INDIA METERS LTD., MADRAS versus PUNJAB STATE ELECTRICITY BOARD AND ORS.

Citation: [1992] SUPP. 1 S.C.R. 309 · Decided: 02-09-1992 · Supreme Court of India · Bench: N.M. KASLIWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

INDIA METERS LTD., MADRAS 
A 
v. 
PUNJAB STATE ELECTRICITY BOARD AND ORS. 
SEPTEMBER 2, 1992 
(N.M. KASLIWAL AND K. RAMASWAMY, JJ.] 
B 
Arbitration Act, 1940: 
Section 3rArbitration clause provided in the purchase order-cum-con-
tract-Terms and conditions regarding payment not mentioned-Supplier in-
C 
sisting on its own term?-l'urchaser not agreeing-Subsequent comspon-
dence-Effect of-Whether contract concluded between parties-rlrbitration 
cluase-Whether could be enforced. 
In response to a tender notice issued by tbe Respondent-Electricity D 
Board, the appellant offered to supply tbeir standard electricity meters 
and stipulated their own terms of payment. It also Indicated tbat it will 
not submit a bank guarantee as demanded in the tender notice. Sub-
sequently tbe appellant sent a telegram reiterating the offer, keeping all 
tbeir terms and conditions unaltered. 
The Respondent-Board sent a purchase order-cum-contract for 
supply of 75,000 meters. In tbe order, tbere was no reference to the terms 
and conditions or payment including tbe furnishing of bank guarantee. It 
E 
was stipulated that tbe meters supplied. by the appellant would be ac· 
cepted subject to furnishing or sampies. It was also stipulated tbat dis· 
F 
pules, if any, would be. referred to the sole arbitration or a nominee of the 
Board. After exchange or series of correspondence, the Respondent-Board 
did not agree to tbe original offer of the appellant, as also its requests 
regarding acceptance of a bank guarantee or Rs. 1 lakh towards 100% 
payment and security deposit. Thereafter, the appellant informed tbe 
Board tbat it was not In a position to take furtber action in the tender and G 
tbe production planning had been dropped. 
The Board appointed an arbitrator, and filed its claim towards 
damages on account of tbe alleged breach or contract made by the appel-
lant. 
H 
309 
310 
SUPREME COURT REPORTS[1992] SUPP. 1 S.C.R. 
A 
The appellant Died an application under section 33 of the Arbltra· 
lion Act before the Sub-Judge alleging that there was no completed con· 
tract between the parties. The Sub-Judge allowed the application and 
restrained the Arbitrator from proceeding further in the arbitration. 
The Respondent-Board preferred an appeal under section 39 of the 
B Arbitration Act before the High Court. Treating it as a Revision Petition, 
the High Court held that the appellant bad accepted the offer of the Board 
and thereafter the Board by their letter dated 27.7.1978 had placed the 
purchase order. It further held that the subsequent correspondence 
regarding the security deposit, mode of payment and samples were merely 
C consequential steps taken in furtherance of the implemeutation of the 
contract aud they do not in any manner undermine the contract which 
othenrise stood concluded between the parties. Against this order of the 
High Court the appellant filed the present appeal. 
On the question as to whether there was any concluded contract 
D between the parties: 
Allowing the appeal, this Court, 
HELD: 1. There was no concluded contract between the parties and 
E as such the respondent-Board was not entitled to enforce the arbitration 
clause. The High Court was not correct in holding that the subsequent 
correspondence regarding the security deposit, mode of payment and 
samples were merely consequential steps taken in furtherance of the 
implementation of the contract and the contract already stood concluded 
between the parties. The mode of payment which included the furnishing 
F of bank guarantee was an important term and condition of the contract as 
...,11 as the furnishing of the samples. The appellant by its letter dated 
24.3.1978 made its offer and had clearly put its own terms and conditions 
as regards the furnishing of bank guarantee and the Board never con· 
curred on those terms, rather in their letter dated 30.8.1978 clearly turned 
G down the request of the appellant. Thus there was no concluded contract 
between the parties. [315 G·H; 316 A·B] 
2. The appellant at the relevant time was a sick unit and steps were 
being taken to revive the same through a Government undertaking. Under 
these circumstances if the appellant was insisting on giving exemption 
H from furnishing bank guarantee, it cannot be said that its action was 
INDIA METERS v. ELECTRICITY BOARD [KASLIWAL, J.] 
311 
unjustified. [316 B·CJ 
CIVIL APPELLATE JURISDICTION :-Civil Appeal No. 3496 of 
1992. 
From the Judgment and Order dated 23.4

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