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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Brijesh Kumar, J.
Acts
  • Section 11(6) of the Arbitration and Conciliation Act, 1996
  • Section 11 of the Arbitration and Conciliation Act, 1996
  • Section 16 of the Act
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Brijesh Kumar, J.
Acts
  • Section 11(6) of the Arbitration and Conciliation Act, 1996
  • Section 11 of the Arbitration and Conciliation Act, 1996
  • Section 16 of the Act
See more information ...
Smart Summary

Factual and Procedural Background

The petitioner submitted the lowest and technically responsive bid in a global tender floated by the respondent. On 10-5-2002 the respondent issued a Letter of Intent (LOI) and the petitioner furnished a bank guarantee as security. The respondent subsequently claimed that the bank guarantee was conditional, cancelled the LOI by letter dated 4-6-2002, and asserted that no final contract—or arbitration agreement—ever came into existence. After the respondent failed to nominate an arbitrator, the petitioner filed the present application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking court-appointment of an arbitrator. The matter was placed before the designated judge of the Supreme Court by order of the Chief Justice of India.

Legal Issues Presented

  1. Whether a concluded contract, containing or incorporating an arbitration clause, existed between the parties.
  2. Whether, in the face of a dispute over the very existence of the arbitration agreement, the Court should exercise its power under Section 11(6) to appoint an arbitrator or leave that determination to the arbitral tribunal under Section 16.

Arguments of the Parties

Respondent's Arguments

  • No concluded contract was ever executed; hence no arbitration agreement exists.
  • The LOI was cancelled on 4-6-2002 because the petitioner supplied a conditional, not unconditional, bank guarantee.
  • Without prima facie evidence of a contract, Section 11(6) cannot be invoked.
  • Cited precedents establishing that consensus ad idem is essential for a valid arbitration agreement.

Petitioner's Arguments

  • The bid was accepted and the LOI issued, thereby constituting a contract under the standard tender documents.
  • A formal, signed contract is unnecessary; an arbitration agreement can arise through correspondence and exchange of documents.
  • Denied the authenticity of the respondent’s purported cancellation letter dated 4-6-2002.
  • Relied on case law and Section 16 to contend that questions on the existence or validity of the arbitration agreement should be decided by the arbitral tribunal.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd.
(1996) 2 SCC 667		 Consensus ad idem is necessary for a valid arbitration clause. Relied upon by the respondent; the Court noted the contention but proceeded to appoint an arbitrator, leaving the issue to be examined by the tribunal.
India Meters Ltd. v. Punjab SEB
(1993) 1 SCC 230		 Existence of a valid agreement is prerequisite to invoke arbitration. Invoked by the respondent for the same proposition; the Court found the matter required further inquiry best undertaken by the arbitrator.
Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd.
(2002) 2 SCC 388		 An arbitral tribunal is competent to rule on its own jurisdiction, including questions on the existence and validity of the arbitration agreement (kompetenz-kompetenz). Relied upon by the petitioner; the Court accepted this approach and directed that objections to the agreement’s existence could be raised before the arbitrator.

Court's Reasoning and Analysis

The Court observed that the dispute was not a “clear-cut” case where the absence of a contract was evident on the face of the record. Given the competing factual assertions—acceptance of bid and issuance of LOI on one hand, alleged cancellation and lack of consensus on the other—the Court concluded that a detailed inquiry would be required. Section 16 of the Arbitration and Conciliation Act empowers the arbitral tribunal to decide on its own jurisdiction, including objections to the existence or validity of an arbitration agreement. Consequently, it was “feasible and appropriate” for the arbitrator, rather than the Court at the Section 11 stage, to investigate these issues. On that basis, the Court held that the statutory conditions for appointment under Section 11(6) were met.

Holding and Implications

Petition Allowed – Arbitrator Appointed. Mr Justice R.S. Pathak, former Chief Justice of India, was appointed as the sole arbitrator. The arbitrator is empowered to settle his fees and procedural terms.

Implications: The decision enables arbitration to commence while preserving the respondent’s right to contest jurisdiction and contract formation before the tribunal under Section 16. The order sets no new precedent but affirms the kompetenz-kompetenz principle at the Section 11 appointment stage.

Show full summary ...

    Angang Group Intnl. Trade Corporation v. Pipavav Railway Corporation Ltd. .

    Order

    1. This petition under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) has come up before me on being designated for appointing an arbitrator, by the Hon'ble the Chief Justice of India.

    2. Learned Senior Counsel appearing on behalf of the respondent raised an objection that there is no concluded contract between the parties, hence no arbitration agreement as well. It is also emphasised that no agreement has been executed by the parties. That being the position, there is no occasion for the petitioner to move the petition for appointment of an arbitrator. It has also been indicated that the letter of intent (LOI) as issued, was cancelled by the respondent by means of a letter dated 4-6-2002, since the bank guarantee furnished was a conditional bank guarantee and not unconditional as per stipulation. It is contended that though the arbitrator is competent to decide any dispute regarding existence or validity of the agreement but prima facie there must be some agreement on the basis of which arbitration clause may be invoked. In absence of any such prima facie material or evidence of an agreement, the provisions of Section 11(6) cannot be invoked. In support of its contention that there must be an agreement between the parties, reliance has been placed on U.P Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd. (1996) 2 SCC 667 and India Meters Ltd. v. Punjab SEB (1993) 1 SCC 230 that there must be consensus ad idem between the parties for there being any valid arbitration clause.

    3. Learned counsel appearing for the petitioner had submitted that in response to a global tender the petitioner had tendered its bid which was found to be the lowest and technically qualified, hence it was accepted by the respondent on 10-5-2002. LOI was also issued and the petitioner had then furnished the bank guarantee. The supply order was to be issued within 7 days of furnishing of the bank guarantee but since no such order was issued the petitioner ultimately served a legal notice upon the respondent and called upon it to appoint its arbitrator by invoking the arbitration clause which it failed to do. It is submitted that it is not necessary to have a formal agreement executed between the parties. It can be even by way of exchange of letters and other such communication. So far as the contract is concerned, he has referred to the definition of “contract” as provided in PRCL Standard Conditions of Contract (2000), according to him which means and includes the invitation to tender, instructions to tenders, acceptance of tender etc. The petitioner has also denied the letter dated 4-6-2002 said to be issued by the respondent cancelling LOI. It is indicated that this letter is an afterthought and not genuine. He has referred to a decision Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. (2002) 2 SCC 388 on the point that the arbitrator is competent to decide upon the validity and existence of an arbitration agreement. In this connection, Section 16 of the Act has also been referred to.

    4. Considering all facts and circumstances and the contentions raised by the respective parties, it is to be noted that it is not one of those clear-cut cases as contended, in which it could be said that there is no contract at all between the parties, on the face of it. The matter is such that it may require probe and enquiry into the objections raised by the respondent and it is only feasible and appropriate that the arbitrator himself may embark upon any such enquiry in case any objection or issue is raised by the respondent before the arbitrator regarding existence of an agreement between the parties.

    5. In the result, the petition is allowed and a case for appointment of an arbitrator is held to be made out.

    6. While reserving the orders, after conclusion of the arguments, I had asked the learned counsel for the parties, that in case it would be found that an arbitrator is to be appointed, would it be possible to indicate any name to which both may agree. Learned counsel for both the parties responded that any Hon'ble retired Judge of the Supreme Court, based in Delhi would be acceptable to both.

    7. I hereby, therefore, appoint Mr Justice R.S Pathak, former Chief Justice of India, No. 7, Sardar Patel Marg, New Delhi, as arbitrator, in exercise of power under Section 11(6) of the Arbitration and Conciliation Act, 1996.

    8. The Hon'ble Arbitrator may settle his terms and conditions and remuneration.

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    Comments

    Angang Group Intnl. Trade Corporation v. Pipavav Railway Corporation Ltd. .
    (May 9, 2003)