U. P. RAJKIYA NIRMAN NIGAM LTD. versus INDURE PVT. LTD. AND OTHERS

Citation: [1996] 2 S.C.R. 386 · Decided: 09-02-1996 · Supreme Court of India · Bench: K. RAMASWAMY · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
U.P. RAJKIYA NIRMAN NIGAM LTD. 
v. 
INDURE PVT. LTD. AND OTHERS 
FEBRUARY 9, 1996 
[K. RAMASWAMY, S. SAGHIR AHMAD AND 
G.B. PAITANAIK, JJ.] 
Arbitration Ac~ 1940: Sections 2(a) and 33. 
C 
Arbitration agreement-Existence and validity of-Maintainability of 
application-Challenge of-Arbitration clause-consensus ad idem between 
parties must-Absence thereof-Agreement would be treated as non- existent. 
Arbitrator~Not competent to go into the question of existence of 
validity of Arbitration agreement-Court alone compet,ent to decide it con-
D clusively-Acquiscence.of-Did not confer jwisdiction-Would not estop the 
party from having remedy under Section 3~Doctrine of EstOppel. _ 
Draft agreement-Material changes-Making of-Amounted to 
counte~Proposal by party-Not accepted by other party Held : no consensus 
ad idem and no concluded contract-Hence application under Section 33 
E maintainable. 
F 
G 
Government undertaking-Articles of Association-Execution of Con-
tract-Must be in accordance therewith-Doctrine of "Indoor Manage-
ment''-Not applicable. 
Contract Act, 1872: Section 32. 
Proposal and counter-Proposaf-Submission of tender-Not trans-
! onned into contract-Held : counter-Proposal only a contingent contract and 
could not be enforced. 
Jurisdiction : Acquiescence-could not confer Jurisdiction-Hence 
party not estopped from challenging jurisdiction. 
The U.P. State Electricity Board had floated tenders for construc-
tion, supply and erection of mechanical equipment and construction work 
H including consultancy services. The appellant-Nigam had purchase~ 
386 
.. 
U.P. RAJKIYA NIRMAN NIGAM LTD. v. IND URE PVT. LTD. 
387 
tender documents from the Board. The respondent approached the appel-
A 
lant for their joint participation to submit the tenders to the Board. In 
furtherance thereof, negotiations were set on foot and it was decided to 
enter into an agreement in that behalf and ultimately draft agreement was 
sent to the respondent for signature. The appellant did not sign the draft 
agreement. The respondent sent a counter-proposal deleting clause (10) of B 
the agreement suggested by the appellant and materially altered clause 
(12) therein after having signed the same. 
The appellant disputed the existence of the arbitration agreement 
and also asserted that no concluded contract existed between the parties. 
It was further stated therein that deletion of material clause (10) of the 
draft agreement and material alteration of clause (12) constituted sub-
stantial modification of the draft agreement and consequently it did not 
accept the counter-proposal of the respondent and that, therefore, no valid 
agreement came into existence which was admitted by the respondent. 
However, they nominated an arbitrator on their behalf. 
Thereafter, the appellant filed an application under Section 33 of the 
Arbitration Act, 1940 for a declaration that there existed no agreement 
between the appellant and the respondent on the basis of which a dispute 
could be referred for arbitration as tlie agreement set up by the respondent 
c 
D 
was non-est. Accordingly, it sought declaration to set aside the said agree-
E 
ment. Th~ High Court held that the draft agreement contained provision 
for arbitration and that the appellant was bound thereby. Aggrieved by the 
High Court's judgment the appellant preferred the present appeal. 
On behalf of the appellant it was contended that by mistake it had p 
agreed for reference and that arbitrators could not decide the existence of 
the arbitration agreement or arbitrability of the disputes without prejudice 
to its stand that no valid agreement existed. 
On behalf of the respondent it was contended that the counter-
proposal made by it amounted to acceptance by conduct of the appellant; G 
that the appellant had submitted to the jurisdiction of the arbitrators and 
having nominated the arbitrator, they were estopped from going back upon 
it; that the appellant had acquiesced to the jurisdiction of the arbitrators; 
and that it was an indoor management between the appellant and its 
officers. 
H 
A 
B 
388 
SUPREME COURT REPORTS 
[1996] 2 S.C.R. 
Allowing the appeal, this Court 
HELD : 1.1 The parties may reach agreement in principle but the 
details may be worked out at a later date. There 'is no dispute to this 
proposition of law .but two factors have to be kept in mind viz., when was 
the counter-proposal made by the respondent and whether the unilateral 
offer amounts to acc

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