Holding

The arbitration clause in the tender form, incorporated by reference into the main agreement, creates a valid arbitration agreement, conferring jurisdiction on the arbitrator.

Summary

The Delhi Development Authority (DDA) invited tenders for steel bars and accepted a tender from J.K. Jain and others for 10,000 metric tonnes. The parties executed a formal agreement that incorporated the tender form and expressly stated that the terms and conditions of the tender form would be binding. Clause 14 of the tender form contained an arbitration clause mandating that any dispute be referred to an arbitrator appointed by the Engineer Member of DDA. The appellants challenged the appointment of an arbitrator, arguing that the arbitration clause was not part of the agreement. The Supreme Court held that, under Section 2(a) of the Arbitration Act, 1940, an arbitration agreement need not be a separate signed document; the incorporation by reference of the tender form made the arbitration clause part of the contract, giving the arbitrator jurisdiction. Consequently, the appeal was dismissed.

Issues considered

Whether clause 14 of the tender form, incorporated by reference in the main agreement, constitutes a valid arbitration agreement under Section 2(a) of the Arbitration Act, 1940.
Whether a written arbitration agreement must be signed by the parties to confer jurisdiction on the arbitrator.
Whether the arbitrator can exercise jurisdiction despite one party's denial of the existence of an arbitration agreement.

Legislation cited

Arbitration Act, 1940s. 2(a)

Subjects

arbitration agreementSection 2(a)tender formincorporation by referencejurisdiction of arbitratorDelhi Development Authoritycontract law

Judgment

A J.K JAIN AND ORS.
v.
DELHI DEVELOPMENT AUTHORITY AND ORS.

SEPTEMBER 26, 1995

B [N.P. SINGH AND FAIZAN UDDIN, JJ.[

Arbitration Act, 1940:

S.2 (aj-Arbitration agreement-Tender documents submitted by Sup-
C plier-Clause 14 of the tender fo1111 provided for an Arbitration-Held, it
should be deemed as p01t of agreement as the pmties had agreed in the main
agreen1ent that the tenns and conditions contained in tlze tender /01111 shall
be binding between them.

The Respondent issued a notice inviting tenders for supply of steel
D bars of various diameters to the extent of 20,000 Metric Tonnes. The
appellants obtained a tender form and submitted their offer. After negotia-
tions, the tender was accepted for supply of only 10,000 Metric Tonnes of
steel bars of various diameters, and a formal agreement was executed. Due
to some disputes between the parties, the respondent rescinded and an-
nulled the contract for the balance quantity to be supplied. The. Engineer
E Member of the respondent-authority, in exercise of powers under clause
14 of the agreement, appointed an Arbitrator.

Appellants filed a petition before the High Court challenging the
appointment of Arbitrator, and it was dismissed by a Single Judge. On
F appeal, Division Bench reversed that order.

In appeal to this Court, it was contended that clause 14 should not
be deemed to be a part of the agreement, since it was only part of the tender
form issued to every contractor intending to supply materials to the
respondent; that it just contained general rules for the guidance of the
G contractors; that the expression 'Tender Form' mentioned in the agree-
ment did not refer to the form relating to 'tender and contract for supply
of materials' which contained an arbitration clause.

Dismissing the appeal, this Court

H HELD : l.l. Section 2(a) of the Arbitration Act defines 'arbitration
72
JK JAIN v. DD.A. 73

agreement' to mean a written agreement to submit present or future A
difl'erences to arbitration, whether an arbitrator is na1ned therein or not.
But \\'hen Section 2(a) \Yhile defining 'arbitration agreement' speaks about
a "Titten agreement to submit present or future difl"erences to the arbitra-
tion, it is not necessary that it should also be signed by the parties like any
formal agreement relating to a contract. [77-H, 78-A)
B
1.2. Jn the instant case, the arbitration clause has not been included
in the agreement itself. But it shall be deemed to be part of the agreement
because the agreement specifically says that the terms and conditions
contained in the tender form shall be binding between the parties which
obviously will include clause 14 or the tender form, according to which any C
dispute between the parties has to be referred to an arbitration. [79-B]

1.3. The other special feature of the present case is that each page
of the tender form which forms part of the agreement has been signed by
the appellant, on behalf of the firm and the Executive Engineer on behalf D
of the respondent. A mere denial of the existence of the contract of
arbitration by one party does not denude the arbitrator of jurisdiction.
The Arbitrator gets jurisdiction to decide the disputes on basis of the
agreement to refer such disputes and not by its acceptance or denial. The
objection on behalf of the appellants, that there was no condition in the
main agreement to refer the disputes to arbitration can be accepted only E
if it is held that the different terms and conditions mentioned in the tender
form are not binding on the parties, because parties never agreed to those
terms and conditions, while entering into a contract. But the fact about
which there is no dispute, is that both the parties had signed the tender
form in token of having accepted the terms and conditions mentioned F
therein including about reference of disputes, if any, to an arbitrator. They
had also agreed in the main agreement, that the terms and conditions
cont~ined in the tender form shall be binding between the parties. In this
background, it is difficult to comprehend that the appellants had never
agreed to refer any dispute arising between the parties to an Arbitrator in
terms of Clause 14 of the tender form. [79-C-F] G

fugal Kislwre RameslJWar Das v. Ms. Goo/bai Honnusji, AIR (1955)
SC 812 = [1955] 2 SCR 857; Banarsi Das v. Cane Commissione1; AIR
(1963) SC 1417= [1963] 2 SCR 760 and Union of India v.A.L. Ral/ia Ram,
AIR (1963) SC 1685 = [1964) 3 SCR 164, referred to. H
74 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.

A Commercial A1tJitratio11 by Mustill and Boyd, second edition page
lflS, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No." 9107 of
1995.

B From the Judgment and Order dated 24.2.92 of the Delhi High Court
in F.A.O. (OS) No. 77 of 1991.

G.L. Sanghi, Mahesh Agrawal, Atul Sharma, E.C. Agrawala, Anant
Vijay Palli and Ms. Purnima Bhat for the Appellants.

C Arun J aitley and V.B. Saharya for the Respondents.

The Judgment of the Court was delivered by

N.P. SINGH, J. Leave granted.

D The appellants have questioned the validity of the order, passed by
the High Court, rejecting the claim of the appellants that there was no
agreement between the appellants and the respondent - Delhi Develop-
ment Authority (hereinafter referred to as 'the respondent') to refer the
dispute between them to an Arbitrator.

E The appellant No. 4 - M/s Jain Rolling Mills is a registered partner-
ship firm and the appellant No. 1 (hereinafter referred to as 'the appellant')
is the Managing Partner. The respondent issued a Notice inviting tendets
for supply of steel bars of various diameters to the extent of 20,000 Mt.
Tonnes. The appellant obtained a tender from the said respondent on
F 16.11.1982. The tender was submitted alongwith a covering letter dated
18.11.1982. After negotiations, the tender was accepted only for supply of
10,000 Mt. Tonnes of steel bars of various diameters. A formal agreement
was executed. Thereafter some dispute arose between the parties and it
appears that the respondent vide its letter dated 23.10.1984 rescinded and
annulled the contract for the balance quantity of 3512.285 tonnes. The
G Engineer Member ·of the authority in purported exercise of the powers
under clause 14 of the agreement, appointed an Arbitrator to make an
Award relating to the disputes between the appellant and the respondent.
An Original Miscellaneous Petition was filed before the Delhi High Court
on behalf of the appellants challenging the appointment of an Arbitrator
H on the ground that appellants were not party to any Arbitration Agree-
J.K. JAIN v. D.D.A. [N.P. SINGH, J.] 75

ment. That petition was dismissed by a learned single Judge. On appeal A
being filed the ·Division Bench came to the conclusion that in view of
Clause 14 of the agreement any dispute between the parties had to be
referred lo an Arbitrator to be appointed by the respondent. In the
agreement which was entered into between the appellants and the respon-
dent it was stated:-
B
WHEREAS the Contractor has submitted tender for the work
"Supplying and stocking of Cold Twisted deformed Steel Bars
Conforming to IS: 1786-1979 of various dias at any D.D.A. Stores
in. Delhi/New Delhi" and the same has been accepted by the
Authority on the terms and condition contained in the tender forms C
and conditions attached herewith in the letter of acceptance dated
the 27.12.82.

NOW THIS DEED WITNESS AS UNDER:

That the terms and conditions contained in the tender form D
and conditions of the contract attached to this deed, and also the
letter of acceptance dated the 27.12.82 shall be binding between
the parties.

To that very agreement, the tender form with the heading 'Tender and
Contract for supply of materials' was enclosed. The tender form has an E
endorsement" issued to M/s Jain Rolling Mills", signed by the Executive
Engineer, Housing Division, on 16.11.1982. Appellant has sigited the agree-
ment aforesaid and the different pages of the tender form on behalf of
appellant No.4, the firm. The Executive Engineer has signed on behalf of
the respondent. Paragraph 14 of the said tender form contains the arbitra- F
tion clause, saying that 'except where otherwise provided in the contract
all question and disputes relating to the meaning of the specifications,
designs, drawings and instructions, hereinbefore mentioned and as to the
quality of workmanship. or materials used on the work or to any other
question, claim, right matter or thing whatsoever, in any way arising out of
or relating to the contract, designs drawings specification, estimates in- G
struction orders or these conditions or otherwise concerning the works or
the executions on failure to execute the same whether arising during the
progress of the work or after the completion or abandonment thereof shall
be referred to the sole arbitration of the person appointed by the Engineer
Member, DOA at the time of dispute ......... ' H
y
76 SUPREME COURT REPORTS (1995] SUPP. 4 S.C.R.

A The stand of the appellants is that the said clause shall not be
deemed to be a part of the agreement, inasmuch as it is only part of the
tender form which is issued to every contractor intending to supply
materials to the respondent. It is just general rules for the guidance of the
contractors. It may be pointed out that the notice inviting tenders clearly
stated 'Contract documents consisting of the detailed plans, complete
B
specifications, the schedule of quantities of the various classes of work to
be done and the set of conditions of contract lo be complied with the person
whose tendo:s may be accepted will also be found p1inted in the fonn of ··~
tenders, can be seen/purchased at the Divisional office between the hours
of 11 A.M. and 4 P.M. every day, except on Sundays and Public Holidays'
c (emphasis supplied). From the notice inviting tenders it is apparent, that
to whomsoever the contract was lo be allotted, the conditions in the printed
form of tender had lo be complied with. It appears because of the aforesaid
condition mentioned in the notice inviting tenders, at the time of the
exe.cution of the agreement, the appellant, the Managing Partner, on behalf
D of the firm signed each page of the said form of tender including the last
page. On behalf of the respondent, it has been signed by the Executive
Engineer and the form of tender has been attached to the agreement
referred to above. In the agreement it has been clearly stated that the terms
and conditions contained in the tender form and the conditions of the
contract attached to the said deed and also the letter of acceptance dated
-
E 27.12.1982 shall be binding between the parties. The effect of the aforesaid
agreement shall be that the tender form and conditions of the contract
attached to the said deed to agreement including the letter of acceptance
dated 27 .12.1982 shall be deemed to be the part of the agreement between
the appellants and the respondent including that in event of dispute in
respect of any. claim, right or n1atter or thing whatsoever in any way arising
F
out of or relating to the contract shall be referred tu the sole arbitration
of the person appointed by the Engineer Member of the respondent.

The learned counsel appearing for the appellants submitted that the
expression 'Tender Form' mentioned in the agreen1cnt does not refer to
G the aforesaid form relating to 'tender and contract for supply of materials'
in which there is an arbitration clause, rather it refers to form No.9 which
had been filled up by the appellants saying that they had submitted their
tender for supply to the respondent, materials described therein within
time specified 'subject lo the conditions of the contract'. Towards the end
H of that form under heading 'Specification and Additional Conditions'
J.K. JAIN v. D.D.A. [N.P. SINGH, J.J 77

details of the steel bats to be supplied and that ISi test certificate in A
original to be given along with each consignment elc. have been n1entioned.

On the direction being given by Court the original agreement
alofib'With all documents attached thereto were producted on behalf of the
respondent. The form of tender in which clause 14 contains condition
regarding referring the disputes lo the arbitration, as well as the form No.
B
9 on which reliance has been placed on behalf of the appellants are
attached to the agreement and as such both shall be deemed to be the part
of the agreement. These documents have been signed on behalf of the
appellants and the respondent. In the agreement, a clear and specific
statement has been made that the terms and conditions contained in the c
tender form shall be binding between the.parties, which shall include the
condition in clause 14 thereof, to refer any dispute to an arbitrator to be
appointed by the Engineer Member of the respondent.

It is true that there must be an arbitration agreement, to confer D
jurisdiction on the Arbitrator to hear and decide the dispute. Where there
is no such agreement there is an initial want of jurisdiction. That is why it
has been impressed by Courts lhat one of the essential ingredients of
submission to arbitration is that the parties should agree that the dispute
should be determined by an Arbitrator. Where there is an arbitration
clause in a contract, it amounts to two contracts into one, one relating to E
the execution of the work entrusted in the manner prescribed and the other
how to resolve the dispute in event any such dispute arises in respect of
the said contract. Whenever one party to the dispute asserts that there is
an arbitration agreement by which the parties had agreed to refer the
dispute to an Arbitralnr which is disputed and challenged by the other F
party to the agreement, il has to be examined and determined. To con-
stitute 11 an arbitration agreement 1' it is not necessary that there should be a
formal agreement or that the terms should all be contained in one docu-
\ ment. All that is necessary that from documents it must appear that parties
had agreed to submit present or future differences lo arbitration.
G
Section 2 (a) of the Arbitration Act defines 'arbitration agreement'
to me~n a written agreement to submit present or future differences to
arbitration, whether an arbitrator is named therein or not. But when
Section 2 (a) while defining 'arbitration agreement' speaks about a written
agreement to sub1nit present or future differences to the arbitration, it is H

"
78 SUPREME COURT REPORTS [1995) SUPP. 4 S.C.R. r
A not necessary that it should also be signed by the parties like any formal
agreement relating to a contract. In the case of fugal Kishore. Ra111eslzµ1ar-
das v. Mn·. Goolbai Honnus;i, AIR (1955) SC 812 = [1955) 2 SCR 857, it
was said:

11
But it is settled law that to constitute an arbitration agreement
B in writing it is not necessary that it should be signed by the parties,
and that .itis sufficient if the terms, are reduced lo writing and the
agreement of the parties thereto is established."
..
It was said in the case of Banani Das v. Cane Commissioner, AIR (1963)
c SC 1417 = [1963] 2 SCR 760:

"It may be pointed out that the arbitration clause in the agree-
ment was enforceable if agreed lo, even without the signature of
the appellant as it is a settled law that to constitute an arbitration
agreement in writing it is not necessary that it should be signed by
D the parties and it is sufficient if the terms are reduced to writing
and the agreement of the parties thereto is established."

In the case of Union of india v. A.L. Rallia Ram, AIR (1963) SC 1685
[1964] 3 SCR 164, it was said:
E
"A writing incorporating a valid agreement to submit differen-
ces to arbitration is therefore requisite : it is however not a
condition of an effective arbitration agreement that it must be
incorporated in a formal agreement executed by both the parties
thereto, nor is it required to be signed by the parties. There must
F be an agreement lo submit present or future differences to arbitra-
tion, this agreement must be in writing, and must be accepted by
the parties. "

In Commercial Arbitration by Mustill and Boyd, second edition at
G page 105, it has been stated:

11
the parties need not set out the tern1s of their arbitration
......

agreement in the contract itself. It is sufficient for the clause to be
incorporated by reference either to a standard form of clause or
to a set of trade terms which themselves include provisions requir-
H ing disputes lo be submitted to arbitration. Nor need the contract
'
J.K. JAIN v. D.D.A. [N.P. SINGH, J.] 79

itself be contained in a single document." A
As already pointed out above, so far lhe present case is concerned,
the arbitration clause has not been included in the agreement itself. But it
shall be deemed lo be part of the agreement because the agreement
specifically says that the terms and conditions contained in the lender form
shall be binding between the part{es which obviously will include clause 14 B
of the lender form, which admittedly requires any dispute between the
parties to be referred to an arbitration. The other special feature of the
present case is that each page of the tender form which forms part of the
agreement has been signed by the appellant, on behalf of the firm and the
Executive Engineers on behalf of the respondent. A mere denial of the C
existence of the contract of arbitration by one party does not denude the
arbitrator of jurisdiction. The Arbitrator gets jurisdiction to decide the
disputes on basi.s of the agreement to refer such disputes and not by its
acceptance or denial. The objection on behalf of the appellants, that there
was no condition in the main agreement to refer the disputes to arbitration
can be accepted only if it is held that the different terms and conditions D
mentioned in the tender form are not binding on the parties, because
parties never agreed to those terms and conditiOns, while entering into a
contract. But the fact about which there is no dispute, is that both the
parties had signed the tender form in token of having accepted the terms
and conditions mentioned therein including about reference of disputes, if E
any, to an Arbitrator. They had also agreed in the main agreement, that
the terms and conditions contained in the tender form shall be binding
between the parties. In this background, it is difficult for us to comprehend
as to how it can be held that the appellants had never agreed to refer any
dispute arising between the p·arties to an Arbitrator in terms of Clause 14
of the tender form. F

In the result, the appeal fails and is dismissed. There shall be no
order as to costs.

G.N. Appeal dismissed.

'