2010 (1) TMI 1241 - SC - Indian Laws

No arbitration agreement found in cable supply tender dispute; arbitration application deemed not maintainable. Importance of valid agreement stressed.

Bharat Sanchar Nigam Ltd. Versus Telephone Cables Ltd.

Bharat Sanchar Nigam Ltd. Versus Telephone Cables Ltd. - 2010 (3) SCR 291 Issues Involved:1. Existence of an arbitration agreement between the parties.2. Entitlement to seek remedy by way of arbitration after availing public law remedy.Detailed Analysis:Existence of an Arbitration Agreement:The appellant invited bids for the supply of Polythene Insulated Jelly Filled cables through a Notice Inviting Tenders. The tender procedure required an evaluation of bids based on 'Vendor Rating,' with the highest-rated bidder receiving a significant portion of the order. The respondent challenged the awarding of the highest Vendor Rating to NICCO, claiming it should have received the highest rating and a larger order. The Delhi High Court directed BSNL to redo the Vendor Rating, and if the respondent was rated as V-1, it was to benefit from any remaining supplies. The respondent later sought damages for the shortfall in orders due to the initial incorrect Vendor Rating.The bid documents consisted of various sections, including General Conditions of Contract (Section III) which contained an arbitration clause. However, the court clarified that the bid documents did not constitute a contract but were merely an invitation to make an offer. The arbitration clause in Section III applied only to contracts made by placing purchase orders and not to the bidding process or non-placing of purchase orders. Therefore, there was no arbitration agreement for disputes arising from the tender process, and the arbitration clause was not in force for the claim of damages due to non-placement of orders.Entitlement to Seek Remedy by Way of Arbitration:The respondent issued notices and filed a writ petition seeking compensation for the shortfall in orders. The High Court allowed the withdrawal of the writ petition with liberty to pursue civil remedies. The respondent then sought arbitration for the claim of damages, which was resisted by BSNL. The court held that since there was no arbitration agreement for the disputed quantity of 5.306 LCKM, the application for arbitration was not maintainable.Collateral Issues:The court addressed the misuse of routine observations made by courts reserving liberty to litigants to seek further remedies. It emphasized that such reservations should be made only when necessary and subject to the availability of remedies in law. The court also highlighted the challenges faced by public undertakings due to unnecessary litigation and the need for a level playing field to compete with the private sector.Conclusion:The appeal was allowed, the order appointing an arbitrator was set aside, and the application under Section 11 of the Arbitration and Conciliation Act was dismissed.