TMI Blog1996 (2) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... AHMAD AND G.B. PATTANAIK, JJ. JUDGMENT Leave granted. This appeal by special leave arises from the judgment and order passed on April 10, 1992 by the Delhi High Court in O.M.P. No.62 of 1992. The appellant filed an application under Section 33 of the Arbitration Act, 1940 [for short, "the Act"] for declaration that there exist no agreement between the appellant and the first respondent-Indure Pvt. Ltd. on the basis of which a dispute for a claim of Rs.1,68,73,628/- could be referred for arbitration as the agreement set up by the respondent was non est and alternatively the dispute was not arbitrable under the agreement. Accordingly it sought declaration to set aside the said agreement. The learned single Judge of the High Court in the impugned order held that the draft agreement dated June 22, 1984 contains provision for arbitration under clause [14] and the appellant is bound thereby; consequently, the arbitrators are entitled to arbiter the dispute. The dispute arose in the backdrop of the facts that the U.P. State Electricity Board had floated tenders for construction, supply and erection of mechanical equipment and construction work including consultancy services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation agreement, was in existence, they nominated an arbitrator on their behalf to arbiter on the question "whether there existed ant valid or subsisting agreement between the parties and whether there existed any valid and binding arbitration clause between the parties?" Since the arbitrator nominated by them expired, the respondent was called upon the appellant to nominate another arbitrator. At that stage the appellant filed above petition under Section 33 of the Act. The High Court found that the respondent returned the agreement duly signed but after deleting clause [10] and materially altering clause [12] thereof. There was no communication by the appellant refusing or negativing the alternations made in the draft agreement. Tenders were submitted on June 30, 1984 after receipt of the modified agreement. Till March 1, 1986, the respondent had not received any communication disowning the contract between it and the appellant. Clause [14] of the agreement contained an arbitration clause for adjudication of the disputes. The withdrawal of the tenders by the appellant caused damages as claimed by the appellant in the notice. Therefore, the respondent called upon appellant to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a lawful object, and are not expressly declared to be void". Section 31 defines "Contingent contract" to mean to contract to do or not to do something, if some event, collateral to such contract, does or does not happen". A contingent contract to do or not to do anything, if an unforeseen future event happens, cannot be enforced by law, under Section 32, unless and until that event has happened. If the event becomes impossible, such contract becomes void. Section 2 [a] of the Act defines "arbitration agreement" to mean "a written agreement to submit, present or future differences, to arbitration, whether an arbitrator is named therein or not". To constitute an arbitration agreement, there must be an agreement between the parties, viz., the parties must be ad idem. The parties are not ad unless they agree to the terms and conditions mentioned in the agreement. As seen, under the Contract Act unless there is an agreement, i.e., there is an acceptance of the proposal, the contract is not complete. It is seen that the draft agreement dated June 22, 1984 was sent to the respondent for acceptance, Admittedly, clause [10] was deleted and clause [12] was materially altered unilaterally to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by conduct. For example, an offer to buy goods can be accepted by supplying them; and an offer to sell goods, made by sending them to the offeree, can be accepted by using them". The substance of paragraph 99 is that parties may reach agreement in principle but the details may be worked out at a later date. There is no dispute to the proposition of law but two factors have to be kept in mind, viz., when the counter offer was made by the respondent and whether the unilateral offer amounts to acceptance by submitting the tenders by the appellant to the Board. We find that it does not amount to acceptance of counter proposal. It is seen that admittedly, clause [10] which thrusts responsibility on the first respondent was deleted in the counter- proposal. In clause 12, for joint responsibility unilateral liability was incorporated. In other words the respondent disowned its material responsibilities. Unless there is acceptance by the appellant to those conditions no concluded contract can be said to have emerged. It is seen that the appellant is a Government Undertaking and unless contract is duly executed in accordance with the Articles of Association, the appellant is not bound by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for hearing on other evidence also and may pass such orders for discovery and particulars as it may do in a suit. In "Law of Arbitration" by Justice Bachawat [2nd Edn.] at page 19 of Chapter II it is stated that "to constitute an arbitration agreement, there must be an agreement, that is to say, the parties must be ad-idem. The parties are not ad -idem if there is an arbitration clause in the bought note while there is none in the sold note. To be enforceable, the agreement must be made by the free consent of the parties". We find no force in the contention of Shri Nariman that the appellant had submitted to the jurisdiction of the arbitrators and having nominated the arbitrator, they are estopped to go back upon it Acquiescence does not confer jurisdiction, The arbitrability of a claim depends on the construction of the clause in the contract. The finding of the arbitrator/arbitrators on arbitrability of the claim is not conclusive as under Section 33, ultimately it is the Court that decides the controversy. It being a jurisdictional issue, the arbitrator/arbitrators cannot cloth themselves with jurisdiction to conclusively decide the issue. In "Russel on Arbitration" [19t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not decide the existence of the arbitration agreement or arbitrability of the disputes without prejudice to their stand that no valid agreement existed. Shri Nariman contended that having agreed to refer the dispute, the appellant had acquiesced to the jurisdiction of the arbitrators and, therefore, they cannot exercise the right under Section 33 of the Act. We find no force in the contention. As seen, the appellant is claiming adjudication under Section 33 which the Court alone has jurisdiction and power to decide whether any valid agreement is existing between the parties. Mere acceptance or acquiescing to the jurisdiction of the arbitrators for adjudication of the disputes as to the existence of the arbitration agreement or arbitrability of the dispute does not disentitle the appellant to have the remedy under section 33 through the Court. In our considered view the remedy under Section 33 is the only right royal way for deciding the controversy. Since the tenders - the source of the contract between the parties - had not transformed into a contract, even if the proposal and counter proposal are assumed to be constituting an agreement, it is a contingent contract and by operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he had not accepted a part of the original agreement though it had signed the agreement containing that part. As found earlier, there is no signed agreement by a duly competent officer on behalf of the appellant. The doctrine of "indoor management" cannot be extended to formation of the contract or essential terms of the contract unless the contract with other parties is duly approved and signed on behalf of a public undertaking or the Government with its seal by an authorised or competent officer. Otherwise, it would be hazardous for public undertakings or Government or its instrumentalities to deal on contractual relations with third parties. In view of the fact that Section 2 [a] of the Act envisages a written agreement for arbitration and that written agreement to submit the existing or future differences to arbitration is a pre-condition and further in view of the fact that the original contract itself was not a concluded contract, there existed no arbitration agreement for reference to the arbitrators. The High Court, therefore, committed a gross error of law in concluding that an agreement had emerged between the parties, from the correspondence and from submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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