led to placing of purchaseorders. That part contained a provision as to what should be theforum of dispute resolution, if there was a dispute at the tender orbidding stage. The other part stipulated the terms and conditionswhich will govern the contract, if and when purchase orders wereplaced. That part also contained a provision as to what should bethe forum if there was a dispute after the contract was enteredinto Clause 30 of Instructions to Bidders makes it clear that inregard to tender-stage disputes, the forum will be Civil Courts.Clause 20 of General Conditions on the other hand was intendedto operate when contracts were made and it specified that ifdisputes arose in regard to the contracts, the forum for disputeresolution will be the Arbitral Tribunal.

25. Clause 1 of the General Conditions of Contract (Section III)makes it clear that the General Conditions of Contract containedin Section III of the document shall apply in contracts made bythe purchaser for the procurement of goods. Clause 20 ofSection III, that is the arbitration clause makes it clear thatarbitration is available in regard to “any question, dispute ordifference arising under this agreement or in connectiontherewith”. Therefore, it is evident that the General Conditions ofContract (Section III) and clause 20 therein providing forarbitration, will not apply in regard to any dispute in regard to thetender or bid, or non-placing of a purchase order, but will applyonly in regard to any contract awarded by BSNL by placing apurchase order.

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27. It is also very significant that Section II (Instructions to Bidders)and Section IV (Special Conditions) which are relevant at the bidstage do not contain any arbitration clause providing that if thereis any dispute between BSNL and a bidder in regard to the bid/tender process, the dispute will be settled by arbitration. On theother hand, the Instruction to Bidders contains a specific provisionthat if there is a dispute or claim arising out of the tender till (issueof authorization for) placement of the purchase order, only courts AB

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will have jurisdiction. Of course, as and when appellant placed apurchase order on a bidder, the purchase order contained a termthat the General conditions of contract, forming part of the biddocuments would be a part of the contract documents, andconsequently the arbitration clause applied to the contracts enteredbetween BSNL and the bidders.

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29. Therefore, only when a purchase order was placed, a ‘contract’would be entered; and only when a contract was entered into, theGeneral Conditions of Contract including the arbitration clausewould become a part of the contract. If a purchase order was notplaced, and consequently the general conditions of contract(Section III) did not become a part of the contract, the conditionsin Section III which included the arbitration agreement, would notat all come into existence or operation. In other words, thearbitration clause in Section III was not an arbitration agreementin praesenti, during the bidding process, but a provision that wasto come into existence in future, if a purchase order was placed.”

18. However, Mr. Dave, strongly relied upon the judgment inKollipara Sriramulu (Dead) by his LR (supra). This judgment didindeed state that it is well-established that a mere reference to a futureformal contract will not prevent a binding bargain between the partiesif, in fact, there is such a bargain. The judgment then went on to statethat “there are, however, cases whether the reference to a future contractis made in such terms as to show that the parties did not intend to bebound until a formal contract is signed.”

19. We are of the view that the facts of the present case wouldbe governed by the ratio contained in the aforesaid sentence. Insofar asthe judgment in Unissi (India) Private Limited(supra) is concerned, itis important to note that, in para 15 of the said judgment, it is stated thatthe tender of the appellant was accepted by PGI for supply of 41 pulseoxymeters. Since the tender document contained an arbitration clause,and since it was found on facts that a binding contract had been enteredinto by acceptance of the tender, the parties therein would be bound bythe aforesaid clause. It was also stated that, in addition, performance byway of supply of material by the appellant and acceptance thereof byPGI had also taken place, which would show that the tender of the appellant, containing an arbitration clause, was admittedly accepted bythe respondent. It is clear that this case is wholly distinguishable, anddoes not apply on facts as has been stated by us herein above. It is clearthat there was no concluded contract at the Letter of Award stage andthis judgment would, therefore, not apply.

20. Mr. Dave also strongly relied upon the judgment in Inox WindLimited vs. Thermocables Limited, (2018) 2 SCC 519. This judgmentin paras 17-19 thereafter made it clear that an exception to the generalrule laid down in M.R. Engineers and Contractors Private Limited(supra) as to standard forms of practice containing arbitration clauseswould be extended also to standard forms between individual personsand not merely standard forms of professional assessments.

21. We may hasten to add that this judgment would have no mannerof application on the facts of this case for the reason that it has beenfound by us that there is no agreement between the parties at all in thefacts of the present case, making it clear, therefore, that the arbitrationclause contained in the draft Concession Agreement would not apply.Further, even the without prejudice argument of Mr. Sibal is worthy ofacceptance. Mr. Sibal argued, relying strongly upon M.R. Engineersand Contractors Private Limited (supra), that assuming that therewas an arbitration clause which governs the parties, the said clausewould be wholly inapt as it would only cover disputes between a SpecialPurpose Vehicle and the Respondent No.1 arising from the ConcessionAgreement not yet entered into, and not between the Respondent No.1and the appellant and Respondent No. 2. He is correct, and we agreewith this contention as well.

22. We now come to the last argument of Mr. Dave that, on theassumption that the High Court judgment is incorrect, yet we should not,in our discretionary jurisdiction under Article 136 of the Constitution ofIndia, interfere.

23. Mr. Dave relies upon the fact that a subsequent tender hasbeen accepted, causing great financial loss to the Respondent No.1.Mr. Sibal has replied by saying that the subsequent tender containeddifferent tender conditions and, in any case, insofar as that subsequenttender was concerned, his bid was considered the best amongst six otherbidders. Apart from this, we are of the view that the High Court judgmentis wholly incorrect in holding that the Letter of Award would constitute a A

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Abinding contract between the parties for the reasons given above. Itwould be a travesty of justice, in the facts of the case, if we were not tointerfere and set aside the same. Consequently, the impugned judgmentof the High Court is set aside and the order of the learned Arbitrator isreinstated.

B24. The appeal is allowed in the aforesaid terms.

25. It would be open for the Respondent No.1 to pursue its claimof Rs. 436 Crores plus in an appropriate forum, which will decide thesame on its own merits in accordance with law.

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Ankit Gyan

Appeal allowed.

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