Case Title: M/s. Jhar Mining Infra Private Limited versus CMD, managing Coalfields Ltd. & Ors. Dated: 27.09.2022

Facts: The respondent Mahanadi Coalfields Ltd. issued a notice inviting tender for setting up a Washery. The petitioner- M/s. Jhar Mining Infra Private Ltd., submitted its bid. 

👉The respondent issued a Letter of Intimation (LOI) to the petitioner, declaring it the lowest bidder. The LoI provided that a Letter of Acceptance/ Letter of Award (LoA) would be subsequently issued to the petitioner after the receipt of environmental clearance (EC).

👉The petitioner accepted the LoI and provided assistance to the respondent in obtaining the environmental clearance for the project. Thereafter, the respondent cancelled the tender and the LoI issued to the petitioner.

👉The petitioner issued a notice to the respondent invoking the arbitration clause contained in the tender document.

👉The respondent, in its reply to the said notice, contended that cancellation of the tender and the LoI by the respondent was not a dispute covered under the arbitration clause, as contained in the tender document.

👉Hence, the petitioner filed a petition under Section 11(6) of the A&C Act before the Orissa High Court, seeking appointment of an arbitrator to adjudicate the disputes between the parties.

Sequitur by the Court:
👉The Court observed that as per the tender documents, the ‘LoA’ is defined as an official communication issued by the respondent, notifying the Bidder about the acceptance of its Bid and for inviting him to sign the Contract.

👉The Court noted that though an LoA was not issued to the petitioner and there was no concluded contract between the parties, however, the respondent by issuing the LoI acknowledged the petitioner as the lowest bidder and the ‘Preferred Bidder’. The bench added that there was prima facie merit in the contention of the petitioner that by accepting the LoI, a contractual relation came into existence between the parties.

👉Further, the Court referred to the arbitration clause contained in the tender document, which provided that all disputes arising during the course of execution of the contract between the tenderer and the tenderee shall be settled by an in-house mechanism, failing which it shall be referred to arbitration.

👉Refuting the contention of the respondent that there was no arbitration agreement between the parties in terms of Section 7 of the A&C Act, the Court held that though there may not be a concluded contract between the parties; however, it cannot be said that there was no contractual relationship between them.

👉The Court thus appointed a sole Arbitrator and referred the parties to arbitration