Skip to content


Damodar Shah Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberOriginal Side Appln.
Judge
Reported inAIR1959Cal526
ActsArbitration Act, 1940 - Sections 2 and 33; ;Specific Relief Act, 1877 - Sections 39 and 42; ;Contract Act, 1872 - Section 2; ;Constitution of India - Article 299
AppellantDamodar Shah
RespondentUnion of India (Uoi)
Appellant AdvocateSubimal Roy, ;S. Roy and ;Subrata Roy, Advs.
Respondent AdvocateG.P. Kar and ;D.K. Sen, Advs.
Cases ReferredHeyman v. Darwin
Excerpt:
- orderp.c. mallick, j. 1. this is an application under section 33 of the indian arbitration act to determine the existence of an arbitration agreement. 2. the petitioner is a contractor who submitted on 18-7-1952 a tender for the supply of sal and teakwood of twenty different specifications for the supply of which tenders were invited by the directorate of supply. the directorate of supply purported to accept the tender submitted by the petitioner on 13-11-1952 and an acceptance note was issued on the same date. the petitioner contends that there was no concluded contract on the so-called acceptance of tender on 13-11-1952, firstly because the tender was open to acceptance by the directorate of supply till 31-10-1952 and could not be accepted on 13-11-1952 and secondly, because the terms.....
Judgment:
ORDER

P.C. Mallick, J.

1. This is an application under Section 33 of the Indian Arbitration Act to determine the existence of an arbitration agreement.

2. The petitioner is a contractor who submitted on 18-7-1952 a tender for the supply of sal and teakwood of twenty different specifications for the supply of which tenders were invited by the Directorate of Supply. The Directorate of Supply purported to accept the tender submitted by the petitioner on 13-11-1952 and an acceptance note was issued on the same date. The petitioner contends that there was no concluded contract on the so-called acceptance of tender on 13-11-1952, firstly because the tender was open to acceptance by the Directorate of Supply till 31-10-1952 and could not be accepted on 13-11-1952 and secondly, because the terms contained in the tender are different from the terms issued in the A/T dated 13-11-1952 and hence the parties were not 'consensus ed idem'. The respondents contend that the A/T dated 13-11-1952 evidences a concluded contract and that the petitioner has committed a breach thereof and as such is liable in damages to the extent of Rs. 1,69,803/8/-. The present notice has been taken out by the petitioner on 1-3-1954 to determine the existence of the arbitration agreement. The arbitration agreement is the usual clause in all Government contracts.

3. Mr. G. P. Kar the learned counsel appearing for the respondent submitted that the petitioner has challenged the contract itself and not merely the arbitration clause. The allegations in the petition attacks the whole contract and not merely the arbitration clause. The Court is invited to declare that there is no concluded contract between the parties. These prayers can only be granted in a declaratory suit. The petition, therefore, should be dismissed and the petitioner should be relegated to a properly constituted suit for declaration and cancellation of the A/T under Sections 42 and 39 of the Specific Relief Act. Mr. Kar has cited a decision or the Appeal Court in the case of State of Bombay v. Adamjee Hajee Dawood and Co., : AIR1951Cal147 in support of his argument that the question should be agitated in a suit and not in an application under Section 33 of the Arbitration Act. In the cited case the plaintiff instituted a suit claiming a declaration that a contract which contained an arbitration clause was not made between the parties and is not binding on it. The defence inter alia was that having regard to Sections 32 and 33 of the Arbitration Act such a suit does not He. The Appeal Court held that the suit was maintainable and that Section 32 of the Indian Arbitration Act was no bar. Banerjee J. in his judgment at page 148 observed as follows :

'I cannot take the view that Section 32 contemplates the case of suits challenging the validity of a contract because it contains an arbitration clause. If the intention of the legislature were that all contracts containing an arbitration clause should come within the purview of Sections 32 and 33 the legislature would have said so in appropriate words. In my view, Sections 32 and 33 have a very limited application, namely, where the existence or validity or an 'arbitration agreement' (and not the contract containing the arbitration agreement) is challenged. Assume for a moment that Sections 32 and 33, Arbitration Act, have repealed Section 39, Specific Relief Act, which section of the Specific Relief Act will apply in such cases to contracts which do not contain an arbitration clause? We cannot take the view either that Section 39, Specific Relief Act, has been partially repealed, that is to say, repealed so far as it relates to contracts containing an arbitration clause. To hold that Section 39 Specific Relief Act has been wholly or partially repealed will lead to absurd results.'

Harries, C. J. in supporting the view of Banerjee J. made the following observation at page 149 :

'I entirely agree with my brother Banerjee that Sections 32 and 33 on their true construction do not purport to deal with suits for declarations that there never was a contract or that a contract is void. The Sections must be confined to attacks on arbitration agreements and awards and the fact that an arbitration agreement may fail with the contract does not prevent the Court declaring in a properly constituted suit that there never was a contract at all or that the contract is void and of no effect.'

This is no authority for the proposition that if the existence of an arbitration agreement in a contract is to be challenged it cannot be done under Section 33 but must be done by a suit. Certain observations of B. K. Mukharji, J. in the case of Anderson Wright and Co. v. Moran and Co., decided by the Supreme Court and : [1955]1SCR862 was also referred to and relied on by Mr. Kar. The observation was made in a case under Section 34 of the Indian Arbitration Act and. in my view, has no application to a case under Section 33. The language of Section 33 leaves no doubt that when the existence of an arbitration agreement or its validity is challenged in an application under Section 33, the Court shall decide the question. In my judgment, the Court has no power to dismiss an application under Section 33 on the ground that the arbitration agreement is a clause in a contract and the decision may involve a declaration as to the existence or validity of the contract itself. In the instant case I am only called upon to decide whether the arbitration agreement exists or not and if in doing so I am required to consider the existence of the contract itself, I will have to do it. Declaration I will make in the order would be only as to the existence of the arbitration agreement. I have no power to dismiss the application and ask the petitioner to file a suit under Sections 42 and 39 of the Specific Relief Act.

4. The first point urged by Mr. Subimal Roy, the learned counsel appearing for the petitioner, is that the tender submitted by the petitioner was open for acceptance till 31-10-1952 and the respondent was not entitled to accept the same beyond that date so as to effect a binding contract between the parties. The tender submitted by the petitioner is Ex. 1. The first page is a letter in printed form addressed by the contractor to the Director of Supply. The letter opens with an offer and there are certain blanks intended to be filled up by the contractor. The blank portion in the letter in which the date up-till which the tender was to be kept open for acceptance has not been filled up. The annexed pages in type contains the subject matter of the contract, its terms and conditions and the answer to certain questions the contractor is required to give in that page it is expressly stated that the tender shall remain open for acceptance till 18-8-1952. I do not think that there is any substance in the argument of Mr. Kar that the fact that the contractor did not fill up the date in the first page of the tender shows that the contractor intended to keep the tender open for acceptance for an indefinite period. The tender must be read as a whole containing the offer of the contractor and it has been expressly stated in the tender, though not in the first page, that the tender shall remain open for acceptance till 18-8-1952. By two subsequent letters the contractor at the request of the Government extended the date of acceptance till 31-10-1952. There is no further extension in writing, nor is there dependable oral evidence as to whether the Government wanted further extension and the contractor expressly granted such extension. There is, however, evidence that even after 31-10-1952 the Government treated the tender not to have lapsed and was still open to acceptance and the contractor's state of mind was the same. According to witness Neogy, the contractor was coming daily to the office to enquire whether the tender had been accepted, though it is not clear from his evidence whether the contractor came after 31-10-1952. There is however a letter by the Director of Supply dated 10-11-1952 asking the contractor to send his representative for discussion in connection with the tender. In his reply dated 13-11-1952 the contractor did not intimate that the date having expired the tender had lapsed and there was no point in further discussion. On the other hand he intimates his desire to meet the Director in his office the next day. More important are the letters of the contractor subsequent to the receipt of the A/T dated 13-11-1952. These letters clearly indicate that the contractor kept the tender open for acceptance even after the expiry of 31-10-1952. Further the contractor purported to supply goods against the A/T dated 13-11-1952. It is too late for the contractor now to contend that it was not open to acceptance beyond 31-10-1952. The conduct of the contractor both before November 1952 and after clearly indicates that it was kept open by the contractor for acceptance by the Government till 13-11-1952.

5. The next argument of Mr. Roy is that assuming the tender was kept open for acceptance till 13-11-1952, the tender submitted by the petitioner was not in fact accepted inasmuch as the A/T issued by the Director of Supply clearly indicates that there is a divergence between the terms in the tender and the terms in the A/T dated 13-11-1952. Hence the said A/T cannot be considered to be an acceptance of the offer of the contractor as contained in his tender dated 18-7-1952. In law the A/T is nothing more than a counter-offer. If this contention is right, then this counter-offer as contained in the A/T dated November 13, must be accepted by the contractor at a subsequent point of time to effect a binding contract between the parties. But in that case the difficulty of the Government is, firstly, that the case made in the petition is that the A/T dated 13-11-1952 is the contract between the parties and no other; and secondly, such a contract if concluded at all at a subsequent date is hit by the provisions of Article 299 of the Constitution and thirdly, no such contract has in any event been proved to have been concluded between the parties by the acceptance of the counter-offer contained in the A/T dated November 13. This argument has been made with great forensic ability and deserves very careful consideration.

6. In the instant case the procedure usual to effect a contract has been followed. The Government issued invitations to tender for supply of goods. Pursuant to that invitation the petitioner submitted his tender and subsequently by the A/T dated November 13, 1952 Government purported to accept it.

7. Mr. Roy's contention is that on the following four points there is a divergence between the tender and the A/T :

(1) In the tender free delivery was offered at Superintendent of Collieries Giridih Railway Station; whereas in the A/T free delivery is to be made at Giridih Colliery.

(2) In the tender, 'sales tax extra wherever and whatever applicable'; whereas in the A/T there is no provision made about sales tax.

(3) In the tender the offer was that delivery should be started immediately and be completed within the period as specified in the schedule of tender; whereas in the A/T the quota for each month of goods to be delivered has been stated and this has been made the essence of the contract.

(4) In the tender the consignee was required to arrange wagon priority if required; whereas in the A/T the Government refused to accept the responsibility of arranging wagon priority.

8. It has been urged on behalf of the respondent that there is in fact no divergence between the tender and acceptance. By the letter dated 6-10-1952 the contractor admitted that there was no difference between 'F. O. R. Giridih Railway Station' and 'Free delivery at colliery'. In the invitation to tender it has been expressly stated that sales tax when leviable and intended to be claimed from the purchaser should be distinctly shown with the price quoted and when it is not done, no claim for sales tax will be admitted. The petitioner has indicated in the tender that sales tax is extra whatever and wherever payable. It has therefore complied with the provision in the invitation to tender. To construe the terms of the contract, the invitation to tender, the tender and the acceptance of tender has to be looked into and on construction of these three documents it may be found that the contractor is not liable to pay sales tax in any event. So also on the question of delivery, the contractor intimated in his tender that he had the entire stock in his hand and that he would be able to give delivery of the entire supply within the stipulated period. All that has been indicated in the A/T is the detail programme of delivery. In the invitation to tender the contractor was required to deliver in regularmonthly instalments. The contractor has not indicated in the tender that he was not in a position to make delivery in regular monthly instalments. On the other hand he has stated 'we confirm your delivery terms'. (Clause 2 of the further terms andconditions) and in answer to query 3 in the schedule as to the earliest date when delivery can be effected--the contractor answered 'as per your schedule'. In other words, the contractor agreed to give delivery 'in regular monthly instalments'. If the contractor agreed to supply in regular monthly instalments and further intimated that he had theentire stock in hand, the Government was invited toindicate the quota of every month. That is exactlywhat the Government has done in the delivery schedule attached to the A/T. There is, therefore, noreal divergence in the tender and its acceptance onthis point, Regarding 'wagon priority', the contractor knew that it was a condition of WSB contractin Form No. 133 that the Government never accepted responsibility for transport and the contractor expressly agreed in the tender to make the offer onterms and conditions to be found in such contract.All that the contractor therefore meant in insertinga clause in his tender as to wagon priority is toseek Government assistance in that regard. Thismust not be considered to be a term of the contractfor sale. The Government in the A/T has only indicated that under this contract the Government didnot accept any responsibility for arranging wagonpriority. The so-called divergence pointed out byMr. Roy is therefore more apparent than real. Itcannot be contended, therefore, that the terms inthe tender and acceptance thereof is so differentthat it must be held that the parties were not 'consensus ad idem'.

9. In my judgment it is not necessary for the purpose of this application to decide whether in fact there was a divergence between the tender and the A/T and, if so, whether such divergence indicated that the parties were not 'consensus ad idem' as to the material terms of the contract. The A/T seems to indicate that a further consensual act on the part of the contractor is necessary to conclude the contract between the parties on the terms stated in the A/T dated 13-11-1952. Annexed to the A/T there is a slip in Form WSB 141. The slip is an acknowledgment receipt of the A/T dated 13-11-1952 to be signed by the contractor and sent back to the Government. Paragraph 2 of the A/T dated 13-11-1952 is in the following terms :

'Please acknowledge receipt of this acceptance of tender as soon as possible on the attached slip --Form No. W.S.B. 141. Any clause or condition in your acknowledgment and inconsistent with this acceptance and the Schedule annexed shall be void and of no force and effect. If you fail to acknowledge receipt you will be deemed to have accepted this contract on the terms and conditions set out herein.'

This paragraph of the A/T, specially the last sentence, does suggest that after the receipt of the A/T the contractor had the right not to accept the contract on terms and conditions set out in the A/T dated November 13. It follows that the A/T is not the last in the chain of events which results in a concluded contract. The contractor on the receipt of the A/T had still the right of refusal. In other words, the contract is not concluded yet.

10. The question next is--Did the contractor exercise his right of refusal or did he accept the contract on terms and conditions set out in the A/T dated 13-11-1952. The contractor is directed by the said A/T to sign and return the receipt in WSB Form 141 in token of acceptance and he is warned that failure to acknowledge receipt will be deemed to be an acceptance of the contract on the terms and conditions set out therein. It has been urged on behalf of the petitioner, that failure to sign the acknowledgment receipt can never be considered acceptance of the contract even though the contractor is given express notice to that effect. That may be correct. But apart from this omission there are positive acts of commission on the part of the contractor which do amount to acceptance of the contract by the contractor. The contractor has been told in unequivocal terms that the contract must be accepted unconditionally--any condition sought to be imposed will be void altogether. As noted before the contractor had the right to refuse. But the point to note is that the contractor had no right to accept some of the terms and reject the rest. He must accept or reject the terms in the A/T dated 13-11-1952 in toto. Even after the acceptance of the contract the contractor had the right to negotiate with a view to modify any term that may cause hardship to him. This is legitimate and permissible. But there is no scope for the contractor to accept the contract in part. Keeping this fact in mind if we read the correspondence immediately after the receipt of A/T dated 13-11-1952 by the contractor and look to the acts of the contractor in making deliveries of the goods which is the subject matter of the A/T there can be no room for doubt that the contractor accepted the term's as stated in the A/T dated 13-11-1952. It is not possible to read in the correspondence any unwillingness on the part of the contractor to accept the contract. On the other hand, I detect a great anxiety on the part of the contractor to get the contract. Accepting the contract the contractor is asking for certain amendments. Not merely that; the contractor delivers a number of consignments of goods covered by the A/T dated 13-11-1952, in fulfilment of the contract, though not as much as he is required to deliver! under the delivery schedule in the A/T. Such delivery was expressly stated to be made against the A/T dated 13-11-1952. By his letter dated 9-3-1953, the contractor agreed that the Government will repurchase at the contractor's risk and expense 25 per cent of the goods covered by A/T. These constitute evidence of acceptance of the contract on terms and conditions set out in the A/T.

11. It was contended by Mr. Subimal Roy that the conduct of the contractor does indicate that the contractor has not accepted the contract evidenced by the A/T dated 13-11-1952. Firstly, he did not sign the acknowledgment receipt. But in terms of the A/T it would be evidence of acceptance and not refusal. Secondly, the contractor did not furnish the security deposit, though called upon. Security deposit was to be made under the terms and conditions of the contract after the contract was concluded. The contractor was being repeatedly asked to furnish security deposit in terms of the contract. The contractor never protested that he was not liable to furnish security deposit. On the other hand, in one of the letters the contractor contended that a large sum of money was due and owing to the contractor on account of other contracts and payment of security deposit should not be insisted on in the instant case. This conduct of the contractor in respect of the security deposit is evidence of acceptance and not repudiation of the contract. Lastly, throughout the correspondence the contractor was protesting that some of the terms were hard and difficult to perform and the contractor was asking for amendment of the A/T. This does indicate that the contractor was seeking to negotiate with respect to some of the terms of the A/T, but it is no indication of the contractor's refusal to accept the contract. On the other hand, this very fact of the contractor asking for amendment of some of the terms presupposes his acceptance of the contract and then seeking to modify some of the terms which were difficult to perform and operating hardship on him.

12. Mr. Roy contended that it is a case in which the Court is called upon to decide whether in the correspondence between the parties there was a concluded contract. In such a case where the existence of a contract is to be found out from correspondence, the rule to be adopted has been laid down by the House of Lords in the case of Hussey v. Horne-Payne (1879) 4 A.C. 311. The House of Lords in that case laid down the rule that the entire bunch of correspondence that passed between the parlies has to be looked into for determining whether there was a concluded contract. Applying that rule the House of Lords in the case before it held that though the first two letters in the bunch of correspondence seem to constitute a completed contract, the whole bunch of correspondence including the above two indicated that there was no concluded contract. The instant case is not, however, a case in which the Court is called upon to spell out a contract from correspondence. It is a case in which there is a formal document, namely the A/T dated 13-11-1952, and the Court is called upon to decide whether the parties accepted this document as evidencing the contract between the parties. This class of cases was expressly excluded from the rule laid down by the House of Lords in the case cited. When the question is whether the contract is to be found in a particular note or memorandum formally signed, the House of Lords pointed out this rule has no application. In the instant case, the plea of the respondent is that the contract is to be found in the A/T dated 13-11-1952, which has been accepted by the contractor. It is not a case of ordinary commercial contract or a contract between two private persons where the contract is to be found out from correspondence. It is a case in which a contract, if any, must be evidenced by a formal document in compliance with Article 299 of the Constitution. In a case like this the rule laid down by the House of Lords in the case cited has no application. If I hold in this case that A/T dated 13-11-1952 does not evidence the contract between the parties, I will have to hold that there was no contract and that would be the end of the respondent's case. But in the instant case I have held that the A/T dated 13-11-1952, has been accepted by the petitioner. The conduct of the petitioner goes to show conclusively that the contract evidenced by the A/T has been accepted by the petitioner. The existence of the contract is proved by subsequent correspondence. The other fact which proves acceptance is the fact of delivery of goods covered by the A/T to the consignee named in the A/T. The letter dated 5-3-1953, addressed by the contractor to the Director of Supply contains a statement of the deliveries made up-to-date. The quantity delivered, though less than what is stated in the schedule of deliveries in the A/T, is, nevertheless, substantial. This is clear evidence of the acceptance of A/T. At the top of the statement the following words are to be found :

'Statement of deliveries of stores A/T No. Cal/ T.R./16270-C/1269 d/- 13-11-52 (Giridih Colliery).'

To get out of this difficulty, the case made by the petitioner in evidence is that such deliveries were made not under and against the A/T but independently of it at the special request of the respondent to meet an emergent necessity. I have no hesitation in rejecting this case. This runs counter to all documentary evidence and is wholly unacceptable. The petitioner is bound by his own statements in innumerable letters and statements furnished by him to the Director of Supplies and is not entitled to make a case that the deliveries made had no reference to the contact evidenced by the A/T dated 13-11-1952. To the knowledge of the petitioner the officer had no power to enter into a contract otherwise than as provided in Article 299 and it is absurd for him to conclude a contract of sale of goods apart from a formal document. In my judgment, it must be held that the petitioner by his conduct as evidenced by subsequent correspondence, by deliveries made in terms of and against the A/T, did accept the A/T dated 13-11-1952 evidencing the contact between the parties.

13. Mr. Subimal Roy strongly relied on a decision of the Court of Appeal in the case of Bishop and Baxter Ltd. v. Anglo Eastern Trading and Industrial Co. Ltd. (1943) 2 All ER 598. In this case, the seller purported to accept an order for the supply of certain goods subject to 'the Government's restrictions as to sales and war clauses'. The question arose whether the acceptance of the offer concluded the contract. It was contended on behalf of the seller that the contract was too vague and indefinite. The argument advanced on behalf of the seller as noted in the judgment of Scott, LJ is that the so-called acceptance of the order was nothing but a counter-offer, inasmuch as the acceptance was subject to certain conditions and was not unconditional and that the counter-offer was incapable of acceptance and required an express consensus on the content of some specific war clause, since that was what the seller had asked for in the counter offer. The contention was upheld and the existence of the contract negatived by Scott, LJ with the following observations :

'Until the parties had made and agreed on a particular form and content of the war clause, there was and could not be consensus ad idem,' Then follows the observation on which Mr. Subimal Roy strongly relies :

'It is urged by counsel for the respondent that both parties after June 2, thought a contract existed and that that fact entitled the Judge to hold that the contract did exist. The answer is obvious. The erroneous legal view of the parties did not alter the legal interpretation of written words 'and war clause' in the counter offer and until the parties had agreed on the particular clause to be incorporated in this agreement there would be no contract binding on the parties to all the other terms of the two letters. After June 2 some other contract might, of course, come into existence as a result either of express oral agreement or to be inferred from the conduct of the parties, but that is not the contract sued on by the counter claim. The respondents were there relying expressly and solely on a written contract alleged to be contained in the two letters which I have read out. If these letters properly construed, constituted no complete contract, the misapprehension of the respondents could not turn them into one.'

On the above authority Mr. Roy submitted that it may be that in the instant case the parties thought that the A/T dated 13-11-1952 evidenced a concluded contract. But this erroneous view of the parties could not turn the A/T dated 13-11-1952, which is nothing more than a counter offer, into a concluded agreement. The A/T dated 13-11-1952 when issued by the Government did not present a concluded bargain. To that extent there is a similarity between the cited case and the instant case. But the point of distinction is that in the cited case till the terms of the 'war clause' were settled by agreement, the counter offer contained in the Acceptance of Offer could not be accepted in law to effect a concluded bargain whereas, in the cited case the A/T dated 13-11-1952 left no scope for further negotiation and was capable of being accepted either expressly or by conduct. There was, therefore, no impediment in the instant case to the contractor's accepting the A/T dated 13-11-1952 expressly or by conduct. The fact that the parties thought that the contract as evidenced by the A/T dated 13-11-1952 did exist is not only not irrelevant but is the most important evidence having bearing on the question. In the cited case the counter offer could not be accepted without a further agreement on the war clause and there admittedly being no such agreement on the war clause, the counter offer could not be accepted either expressly or by conduct. There is no such impediment in the instant case and the A/T dated 13-11-1952 was capable of being accepted, so as to effect a binding and concluded bargain between the parties. The case cited is, therefore, clearly distinguishable and the observation of Scott, L. J. in the cited case has no application to the facts of the instant case.

14. The next point to be considered is Article 299 of the Constitution and its applicability to the facts of this case, Article 299 lays down the formalities to be complied with in order that there might be a binding contract with the Government. It reads as follows :

'All contracts made in exercise of executive power of the Union .... shall be expressed to be made by the President ...... and all such contracts ......made in the exercise of that power shall be executed on behalf of the President ...... by such person and in such manner as he may direct or authorise.'

The contention of Mr. Subimal Roy is that the formal document contemplated in Article 299 cannot be executed in the manner indicated in the Article before the contract is concluded. In the case of Government contracts, the Tender is the offer and A/T is the acceptance o the offer which results in a binding contract if the A/T complies with the formalities laid down in Article 299 of the Constitution. If, however, the A/T does not conclude the deal and if it is nothing more than a counter offer which requires further acceptance by the other contracting party, to conclude the contract, as in the, instant case, then a further formal document must be executed in compliance with the formalities prescribed by Article 299. The A/T which is yet to be accepted cannot be said to be in compliance with the formalities prescribed by Article 299 of the Constitution, because the contract has not yet been concluded. In other words, there must be a concluded contract first, before a formal document in compliance of Article 299 can come into existence. If the formal document is anterior to the conclusion of the contract, Article 299 is not complied with. I do not think this argument is sound. There is nothing in Article 299 to indicate that the formal document embodying the terms of the contract cannot come into existence before the acceptance of the terms by the other contracting party. The Article only requires that the terms of a contract, in order that it may bind the Government, must be agreed to by the proper authority and must be evidenced by an instrument executed by an officer duly empowered. There is nothing to prevent the Government from offering a contract by a formal document in compliance with Art 299 for the other contracting party to accept and conclude the deal. In the instant case, the Government has offered a contract to the petitioner by its A/T dated 13-11-1952 containing all the terms of the contract and the A/T is executed by an officer duly authorised and it is in compliance with the formalities. In my judgment Article 299 has been complied with in the instant case and on the acceptance of the A/T dated 13-11-1952, a contract is concluded between the parties. It is not necessary to decide in the instant case at what date the contract was concluded. Whether it was concluded on 19-11-1952 when the letter was sent by the contractor or subsequently when the first consignment of goods was sent or on 9-3-1953 when the parties agreed to a Novation is wholly immaterial for the purpose of this case. The Government's case is that the contract is evidenced by the A/T dated 13-11-1952 which contains the terms including the arbitration clause. The fact that it was accepted by the other contracting party at a subsequent date is wholly immaterial.

15. Mr. Kar has contended that Article 299 is a constitutional provision to give protection to the Government and Government alone. Hence it cannot be invoked by the other contracting party to defeat a contract which is not in strict compliance with Article 299 of the Constitution. Such a contract, in his submission is not void. Mr. Kar relied on the observation of the Supreme Court in Chaturbhuj Vithal Das v. Moreshwar Parashram : [1954]1SCR817 . It has, however, been held authoritatively that the provisions of Article 299 are mandatory and not directory and as such a contract which does not comply with the formalities prescribed by Article 299 is unenforceable in law, Mr. Kar's argument is that' it is unenforceable against the Government, but enforceable against the other contracting party by the Government; in other words, one of the contracting parties is bound and not the other. A number of decisions including an unreported decision of the appeal Court has been cited by the parties : Union of India v. Ramnagina Singh, 89 Cal LJ 342 (357); Sankara Mining Syndicate Ltd. Nellore v. Secy, of State, AIR 1938 Mad 749; S.C. Mitter and Co. v. Governor General of India in Council, ILR (1950) % Cal 431; New Churulia Coal Co., Ltd. v. Union of India, : AIR1956Cal138 . Perumal Mudaliar v. Province of Madras, : AIR1950Mad194 ; Jagu Singh v. M. Shaukat Ali, 58 Cal WN 1066; Surendra Nath v. Dalip Singh : [1957]1SCR179 ; P. H. Avari v. State of West Bengal, : AIR1958Cal203 , and 1944-1 KB 12; Halsbury (Simonds Edition) Volume VIII, Articles 128 and 129 Cheshire page 31. It is not necessary for me in the instant case to express any opinion on this point, in view of my finding that in the instant case the contract is evidenced by the A/T dated 13-11-1952. This A/T is admittedly in strict compliance with the provisions of Article 299 of the Constitution. It has been proved that R. C. Das Gupta had the authority to enter into the contract. Mr. Roy contended that the Government is bound by its own pleading and in the affidavit of Das Gupta the case made is that the A/T dated 13-11-1952 concluded the deal. It is not therefore open to the Government to make a new case that by subsequent acceptance by the contractor of the A/T dated 13-11-1952, there was a concluded contract between the parties. But the petitioner himself has made the case in 20 (g) of the petition, that he never agreed to accept the counter-offer made in the A/T and he asks for a negative declaration that there was no concluded agreement. Failure of the Government to establish that the A/T dated 13-11-1952 concluded the agreement, would not entitle the petitioner to the negative declaration unless the petitioner succeeds in proving his own case that the counter offer contained in the A/T was not accepted by the petitioner. This case the petitioner, has failed to substantiate and he is not entitled to the negative declaration claimed in the petition, I am not therefore inclined to accept this argument of Mr. Roy.

16. The true nature and function of an arbitration clause in a contract has been indicated by the House of Lords in the case of Heyman v. Darwin (1942) 1 All ER 337. It is distinct from the other clauses. A contract with an arbitration clause, rolls as it were, two contracts into one. No doubt if themain contract does not exist, the arbitration agreement also cannot exist. In the words of Lord Macmillan 'If there has not been a contract at all, therehas never been as part of it an agreement to arbitrate; the greater includes the less.' In the presentapplication to determine the existence of an arbitration agreement, I had to decide the existence of thecontract containing the arbitration clause. I am notcalled upon to decide the other terms of the contract in this application. The disputed terms of thecontract on the determination of which the liabilityof either party against the other would arise cannotbe determined in this application and I do not finally decide the same. The only point I decide is thatthere is a contract subsisting between the partieswhich contains the arbitration clause. I make adeclaration accordingly in terms of prayer (2) of thepetition. The petitioner will pay the costs of thisapplication to the respondent. Certified for twocounsel.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //