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M/s PSA Mumbai Investments Pte. Limited v. The Board of Trustees of the Jawaharlal Nehru Port Trust

Civil Appeal · 2018 INSC 806Decided 11 Sept 2018
Civil Appeal No. 9352 of 2018
Justice Rohinton Fali Nariman · Justice Indu Malhotra

Background

The Jawaharlal Nehru Port Trust (JNPT) floated a global tender for developing its 4th Container Terminal, which both the RFQ (Request for Qualification) and RFP (Request for Proposal) documents expressly stated would not themselves create any binding agreement between the parties. The appellant's consortium (with Respondent No. 2) was selected via a Letter of Award, but no formal Concession Agreement was ever signed; a dispute arose over whether the arbitration clause contained in the draft Concession Agreement (annexed to the RFP) could nonetheless be invoked at this pre-contract stage. The appellant had sought arbitration and obtained an order from an Arbitrator in its favour, but the High Court held that the Letter of Award itself constituted a binding contract incorporating the arbitration clause, and set aside the Arbitrator's order.

Decision Breakdown

The Supreme Court held that the RFQ and RFP documents, and the Letter of Award issued under them, explicitly disclaimed any intention to create a binding contract until a formal Concession Agreement was executed by a Special Purpose Vehicle with JNPT, and since no such Concession Agreement was ever signed, there was no concluded contract between the actual parties before the Court, and hence no binding arbitration clause applicable to them. It distinguished the precedents relied upon by the respondent (where tenders had in fact been accepted and performed) and agreed with the appellant's alternative argument that, even if an arbitration clause existed, it would only cover disputes between the future Special Purpose Vehicle and JNPT, not between JNPT and the consortium members directly. Finding the High Court's reasoning "wholly incorrect," the Supreme Court set aside the High Court's judgment and reinstated the Arbitrator's order, while leaving JNPT free to pursue its separate claim of over Rs. 436 crores in an appropriate forum.

Lesson Learnt

Pre-contract tender documents (RFQs, RFPs, Letters of Award) that expressly disclaim forming a binding agreement will not be treated as creating one, including any arbitration clause contained in a draft agreement annexed to them, until the parties actually sign the final contract they contemplated.

Official source (sci.gov.in)View Judgment (PDF)

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