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Hindustan Vegetable Oils Corpn. v. A.P Paracer And Others
Factual and Procedural Background
The appeal challenged a High Court order passed on an application filed by the appellant under Sections 32 and 33 of the Arbitration Act, objecting to ongoing arbitration proceedings. The appellant had issued a newspaper advertisement (Indian Express, 16-10-1984) inviting pre-qualification bids within ten days. According to the appellant, an architect engaged for processing tenders reported receiving ten applications within time, found five eligible, and tender forms were issued to those five. Respondent 2 submitted a tender that was found to be in order and, being the lowest bidder, was awarded the contract.
Disputes later arose and arbitration was initiated. The appellant then sought to resist arbitration, alleging that only four pre-qualification bids were actually received by 26-10-1984 and the architect’s statement about ten bids constituted fraud inducing issuance of tender forms and award of contract. The High Court rejected the challenge, holding that any fraud was confined to the pre-qualification stage, that acceptance of the tender concluded the contract, and that no prejudice was caused since Respondent 2 was the lowest bidder. The High Court also noted that the appellant participated in arbitration on 11 occasions until conclusion of hearings on 29-8-1986 after the alleged fraud was committed/discovered, and held the appellant had acquiesced and could not challenge the arbitrator’s appointment.
Legal Issues Presented
- Whether alleged fraud at the pre-qualification stage rendered the contract void such that no arbitration could arise under it.
- Whether the appellant, having participated in arbitration proceedings after discovery of the alleged fraud, was barred by acquiescence from challenging the arbitrator’s appointment and the arbitration proceedings.
Arguments of the Parties
Appellant's Arguments
- Fraud “vitiates everything,” making the contract contrary to law.
- Because the architect committed fraud and the contract was awarded pursuant to it, there was no contract in the eye of law and therefore no basis for arbitration under such a contract.
Respondents' Arguments
This information was not available in the provided opinion.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court declined to accept the appellant’s submission that alleged fraud nullified the contract and eliminated any basis for arbitration. It agreed with the High Court that any fraud, if it existed, related only to the pre-qualification stage. Once Respondent 2’s tender offer was accepted, the contract stood concluded, and the alleged fraud was treated as having no further significance for the validity of the concluded contract or the arbitration clause.
The court also relied on the appellant’s conduct: after the alleged fraud was committed/discovered (noted by the High Court as early as 1-8-1986), the appellant participated in arbitration proceedings on 11 occasions up to the conclusion of hearings on 29-8-1986. Given this participation, the court held it was not open to the appellant to challenge the arbitration at that stage or to contend that it could not have brought the matter earlier to the arbitrator or the court. This supported the High Court’s conclusion that the appellant had acquiesced in the arbitration proceedings.
Holding and Implications
DISMISSED: The civil appeal was dismissed, and the parties were directed to bear their own costs.
The direct effect was that the High Court’s refusal to entertain the appellant’s challenge to the arbitration proceedings (including the arbitrator’s appointment) stood affirmed. The opinion does not indicate any broader implications or that any new precedent was set.
Order
1. This appeal is directed against an order made in an application filed under Sections 32 and 33 of the Arbitration Act by the appellant. The appellant published an advertisement in the Indian Express on 16-10-1984 inviting pre-qualification bids to be sent within ten days from that date. The case put forth on behalf of the appellant is that they had engaged the services of an architect who has to process tenders and the architect stated that he had received ten applications within the stipulated period and out of them he found five persons eligible and the tender forms could be issued to them. Tender forms were issued to those five eligible persons. The tender to Respondent 2 was found to be in order and being the lowest bidder, the contract was awarded to him. Thereafter certain disputes arose between the parties and arbitration proceedings were initiated. Objecting to the arbitration proceedings, the said application was filed by the appellant on the ground that he had in fact received only four pre-qualification bids by 26-10-1984 and the architect had wrongly stated that he had received ten such bids by that time, that this wrong statement of the architect amounted to fraud played on the appellant, that as a result of this fraud, the appellant agreed to issue tender forms and thereafter awarded the contract. After critical examination of these contentions, the High Court came to the conclusion that the fraud, if any, was only up to the stage of pre-qualification bids and thereafter the tender offered by the respondent having been accepted the same had no significance at all. It was noticed that the tender offered by the second respondent being the lowest no prejudice was caused to the appellant and, therefore, it was wholly unnecessary to rely upon the architect's fraud, if any. Further, the High Court noticed that the fraud was committed as early as 1-8-1986, but the appellant appeared before the arbitrator on 11 different occasions till the hearings concluded on 29-8-1986 without demur. In those circumstances, the High Court found that the appellant had acquiesced in the arbitration proceedings and therefore, cannot now challenge the arbitrator's appointment.
2. In this appeal, the learned counsel for the appellant contended that the fraud vitiates everything and the contract is contrary to law. When the architect had committed fraud upon the appellant and pursuant to which the contract had been awarded to 2nd respondent, there was no contract in the eye of the law and therefore, no question of arbitration proceedings arose at all under such contract. We do not think that we can accede to this contention. As rightly observed by the High Court that the fraud, if any, was only up to the stage of pre-qualification bid. The offer of tender of Respondent 2 having been accepted, the contract became concluded and therefore the allegation of fraud pales into insignificance. Further the appellant had participated in the proceedings as many as on 11 occasions after discovery of alleged fraud as noticed by the High Court in the course of the arbitration proceedings. Having done so, it is not now open to the appellant to state that though the arbitration proceedings commenced on 1-8-1986(sic) could not bring to the notice of the arbitrator or before the Court earlier. In view of this position, we have no option but to dismiss the appeal. The civil appeal is dismissed. In the circumstances the parties shall bear their own costs.
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