UNION OF INDIA Vs. N K PRIVATE LIMITED

JUDGEMENT

(1.) This appeal is by special leave. The question for consideration is whether there is a binding, valid and concluded contract between the appellants and the Respondents. On an application filed by the Respondents under section 20 of the Arbitration Act a single Judge of the Delhi High Court directed the appellants to file the arbitration agreement to refer the disputes between the parties arising under the contract to arbitrators. An appeal against that order to a Division Bench was dismissed.

(2.) In order to understand the scope of the controversy, a few facts may be stated. On the 21st March 1968, a notice of Global Tender No. 1 of 1968 was issued by the President of India, therein referred to as the Government of India, Ministry of Railways (Railway Board) proposing to sell 80,000 tonnes of surplus released serviceable and scrap rails, as per details given in the schedule thereto, established buyers abroad or their accredited agents. It invited offers in respect thereof to be addressed to the President of India and sent to Shri R.N. Mubayi, Director, Railway Stores, Railway Board. With this notice were enclosed the general conditions of tender, special conditions of tender, instructions to tenderers, including proforma for performance guarantee and deed bonds as in clauses 4A and 4B shipping terms and schedule of stocks available as on 1st March 1968. In the general conditions the seller was defined to mean, the President of India acting through the Director, Railway Stores, Railway Board, unless the context otherwise provided. The delivery F.O.B. (Free on Board)/ F.A.S. (Free alongside ship) invoices and freight were dealt with in clause 9. The default clause in clause 11 provided that where a buyer fails to execute the contract the seller was to have power under the hand of the Director, Railway Stores, Railway Board, to declare the contract at an and at the risk and cost of the buyer. The special conditions of tender dealt with prices, quotations, payments, terms of shipment, weighment, basis of sales and handling at ports, force majeure, arbitration, legal jurisdiction, acceptance of offers and title and risk. In the instructions to tenderers, the tenderers were requested to quote their highest offer indicating the price per metric tonne inclusive of export incentive of 5 % of F.O.B. value of currently applicable as guarantee by the Government of India which will always be to the sellers benefit for handing over of the rails F.O.B. docks/F.A.S./F.O.B. Indian Port or C. I. F. destination port. The tenderer was required to offer comments clause by clause on the 'general conditions of tender' and the 'special conditions of tender' either confirming acceptance of the clauses or indicating deviation therefrom if any. It was further provided that the contract will come into force from the date the buyers' letter of credit is accepted by the buyers sellers nominee. In 4-A of these instructions the pro forma deed bond was given which was to be signed by the tenderer and the acceptance was to be signed for and on behalf of the President of India by the person designated for that purpose. Similarly, paragraph 4-B gave the proforma performance guarantee bond to be addressed to the President of India executed by the tenderer and accepted for and on behalf of the President of India by the person so designated. These terms and conditions also set out the shipping terms in detail, though a few of them were also mentioned in the special conditions under the headings, shipment, Terms of Shipping and Receiving Notice. It appears that the terms and conditions enclosed with the tender notice annexed to the petition filed in court were not full and complete. Consequently the appellant has annexed a true copy of the enclosures with the special leave petition and prayed that this may be admitted in evidence. As there was no dispute in respect of the contents thereof, we have allowed this prayer because without them it is not possible to arrive at a just conclusion.

(3.) Pursuant to this tender notice, the Respondents by their letter, Ex. 'B', dated 21-5-1968, offered to buy 80,000 tonnes of rails at $ 45.1 per tonne F. O. B. Indian Ports on the terms and conditions set out therein. In reply thereto, by a letter dated 25-5-1968, the Dy. Director, Railway Stores, Railway Board, P.C. Oak in Paragraph 1(6) categorically stated by reference to paragraph 14 of the conditions of the letter of the Respondents that as shipping terms have financial implications they were requested to indicate with reference to the tender which particular clauses they desire to re-negotiate and settle. In paragraph 2 it was stated that the offer of the Respondents was not addressed to the President of India as required under clause 1 (3) of the Instructions to the Tenderers and, therefore, the Respondents were required to confirm that their offer was deemed to have been addressed to the President of India and is open for acceptance on behalf of the President. It was further stated in paragraph 4 that they should send the reply addressed to the President of India through the Director of Railway Stores, Railway Board covering all the points indicated therein, to reach them not later than 28-5-1968. No reply was, however, received by the time indicated in the letter of the appellants and while so stating another letter was addressed to the Respondents on 3-6-1968 by C. Parasuraman for Secretary, Railway Board, seeking further clarification in respect of items Nos. 26 and 27 of the offer contained in the aforesaid letter of the Respondents dated 21-5-1968. There were also two other clarifications in respect of the weight of the tonne for which $ 45.1 was quoted and option to transfer the contract in the name of the foreign principals which it was stated, could not be agreed to straightway unless and until they knew the names of the foreign principals and their willingness to enter into a legal binding guarantee of all the terms and conditions of the contract. The Respondents wrote subsequently to the Director, Railway Stores on the 15th June, 29th June, 8th July and the three letters on 10th July and one on the 15th July 1968, some of which were written after a discussion with the Director of Railway Stores in the presence of the Director of Finance, Mr. Datta. On the same day as the letter of 15th July was sent by the Respondents, P. C. Oak signing for the Secretary of the Railway Board, addressed the following letter of acceptance No.68/RS (G)/709/10 to the Respondents: -