V.S.Sirpurkar, CJ. - (1.) Present application under section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter called 'Act') is filed by Gulf (Oil) Corporation Limited, a company incorporated under the Companies Act, 1956 having its registered office at Hyderabad in the State of Andhra Pradesh. It is pointed out in this application that a Notice Inviting Tender (NIT for short) was floated by the respondent No.1, M/s. Steel Authority of India Limited ('SAIL' for short) and the respondent No. 2, its General Manager and respondent No.3, Chief Materials Manager. It is pointed out that the petitioner in pursuance of that advertisement, participated in the price bid and since the quotation offered by the petitioner was the lowest, he was termed as 'L-1' by the respondent No.1. It is then pointed out that on 19th October, 2004, the petitioner submitted the price break up for the explosives to be supplied under the Request For Quotation (RFQ for short). It is then pointed that in the last week of October, 2004, the third respondent requested the petitioner's Head Office at Hyderabad over telephone to supply certain explosives which items were covered under the NIT dated 24th September, 2004 on urgent supply basis as the respondent No. 1 had required the explosives for the immediate use to be mines of the respondent No.1. The petitioner supplied the said materials on various dates with the understanding that such supply of explosives were outside the purview of the tender and as well as online reverse auction, since no agreement was signed till that date in terms of such RFQ or NIT. The petitioner was also requested to supply further two truck loads of explosives by the respondent on 16th November, 2004 over telephone. This supply was recorded in the letter of the petitioner dated 17.11.2004.
(2.) The price bid or, as the case may be, tender offered by the petitioner was accepted on 19th November, 2004 by respondent No.1, who through respondent No.3, issued a Letter of Intent (LOI for short). However, on or about 3rd December, 2004, the petitioner wrote a letter to the respondent No. 3 informing the respondent No. 1 about non-acceptance of the said LOI by the petitioner for various reasons enumerated in the said letter including the aspect of nonpayment of their dues to the tune of Rs.1.2 crores by the respondents. The respondent No. 1 immediately upon receipt of such letter, sent a communication dated 3rd December, 2004 threatening that the respondent would initiate the Risk Purchase Action against the petitioner as per Clause 14 of the LOI. The petitioner by his letter dated 4th December, 2004 to the respondent No. 3 denied and disputed that the risk purchase action could be invoked by the respondents against the petitioner since the petitioner had not accepted the LOI at all. On 6th December, 2004, the second respondent wrote a letter pointing out that the petitioner had participated and accepted all the terms and conditions of RFQ or NIT and thus Clause 22 of the RFQ could be invoked and the question of non-acceptance of the LOI by the petitioner could not and did not arise in view of the participation and acceptance of the terms and conditions. This letter was received by the petitioner on 7th December, 2004. The petitioner also received another letter 7th December, 2004 advising the petitioner to resume supply of the balance quantity of explosives, that is the quantity mentioned in the tender notice minus the quantity already supplied by the petitioner on 3rd November, 2004 and 16th November, 2004. Again a notice was given by the respondent to invoke the risk purchase clause under Clause 14 of the LOI dated 19.11.2004. The respondent again pointed out on 9th December, 2004 that the delivery of explosives by the petitioner was to commence immediately after the receipt of the LOI as the petitioner had delivered four truck load of explosives already. It was pointed out that the LOI was a completed contract with all the terms and conditions and the petitioner was bound to execute all the orders placed in connection with the LOI and any unilateral violation would be construed as a breach of contractual obligation. A reference was then made to the further correspondence. The petitioner then pleads that the supply of the five truck load of explosives was absolutely outside the purview of the LOI and had no connection with the said LOI. The petitioner also sent the bills amounting to Rs.6,59,953/- in respect of the explosives supplied by the petitioner which was urgently required by the respondent No. 1 on or about 15th December, 2004. The petitioner again received a letter from the respondent on or about 7th January, 2005 informing that the respondents incurred additional espenses to the extent of Rs 20,28,412/- due to alternate procurement of explosives on account of the non-supply of the explosives by the petitioner in terms of the LOI and he was advised to pay the amount. The petitioner vide letter dated 20th January, 2005, denied its liability for making any payment. There is a reference to further correspondence in the application on this subject. It is then pointed out that the respondents issued an internal memorandum dated 23rd February, 2005, advising the Chief Finance Manager to deduct the amount of Rs. 20,28,412/- from the outstanding bills of the petitioner. The petitioner, therefore, pleads that there is a live dispute between the petitioner arid the respondents on the following three points: a) Whether there is any agreement to supply the explosives to the respondents by the petitioner herein in terms of the LOI dated 19th November, 2004, b) Whether the Clause 14 of the LOI dated 19th November, 2004 can be invoked by the respondents herein for the purpose of risk purchase, and c) Whether the respondents were justified on arbitrarily, illegally and wrongfully deducting the said amount of Rs. 20,28,412/- from the outstanding bills of the petitioner herein.
(3.) The petitioner then pleads that there was Clause 23 in the LOI providing the arbitration. The clause is as under: "ARBITRATION: All questions, claims disputes or differences of any kind whatsoeve'r arising out of or in connection with or concerning this contract, at any time, whether before or after the determination of the contract other than questions, claims, disputes or differences of the decision of which specific provisions have been made in the foregoing clauses of this condition (hereinafter referred as 'excepted matter' and decisions on which excepted matter according to the said specific provisions shall be final and binding on the parties to this contract and shall not be reopened or attempted to be reopened on the ground of any informality, omission, delay or error in the proceeding or on any other ground whatsoever) shall be referred by the parties hereto for the decision by a sole Arbitrator to be appointed as hereinafter mentioned. The notice regarding the invoking of the arbitration clause shall be served by the parties hereto by registered post at their address given in the contract. Matter in question, dispute, claim or differences other than the expected matter in respect of this contract to be submitted to the Arbitrator as aforesaid shall be referred for decision to a sole Arbitrator to be appointed by the Chief Executive (Director for SAIL, Raw Material Division, Managing Director for BSP/IISCO) in which arbitration is invoked. In case the designation of the Chief Executive is changed or his office abolished, the officer who for the time being is entrusted with the functions of the Chief Executive, by whatever designation such officer is called, shall be the person designated to appoint the sole Arbitrator. The Arbitrator so appointed shall adjudicate upon the disputes between the parties hereto. The sole Arbitrator appointed as stated above, shall from the time of his appointment and throughout the arbitration proceedings, without any delay, disclose to the parties in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality provided that the mere fact that such sole Arbitrator is an employee of SAIL/IISCO shall not be regarded as such circumstances. The Arbitrator shall decide the questions, claims, disputes or differences submitted to him by the parties in accordance with the substantive law for the time being in force in India. The Arbitrator shall hear the cases independently and impartially and shall not represent the interest of any party. The venue of the arbitration shall be as decided by the SAIL/IISCO. The question of procedure for conduct of the arbitration proceeding shall be decided by the Arbitrator, in consultation with the parties before proceeding with reference. The Arbitrator may hold preparatory meeting(s) for this purpose. In the preparatory meeting(s) as aforesaid, the Arbitrator in consultation with the parties shall also determine the manner of taking evidence, the summoning of expert evidence, and all such matters for the expeditious disposal of the arbitration proceedings. The Arbitrator shall be entitled to actually incurred espenses only, in respect of preparatory meeting(s). The provision of the Arbitration and Conciliation Act, 1996 and the rules framed thereunder, if any, and all modifications/amendments thereto shall deem to apply and/or be incorporated in this contract as and when such modifications/amendments to the Act/Rules are carried out. Work/supply under the contract shall continue by the supplier, under the contract, during the Arbitration proceedings and recourse to arbitration shall not be a bar to continuance for the work or supply.";