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Qingdao Construction Enginering Group Company Limited - M/s. Venkata Rao Infra Projects Private Limited (JV) v/s Government of India Through Ministry of Road Transport & Highways represented by the Chief Engineer (NH, R&B) & Another

    Stamp Number (Main) No. 4290 of 2019

    Decided On, 01 February 2021

    At, In the High Court of Bombay at Goa

    By, THE HONOURABLE MR. JUSTICE M.S. SONAK

    For the Petitioner: A.R. Kantak, R. Kantak, Advocates. For the Respondents: P. Faldessai, Assistant Solicitor General of India with R. Chodankar, Central Govt. Standing Counsel.



Judgment Text

1. Heard Mr. A. R. Kantak for the Petitioner and Mr. P. Faldessai, Assistant Solicitor General of India for the Respondents.2. The petitioner is a joint venture concern comprising of Qingdao Construction Engineering Group Company Limited - M/s Venkata Rao Infra Projects Private Limited (JV). On 23.12.2016, the respondents invited requests for proposals (RFP) for the work of fourlaning of NG-17 from existing km.475.000 to km. 502.500 (Patradevi to Karaswada Section) through an Engineering Procurement and Construction Agreement (EPC) in the State of Goa (said project). The builders were required to submit a technical bid and a financial bid in the format prescribed.3. The petitioner claims to have submitted a financial bid of INR 472,88,79,000/-, inclusive of taxes and an amount of INR 444,51,46,000/-, exclusive of taxes.4. It is further the case of the petitioner that the respondent vide communication dated 06.10.2017 conveyed acceptance of the petitioner's bid, albeit for a bid amount INR 444,51,46,000/-.5. The petitioner, therefore, by communication dated 16.10.2017 requested the respondent to correct the bid amount or the contract price in the LOA from INR 444,51,46,000/- to INR 472,88,79,000/-. On the same date, the petitioner conveyed “conditional acceptance” of LOA, subject to the contract price being revised from INR 444,51,46,000/- to INR 472,88,79,000/-.6. The respondent, vide communication dated 15.03.2018 informed the petitioner that no conditional acceptance could be considered and the petitioner may, if it so desires, submit an unconditional acceptance/acknowledgment of the LOA.7. The petitioner thereafter, vide communication dated 23.03.2018 conveyed to the respondent its acknowledgment of LOA without prejudice to its legal rights.8. Based upon the aforesaid, the parties entered into and executed an agreement dated 08.05.2018 in respect of the execution of the said project. The petitioner relies on Article 26 of the agreement dated 08.05.2018 to submit that a dispute has arisen between the parties on the issue of the correct contract price and the same is liable to be resolved by arbitration in terms of Article 26 of the agreement.9. The petitioner has pleaded that efforts were made to resolve such dispute through conciliation but since there was no response from the respondent, the petitioner has no option but to invoke the arbitration clause in the agreement and to seek resolution of the dispute through arbitration.10. Mr. Kantak, the learned counsel for the petitioner submits that the arbitration clause in Article 26 is quite wide and the same encompasses the dispute as to the correct contract price. He, therefore, submits that the respondent is not at all justified in resisting the resolution of such dispute by arbitration.11. Mr. Kantak submits that the petitioner was required to respond to the RPF by filling up the prescribed forms available on the website. He points out that the petitioner, accordingly, submitted the technical bid and financial bid in the format at Appendix IA and Appendix IB of the RFP respectively. He points out that one of the formats required the bid amount to be stated exclusive of taxes and the other inclusive of taxes. He submits that accordingly in one of the formats, the bid amount was stated at INR 444,51,46,000/- (exclusive of taxes), and in the other format, the bid amount was stated at INR 472,88,79,000/- (inclusive of taxes). He submits that there was no justification for the respondent, in these circumstances, to treat the petitioner's financial bid as INR 444,51,46,000/- inclusive of taxes. He submits that the dispute has arisen between the parties on this score and such a dispute is liable to be resolved by arbitration under Article 26 of the agreement dated 08.05.2018.12. Mr. Kantak submitted that even the terms and conditions of the RPF have been specifically made a part of the agreement dated 08.05.2018. He, therefore, submits that even if it is assumed that the dispute which has now arisen between the parties relates to the terms and conditions of the RFP, even then, such dispute is liable to be resolved by arbitration, now that the terms and conditions of the RFP have been made a part of the terms and conditions of the agreement dated 08.05.2018, which contains the arbitration clause.13. Mr. Kantak submits that Article 26.1.1 of the agreement provides that any dispute, difference, or controversy of whatever nature howsoever arisen under or out of or in relation to the agreement (including its interpretation) between the parties will have to be resolved by arbitration where conciliation fails. He submits that even the issue of interpretation of the agreement, therefore, will have to be referred to arbitration.14. Mr. Kantak, for all the aforesaid reasons submits that this application may be allowed and the parties be referred to arbitration as provided under Article 26 of the agreement dated 08.05.2018.15. Mr. Faldessai, learned Assistant Solicitor General of India submits that the dispute as projected by the petitioner relates to the bidding process or in any case to the process before the execution of the agreement dated 08.05.2018. He submits that such a dispute, which has arisen between the parties, even before their entering into the contract, can never be resolved by arbitration based on the arbitration clause in the contract.16. Mr. Faldessai points out that after the respondent refused to accept the petitioner's conditional bid or after the respondent refused to accept that the petitioner's bid was in fact for INR 472,88,79,000/-, the petitioner, withdrew its contention and accepted the LOA unconditionally. Mr. Faldessai submits that now, the petitioner, can neither raise any dispute and in any case, such dispute, is not amenable to arbitration.17. Mr. Faldessai once again submitted that the dispute now sought to be raised by the petitioner relates to the bidding process. He referred to clause 6.1 of the agreement dated 08.05.2018 and pointed out that any disputes relating to the bidding process were subject to the exclusive jurisdiction of the courts at New Delhi. Mr. Faldessai submits that this is yet another indication that the disputes in connection with the bidding process were never intended to be arbitrable.18. Mr. Faldessai relies on Bharat Sanchar Nigam Limited v. Telephone Cables Limited (2010) 5 SCC 213), M/s. PSA Mumbai Investments Pte. Limited v. The Board of Trustees of the Jawaharlal Nehru Port Trust & Anr. (2019 (1) ALL MR 960 (S.C.), Dresser Rand S.A. v. Bindal Agro Chem Ltd. & Anr. (2006) 1 SCC 751) and National Highways And Infrastructure Development Corporation Limited v. BSCPL Infrastructure Limited in support of his contentions.19. The rival contentions now fall for my determination.20. In this matter, the main dispute between the parties is whether the petitioner's financial bid submitted in response to the RFP dated 23.12.2016 was for INR 444,51,46,000/- or INR 472,88,79,000/-. The petitioner contends that its financial bid was for INR 472,88,79,000/- inclusive of taxes whereas, the respondent contends that the petitioner's bid was for INR 444,51,46,000/-, all-inclusive.21. The correspondence on record indicates that the petitioner did attempt to clarify its financial bid and even purported to accept the LOA issued by the respondent subject to the condition that its financial bid is treated as INR 472,88,79,000/-. However, the respondent, vide communication dated 15.03.2018 made it clear to the petitioner that no conditional acceptance could be considered and the petitioner, if it so desires, may submit unconditional acceptance/ acknowledgment of the LOA.22. Thereafter, by communication dated 23.03.2018 the petitioner, did communicate to the respondent unconditional acceptance or acknowledgment of the LOA. The petitioner however made it clear that this was without prejudice to its legal rights.23. Therefore now a dispute has arisen between the parties as to whether the financial bid amount submitted by the petitioner ought to be construed as INR 472,88,79,000/- (all-inclusive) as contended by the petitioner, or whether, the financial bid amount should be construed as INR 444,51,46,000/- (all-inclusive) as contended by the respondent. At this stage, this Court is obviously not concerned with the merits or demerits of such dispute.24. However, it does appear that the aforesaid dispute relates to the bidding process or in any case, relates to the stage before the parties entered into the agreement dated 08.05.2018, which contains the arbitration clause in Article 26 thereof. Therefore, the dispute which has arisen, cannot be stated to be a dispute arising under or out of or in relation to the agreement dated 08.05.2018.25. Mr. Kantak relying upon clause 1.4 of the RFP bid documents did contend that the terms and conditions of the bid documents were made a part of the contract agreement dated 08.05.2018. Although, Mr. Kantak, was unable to point out any specific clause to this effect, clause 1.4.1 which he relied upon does provide that the agreement and all other agreements and documents forming part of or referred to in this agreement are to be taken as mutually explanatory and, unless otherwise expressly provided elsewhere in this agreement, the priority of this agreement and other documents and agreements forming part hereof or referred to herein shall, in the event of any conflict between them, be in the following:(a) this Agreement; and(b) all other agreements and documents forming part thereof or referred to herein; i.e. this Agreement at (a) above all shall prevail over the agreements and documents at (b).26. Even if it is assumed that all the terms of the RFP bid documents are now made a part of the contract agreement dated 08.05.2018, at least, in the facts of the present case, it cannot be said that the dispute has arisen between the parties after the contract agreement was entered into on 08.05.2018 or after the terms of the RFP bid documents were incorporated in the contract agreement dated 08.05.2018. The dispute, which had arisen between the parties during the bidding process or in any case at a stage before the parties entered into the contract agreement dated 08.05.2018 cannot be referred to arbitration under the arbitration clause in the contract agreement dated 08.05.2018, merely because the terms of the RFP bid documents may have been incorporated in the contract agreement dated 08.05.2018.27. In Bharat Sanchar Nigam Limited (supra) , the dispute between the parties was whether Telephone Cables Limited (TCL) was entitled to a purchase order from BSNL and further, on account of the nonissuance of such purchase order, was entitled to damages to the tune of `10,61,20,000/- from BSNL. TCL applied under Section 11(6) of the said Act seeking appointment of arbitrator relying upon the bid documents, which had made it clear that the bid documents would be a part of the contract documents. BSNL resisted the application seeking the appointment of an arbitrator on the ground that there could be no arbitration concerning such a claim.28. The Hon'ble Supreme Court held that bid documents did not constitute a contract, or an agreement, or an agreement to enter into a contract. It was merely an invitation to make an offer. It informed the prospective bidders, how they should make their bids; how the bids would be processed by BSNL; how contracts would be entered by placing purchase orders; and what terms would govern the contracts if purchase orders were placed. The Hon'ble Supreme Court noted that some sections of the bid documents governed the tender process which preceded the placing of purchase orders. Some sections contained the forms in which the bid should be made by the bidder. Other sections of the bid documents contained provisions that would govern the contracts when purchase orders were placed by BSNL by accepting the bid. For example, Section I (notice inviting tenders) and Section II (instructions to bidders) had nothing to do with the performance of the contract. They relate to the precontract process of bidding, that is, who would be eligible to make bids and how the bids should be made. On the other hand, Section III had nothing to do with the bidding process or selection of suppliers but contained provisions that 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 clause was a part of Section III of the bid documents.29. The Hon'ble Supreme Court then held that as per the scheme of the 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 the placing of purchase orders. That part contained a provision p 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. The Hon'ble Supreme Court observed that Clause 20 which contained the arbitration clause was intended to operate when contracts were made and it specified that if disputes arose about the contracts, the forum for dispute resolution will be the Arbitral Tribunal.30. Based upon the aforesaid the Hon'ble Supreme Court held that BSNL intended to have arbitrations only when it had entered into the contracts and there were disputes relating to such contracts. It did not intend to have arbitration about the tender stage disputes or pre-contract differences, at a stage when there was no privity of contract. The Hon'ble Supreme Court also took note of the tender documents or the instructions to the bidders which had specified that if a dispute or claim is arising out of the tender till placement of the purchase order, only courts will have jurisdiction. Of course, as and when BSNL placed 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 into between BSNL and the bidders.31. Applying the ratio of the said decision to the facts of the present case, it is apparent that the disputes which had arisen between the parties were pre-contract disputes and differences. In respect of such disputes and differences, the bid documents had made it clear that the courts at New Delhi shall have exclusive jurisdiction. This is not a case where disputes had arisen between the parties after the execution of the contract agreement dated 08.05.2018. The disputes had arisen before the parties entered into the contract agreement dated 08.05.2018 as to whether the bid amount should be treated as INR 472,88,79,000/- (all-inclusive) or INR 444,51,46,000/- (all-inclusive).32. In Dresser Rand S. A. (supra), the Hon'ble Supreme Court reiterated that the tender document or the invitation to bid containing the instructions to the bidders and the general conditions of the purchase, by itself, neither constitute an agreement nor a contract. Further, the parties agreeing upon terms subject to which a contract would be governed when made is not the same as entering into the contract itself. Similarly, agreeing upon terms that will govern a purchase when a purchase order is placed, is not the same as placing a purchase order. Therefore a prelude should not be confused with a contract itself. Relying on this decision, the Hon'ble Supreme Court in Bharat Sanchar Nigam Limited (supra) held that an 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

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future, if a purchase order was placed.33. In M/s. PSA Mumbai Investments Pte. Limited (supra), the Hon'ble Supreme Court, relying on Bharat Sanchar Nigam Limited (supra) and Dresser Rand S. A. (supra) , held that there was no concluded contract at a Letter of award stage and therefore, any dispute at the Letter of award stage was not arbitrable under the arbitration clause which was to form a part of the contract between the parties only if the Letter of award was actually issued to the bidder and unconditionally accepted by the bidder. In short, the Hon'ble Supreme Court held that the disputes arising before the stage the parties enter into the contract were not arbitrable under the arbitration clause existing in the contract entered at a subsequent stage.34. In National Highways And Infrastructure Development Corporation Limited (supra) the Hon'ble Supreme Court following the ruling in M/s. PSA Mumbai Investments Pte. Limited (supra) , held that even at the stage of acceptance of LOA, if disputes arise between the parties, they could be resolved by courts of Delhi (i.e. in terms of Clause 6.1) and not by arbitration and a standard form arbitration clause contained in a draft agreement cannot oust Clause 6.1 and disturb the entire scheme of the schedule of the bidding process. It is pertinent to mention that clause 6.1 referred to in this decision is identical to clause 6.1 involved in the present matter. Therefore, the decision in National Highways And Infrastructure Development Corporation Limited (supra) supports the contention of Mr. Faldessai, and based on the same, this application is required to be rejected.35. For all the aforesaid reasons this application is liable to be rejected and is hereby rejected.36. There shall be no order as to costs.
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