REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 9352  OF 2018 (Arising out of SLP (C) No. 8166 of 2018)

M/S PSA MUMBAI INVESTMENTS  PTE. LIMITED     …APPELLANT

VERSUS

THE BOARD OF TRUSTEES OF THE JAWAHARLAL  NEHRU PORT TRUST AND ANR.   ...RESPONDENT

J U D G M E N T  

R.F. Nariman, J.

1. Leave granted.

2. The factual matrix in which the present matter arises is

that the Respondent No.1 issued a Global Invitation of Request

for  Qualification  (hereinafter  referred  to  as  “RFQ”)  in  March,

2009  inviting  applications  from  interested  persons  for  the

development of the 4th Container Terminal Project on Design,

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Build,  Finance,  Operate  and  Transfer  Basis  at  Jawaharlal

Nehru  Port.   The  RFQ  document  of  02.03.2009  expressly

contained a clause by which the bidder could be a Single Entity

or a Consortium.  On facts, the appellant and the Respondent

No.2 before us together formed a Consortium with the appellant

as the Lead Member, Technical Member and Financial Member

of the Consortium.  It may be pointed out at this stage that the

appellant  is  a  Company  registered  in  Singapore,  whereas

Respondent No.2 is a Company registered in India.   

3) 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 RFQ will be construed to make the RFQ an Agreement

between the parties.  Whatever is stated in the RFQ Clauses

would only be by way of information to a prospective bidder as

to the work to be performed.  The bid itself was in two stages –

the first being at the stage of eligibility, and the second being at

the stage of the Request for Proposal (hereinafter referred to as

“RFP”).  Since the Consortium between the appellant and the

Respondent No.2 qualified in the first stage, they were entitled

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to  be  considered  under  an  RFP  document  floated  by  the

Respondent  No.1  dated  07.06.2010.  Under  this  document,

what was made clear was, like the RFQ, that  nothing in the

RFP should be construed as forming an agreement between

the parties.  The only idea of the RFP was that the Consortium,

in  making  its  financial  bid,  would  know  what  exactly  was

required of it during performance of an agreement to be entered

into in future.  What is interesting to note is that though there is

no agreement at the stage of an elaborate bid process set out

in  a  schedule  to  the  RFP,  yet,  right  until  a  Concession

Agreement is to be signed between a Special Purpose Vehicle

set up for the purpose by the Consortium and the Respondent

No.1, the bid process will be governed by Indian law and the

Courts  at  Mumbai  shall  have  exclusive  jurisdiction  over  the

disputes that  may arise under or  in connection with the said

process.  Another important clause is that the Jawaharlal Nehru

Port  Trust  (Respondent  No.  1)  can  annul  the  bid  process

without  assigning  any  reason  right  up  to  the  stage  that  a

Concession Agreement is actually entered into, as stated here-

in-before,  between  the  Special  Purpose  Vehicle  and  the 3

Respondent  No.1.   Equally,  what is of  great  importance is  a

draft  Concession  Agreement,  which  forms  part  of  the  RFP

document  and  is,  therefore,  deemed  to  be  a  part  of  the

Consortium  bid  itself.   This  draft  Concession  Agreement

contained an arbitration clause in the following terms:

“19.1 Amicable Settlement If  any  dispute  or  difference  or  claims  of  any  kind

arises  between  the  Concessioning  Authority  and  the Concessionaire  in  connection  with  construction, interpretation or application of any terms and conditions or any  matter  or  thing  in  any  way  connected  with  or  in connection with or arising out of this Agreement or the rights, duties  or  liabilities  of  any  Party  under  this  Agreement, whether before or after  the termination of this Agreement, then the parties shall meet together promptly, at the request of any Party, in an effort to resolve such dispute, difference or claim by discussion between them.

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19.3 Arbitration

(a) Arbitrators

Failing  amicable  settlement  and/or  settlement  with  the assistance  of  Expert  appointed  by  the  Parties  by  mutual consent, the dispute or differences or claims as the case may be,  shall  be finally  settled by 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 for Alternative Dispute Resolution,  New Delhi  shall  apply  to  the  arbitration.   The arbitration shall be by a panel of three Arbitrators, one to be appointed  by  each  party  and  the  third,  who  shall  act  as presiding arbitrator,  to  be appointed by the  two arbitrators appointed by the parties.  The Arbitration shall be invoked by one party issuing to the other a notice in writing invoking the

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arbitration and appointing an arbitrator.  Upon receipt of the notice,  the other  Party  shall  appoint  the second Arbitrator. The  two  Arbitrators  so  appointed  shall  appoint  the  third Arbitrator who shall act as the ‘Presiding Arbitrator’.   If the other  Party  fails  to  appoint  a  second  Arbitrator  within  30 (thirty) days from the receipt of the request to do so, then the Arbitrator so appointed by the first party shall adjudicate the disputes as ‘Sole Arbitrator’.

(b) Place of Arbitration

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

(c) English Language

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

(d) Procedure

The procedure to be followed within the arbitration, including appointment  of  arbitrator/arbitral  tribunal,  the  rules  of evidence which are to apply shall be in accordance with the Arbitration and Conciliation Act, 1996.

(e) Enforcement of Award

Any decision or award resulting from arbitration shall be final and binding upon the parties.  The parties hereto agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having jurisdiction thereof.

(f) Fees and Expenses

The  fees  and  expenses  of  the  arbitrators  and  all  other expenses of the arbitration shall  be intially borne and paid equally by respective parties subject to determination by the arbitrators.  The arbitrators may provide in the arbitral award for the reimbursement to the successful party of its costs and expenses  in  bringing  or  defending  the  arbitration  claim, including legal fees and expenses incurred by the party.

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(g) Performance during Arbitration

Pending  the  submission  of  and/or  decision  on  a  dispute, difference or claim or until the arbitral award is published, the parties shall continue to perform all of their obligations under this  Agreement  without  prejudice  to  a  final  adjustment  in accordance with such award.”

4) Equally  of  importance  is  to  notice  that  if  there  is  any

discrepancy  between  the  RFP  and  the  draft  Concession

Agreement, the draft  Concession Agreement will  override the

RFP.  The RFP also speaks of a Letter of Award to be given in

case the financial bid of the Consortium is accepted.  What is

important to notice is that under the schedule that is annexed to

both the RFQ as well as RFP indicating the bid process, the

signing of the Concession Agreement comes after the Letter of

Award as the last stage in the bid process.  Since this schedule

is of importance and has been relied upon by learned counsel

for both parties, the schedule to the RFQ is set out herein below:

1.3Schedule Of Bidding Process

The authority shall endeavor to adhere to the  following schedule :- Event Description Date

Qualification Stage 1. Last date for receiving queries 30th March, 2009 2. Pre-Application conference   15th April 2009

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3. Application due date  30th April 2009 4. Announcement of short list Will be announced

later Bid Stage                Estimated Date

1. Sale of Bid Documents      To be Specified 2. Last date for receiving       queries      To be Specified 3. Pre-bid meeting – 1      To be Specified 4. Authority response to queries       latest by      To be Specified 5. Pre-bid meeting – 2      To be Specified 6. Bid Due Date (s)      To be Specified 7. Opening of Bids     On Bid Due Date 8. Letter of Award (LOA)    Within 30 days of Bid  

  Due Date 9. Validity of Bids    120 days of Bid Due  

  Date 10. Signing of Concession  Within 30 days of award       Agreement of LOA

5) Ultimately, as the Consortium’s bid dated 15.10.2010 was

found to be the most favourable from a financial point of view, a

Letter of Award dated 26.09.2011 was given by the Respondent

No.1 to the Consortium, which was duly acknowledged by the

Consortium.

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6) Meanwhile,  some problems as to the exact  stamp duty

between the parties cropped up, and since there was delay in

signing the Concession Agreement, Respondent No.2 decided

to  opt  out  of  the  bid  process.   This  was  apprised  to  the

Respondent No.1 by the appellant by a letter dated 02.04.2012.

By a letter dated 30.04.2012, the Respondent No.1 indicated

that the appellant,  who would now be left  as the sole bidder

should  be  ready  to  indicate  a  Special  Purpose  Vehicle  for

entering into and executing the contract in the form of the draft

Concession  Agreement.   However,  the  letter  made  this

conditional upon the Ministry of Shipping according approval.

In anticipation of such approval, by a letter dated 30.05.2012,

the appellant wrote to Respondent No.1 stating that it had, in

fact, incorporated another Special Purpose Vehicle to execute

and  perform  the  Concession  Agreement.   Meanwhile,  the

appellant was informed by a letter dated 30.08.2012 that the

Ministry of Shipping had not accorded approval to the change

from consortium to single entity as requested by the appellant.   

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7) This being the case, on 18.09.2012, the bid security that

was given by the Consortium was encashed by Respondent

No.1  for  the  recovery  of  which,  a  Suit  has  been  filed  on

21.09.2015, which is still  pending.  At this stage, by a show-

cause  notice  dated  12.09.2012  by  Respondent  No.1,  the

Consortium was called upon to perform its part of the bid as

originally agreed to.  Since this was not done, by a letter dated

16.10.2012,  the  Letter  of  Award  that  was  accorded  and

acknowledged by the appellant on 26.09.2011 was “withdrawn”

by  the  Respondent  No.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 the Consortium, and sent an

arbitration notice dated 18.02.2015 stating that, according to it,

Clause 19  of  the  draft  Concession  Agreement  would  be the

arbitration  clause  governing  the  parties,  and  that  they  were

appointing Retired Justice V.G. Palshikar of the Bombay High

Court as their Arbitrator.  The appellant and Respondent No.2

were called upon to appoint their Arbitrator within 30 days of

receipt of this letter.  By a reply dated 29.04.2015, the appellant

stated  that  as  no  agreement  was  entered  into  between  the 9

parties,  Clause 19 of  the draft  Concession Agreement would

not  govern  the  parties  and  indicated  that  if  the  Respondent

No.1 agreed, an Arbitration Agreement could be entered into

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.1 continued to reiterate that it was governed by

the arbitration clause in the draft Concession Agreement and

that as 30 days had elapsed and no arbitrator was appointed by

the  Appellant,  and  as  the  said  clause  provided  that  the

Arbitrator appointed by the Respondent No.1 would now be the

sole  Arbitrator  to  decide  the  disputes  between  the  parties,

called  upon  Justice  Palshikar  to  adjudicate  the  disputes

between the parties.   

8) An  application  under  Section  16  of  the  Arbitration  and

Conciliation Act, 1996 was then filed before the sole Arbitrator

by the appellant and Respondent No. 2, in which they argued

that  there  was  no  arbitration  clause  entered  into  by  way  of

agreement  between  the  parties  and  that,  in  any  case,  the

arbitration clause relied upon by Respondent No.1 would not fit

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the bill as the disputes that were to be adjudicated under that

clause related only to a Concession Agreement which had not

yet  been  entered  into,  the  parties  to  which  would  be

Respondent No.1 and a Special Purpose Vehicle, and not the

Respondent No.1 and the appellant and Respondent No.2.  The

learned Arbitrator agreed with the 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 asking for their qualification and proposal.  It cannot and does not have any reference to  any  arbitration  clause.   Similarly  there  is  no  such reference in the LOA and therefore there is no contract in which there is a reference to a document incorporating an arbitration clause.  In fact,  clause 6(1) of both RFQ and RFP  provide  that  the  Courts  at  Mumbai  shall  have exclusive  jurisdiction  for  all  disputes  arising  under, pursuant to or in connection with the bidding process, this cannot be read to mean it is a document mentioning any arbitration clause.

26. It would also be necessary to consider the fact that the Letter of Acceptance was factually withdrawn by the Claimant by its communication dated 16th October 2012. In this letter it is observed in paragraph 4 thus:

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

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

“The said change constitutes a change in the offer and also constitutes  a  change  in  the  Draft  Concession  Agreement proposed to be executed.  The said deviation in the Draft Concession Agreement is not accepted by JNPT.  The bid

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stage is over with the issue of Letter of Award and no further modification can be acceded to after issue of LOA.”

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

9) An appeal against the said order was filed before the High

Court under Section 37of the Arbitration and Conciliation Act,

1996 in which the learned Arbitrator’s order was set aside.  The

High Court held that there is a concluded contract between the

parties  as  the  Letter  of  Award  had  been  accepted  by  the

appellant, and that since the arbitration clause forms a part of

the bid document  between the parties,  the arbitration clause

would  govern  the  parties.   It  may  be  pointed  out  that  an

alternative argument was made on behalf of the appellant that

even  if  it  was  said  that  the  parties  were  governed  by  the

arbitration clause in question, yet, the clause was “inapt” in the

language of our judgment in M.R. Engineers and Contractors

Private  Limited vs.  Som Datt  Builders  Limited,  (2009)  7   

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SCC 696.  This argument though noticed in the judgment was

not, however, answered by the judgment.

10) Mr.  Amit  Sibal,  learned Senior  Advocate,  appearing  on

behalf of the appellant has made detailed submissions before

us.  According to him, on a detailed reading of the RFQ and

RFP, the first thing that strikes one is that there is a disclaimer

in  both  the  documents  which  clearly  states  that  neither

document will  be construed to be an agreement between the

parties.  Secondly, he strongly relies upon the schedule and the

definition of “bid process” in both the RFQ and RFP showing

that  at  least  insofar  as the present  tender  is  concerned,  the

Letter  of  Award is  not  an unqualified  acceptance of  an offer

made but has to await a contract to be signed in the form of a

Concession  Agreement  between  the  Respondent  No.1  and

another entity, namely, the Special Purpose Vehicle set 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 RFQ and ends with the ultimate signing of the

Concession  Agreement.   According  to  the  learned  Senior

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Advocate, until such Concession Agreement is signed, Courts

in Mumbai alone will have exclusive jurisdiction to decide the

disputes  that  may  arise  between the  parties  both  under  the

RFQ  as  well  as  the  RFP.   It  is  only  thereafter  that  if  a

Concession  Agreement  is  entered  into  between  the

Respondent  No.1  and  the  Special  Purpose  Vehicle  that  the

arbitration clause will kick in and will govern the disputes that

will arise post the Concession Agreement in the performance of

the contract between those two parties. He also strongly relied

upon a clause in the RFP document which further made this

clear, as the Respondent No.1 could annul the bid process right

till the stage of the entering into the Concession Agreement but

not  thereafter.   He also strongly  relied upon the letter  dated

16.10.2012,  by  which  the  Letter  of  Award  that  was  granted

earlier  was  “withdrawn”  showing  thereby  that  there  was  no

agreement that had been entered into between the parties, as

otherwise the expression used would have been “terminated”.

He strongly relied upon this Court’s judgment in Dresser Rand

S.A. vs. Bindal Agro Chem Ltd. And Anr., (2006) 1 SCC 751

as followed in Bharat Sanchar Nigam Limited vs. Telephone 14

Cables Limited, (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 between the parties, no arbitration

clause  could  be  said  to  be  contained  which  would  bind  the

parties.   He also strongly  relied upon the RFP document  to

show that the bid could be by a single entity or a Consortium,

and then showed us a clause in the RFP document by which a

change  in  the  Consortium  could  be  made  provided  the

appellant remained as lead Member thereof.  According to him,

relying on this clause, the Respondent No.1, left to itself, would

have accepted the change from Consortium to single entity, but,

de  hors  the  bid  document,  the  Respondent  No.1  went  for

confirmation  to  the  Ministry  of  Shipping,  which  refused  to

confirm the same.  Shri  Sibal  also made a without prejudice

argument, on the assumption that the arbitration clause were to

apply, that the said clause would be wholly “inapt” as held in

M.R. Engineers and Contractors Private Limited (supra) as

it  was  to  decide  only  questions  that  may  arise  under  a

Concession Agreement  never  entered  into,  and between the

Respondent No.1 and the Special Purpose Vehicle and not the 15

Respondent No.1 and the appellant and Respondent No.2.  He

also  pointed  out  that  though  this  argument  had  been  made

before the High Court, the High Court has not adverted to or

answered this contention.

11) Mr.  Dushant  Dave,  learned Senior  Advocate,  appearing

on behalf of the Respondent No.1 took us through the RFQ and

RFP and relied upon various clauses of the same. He also took

us through the Joint Bidding Agreement dated 21.08.2009 that

was entered into between the appellant  and the Respondent

No.2.  According to him, one very important part of the RFP is

that the draft Concession Agreement would override the RFP in

the  case  of  inconsistency  between  the  two.   He,  therefore,

argued  that  since  an  arbitration  clause  between  the  parties

governs  them,  the  inconsistent  clause  of  Courts  at  Mumbai

having exclusive jurisdiction would, therefore, go out of harm’s

way.  He also argued that the bidder had, in the present case,

not only acknowledged the Letter of Award in his favour, which

was a  binding  contract  between the  parties,  but  had  signed

each page of the draft  Concession Agreement signifying that

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they  would,  therefore,  be  governed by  the  arbitration  clause

contained therein. He relied strongly upon the fact that it could

never have been conceived that if disputes arose during the bid

process,  the Respondent No.1 would have to be driven to a

Court of law instead of an arbitral process and asked us to look

at the agreement both in accordance with its object and as a

man of commerce would look at the same.  He went on to state

that a direct judgment of this Court in  Unissi (India) Private

Limited vs.  Post Graduate Institute of  Medical  Education

and Research,  (2009) 1 SCC 107 would govern the facts of

this  case being very similar  thereto.   He also strongly  relied

upon  para  24(v)  of  the  M.R.  Engineers  and  Contractors

Private Limited (supra) judgment to indicate that, on facts, he

would fall within the ratio set out in this sub-para.  He also relied

strongly  upon  this  Court’s  judgment  in  Kollipara  Sriramulu

(Dead) by his LR vs.  T. Aswatha Narayana (Dead) by his

LRs & Others, (1968) 3 SCR 387 to state that merely because

a future formal contract may have to be entered into between

the  parties,  this  does  not  mean  that  if  such  future  formal

contract  is  not  entered  into,  then  an  agreement  could  not 17

otherwise be established on facts.  According to him, the facts

of  the present  case fall  within the ratio of  this  judgment.  He

ended  by  stating  that  even  assuming  that  the  High  Court

judgment were wrong, we should not exercise our discretionary

jurisdiction under Article 136 of the Constitution of India given

the fact that, as a result of the appellant’s conduct, there has

been a huge revenue loss discerned by the fact that a revenue

sharing ratio  of  50.8:49.2 has now been reduced,  in  a fresh

tender between the appellant and Respondent No. 1, to 35:65.

12) Having heard learned counsel on behalf of both parties, it

is important 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), whether verbally or in documentary or any other form  by  or  on  behalf  of  the  Authority  or  any  of  their employees  or  advisors,  is  provided  to  Bidder(s)  on  the terms and conditions set out in this RFP and such other terms and conditions subject to which such information is provided.

This RFP is not an agreement and is neither an offer nor invitation  by  the  Authority  to  the  prospective  Bidders  or any other person.  The purpose of this RFP is to provide

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interested parties with information that may be useful to them in making their financial offers pursuant to this RFP (the “  Bid  ”).  This RFP includes statements, which reflect various assumptions and assessments arrived at by the Authority  in  relation  to  the  Project.   Such  assumptions, assessments and statements do not purport to contain all the information that each Bidder may require.  This RFP may  not  be  appropriate  for  all  persons,  and  it  is  not possible  for  the  Authority,  its  employees  or  advisors  to consider the investment objectives, financial situation and particular needs of each party who 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  or  correct.   Each  Bidder  should,  therefore, conduct  its  own investigations  and  analysis  and  should check the accuracy, adequacy, correctness, reliability and completeness  of  the  assumptions,  assessments, statements  and  information  contained  in  this  RFP and obtain independent advice from appropriate sources.

Information provided in this RFP to the Bidder(s) is on a wide  range  of  matters,  some  of  which  depends  upon interpretation  of  law.   The  information  given  is  not  an exhaustive account of statutory requirements and should not be regarded as a complete or authoritative statement of  law.   The  Authority  accepts  no  responsibility  for  the accuracy or otherwise for any interpretation or opinion on law expressed herein.

The  Authority,  its  employees  and  advisors  make  no representation  or  warranty  and shall  have no liability  to any person, including any Applicant or Bidder under any law,  statute,  rules  or  regulations  or  tort,  principles  of restitution or unjust enrichment or otherwise for any loss, damages, cost or expense which may may arise from or be incurred or suffered on account of anything contained in  this  RFP  or  otherwise,  including  the  accuracy, adequacy, correctness, completeness or reliability of the RFP  and  any  assessment,  assumption,  statement  or

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information contained therein or deemed to 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 whether resulting from negligence or otherwise howsoever caused  arising  from  reliance  of  any  Bidder  upon  the statements  contained in this RFP.

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

The  Bidder  shall  bear  all  its  costs  associated  with  or relating  to  the  preparation  and  submission  of  its  Bid including but not limited to preparation, copying, postage, delivery  fees,  expenses  associated  with  any demonstrations or presentations which may be required by the Authority or any other costs incurred in connection with or  relating  to  its  Bid.   All  such costs  and expenses will remain with the Bidder and the Authority shall not be liable in any manner whatsoever for the same or for any other costs or other expenses incurred 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 incorporated under the Companies Act, 1956 or undertakes to  incorporate  itself  as  such  prior  to  execution  of  the Concession  agreement  (the  “Concessionaire”),  shall  be responsible  for  (Designing,  engineering),  financing, procurement, construction, operating and maintenance of the Project under and in accordance with the provisions of a  long  term  Concession  agreement  (the  “Concession Agreement”)  to  be  entered  into  between  the  selected Bidder  and  the  Authority  in  the  form  provided  by  the Authority  as  Part  of  the  Bidding  Documents  pursuant hereto.

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1.1.5 The  Concession  Agreement  sets  forth  the detailed terms and 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 are intended to provide a proper understanding to the  Bidders  about  the  subject  matter  of  this  RFP  and should not be construed or interpreted as limiting in any way or manner the scope of services and obligations of the Concessionaire set forth in the Concession Agreement or the Authority’s rights to amend, alter, change, supplement or clarify the scope of work, the concession to be awarded pursuant  to  this  RFP  or  the  terms  thereof  or  herein contained.   Consequently,  any  omissions,  conflicts  or contradictions in 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 Concession  Agreement  for  the  Project.   The  Feasibility Report  prepared  by  the  Authority/consultants  of  the Authority (the “Feasibility Report”) is also included.  Subject to the provisions of Clause 2.1.3, the aforesaid documents and  any  addenda  issued  subsequent  to  this  RFP Document, but before the Bid Due Date, will be deemed to form part of the Bidding Documents.

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

1.2.7 Bids are inviting for the Project on the basis of percentage of  revenue to  be shared with  Authority  by a Bidder  for  implementing  the  Project.   The  Concession Period is pre-determined, as indicated in the Concession Agreement.   The revenue share shall  constitute the sole

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criteria for evaluation of Bids.  Subject to Clause 2.16, the Project will be awarded to the Bidder quoting the highest revenue share.

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1.3 Schedule of Bidding Process

The  Authority  shall  endeavour  to  adhere  to  the  following schedule:

Event Description Date

1. Last date of receiving queries To be specified

2. Authority response to queries To be specified

latest by

3. Pre-bid meeting – 1 To be specified

4. Pre-bid meeting – 2 To be specified

5. Bid Due Date(s) 22nd July 2010

6. Opening of Bids On Bid Due Date

7. Letter of Award (LOA) Within 30 days of Bid   Due Date

8. Validity of Bids 120 Days of Bid Due   Date

9. Signing of Concession Within 30 days of  Agreement award of LOA

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2.1.4 Notwithstanding anything to the contrary contained in this RFP, the detailed terms specified in the draft Concession Agreement shall have overrriding effect; provided, however, that  any  conditions  or  obligations  imposed  on  the  Bidder hereunder  shall  continue  to  have  effect  in  addition  to  its obligations under the Concession Agreement.

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

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

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

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

2.2.2 Approval for change in the composition of a Consortium shall be at the sole discretion of the Authority and must be approved by 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 Bidding Documents;

b. received  all  relevant  information  requested  from  the Authority;

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

d. satisfied itself about all matters, things and information including  matters  referred  to  in  Clause  2.5.1  hereinabove necessary  and  required  for  submitting  an  informed  Bid, execution  of  the  Project  in  accordance  with  the  Bidding Documents  and  performance  of  all  of  its  obligations thereunder;

e. acknowledged  and  agreed  that  inadequacy,  lack  of completeness or incorrectness of information provided in the Bidding  Documents  or  ignorance  of  any  of  the  matters referred to in Clause 2.5.1 hereinabove shall not be a basis for any claim for compensation, damages, extension of time for performance of its obligations, loss of profits etc. from the

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Authority;  or  a  ground  for  termination  of  the  Concession Agreement; and,

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

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2.6.1 Notwithstanding  anything  contained  in  this  RFP,  the Authority reserves the right to accept or reject any Bid and to annul  the  Bidding  Process  and  reject  all  Bids  at  any  time without  any  liability  or  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 the Authority as part of the Bid Documents shall be deemed part of this RFP.

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2.11.2 The documents accompanying the Bid shall be placed in a separate envelope and marked as “Enclosures of the Bid”. The documents 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 initialled  by  the  person  signing  –  b)  Power  of  Attorney  for signing of Bid in the prescribed format (Appendix – III);

iv.  If  applicable,  the  Power  of  Attorney for  Lead  Member  of Consortium  the  Bid  in  pursuance  of  the  Power  of  Attorney referred to 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 – I and  shall  consist  of  a  revenue  share  to  be  quoted  by  the Bidder.   The  Bidder  shall  specify  (in  Indian  Rupees)  the revenue  share  offered  by  him  to  undertake  the  Project  in accordance  with  this  RFP  and  the  provisions  of  the Concession Agreement.

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

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

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

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2.20.7 The Bid Security shall be forfeited and appropriated by the  Authority  as  mutually  agreed  genuine  pre-estimated compensation and damages payable to the Authority for, inter alia, time, cost and effort of the Authority without prejudice to any other right or remedy that may be available to the Authority hereunder or otherwise, 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 as specified in Clause 4 of this RFP;

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

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

i. to sign the Concession Agreement and/or

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

e) in  case  the  Selected  Bidder,  having  signed  the Concession Agreement,  commits any breach thereof  prior  to furnishing the Performance Security.

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3.3.5 After selection, a Letter of Award (the “LOA”) shall be issued, in duplicate, by the Authority to the Selected Bidder and the Selected Bidder shall, within 7 (seven) days of the receipt of the  LOA,  sign  and  return  the  duplicate  copy  of  the  LOA in acknowledgement thereof.  In the event the duplicate copy of the LOA  duly signed by the Selected Bidder is not received by the  stipulated  date,  the  Authority  may,  unless  it  consents  to

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extension of  time for submission thereof,  appropriate the Bid Security  of  such  Bidder  as  mutually  agreed  genuine  pre- estimated  loss  and  damage  suffered  by  the  Authority  on account of  failure of the Selected Bidder to acknowledge the LOA, and the next eligible Bidder may be considered.

3.3.6 After acknowledgement of the LOA as aforesaid by the Selected  Bidder,  it  shall  execute  the  Concession  Agreement within the period prescribed in Clause 1.3.  The Selected Bidder shall  not 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 in accordance with, the laws of India and the Courts at  Mumbai  shall  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

things become clear - (i) first and foremost a Disclaimer at the

forefront  of  the  RFP makes  it  clear  that  there  is  only  a  bid

process that is going on between the parties and that there is

no concluded contract between the same (ii) it is equally clear

that such bid process would subsume a Letter of Award to be

issued by the Respondent No.1 with two further steps under the

schedule  to  be  gone  into  before  the  draft  Concession

Agreement finally 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 dispute resolution is exclusively 26

with the Courts at Mumbai and (iv) that right uptil the stage of

the entering into the Concession Agreement, the bid process

may be annulled without giving any reason whatsoever by the

Respondent No.1

14) In addition, it may also be pointed out, on a reading of the

Letter  of  Award itself  dated 26.09.2011, as acknowledged by

the appellant, that:

“3. You are required to incorporate a Special Purpose Vehicle solely 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 shall  remain  in  force  and effect  till  the  Concessionarie  furnishes the   Performance Guarantee of a sum equal to Rs.3350 million (Rupees Three Thousand Three Hundred Fifty million),  not later than 90   days from the date of signing of the Concession Agreement.

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

This would show that even after the Letter of Award, a Special

Purpose  Vehicle  solely  for  the  purpose  of  implementing  the

project would have to be set up, and that this Special Purpose

Vehicle would be called the Concessionarie.  Further, the bid

security  given  by  the  appellant  shall  remain  in  force  till  the

Special Purpose Vehicle furnishes the Performance Guarantee

for a sum equal to Rs. 3350 million, and that the Concession

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Agreement is expected to be signed within 30 days of the issue

of this Letter of Award.

15) 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.  

16) Mr. Amit Sibal, learned Senior Advocate, is wholly correct

in relying upon both  Dresser Rand S.A. (supra) and  Bharat

Sanchar  Nigam  Limited  (supra).   In  Dresser  Rand  S.A.

(supra) it was found,on the facts, that unless a purchase order

was placed, there would be no agreement between the parties.

Everything  that  took  place  before  such  purchase  order  was

placed would only be a prelude to a contract which cannot be

confused with the contract itself.  This was set out in para 32 of

the judgment as follows:-         

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“32. Parties agreeing upon the terms subject to which a contract will be governed, when made, is not the same as entering into the contract itself.  Similarly, agreeing upon the terms which will govern a purchase when a purchase order  is  placed,  is  not  the same as placing a purchase order.  A prelude to a contract should not be confused with the contract itself.  The purpose of Revision 4 dated 10-6- 1991 was that if and when a purchase order was placed by  BINDAL,  that  would  be  governed  by  the  “General Conditions  of  Purchase”  of  BINDAL,  as  modified  by Revision  4.   But  when  no  purchase  order  was  placed, neither  the  “General  Conditions  of  Purchase”  nor  the arbitration clause in the “General Conditions of Purchase” became effective or enforceable.  Therefore, initialling of “Revision 4” by DR and BINDAL on 10-6-1991 containing the modifications to the General Conditions of Purchase, did not bring into existence any arbitration agreement to settle disputes between the parties.”

17) This judgment was followed in  Bharat Sanchar Nigam

Limited (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 stated that the Courts in Delhi will have jurisdiction to

entertain disputes or claims arising out of the tender till issue of

authorization letters to circles for placement of purchase orders.

It is only thereafter that Clause 20 of the General Conditions of

Contract, providing for an arbitration, could kick in.  This being

the case, this Court held:

“23. On the other hand, Section III had nothing to do with the bidding process or selection of suppliers, but contained provisions which would govern the performance, that is, the terms and conditions of the contract, if and when contracts were entered by placing purchase orders. The arbitration

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clause  (clause  20)  is  a  part  of  Section  III  of  the  bid documents.  

24. As per the scheme of bid documents, there is a clear division of the terms that will  govern the tender process, and the terms that will govern the contract, when the bids are accepted. One part regulated the tender process that led to  placing of  purchase orders.  That  part  contained a provision  as  to  what  should  be  the  forum  of  dispute resolution, if there was a dispute at the tender or bidding stage. The other part stipulated the terms and conditions which will govern the contract, if and when purchase orders were  placed.  That  part  also  contained  a  provision  as  to what should be the forum if there was a dispute after the contract  was  entered  into  Clause  30  of  Instructions  to Bidders  makes  it  clear  that  in  regard  to  tender-stage disputes,  the  forum  will  be  Civil  Courts.  Clause  20  of General  Conditions  on  the  other  hand  was  intended  to operate when contracts were made and it specified that if disputes  arose  in  regard  to  the  contracts,  the  forum for dispute resolution 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  contained  in  Section  III  of  the  document  shall apply  in  contracts  made  by  the  purchaser  for  the procurement of goods.  Clause 20 of  Section III,  that  is the  arbitration  clause  makes  it  clear  that  arbitration  is available in regard to “any question, dispute or difference arising under  this  agreement or  in  connection therewith”. Therefore,  it  is  evident  that  the  General  Conditions  of Contract (Section III) and clause 20 therein  providing  for arbitration, will not apply in regard to any dispute in regard to the tender or bid, or non-placing of a  purchase  order, but  will  apply  only  in regard to  any contract  awarded by BSNL by placing a purchase 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  bid  stage  do  not  contain  any  arbitration clause providing that if there is any dispute between BSNL and  a  bidder  in  regard  to  the  bid/tender  process,  the

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dispute will be settled by arbitration. On the other hand, the Instruction to Bidders contains a specific provision that if there is a dispute or claim arising out of the tender till (issue of authorization for) placement of the purchase order, only courts  will  have  jurisdiction.  Of  course,  as  and  when appellant  placed  a  purchase  order  on  a  bidder,  the purchase  order  contained  a  term  that  the  General conditions of contract,  forming part  of  the bid documents would  be  a  part  of  the  contract  documents,  and consequently the arbitration clause applied to the contracts entered between 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, the General Conditions of Contract including the arbitration clause would become a part of the contract. If a purchase order was not placed, and consequently the general conditions of contract (Section III) did not become a part  of  the  contract,  the  conditions  in  Section  III  which included the arbitration agreement, would not at all  come into existence or operation. In other words, the arbitration clause in Section III  was not an arbitration agreement in praesenti, during the bidding process, but a provision that was to come into existence in future, if a purchase order was placed.”

18) However, Mr. Dave, strongly relied upon the judgment in

Kollipara Sriramulu (Dead) by his LR (supra).  This judgment

did indeed state that it is well-established that a mere reference

to a future formal contract  will  not  prevent a binding bargain

between the parties  if,  in  fact,  there  is  such a  bargain.  The

judgment then went on to state that “there are, however, cases

whether  the  reference  to  a  future  contract  is  made  in  such

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terms as to show that the parties did not intend to be bound

until a formal contract is signed.”

19) We are  of  the  view that  the  facts  of  the  present  case

would  be  governed  by  the  ratio  contained  in  the  aforesaid

sentence.  Insofar as the judgment in  Unissi (India) Private

Limited (supra) is  concerned, it  is  important  to note that,  in

para 15 of the said judgment, it is stated that the tender of the

appellant  was  accepted  by  PGI  for  supply  of  41  pulse

oxymeters.  Since the tender document contained an arbitration

clause, and since it was found on facts that a binding contract

had been entered into by acceptance of the tender, the parties

therein would be bound by the aforesaid clause.  It was also

stated  that,  in  addition,  performance  by  way  of  supply  of

material by the appellant and acceptance thereof by PGI had

also  taken  place,  which  would  show  that  the  tender  of  the

appellant,  containing  an  arbitration  clause,  was  admittedly

accepted by the respondent.  It is clear that this case is wholly

distinguishable, and does not apply on facts as has been stated

by us herein above.  It  is clear that there was no concluded

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contract at the Letter of Award stage and this judgment would,

therefore, not apply.       

20) Mr. Dave also strongly relied upon the judgment in  Inox

Wind Limited vs. Thermocables Limited, (2018) 2 SCC 519.

This judgment in paras 17-19 thereafter made it clear that an

exception to the general rule laid down in M.R. Engineers and

Contractors Private Limited (supra) 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.   

21) We may hasten to add that this judgment 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  Private  Limited  (supra), that

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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, 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.      

22) We now come to the last argument of Mr. Dave that, on

the assumption that the High Court judgment is incorrect, yet

we should not, in our discretionary jurisdiction under Article 136

of the Constitution of India, interfere.   

23) Mr. Dave relies upon the fact that a subsequent tender

has  been  accepted,  causing  great  financial  loss  to  the

Respondent  No.1.   Mr.  Sibal  has  replied  by  saying  that  the

subsequent tender contained different tender conditions and, in

any case, insofar as that subsequent tender was concerned, his

bid was considered the best amongst six other bidders.  Apart

from this, we are of the view that the High Court judgment is

wholly  incorrect  in  holding  that  the  Letter  of  Award  would

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constitute  a  binding  contract  between  the  parties  for  the

reasons given above.  It would be a travesty of justice, in the

facts of the case, if we were not to interfere and set aside the

same.  Consequently, the impugned judgment of the High Court

is set aside and the order of the learned Arbitrator is reinstated.

24) The appeal is allowed in the aforesaid terms.   

25) It would be open for the Respondent No.1 to pursue its

claim of Rs. 436 Crores plus in an appropriate forum, which will

decide the same on its own merits in accordance with law.   

…………………………......J. (R.F. Nariman)

…………………………......J. (Indu Malhotra)

New Delhi; September 11, 2018.

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