Tender acceptance and arbitration clause enforceability, but a non-speaking award on public funds was set aside for lack of reasons.

Acceptance of a tender by the State, read with the tender terms and the parties' conduct, can create a concluded contract even if a formal agreement remains optional; the arbitration clause in the tender conditions then becomes enforceable. Refusal of adjournment did not breach natural justice where no stay had been granted and the party chose not to participate. However, a non-speaking award in a dispute involving public funds was unsustainable because the arbitrator gave no reasons or findings on the material claims. The award was therefore set aside and the matter remitted for fresh decision.

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Issues: (i) whether the acceptance letter dated 16.11.1985, read with the tender conditions and the conduct of the parties, resulted in a concluded contract and made the arbitration clause enforceable; (ii) whether the Arbitrator violated natural justice by refusing adjournment while a related appeal was pending; (iii) whether the award, being unreasoned, was liable to be set aside.

Issue (i): whether the acceptance letter dated 16.11.1985, read with the tender conditions and the conduct of the parties, resulted in a concluded contract and made the arbitration clause enforceable

Analysis: The acceptance letter was issued on behalf of the Governor of Uttar Pradesh and expressly treated the tender terms, acceptance letter and agreement forms as governing the transaction. The respondent deposited security, sent a signed agreement and took steps for execution of the contract. Under Section 5 of the Sale of Goods Act, 1930, a contract of sale may arise from offer and acceptance and may also be inferred from the conduct of the parties. The execution of a formal agreement was only optional and did not negate the concluded bargain. Since the tender form formed part of the contract, the arbitration clause contained therein was also available to the parties.

Conclusion: A concluded contract came into existence and the respondent could invoke the arbitration clause.

Issue (ii): whether the Arbitrator violated natural justice by refusing adjournment while a related appeal was pending

Analysis: The record showed that no stay had been granted by the High Court against the order under challenge. The Arbitrator had earlier accommodated the appellants, but when the appellants did not participate despite absence of any stay, the Arbitrator was justified in proceeding ex parte. The appellants could not rely on their own non-participation to claim denial of hearing.

Conclusion: There was no violation of natural justice in proceeding with the arbitration.

Issue (iii): whether the award, being unreasoned, was liable to be set aside

Analysis: The award merely reproduced the claim and allowed it without examining the heads of claim or recording any reasons, much less findings on loss or damages. In a dispute involving the State, a non-speaking award affecting public funds cannot stand where the arbitrator fails to give even brief reasons. The omission constituted a valid ground for interference and the courts below erred in sustaining the award.

Conclusion: The unreasoned award was liable to be quashed.

Final Conclusion: The appeal succeeded in part: the contractual and jurisdictional objections failed, but the award could not be sustained because it was non-speaking and unsupported by reasons, so the matter had to be heard afresh by an arbitrator.

Ratio Decidendi: Where a government contract is concluded by acceptance of a tender on behalf of the State and the arbitration clause forms part of that contract, the resulting award must still contain at least brief reasons on the material claims, failing which it is liable to be set aside and remitted for fresh decision.

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