Alang Metal Exim Pvt. Ltd. vs Mstc Limited

The petitioner being the plaintiff in a money suit in O.S.No.3749/2013 is invoking the writ jurisdiction of this Court for assailing the order dated

06.06.2014 made by the trial Court allowing the applications filed by the respondent-defendants in IA Nos. 1 and 2 under Section 8 of the Arbitration

and Conciliation Act, 1996 (hereafter “1996 Actâ€) seeking reference of the subject ‘dispute’ to the arbitration. The respondent-defendants

having entered appearance through their counsel, resist the writ petition.

Learned counsel for the petitioner Mr. P.D. Surana vehemently argues:

a) that the respondent-defendants having filed the Written Statement have subjected themselves to the jurisdiction of the Court for the purpose of the

trial of the suit and therefore, their applications filed under Section 8 of the 1996 Act could not have been favoured;

b) secondly that, there is no arbitration clause enforceable in law inasmuch as petitioner having withdrawn the offer before its acceptance, eventually

no contract having came into existence;

c) lastly that, the petitioner having participated in the E-auction held on 07.04.2010, by mistake had pressed the wrong key of the computer i.e., instead

of pressing the key ‘1’ he had pressed the key ‘4’ and consequently instead of Rs.192105070/- an astronomical figure of Rs.492105070/-

had factored; immediately he had withdrawn the offer by sending e-mails on the same day and by making a representation to the contesting defendant,

following day i.e., on 08.04.2010 thus, the offer made by mistake was withdrawn and therefore the arguable Contract stands avoided on the ground of

mistake.

Per contra, both the learned counsel for the respondents make submission in justification of the impugned order of reference to arbitration

contending:

a) that a mere filing of the Written Statement resisting the suit does not amount to defendants subjecting themselves to the jurisdiction of the Court by

waiving arbitration clause inasmuch as on the same day application was also filed under Section 8 of the 1996 Act seeking reference to arbitration; in

any event, the other defendant had not filed the Written Statement at all but had filed the similar but separate application seeking reference;

b) that the very terms of the tender stipulated non-withdrawal of the offer once made, regard being had to the nature and mode of the tender process

and therefore withdrawal was impermissible; when there was nothing left to be done by the defendants, once the button was pressed there is deemed

acceptance in the circumstances and therefore, a Contract had come into existence;

c) that the alleged ground of mistake pleaded by the petitioner-plaintiff for avoiding the Contract even if assumed to be true, does not avail to him in

law since it is unilateral, when the law requires the bilateral.

I have heard the learned counsel for the petitioner and the learned counsel for the respondents. I have perused the writ petition papers and the

Rulings cited from the side of the petitioner namely, T. LINGA GOWDER VS. THE STATE OF MADRAS, AIR 1971 MADRAS 28 and

RAJENDRA KUMAR VERMA VS. STATE OF MADHYA PRADESH AND OTHERS, AIR 1972 MP 131. No rulings are cited from the side of

the respondents.

Petitioner-plaintiff’s suit in O.S.No.3749/2013 is for a money decree; after service of notice, the respondents entered appearance on 29.07.2013

and the case was posted for filing of the Written Statement; on 30.08.2013, the first respondent being the first defendant filed its application under

Section 8 of the Act without filing its Written Statement; the second respondent herein being the second defendant in the suit filed its Written

Statement/Counter Claim accompanied by an application again under Section 8 of the 1996 Act seeking reference of the dispute to the arbitration. The

learned trial judge vide impugned order has allowed the applications independently filed by both the defendants, invoking the arbitral clause. The

legality of this order is in challenge before this Court.

The contention of the learned counsel for the petitioner â€" plaintiff that by mistake, he had pressed a wrong button on 07.04.2010 which is in the

nature of an offer and after discovering the same, on the very same day afternoon, the plaintiff had withdrawn the offer by sending e-mails, and a

representation on the following day ie., 08.04.2010, appears to be attractive on the face of it, but a deeper scrutiny shows its untenability. Where the

terms of the tender prohibit the withdrawal of the offer, regard being had to the very nature of the tender process, it is not open to the proposer to

withdraw the offer, having agreed thereto and having waived his right of withdrawal by very participation itself. Ordinarily, an offer can be withdrawn

by the proposer at any time before the same is accepted. However, where there is a stipulation against the withdrawal and there remains nothing to be

done by the offeree, arguably a Contract comes into existence subject to all just exceptions which are not urged herein. Therefore, the provisions of

Section 5 of the Indian Contract Act, 1872 do not avail. The Division Bench of Patna High Court in the case of COMMISSIONER OF SALES TAX,

BIHAR VS. NEW INDIA SUGAR MILLS, DARBHANGA, (1959) 10 STC 74 (81) (Pat) (DB) has observed that, there is in principle a material

distinction between acceptance of an offer which asks for an act on the condition of the offer becoming a promise; in the former case where the

acceptance is to consist of a promise, there must be communication to the proposer; but in the latter class of cases, as for example, dispatching goods

ordered by post, the rule is that no further communication of acceptance is necessary than performance of proposed act.â€​

Reliance by the learned counsel for the petitioner on the decision of the Madras High Court in the case of T.Linga Gowder may not come to his

rescue. At paragraph No.2, the decision reads as under:

“2. Admittedly, the auction sale in this case was held by the District Forest Officer the 2nd defendant in the case. On the 19th of January, 1959,

before the receipt of any order from the District Forest Officer confirming the sale of the leas-hold right, the plaintiff, complaining that he had received

no information in the matter and that the cultivation season had also passed, withdrew his bids and asked for the refund of the earnest deposit of Rs.

There was no response to this letter of the plaintiff withdrawing his bid, and without reference to the same by proceedings dated 30th

January,1959 and 31st January, 1959, the District Forest Officer proceeded to confirm the plaintiff’s bids and called upon him to execute

agreements in the prescribed form. There is a separate confirmation order for each one of the four plots. Each order refers to the bid amount and

requires the plaintiff to pay the balance due less the earnest deposit within 10 days of the receipt of the order in accordance with the conditions of the

sale. The plaintiff refused to comply with the demands and the District Forest Officer proceeded to resell by public auction the leasehold right with

regard to the four plots. By his letter, dated 3rd September, 1959, he intimated the plaintiff that the plots have been re-auctioned and that the plaintiff

should pay a sum of Rs.4,025, the loss sustained by the government as a result of the re-sale, giving credit for the earnest deposit of Rs.400. He

initiated proceedings to recover the aforesaid amount under the Revenue Recovery Act through the Collector of Nilgiris. The plaintiff, thereupon,

issued the necessary notice under Section 80, Civil Procedure Code, and commenced action for a declaration that the proceedings of the State of

Madras represented by the District Forest Officer, Coimbatore, and the coercive action initiated under the Revenue Recovery Act are illegal and

unsustainable in law and for refund of the earnest money deposit of Rs.400. The plaintiff took the stand that there was no completed contract in the

case, and that, before due acceptance of his highest bid by confirmation in accordance with the conditions of the sale, he had withdrawn his bid. The

learned Subordinate Judge, Nilgiris, upheld the plaintiff’s contention that there was no concluded contract and granted him the declaration as

prayed for and decree for the refund of the earnest deposit. On appeal, the learned District Judge, Coimbatore, took the view that there was a definite

acceptance of the plaintiff’s bid at the auction and the sale was confirmed by the authority concerned. On that view, he reversed the decree of

the trial court and dismissed the suitâ€​.

In the aforesaid case, there was no clause in the tender documents interdicting the withdrawal of offer unlike in the present suit, wherein the

BUYER SPECIFIC TERMS & CONDITIONS, at para 3.4 reads “A bid once given cannot be retractedâ€. Thus the petitioner had waived the

formal requirement of acceptance and its communication. That makes all the difference to the case in hand and the ratio of the ruling cited. LORD

HALLSBURY more than a century ago, in the celebrated case of QUINN V LEATHEM (1901) A.C. 495, 506:has observed as under:

“Now before discussing the case of Allen v. Flood, (1898) A.C. 1 and what was decided therein, there are two observations of a general character

which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts

proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole

law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an

authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of

reasoning assumes that the law is necessarily a logical Code, whereas every lawyer must acknowledge that the law is not always logical at all.â€​

Thus, a case is an authority for the proposition that directly and substantively laid down therein and not for all that logically follows therefrom. The

ruling of the Madras High Court cited by Mr. Surana does not support the proposition canvassed hereinabove.

Ordinarily, going by the text of Section 5 of the Indian Contracts Act, 1872, a proposal may be revoked at any time before, the communication of its

acceptance is complete. This is only a general rule subject to a term agreed to by the parties to the contrary. There being a contra term which the

petitioner has acted upon by participating in the tender process, I am afraid that it is not permissible for the petitioner to invoke the provision of this

Section which enacts only a general rule into which his case does not fall.

The reliance of the learned counsel on the decision of Madhya Pradesh High Court in the case of Rajendra Kumar Verma again does not come to

the aid of the petitioner, the same having been rendered in a bit different fact matrix of that case, wherein para 3 reads as under:

“3. The reply on behalf of the respondents is that under the tender condition No. 10(b)(i) a tenderer may be allowed to withdraw his tender of any

unit of a division before the commencement of the opening of tenders of that division on the condition that on opening the remaining tenders, there

should be at least one valid tender complete in all respects available for consideration for that particular unit. In this case, since there was no other

tender, the tender given by the petitioner could not be withdrawn. We are unable to accept this contention. A person who makes an offer is entitled to

withdraw his offer or tender before its acceptance is intimated to him. The Government, by merely providing such a clause in tender notice could not

take away that legal right of the petitioner. The fact that the petitioner had applied for withdrawal of the tender is not denied. It is, therefore, quite

clear that when the tenders were opened, there was really no offer by the petitioner and, therefore, there could be no contract either impliedly or

explicitly between the parties.â€​

This decision is also not invokable in the present case since it involved a Government contract as contemplated under Article 299(1) of the Constitution

of India which factor weighed with the Court as is reflected at para 4 therein which reads as under:

“4. It has been repeatedly held by this Court and by the Supreme Court that unless there is a valid contract executed as envisaged by article 299

(1) where the Government is a party, there could be no enforceable contract at all. In K P Chowdhry v. State of M P., 1966 MPLJ 1057 = (AIR 1967

SC 203), their Lordships of the Supreme court specifically laid down as follows:

“The provisions of Article 299 (1) of the Constitution are mandatory. There can be no implied contract between the Government and another

person. If such implied contracts are allowed, they would in effect make that article useless, for then a person having a contract with Government

which was not executed at all in the manner provided in Article 299 (1) could get away by saying that an implied contract may be inferred on the facts

and circumstances of particular case…â€​

Even otherwise also this Court finds it a bit difficult to agree with the observation in the said decision that the Government, by merely providing a

clause in the tender notice could not take away the legal right of proposer to withdraw the proposal at any time before its acceptance is

communicated. This view appears to be little inconsistent with the inner voice of the judgment of the Apex Court in the case of NATIONAL

HIGHWAY AUTHORITY OF INDIA VS. GANGA ENTERPRISES (2003) 7 SCC. S4e1c0tion 5 of the Indian Contracts Act, 1872 recognizes

only the liberty of the proposer to withdraw the proposal before its acceptance. This Section does not enact any inviolable rule of public policy which

the parties cannot waive, unlike the Fundamental Right to Equality enshrined in Article 14 of the Constitution of India or such other sacrosanct right.

The last contention that there was a mistake on the part of the petitioner in pressing the wrong button of the key board and therefore the same

having been brought to the notice of the respondents forthwith whatever contractual arrangement arguably arising stands avoided by virtue of mistake,

is legally unsound. The mistake as a ground for avoiding the Contract as contemplated under Section 20 of the Indian Contracts Act, 1872 is not a

unilateral mistake. This Section reads,

“Agreement void where both parties are under mistake as to matter of fact â€" Where both the parties to an agreement are under a mistake as to

a matter of fact essential to the agreement, the agreement is voidâ€​.

The text of the provision being as clear as Gangetic waters, needs no interpretation and the unilateral mistake as contended by the learned counsel for

the petitioner cannot be accepted as ground for avoiding the contract/obligation without manhandling the said provision and that the Courts cannot

arrogate to themselves this power which is vested with the law maker.

In more or less a case involving forfeiture of the security deposit after the bidder withdrew the offer before its acceptance was communicated,

was the subject matter of scrutiny by the Apex Court in the case of NATIONAL HIGHWAYS AUTHORITY OF INDIA supra. The Bombay High

Court in the said case had held that the statutory right given under the Indian Contracts Act, 1872 for withdrawing the offer could not have been

curtailed by a condition to the contrary, in the tender documents; any clause in so far as it is contrary to or came in conflict with the provisions of the

said Act was inoperative and void; a person who makes an offer has the right of withdrawing it before its acceptance; until the offer is accepted

unconditionally, it created no legal right and the bid could be withdrawn at any time and therefore, forfeiture of the earnest was unjustifiable. The

Apex Court disagreeing with this view of the High Court, observed at paragraph No.9 as under:

“9. In our view, the High Court fell in error in so holding. By invoking the bank guarantee and/or enforcing the bid security, there is no statutory

right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian

Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a

completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to

withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is

not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him.

Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to

ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into

existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in

government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a

person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a

clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted.â€​

In the above circumstances, this writ petition being devoid of merits, fails and accordingly it is dismissed.

The observations made hereinabove being confined to the disposal of this writ petition, the same would not influence the decision making process by

the arbitral Tribunal on the grounds to be urged by both the sides.

No costs.