Concluded contract and valid arbitration agreement require consensus ad idem; counter-offer and conduct could not create jurisdiction.

A written arbitration agreement under the Arbitration Act, 1940 requires a concluded contract with consensus ad idem on material terms. Where one party materially altered the draft by deleting one clause and changing another, the response was a counter-offer, not acceptance, and later conduct did not create a binding contract. In the absence of a concluded underlying agreement, the arbitration clause could not operate independently. The Court, not the arbitrators, decides the existence and validity of an arbitration agreement under Sections 31(2) and 33, and nomination of an arbitrator or acquiescence cannot create jurisdiction where none exists. The doctrine of indoor management did not cure lack of authorisation.

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Issues: Whether the correspondence and conduct of the parties resulted in a concluded contract containing a valid arbitration agreement, and whether the arbitrators could assume jurisdiction to decide the existence and arbitrability of the dispute.

Analysis: A valid arbitration agreement under Section 2(a) of the Arbitration Act, 1940 requires a written agreement embodying consensus ad idem. The draft agreement sent by one party was materially altered by the other by deleting one clause and changing another in a way that shifted the contractual allocation of responsibility. Such a communication amounted to a counter-offer, not an unqualified acceptance. Mere subsequent conduct, including submission of tenders and related correspondence, did not amount to acceptance of the counter-offer so as to create a concluded contract. In the absence of a concluded underlying contract, clause 14 could not operate as an independent arbitration agreement. The existence or validity of an arbitration agreement is a matter for the Court under Sections 31(2) and 33 of the Arbitration Act, 1940, and not for the arbitrators to decide conclusively. Acquiescence or nomination of an arbitrator did not confer jurisdiction where none existed in law. The doctrine of indoor management could not cure the absence of due execution by an authorised officer of a public undertaking.

Conclusion: No concluded contract and no valid arbitration agreement came into existence. The arbitrators had no jurisdiction to proceed, and the challenge under Section 33 succeeded.

Final Conclusion: The decision sets aside the finding of the High Court and confirms that, where the parties never reached consensus on material terms, arbitration cannot be compelled on the basis of the draft or counter-proposal alone.

Ratio Decidendi: A written arbitration agreement must rest on a concluded contract with consensus ad idem on the material terms; a material counter-offer prevents acceptance by conduct from creating an enforceable arbitration clause, and the Court alone decides the existence or validity of such agreement.

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