Holding

No arbitration agreement existed because the General Conditions of Purchase and its arbitration clause became effective only upon issuance of a purchase order, which never occurred, and the Letters of Intent were not purchase orders and did not incorporate the arbitration clause.

Summary

The Indian company Bindal Agro Chem Ltd. invited bids for equipment and, after negotiations, agreed to modify its General Conditions of Purchase (which contained an arbitration clause) with Dresser Rand SA. The parties exchanged a revised set of conditions on 10 June 1991 and subsequently issued Letters of Intent on 12 June 1991 on the letter‑head of K.G. Khosla Compressors Ltd., which Bindal claimed were issued on its behalf. No formal purchase order was ever placed. Dresser Rand sought a stay of the suits filed by Bindal and KGK under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, asserting that an arbitration agreement existed. The High Court and the Division Bench held that no arbitration agreement was formed because the arbitration clause in the General Conditions of Purchase became operative only upon issuance of a purchase order, which never occurred, and the Letters of Intent were merely preparatory and did not incorporate the arbitration clause. The Supreme Court affirmed this view, holding that there was no enforceable arbitration agreement and that the parties were not estopped or bound by any alleged waiver. Consequently, the applications under Section 3 were dismissed and the appeals were rejected.

Issues considered

Whether an arbitration agreement existed between Dresser Rand SA and Bindal Agro Chem Ltd. (and KGK) based on the General Conditions of Purchase and the Letters of Intent.
Whether the Letters of Intent dated 12 June 1991 constituted a purchase order and thereby incorporated the arbitration clause.
Whether Bindal and KGK were estopped or had acquiesced to the existence of an arbitration agreement.
Whether Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 could be invoked in the absence of a valid arbitration agreement.

Legislation cited

Arbitration Act, 1940s. Section 33, s. Section 34
Foreign Awards (Recognition and Enforcement) Act, 1961s. Section 3

Subjects

arbitration agreementletters of intentpurchase orderforeign awards actsection 3arbitration clausecontract formationestoppelwaiverjurisdiction of arbitrators

Judgment

A DRESSER RAND S.A.
v.
MIS. BINDAL AGRO CHEM LTD. AND ANR.

JANUARY 12, 2006

B [ARUN KUMAR AND R.Y. RA VEENDRAN, JJ.]

Arbitralion--Arbitralion agreement-Existence of--Purchaser-lndian
Company offering invitation to bid to Foreign Company for •upply of
equipment--General Conditions of Purchase containing arbitration clause
C modified by supplier-Foreign Company and agreed to by Indian Company
and Foreign Company-Subsequent issue of leiter of intent by Indian Company
lo Foreign Company-letter of intent contemplating issuance of regular and
de/ailed purchase order--However, purchase order not issued--Dispule
between parties·-Arbitration agreement, if brought inlo existence--Held:
D Invitation to bid and also acceptance of modification lo General .Condition of
Purchase by purchaser as suggested by supplier merely set out terms on
which parties were ready to do business when purchase order was placed by
purchaser--Since no purchase order placed, neither General Conditions of
Purchase nor Arbitration Clause contained therein became effective and
enforceable-lei/er of lnlent provides that when purchase order 1~5 placed
E General Condition of Purchase containing arbitralion clause would become
applicable and available lo parlies--No purchase order placed and feller of
intent cannot be /reated as purchase order, issuance of /euer of inten' did not
mean arbitralion clause enforceable-Hence, there is no arbitration agreement
lo resolve disputes. by arbilration-Foreign Awards (Recognition and
F Enforcement) Act, 1961-Seclion 3

Foreign Awards (Recognition and Enforcement} Act, /961: Section 3

Staying ofproceedings in respect of mailers to be referred to arbitrution--
£ristence ofarbitration agreement-Determination of--Held: Fulls/or decision
of the Court under section 3 and has to be finally decided by Court.
G
Mere acquiescence or ac~eptance to the jurisdiction of arbitrator by
Indian Company, if Indian Company estopped from challenging existence of
.. <
arbitration ugreemenl-Held: When mutter comes up before the Court under
section 3. Indian Company can slate that /here was no arbitration agreement--
There is no question of waiver or acquiescence.
II 308
DRESSER RANDS.A."· BINDAL AGRO CHEM. LTD 309
)
Res1>ondent No. I-Indian Company invited bid for purchase of A
certain equipments for its new project from the appellant, a foreign
company. Appellant offered to supply'. the equipments. Appellant suggested
certain modifications to the General Conditions of Purchase containing
an arbitration clause. Representatives of both appellant and respondent
no. I initialed the revision clauses dated 10.6. f 991 containing modifications
B
to General Conditions of Purchase. Thereafter, representative of the
respondent no. I issued letters of intent dated 12.6.1991 on the letterhead
of another company-respondent no. 2, on the appellant and the appellant
countersigned them. Letters of intent contemplated issue of regular and
detailed purchase order. Respondent no. I neither placed any purchase
order nor issued any confirmation that Letters of Int~nt _were placed by c
respondent no. 2 on its behalf. Thereafter, respondent no. I informed the
·appellant that it proposed to obtain the equipments from an alternative .
source, expressing its inability for the same. Thereafter, appellant issued
several notices to the respondents to open Letters of Credit otherwise it
·( would proceed on the basis that the respondents had repudiated the
contract. Then in terms of General Conditions of Purchase incorporated
D
in the agreement of 12.6.1991, it referred the disputes relating to the
agreement against respondents to International Chamber of Commerce
for resolution by Arbitration. ICC issued notice to respondents regarding
the said claim by the appellant. Advocate B acting under instructions from
respondents sent telex to ICC that the respondents were in .process of E
jointly nominating an arbitrator. Thereafter, another advocate sent
communications to ICC that he had been instructed to represent the
respondents in place of Advocate B and denied the existence of arbitration
agreement and sought rejection of claim lodged by appellant.

Respondent no. I and 2 filed suit for declaration that there was no F
arbitration agreement between itself and appellant and for an injunction
restraining the appellant from proceeding with arbitration before ICC.
They also filed applications seeking temporary injunction to restrain
appell11nt from proceeding with arbitration. Appellant filed suit under
section 3 of Foreign Awards (Recognition and Enforcement) Act, 1961 for
G
staying the proceedings in the said suits. Single Judge of High Court
.¥ •r artowed the applications filed by respondent no. I and 2 and restrained
the appellant from proceeding with the arbitration subject to their
furnishing of bank guarantee. However, it dismissed the applications under
section 3 of the Act holding that no valid or operative agreement capable
of being performed had come into existence by issue of letters of intent H
310 SUPREME COURT REPOR IS [20061 I S.C.R.

A signed by respondent no. 2 and countersigned by appellant. Aggrieved
appellant filed appeals. Division Bench of High Court dismissed the
appeals. However, it allowed the appeals filed by the respondents and
deleted the requirement of imposition of condition of furnishing a bank
guarantee. Hence, the present appeals.

B Dismissing the appeals, the Court

HELD: I.I. Clause (2) of Article II of the Schedule to the Foreign
Awards (Recognition and Enforcement) Act, 1961 contains the Convention
on the Recognition and Enforcement of Foreign Arbitral Awards that an
C 'agreement in writing' includes not only an arbitral clause in a contract
or a separate arbitration agreement, signed by the parties, but a term
contained in an exchange of letters or telegrams agreeing to submit their
differences to arbitration. The question whether there is an arbitration
agreement or not squarely falls for decision of the Court under section 3
of the 1961 Act and will have to be finally decided by the Court.
[) [328-B-C[

Renusagar Power Co. ltd v. General Electric Company, [ 1984[ 4 SCC
679 and Rickmers Verwaltung Gmbh v. Indian Oil Corporation ltd. [ 19991
I SCC I, relied on.

E 2.1. Parties agreeing upon the terms subject to which a contract will ·
be governed, when made, is not the same as entering into the contract itself.
Similarly, agreeing upon the terms which will govern a purchase wh,~n a
purchase order is placed, is not the same as placing a purchase order. A
prelude to a contract should not be confused with the contract itself.
[333-D-EI
F
2.2. The tender document or the invitation to bid of purchaser-
respondent no I (containing the "instructions to bidders" and the "general
conditions of purchase"), by itself, is neither an agreement nor a contract.
The instructions to bidders informed the intending bidders how the bid
G should be made and laid down the procedure for consideration and
acceptance of the bid. The process of bidding or submission of tenders
would result in a contract when a bid or offer is made by a prospective
supplier and such bid or offer is accepted by purchaser-respondent no I.
.. '
The second part of the Invitation to Bid consists of the 'General Conditions
of Purchase', that is, the conditions subject to which the purchase order
H will be placed or offer will be accepted. The 'General Conditions of
DRESSER RAND SA r. BINDAL AGRO CHEM. LTD. 311

Purchase' were made available as a part of the Invitation to bid, so as to A
enable the prospective suppliers to ascertain their obligations and
formulate their offers suitably. 1330-D-EI

2.3. Where a tenderer is not willing to make his offer subject to the
'General Conditions of Purchase' prescribed and stipulated by the
purchaser, he would either suggest his own terms and conditions or suggest B
modifications to the 'General Conditions of Purchase' prescribed by the
intending purchaser (person inviting the offers). Many 'Invitations to Bid'
contain a condition that the tenderers will not be entitled to make any
changes in the 'General Conditions of Purchase', in which event he is
required to mould his offer strictly in accordance with the 'General C
Conditions of Purchase' stipulated by the purchaser. The reason for
insisting upon adherence to Purchaser's 'General Conditions of Purchase'
is not far to seek. If several persons submit their offers subjecting them
to different terms and conditions of supply, it will be difficult or virtually
impossible to evaluate them with reference to a common denominator. The
,, general conditions of purchase act as a common denominator for all D
tenderers to base their offers and for evaluation of such offers.
(330-F-H; 331-A-BI

2.4. Many a time the supplier is able to persuade the purchaser to
agree for modification of the 'conditions of purchase' stipulated by the
purchaser, particularly where a supplier is in a position of strength and E
the purchaser is keen to purchase a particular product of that supplier.
There are also several suppliers who stipulate their own 'conditions of sale'
and refuse to go by the conditions of purchase stipulated by the purchaser.
The intending purchaser. and the intending supplier are at liberty to
negotiate and agree upon the terms subject to which offers will be made p
and accepted. As contrasted from sale of ready Goods sold off the shelf
across the counter, sale/purchase of complex machinery/ equipment made
to order, to suit particular requirements of the purchaser, have several
facets relating to pricing, period of delivery, mode of delivery, period and
nature of warranty, suitability for the intended purpose, patent rights,
packing, insurance, incidental services, consequences of delay and breach, G
rejection/replacement force majeure etc. (331-B-CI
2.5. The 'General Conditions of Purchase' and Revision No.4 dated
1°0.6.1991 containing the modifications thereto, merely set out the terms
on which the parties were ready to do business with each other if and when
purchase order was placed by respondent no. I. Parties merely agreed that H
312 SUPREME COURT REPORTS (20061 I S.C.R.

A when an order was placed or contract was entered for supply of a
machinery by appellant to respondent no. I, it will be subject to the
'General Conditions of Purchase' stipulated by respondent no. I as
modified by Revision No.4 dated I0.6.1991 agreed by both parties. But
when no purchase order was placed, neither the 'general conditions of
B purchase' nor the arbitration clause in the 'General Conditions of
Purchase' became effective or enforceable. Therefore, initialing of
'Revision No. 4' by appellant and respondent no. I on I0.6.1991 containing
the modifications to General Conditions of Purchase, did not bring into
existence any arbitration.agreement to settle disputes between parties.
1331-A; 332-A-B; 333-E-Fl
c Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram, AIR (1954) SC
236 and Rickmers Verwaltung Gmbh v. Indian Oil Corporation ltd., 119991
I SCC I, referred to.
3. A Letter of Intent merely indicates a party's intention to enter
into a contract with the other party in future. A Letter of Intent is not
D intended to bind either party ultimately to enter into any contract. A Letter
of Intent may be construed as a letter of acceptance if such intention is
evident from its terms. It is not uncommon in contracts involving detailed
procedure, in order to save time, to issue a letter of intent communicating
the acceptance of the offer and asking the contractor to start the work
E with a stipulation that the detailed contract would be drawn up later. If
such a letter is issued to the contractor, though it may be termed as a
Letter of Intent, it may amount to acceptance of the offer resulting in a
concluded contract between the parties. But the question whether the letter
of intent is merely an expression of an intention to place an order in future
or whether it is a final acceptance of the offer thereby leading to a contract,
F is a matter that has to be decided with reference to the terms of the letter.
1337-A-B; C-El
Rajasthan Co-operative Dairy Federation ltd. v. Maha laxmi Mingrate
Marketing Service Pvt. ltd.. 119961 IO SCC 405, relied on.
Chitty 011 Contracts Volume I- 2/ith Edn Para 2.115, referred to.
G
4.2. Clause 'C' of Letters of Intent provides that the Purchase Order
shall be subject to the "General Conditions of Purchase" included in the
- 1
inquiry, as amended by appellant's comments thereto, Revision 4 dated
I0.6.1991 ".Therefore, the General Conditions of Purchase which contains
the arbitration clause, is not made a part of the Letters of Intent nor are
H the Letters of Intent made subject to the General Conditions of Purchase.
DRESSER RANDS.A. 1•. BIN DAL AGRO CHEM.LTD. 313

) The Letters of Intent merely provide that if and when the purchase order A
is placed, the purchase order will be subject to the General Conditions of
Purchase, as modified by Revision No.4. Therefore, the point of time at
which the General Conditions of Purchase will become applicable, is the
point when the purchase order is placed and not earlier. Consequently,
Clause 27.4.2 of the General Conditions of Purchase containing the B
arbitration clause would become applicable and available to the parties
only when the purchase order was placed and not earlier. The term
\ 'purchase order' has a specific meaning and connotation. The purchase
order is the "agreement entered into between respondent no I. and the·
prospective supplier as recorded in the purchase· order form (prepared in
the form of Attachment-VII to the General Conditions of Purchase) signed C
by the parties, including all Attachments and annexures thereto and all
documents incorporated by reference therein together with any subsequent
modifications thereof in writing." Admittedly, no such purchase order was
placed by either respondent no.I or any one authorized by respondent no.I.
(336-C-FI
D
4.3. It is also evident from Clause (I) of the Letters of Intent that
the purchase order was to be issued simultaneously with the Letter of
Credit. The last para of Letters of Intent required appellant to sign and
return the duplicate copy of the letter as token acceptance of appellant
having agreed to the Letters of Intent which means that the person issuing E.
the Letters of Intent wanted concurrence of appellant to the terms
contained in the Letter of Intent so that it can place an-order in terms of
the conditions mentioned in the Letters oflntent. The concurrence sought
was to the contents of Letters of Intent and not acceptance of any order
for supply. These provisions clearly indicate that the Letters of Intent were
only a step leading to purchase orders and were not, by themselves, F
purchase orders. When all the terms of the Letter of Intent are
harmoniously read, it is clear that Letters of intent merely required the
supplier to keep the offer open till 31.8.1991 with reference to the price
and delivery schedule. Therefore, issue of the Letters of Intent by
respondent no 2, assuming that it was done on behalf of respondent no I,
did not mean that the General Conditions of Purchase whkh contains the G
provision for arbitration became a part of the Letters of Intent or became
e_nforceable. Therefore, the letters of intent, even if assumed to result in
any binding contract, did not provide for arbitration.
(336-A-B; F-G-H; 338-8-C; 336-G-H; 337-A; 339-A-BI
H

•
314 SUPREME COURT REPORTS [20061 I S.C.R.

A 4.4. The submission that the words 'the purchase order' in clause (C)
should be read as 'this purchase order' cannot be accepted. It is not open
to change the terms of any document. The use of the words "this purchase
order" in some clauses of the General Conditions of Purchase was not
inappropriate. The General Conditions of Purchase, in entirety, were
B intended to be treated as a part of the purchase order as and when the
purchase order was placed. Therefore, when the General Conditions of
Purchase were read as part of the purchase order, use of the words 'this
purchase order' in the 'General Conditions of Purchase' would be
appropriate. Therefore, it is impermissible to read the words 'I.he purchase
order' in clause (C) of Letters of Intent as 'this purchase order. (339-B-D(
c
4.5. Neither the General Conditions of Purchase forming part of
Invitation of Bid nor Revision No.4 dated I0.6.1991, nor the Letters of
Intent dated 12.6.1991 contain any arbitration agreement. There is also
no other document or correspondence which can be read as containing a
provision that can be interpreted as an agreement to resolve disputes by
D arbitration. Therefore, the decision of High Courts that there is no
arbitration agreement, does not suffer from any infirmity. 1339-E-FI

5. Mere acceptance or acquiescing to the jurisdiction of arbitrators
for adjudication of the disputes as to the existence of the arbitration
E agreement or a rbitrability of the dispute does not disentitle the party to
have the remedy under section 3 of Foreign Awards Act. Therefore, the
fact that at some point of time, respondent no. I or no. 2 had stated that
they would appoint an Arbitrator will not come in the way of their
demonstrating that there is no arbitration agreement when the matter
comes up before the court under section 3 of the Act. There is no question
F of either waiver or acquiescence. (342-B-C-D(
U.P. Rajkiya Nirman Nigam Ltd. v. lnJure Pvt. Ltd. (1996( 2 SCC 667,
relied on.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 8357 of2003.
G From the Judgment and Order dated 4.3.2003 of the Delhi High Court
in FAO (OS) Nos. 136/2002.
WITH
Civil Appeal No. 8358 of 2003.
F.S. Nariman, P.H. Parekh, Ashok Pratap. Sameer Parekh and Ms.
H Shakun Sharma (for Mis. P.H. Parekh & Co.) for the. Appellants.
DRESSER RANDS.A.1•. BINDALAGROCHEM. LTD. [RAVEENDRAN, J.] 3 J5
Rajeev Dutta, R. Nedumaran, Uday Kumar, Ms. Namrata Chopra and A
, Rajiv Rufus for the Respondent No. I.
'
Dr. A.M. Singh vi, Joy Basu and B.K. Satija ·for Respondent No. 2.

The Judgment of the Court was delivered by
B
RAVEENDRAN, J. These appeals arise from the judgment of the
Delhi High Court in FOA (OS) Nos. 94, 113, 136 and 137 of 2002 dated
\ 04.3.2003 affirming the order dated 14.2.2002 passed by a learned single
Judge of High Court. of Delhi in I.A. Nos. 5795/93, 9246/93 in Suit No.
1362/93 and I.A. Nos. 5819/93, 9355/93 in Suit No. 1380 of 1993.
c
2. For convenience, Dresser Rand S.A. (Appellant in both the appeals],
BINDAL Agro Chem. Ltd., [Respondent No. I in both appeals) and K. G.
Khosla Compressors Ltd. [Respondent No. 2 in both appeals) will also be
hereinafter referred to as DR, BINDAL and KGK respectively.

3. BINDAL has filed Suit Nos. 1363/1993 in the Delhi High Court, D
for a declaration that there exists no arbitration agreement between itself and
DR and for a consequential injunction restraining DR from proceeding with
the arbitration before the International Chamber of Commerce, Paris. KGK
has also filed Suit No. 1380/1993 in the said court for similar relief.

4. BINDAL and KGK have filed IA Nos. 5795/93 and 5819/1993 E
respectively in their respective suits, under Order 39 Rules I and 2 CPC
seeking a temporary injunction to restrain DR from proceeding with the
arbitration. -
'
5. DR has filed I.A. No. 9246/1993 in Suit No. 1363/1993 and I.A .. No.
F
9355/1993 in Suit No. 1380/1993 under Section 3 of the Foreign A~ards
(Recognition and Enforcement) Act, 1961 [for short 'Foreign Awards. Act']
for staying further proceeding in the said suits. DR contended that there was
-i an arbitration agreement between itself and BINDAL and KGK and
' consequently, further proceedings in the suits filed by BINDAL and KGK
-1 should be stayed under section 3 of the Foreign Awards Act. G
6. A learned single Judge of the High Court heard the four applications
• ~
in the two suits and passed a common order dated 14.2.2002. He held that
the plaintiffs in the two suits (BINDAL and KGK) had made out a prima
facie case for grant of a temporary injunction restraining DR from proceeding
H
316 SUPREME COURT REPORTS 120061 I S.C.R.

A with the arbitration. He also held that DR had failed to prove that any
provisional concluded arbitration agreement had come into existence between
either DR and BINDAL or DR and KGK. He also held that in the absence
of any tripartite arbitration agreement, it may not be possible to decide the
obligations between BINDAL and KGK. He, therefore, allowed the
B applications for temporary injunction filed by BINDAL and KGK and
restrained DR from proceeding with the arbitration, subject however to
BINDAL and KGK furnishing a bank guarantee to an extent of 5% (3% by
BINDAL and 2% by KGK] of French Francs 4,93,00,000 and 5.26.25,000.
The learned single Judge dismissed the applications filed by DR under section
3 of the Foreign Awards Act by holding that no valid or operative agreement
C capable of being performed had come into existence by issue of Letters of
Intent signed by KGK and counter-signed by DR. The said order dated
14.2.2002 in so far as it grants temporary injunction is an interim order and
in so far as it rejects DR's applications for stay under section 3 of the Foreign
Awards Act is a final order. The said common order granting temporary
injunction restraining it from proceeding with the arbitration was challenged
D by DR in FAO (OS) No.136/2002. The said common order rejecting the two
applications for stay under Section 3 of the Foreign Awards Act was challenged
by DR in FOA (OS) No.137 of2002. BINDAL and KGK challenged the said
common order in so far as it imposed a condition (relating to furnishing of
Bank Guarantee) for temporary injunction. in FAO (OS) No.94/2002 and
E FAO (OS) No.113/2002 respectively.
7. A Division Bench of the Delhi High Court by common order dated
4.3.2003 dismissed the appeals filed by DR and allowed the appeals filed by
BIN DAL and KGK. The Division Bench affirmed the finding of the learned
single Judge of the High Court that there was no arbitration agreement and
F consequently, upheld the rejection of the applications under section 3 of the
Foreign Awards Act. The Division Bench while affirming the temporary
injunction granted by the learned Single Judge restraining DR from proceeding
with the Arbitration, deleted the requirement imposed by the learned Single
Judge relating to furnishing of bank guarantee by BINDAL and KGK.

G 8. Feeling aggrieved, DR has filed these civil appeals by special leave
[CA No.8357/L003 and CA No.8358/2003] challenging the rejection of FAO
(OS) No.136/2002 and FAO (OS) No.137/2002. On the contentions urged,
the following questions arise for consideration in these appeals :-

(i) Whether there is an arbitration agreement between DR and
H
DRESSER RAND SA"· BIN DAL AGRO CHEM.LTD. [RA VEENDRAN, J] 317
BINDAL; A
(ii) Whether there is an arbitration agreement between DR and KGK;
(iii) Whether BINDAL and KGK are estopped from contending that
there is no arbitration agreement, in view of their counsel having
stated in his telex dated 11.4. l 993, that his clients were in the
process of jointly appointing an arbitrator. B
FACTUAL BACKGROUND :

9. BINDAL wanted to invite global tenders for supply of various
equipments and materials for its Shahjahanpur Fertilizer Project. For that
purpose, it prepared its standard 'Invitation to Bid' comprising "Conditions C
of Purchase for Supply of Equipment and Material under ICB Procedure -
Shahjahanpur Fertilizer Project". The said Invitation to Bid consisted of the
following sections :-

(i) Attachment I - Instructions to bidders (Articles I to 34);
y D
(ii) Attachment II - General conditions of purchase (Articles -1 to
36);

(iii) Attachment Ill to XVI : Special conditions of purchase
(Attachment-III), schedule of requirements (Attachment-IV),
Technical Specifications (Attachment-V) Bid Form and Price E
Schedules (Attachment VI), Purchase Order Form (Attachment
VII), Spare Parts List (Attachment-VIII), Vendor Data
Requirements (Attachment-IX), List of Lubricants (Attachment-
X), Progress Trend Charts (Attachment-XI), Draft form of
Performance Guarantee (Attachment-XII), Draft Form of Bank
Guarantee for Advance/Progress Payments to Supplier F
(Attachment-XIII), Bid Security Form (Attachment-XIV), General
specifications for packing (Attachment-XV) and check list
(Attachment-XVI).

I 0. BINDAL sent a telex dated 12.1.1990 to DR informing that it was
implementing a Gas-based Fertilizer Plant at Shahjahanpur and it was in the G
process of exploring possibilities for securing ~~;ious equipments including
Synthesis Gas Compressors, -Process Air Compressors, Refrigeration
Compressors and co~ Compressors and enquired whether DR would be
interested in supplying the equipments. DR sent a reply dated 18.5.1990
offering to supply Syn-Gas Compressor and indicating the total price of the H
318 SUPREME COURT REPORTS (20061 I S.C.R.

A compressor and spare parts. The matter was dormant for some times. By
letter dated 16.3.1991, BINDAL informed DR that the necessary Government
approval for fertilizer project has been received and, therefore, it wished to
revive the discussions for supply of Syn. Gas compressors and C0 2
compressors. By fax dated 5.4.1991, BINDAL requested DR for a quotation
to be followed by a formal Bid for Syn-Gas and C0 2 compressors and informed
B DR that having regard to the tight foreign exchange situation, the Government
of India had allocated only 50% of its total foreign exchange requi. ement
and, therefore, it had decided to limit its imports only to moving machinery,
cutting out static equipment. DR sent a reply dated 16.5.1991, quoting its
price for Syn. Gas compressor and proposed to discuss the modalities of DR
C having overall responsibility for various compressor turbines/auxiliaries not
included in the scope of supplies, as also commercial points. This was followed
by a meeting between the representatives of DR and BINDAL wherein the
technical details in regard to performance of the syn. gas compressor were
discussed.

D 11. Thereafter, DR gave its comments/modifications to the terms and
conditions of BINDAL termed as "Revision 4 (Attachment IV)" dated
I0.6.1991 wherein it set out the amendments/modifications it required to
BINDAL's 'General Conditions of Purchase'. The said "'Revision 4"' was
initialled by the representatives of DR and BINDAL, presumably in token of
E the changes agreed in the standard General Conditions of Purchase of
BINDAL.

12. We extract below relevant portions of clauses I and 27 in the
BINDAL's 'General Conditions of Purchase' and the modifications thereto
by DR (Note : We are not referring to other clauses of "General Conditions
F of Purchase' or the modifications thereto by DR, as they are not relevant for
our immediate purpose) :

Clause BINDAL's General Conditions of Purchase Modifications
No. made by DR

1.0 DEFINITIONS
G In this General Conditions of Purchase the
following terms shall be interpreted as
indicated.

I. I The PURCHASE ORDER means the agreement No change
entered into between OWNER or by
H
f
DRESSER RANDS.A. 1•. BIN DAL AGRO CHEM. LTD. [RA VEENDRAN. lh 319
!
CONTRACTOR on behalf of OWNER and the A
SUPPLIER as recorded in the PURCHASE
ORDER Form, signed by the parties, induding
all attachments and annexures thereto and all
documents incorporated by reference therein
together with any subsequent modifications
thereof in writing. B
... 1.5 OWNER shall mean BINDAL AGRO-CHEM No change
\
LIMITED having their Registered office at
Gopala Tower, 12th Floor, Rajindra Place,
New Delhi I JO 008, India, and shall
include all their legal representatives,
c
successors and assignees.

1.7 SUPPLIER or VENDOR shall mean the No change
individual or firm supplying the GOODS
( and SERVICES under this PURCHASE ORDER.
D
27.0 RESOLUTION OF DISPUTES/ ARBITRATION
27.1 The OWNER and the SUPPLIER shall make
every effort to resolve amicably by direct
informal negotiations any disagreement or
dispute arising between them under or in
connection with the PURCHASE ORDER. E
27.2 If, after thirty (30) days from the commencement
of such informal negotiations, the OWNER and
the SUPPLIER have been unable to
resolve amicably a PURCHASE ORDER
dispute, either party may require that the dispute, F
be referred for resolution to the formal
mechanisms as specified hereunder.
27.3 Legal Construction
Subject to the provision of Article 27.4 the Deleted
G
PURCHASE ORDER shall be, in all respects,
construed and operated as an Indian Contract and
• -"'.
in accordance with Indian Laws as in force for the
time being and is subject to the jurisdiction of
the Courts in Delhi.
H
320 SUPREME COURT REPORTS (2006) I S.C.R.

A 27.4 Arbitration
27.4.1 In case of indigenous PURCHASE ORDERS all Deleted
disputes which cannot be settled by mutual
negotiations, the matter shall be referred for
arbitration in accordance with Indian Arbitration
B Act, 1940 of any statutory modification of
enact?1ent thereof for the time being in force.

27.4.2 In case of foreign SUPPLIER all disputes which No change
cannot be settled by mutual negotiations shall be
settled under the Rules of Conciliation and
c Arbitration of International Chamber of
Commerce, Paris by one or more arbitrators
appointed in accordance with rules.

27.4.3 Execution of the PURCHASE ORDER shall be Deleted
continued by the SUPPLIER during the
D Arbitration proceedings unless otherwise
directed in writing by the CONTRACTOR/
OWNER.

27.4.4 The venue of Arbitration in all cases Deleted
shall be Delhi and sha!l be conducted in English
E language only.

13. According to DR. after Revision No.4 dated I0.6.1991 was initialled,
negotiations and discussions continued, and they were concluded late in the
evening of 12.6.1991. It is stated that at that stage. the representative of
BIN DAL delivered two letters described as ·'Letters of Intent" dated 12.6.1991
F
issued on the letterhead of K.G. Khosla Compressors Ltd. (KGK) stating the
intention to place an order for the following :

(a) One Dresser Rand Model 463 B.5/5 and one Model 373 BR8/l
vertically split compressor for Synthesis Gas Service and Steam
turbine driver model SBQ at a price of FF 49,300,000 (French
G
Francs).
f
(b) Two Dresser Rand Model JM9.8 and Two Model 260-885/4 "

Centrifugal compressors for CO:! service and team turbine driver
Model QUBVT at a price of FF 52,625.000.
H
DRESSER RAND SA v. BINDAL AGRO CHEM. LTD. IRAVEENDRAN, J.] 32 J

Except the description of the machinery and the price, the Letters of A
Intent were identical in its terms and relevanrportions thereof are extracted
below (not seriatim) :-

L PURCHASE ORDER

This Letter. of Intent will be followed by a regular and detailed B
Purchase Order to be issued by KGK simultaneous with the
establishment of the Letter of Credit mentioned at para B of this
letter.

C. TERMS AND CONDITIONS

The Purchase Order shall be subject to the "General Conditions of
c
Purchase" included in inquiry and as amended by DR's comments
thereto, Revision 4 dated June I0, 1991, initialled by DR and KGK
separately.
y
M. GOVERNMENT OF INDIA APPROVALS D
This Letter of Intent is being issued subject to the necessary approvals
to be given by Indian Government Authorities.

The Letters of Intent also contained terms relating to price, manner of
making payment of price, opening of Letter Guarantee, date for delivery, and E
consequences of not opening Letter of Credit by the stipulated date. The
relevant clauses are extrac(ed below :-

B. PRICE AND TERMS OF PAYMENT

I .....
F
"2. Payment shall be made through an irrevocable and confirmed
Letter of Credit (Confirmation charges being to DR's account) allowing
partial payments releasable in one or several drafts, and according to
the terms and conditions of this Letter of Intent, to be opened by 31st
August, 1991 by Bank of America, Barakhamba Road, New Delhi, or G
any other Bank acceptable to DR., notified and payable to DR by
Bank of America, Paris. The said Letter of Credit will be construed
in accordance with the Uniform Customs and Practices for
Documentary Credits of the International Chamber of Commerce.
Draft of such Letter of Credit is provided for in Attachment II of th is
Letter of Intent and is subject to changes proposed by KGK or its H
322 SUPREME COURT REPORTS (2006) I S.C.R.

A bankers and prior written agreement by DR or its bankers. The said
Letter of Credit shall be valid for a period of 15 months from its
notification to DR and shall be extendable by two (2) months period
at DR's request in order to allow complete drawings of the said
Letter of Credit."

B xxx

D. DELIVERY DATE

The delivery date (last shipment) shall be 15-1/2 (Fifteen & One Half
Months) after DR's receipt of this Letter of Intent. For the purpose
C of assessing liquidated damages for delivery, delivery time shall be
calculated on the basis of issuance of DR's Certificate of readiness to
ship, after inspection by KGK or its authorized agents and in the
event of their failure to do so, a declaration by DR that one month's
notification, of readiness to ship and invitation to inspect was given.
The time lag between the first and the last shipment will not exceed
D 12 weeks.

G. OPTIONAL PERFORMANCE TEST

KGK has an option of asking DR to carry out shop performance test
(PTC-10 class Ill) for the equipment described in this LOI for an
E extra price of FF. 875,020/-. The said option shall be exercised by
19th June, 1991 in writing by KGK. It is agreed that the delivery
period described in para D of this Letter shall be extended by three
week in case performance test is desired to be carried out.

F. AUTHORISATION TO PROCEED
F
This Letter of Intent shall serve as DR's authorization to proceed
with this order.

L. ENTRY INTO FORCE

This contract will come into force upon receipt of this Letter of Intent
G by Supplier.

lfby August 31, 1991 KGK is 1unable to fulfil the obligations described -.._ ,
in this LOI. the contract perfom1ance schedule and prices may be
revised.

H DR alleges that when the Letters of Intent dated 12.6.1991 were delivered by·
DRESSER RANDS.A. v. BIN DAL AGRO CHEM.LTD. [RA VEENDRANJ] 323
BINDAL on 12.6.1991, it enquired as to why the Letters of Intent were being A
issued in the name of KGK, when all its negotiations, discussions and
correspondence were only with BINDAL, and as the equipment supply was
also for BINDAL. DR further alleges that BINDAL's representatives informed
that for its own convenience, the Letters of Intent were being issued in the
name of KGK and assured that full and total responsibility for performance B
would, however, be that ofBINDAL; and that acting on the said representation,
DR's representatives countersigned the Letters of Intent in token of its
\ acceptance and returned one copy each to BINDAL. According to DR, except
the Letters of Intent dated 12.6.1991 (and a subsequent clarification dated
15.6.1991 from KGK that it did not require the shop performance test), there
was no discussions, negotiations or communications either in writing or verbal, C
between KGK and DR at any time. According to DR, it did not meet any
official of KGK at any point of time and it always proceeded on the basis that
the said letters of intent were issued by KGK as an agent/consultant of
BINDAL and not independently on its own account.
y 14. BINDAL neither placed any purchase order nor issued any
D
confirmation that the Letters of Intent dated 12.6.1991 were placed by KGK
on its behalf. However, the Chairman of BINDAL sent a communication
dated 26.8.1991 to DR stating that in spite of its efforts, procedural matters
at Government level did not move as fast as it expected, and that it was fully
conscious of the position in which DR had to receive the Letters of Credit E
before making major financial commitments for castings etc. and requested
DR to wait till 31.10.1991. BINDAL also stated that it was confident to open
the Letters of Credit before 3 I.I 0.1991 and will accept a corresponding delay
in the delivery schedule.

14.1. Thereafter, DR by communication dated 24.10. f99 I, after referring F
to the discussions with BINDAL (wherein the Commercial Director of
BlNDAL had assured that all approvals from the Government were received
and the Letter of Credit was likely to be opened before the end of November,
1991) advised BINDAL that in view of the delay, there will be a price
increase of 4.5% (provided the LOC was established by 30. 11.1991) apart G

-
·• ..,
from the corresponding delay in supply.

14.2. By communication dated 9.12.1991, BINDAL informed DR that
it was not possible to accept the Syn. Gas Compressor turbine manufactured
by DR as it found after a visit to DR's works at France that DR did not have
any experience in manufacturing. large mechanical turbines, and therefore it H
324 SUPREME COURT REPORTS [2006] I S.C.R.

A was proposing to obtain the drive turbine for Syn. Gas Compressor from an
alternative source who has supplied similar turbines. By a subsequent letter
dated 23.12.1991, BINDAL infonned DR that it was not agreeable to any
revision in prices and it would like to discuss certain other issues in January,
1992. This was followed by a communication dated 13.2.1992 from BINDAL
B stating that the Bank required a purchase order for opening the Letter of
Credit and, therefore, it was taking action to re-write all their foreign letters
of intent in the fonnat of letter of intent and labelling them as purchase
orders, and that consequently, some of the clauses of the Letters of Intent (C,
F, H, I, L etc.) would undergo changes and a draft of a purch?.se order
cleared by the Bank will be faxed. However, no such draft purchase order
C was sent by BIN DAL nor any Letter of Credit was opened by BINDAL. No
purchase order was issued. Ultimately, DR was given to understand by the
Commercial Director of BINDAL that Indian Government had pressurized
BINDAL to buy Indian equipment and, therefore. BINDAL proposed to
purchase the equipment from BHEL and not from DR.

D 15. Thereafter. DR through its counsel, issued notices dated 9.1.1993
to BINDAL and KGK referring to the Letters of inr.ent dated 12.6.1991
issued by KGK and infonning that if the Letter of Credit was not opened in
terms of Letters of Intent dated 12.6.1991 within I0 days, DR will proceed
on the basis that BINDAL and KGK had repudiated the contract and committed
E breach. As there was no reply, counsel for DR sent notices dated 29.1.1993
to BINDAL and KGK stating that DR had treated the inaction of BIN DAL
and KGK as repudiation of the contract. This was followed by notices c.ated
4.2.1993 to BINDAL and KGK whereby DR's counsel sought return of all
papers and technical information furnished by DR to BINDAL/KGK. Again
F by notices dated 5.2.1993, DR's counsel informed BINDAL and KGK that
in terms of clause 27.4.2 of general conditions of purchase incorporated in
the "agreement" dated 12.6.1991, DR intended to refer the disputes relating
to the "agreement" to the International Chamber of Commerce, Paris, ('ICC'
for short) for resolution by arbitration. It also proposed a panel of 3 names
for appointment of the sole arbitrator. As there was no reply, DR lodged a
G request for arbitration with ICC (received by ICC on 8.3.1993) in respect of
its claim against BINDAL and KGK for the following reliefs :-

I. an award for US $ I 0,411.000 or alternatively, damages in such
sum as the Arbitrator may determine;
2. delivery to DR, of the documents enumerated in Appendix
H
DRESSER RANDS.A."· BIN DAL AGRO CHEM.LTD. [RAVEENDRAN.J.] 325
thereto (with all copies thereof made by BINDAL and KGK); A
3. · an injunction restraining BINDAL/KGK by themselves, their
agents or contractors from using any of the said documents for
any purposes; and
4. for interest, costs etc.
B
ICC issued a notice dated 10.3.1993 to BINDAL and KGK in regard to
-1. lodgment of the said claim by DR.
'
16. One Bishwajit Bhattacharyya, Advocate, acting under instructions
from BINDAL and KGK sent a telex dated 11.4.1993 to ICC in reply to the
notice of Lodgment dated 10.3.1993 stating that BINDAL and KGK were in c
the process of jointly nominating an arbitrator and that his clients were not
agreeable for appointment of a sole arbitrator. This was, however, followed
by two different communications from different counsel. Mr. R. S. Gill,
Advocate sent a communication dated 27.4.1993 to ICC stating that he had
y
been instructed to represent BINDAL in place of Mr. Bhattacharyya. Similarly,
D
one Mr. J.S. Sinha, Advocate sent a communication dated 28.4.1993 to ICC
stating that he had been instructed to represent KGK in place of Mr.
Bhattacharyya. The written replies of BIN DAL and KGK were enclosed with
the said communications dated 27.4.1993 and 28.4.1993. In those
communications, BINDAL and KGK denied the very existence of any
arbitration agreement and sought rejection of the claim lodged by DR. On E
28.5.1993, ICC informed the parties that the advance on costs in regard to
arbitration would be US$ 2,70,000 and directed the counsel for claimant and
counsel for defendants to deposit us $ 67,500 each towards 50% of advance
as costs of arbitration.

17. At that stage, BIND AL filed Suit No.1363 of 1993 on 1.6.1993 in F
the Delhi High Court, for a declaration that there was no arbitration agreement
between BINDAL and DR and for an injunction restraining DR from
proceeding with the arbitration. KGK also filed a suit (Suit No.1380 of 1993)
on 28.6.1993 for similar reliefs. I.A. Nos.5795/93 and 5819/93 were filed liy
BlNDAL and KGK in the said suits for temporary injunction restraining DR G
from proceeding with the Arbitration. On 4.10.1993, DR filed application
'{ ,.;
under Section 3 of the Foreign Awards (Recognition & Enforcement) Act,
1961 for stay of suits. What happened thereafter is detailed in paras 6 & 7
above.

Re : Points (i) and (ii) : H
326 SUPREME COURT REPORTS [2006) 1 S.C.R.

A 18. Section 3 of the Foreign Awards Act providing for stay of
proceedings in respect of matters to be referred to arbitration reads thus :

"Notwithstanding anything contained in the Arbitration Act, 1940, or
in the Code of Civil Procedure, 1908, if any party to an agreement
to which Article II of the Convention set forth inthe Schedule applies,
B or any person claiming through or under him commences any legal
proceedings in any court against any other party to the agreement or
any person claiming through or under him in respect of any matter
agreed to be referred to arbitration in such agreement, any party to
such legal proceedings may, at any time after appearance and before
filing a written statement or taking any other step in the proceedings,
c apply to the court to stay the proceedings and the court, unless satisfied
that the agreement is null and void, inoperative or incapable of being
performed or that there is not, in fact, any dispute between the parties
with regard to the matter agreed to be referred, shall make an order
staying the proceedings."
D
Article II of the Schedule to the Foreign Awards Act which contains
the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards is extracted below :-

"I. Each Contracting State shall recognize an agreement in writing
E under which the parties undertake to submit to arbitration all or any
differences which have arisen or which may arise between them in
respect of defined legal relationship, whether contractual or not,
concerning a subject-matter capable of settlement by arbitration.

2. The term ·•agreement in writing" shall include an arbitral clause in
F a contract or an arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams.

3. The Court of a Contracting State, when seized of an action in a
matter in respect of which the parties have made an agreement within
the meaning of this article, shall, at the request of one of the parties,
G refer the parties to arbitration, unless it finds that the said agreement
is null and void, inoperative or incapable of being performed."

19. In Renusuxur Power Co. ltd. v. Generul Electric Company. [1984)
4 SCC 679, this Court considered the scope of section 3 of Foreign Awards
Act and formulated the following six conditions required to be fulfilled for
H invoking section 3:-
DRESSER RAND SA 1·. BINDAL AGRO CHEM.LTD. [RAVEENDRAN, J.] 327

t (i) there must be an agreement to which Article II of the Convention A
set forth in the Schedule applies;

(ii) a party to that agreement must commence legal proceeding against
another party thereto;

(iii) the legal proceedings must be "in respect of any matter agreed B
to be referred to arbitration" in such agreement;

(vi) the application for stay must be made before filing the written
statement or taking any other step in the legal proceedings;

(v) the Court has to be satisfied that the agreement is valid, operative
and capable of being performed; this relates to the satisfactfon about C
the "existence and validity" of the arbitration agreement;

(vi) the Court has to be satisfied that there are disputes between the
parties with regard to the matters agreed to be referred; this relates to
effect (scope) of the arbitration agreement touching the issue of D
arbitrability of the claims.

This Court also held that section 3 of Foreign Awards Act combines in
its own ambit both sections 33 and 34 of the Arbitration Act, 1940 and questions
regarding the existence, validity or effect (scope) of the Arbitration agreement
which can be decided under section 33 of the Arbitration Act, are required E
to be decided under section 3 of the Foreign Awards Act before a stay of
legal proceedings contemplated therein could be granted. This Court stated
the scope of enquiry under sectiOn 3 of the Foreign Awards Act thus· :-

"Here we are concerned with Section 3 which makes it obligatory
upon the Court to stay the legal proceedings if the conditions of the F
section are satisfied and what is more the section itself requires that
before any stay is granted the Court should be satisfied that the
arbitration agreement is valid, operative and capable of being
performed and that there are disputes between the parties with regard
to the matters agreed to be referred to arbitration [conditions (v) and
(vi) mentioned earlier]. In other words, the section itself indicates G
that the proper stage at which the Court has to be fully satisfied about
these conditions is before granting the relief of stay in a Section 3
petition and there is no question of the Court getting satisfied about
these conditions on any prima facie view or a pro tanto finding
thereon. Parties have to put their entire material before the Court on H
328 SUPREME COURT REPORTS [2006] I S.C.R.

A these issues (whichever may be raised) and the Court has to record
its finding thereon after considering such material."

Therefore, the question whethc:r there is an arbitration agreement or not
squarely falls for decision of the Court under section 3 and will ~ave to be
finally decided by the Court.
B
20. It is clear from Clause (2) of Article II that an 'agreement in
writing' includes not only an arbitral clause in a contract or a separate
arbitration agreement, signed by the parties, but a term contained in an ,
exchange of letters or telegrams agreeing to submit their differences to
arbitration. The question, therefore, is whether there is an "agreement in
c writing" under which parties have agreed to submit their differences to
arbitration.

21. The principle as to how to find out whether the correspondence
shows consensus ad idem, was stated by this Court in Rickmers Verwaltung
D Gmbh v. Indian Oil Corporation Ltd, (1999] I SCC I :

"The submission of Mr. Nariman that an agreement, even if not signed
by the parties, can be spelt out from correspondence exchanged
between the parties admits of no doubt. In fact, various judgments
cited by him at the bar unmistakably support this assertion. The
E question, however, is can any agreement be spelt out from the
correspondence between the parties in the instant case?

In this connection the cardinal principle to remember is that it is the
duty of the court to construe correspondence with a view to arrive at
a conclusion whether there was any meeting of mind between the
F parties, which could create a binding contract between them but the
Court is not empowered to create a contract for the parties by going
outside the clear language used in the correspondence, except insofar
as there are some appropriate implications of law to be drawn. Unless
from the correspondence it can unequivocally and clearly emerge that
the parties were ad idem to the terms, it cannot be said that an
G agreement had come into existence between them through
correspondence. The Court is required to review what the parties
wrote and how they acted and from that material to infer whether the
intention as expressed in the correspondence was to bring into existence
a mutually binding contract. The intention of the parties is to be
H gathered only from the expressions used in the correspondence and
j
DRESSER RAND SA 1·. BIN DAL AGRO CHEM. LTD. [RA VEENDRAN, J] 329

the meaning it conveys and in case it shows that there had been A
meeting of mind between the parties and they had actually reached
an agreement, upon all material terms, then and then alone can it be
said that a binding contract was capable of being spelt out from the
correspondence."

22. According to DR, the arbitration agreement is contained in "the B
General Conditions of Purchase" forming part of the Invitation to Bid issued
by BINDAL, as modified by Revision No.4 dated I0.6.1991 agreed to between
4., DR and BINDAL, incorporated by reference in the Letters of Intent dated
12.6.1991 placed by KGK on DR and accepted by DR by counter signing
them. The said contention of DR that there is an arbitration agreement by C
correspondence is elaborated thus ·:-

(a) BINDAL's "general conditions of purchase" which is forming
part of the tender documents/Invitation to Bid contains an arbitration
agreement in Clause 27.4.

The suggestions made by DR for modification of the arbitration clause D
(Clause 27.4) in the "General Conditions of Purchase", as per Revision
No.4 dated I0.6.1991, were agreed to by BIND AL. Consequently,
the "General Conditions of Purchase" contain the following arbitratior.
clause :
"In cases offoreign supplier, all disputes which cannot be settled E
by mutual negotiations shall be settled under the Rules of
Conciliation and Arbitration of ICC....... "

(b) Clause 'C' of the letters of intent dated 12.6.1991 issued by KGK
as an agent/authorized consultant of BINDAL to DR provided that
"the purchase order shall be subject to the 'general conditions of F
purchase' included in inquiry and as amended by DR's comments
thereto, Revision No.4 dated 10.6.1991 initialled by DR and KGK
separately";

(c) The Letters of Intent are the purchase orders and they have been G
accepted by DR by counter-signing them. Therefore, there are
concluded contracts between DR on the one hand and KGK
representing BJNDAL on the other, for supply of the machinery
mentioned in the Letters of Intent which are governed by BlNDAL's
'general conditions of purchase' which contain an arbitration clause.
Thus there is an arbitration agreement between the parties in terms of H
330 SUPREME COURT REPORTS 12006] I S.C.R.

.A clause 27.4.2 of the 'General Conditions of Purchase".

23. We find that the said submission of DR is based on two premises.
The first is that there is an 'arbitration agreement' between ·DR' on the one
hand and 'BINDAL' on the other as per clause 27.4.2 of the 'General
Conditions of Purchase'. The second is that even if clause 27.4.2 of General
B Conditions of Purchase itself may not operate as an arbitration agreement
between the parties, the Letters of Intent by KG K are purchase orders placed
on behalf of BINDAL which are made subject to the General Conditions of
Purchase including the arbitration clause (clause 27.4.2) and therefore, there
is an arbitration agreement between DR and BINDAL/KGK. On a careful
C examination, we find that both premises are erroneous and are baseless
assumptions.

Whether clause 27.4.2 of '(Jenera/ Conditions of Purchase' is an
'Arbitration agreement'

D 24. The tender document or the invitation to bid of BINDAL (containing
the ·'instructions to bidders" and the "general conditions of purchase"), by
itself, is neither an agreement nor a contract. The instructions to bidders
informed the intending bidders how the bid should be made and laid down
the procedure for consideration and acceptance of the bid. The process of
bidding or submission of tenders would result in a contract when a bid or
E offer is made by a prospective supplier and such bid or offer is accepted by
BINDAL. The second part of the Invitation to Bid consists of the 'General
Conditions of Purchase', that is, the conditions subject to which the purchase
order will be placed or offer will be accepted. The 'General Conditions of
Purchase' were made available as a part of the Invitation to bid. so as to
F enable the prospective suppliers to ascertain their obligations and formulate
their offers suitably.

25. Where a tenderer is not willing to make his offer subject to the
'General Conditions of Purchase' prescribed and stipulated by the purchaser,
he would either suggest his own terms and conditions or suggest modifications
G to the 'General Conditions of Purchase' prescribed by the intending purchaser
(person inviting the offers). Many 'Invitations to Bid' contain a condition
that the tenderers will not be entitled to make any changes in the 'General
Conditions of Purchase'. in which event he is required to mould his offer > '

strictly in accordance with the 'General Conditions of Purchase' stipulated by
the purchaser. The reason for insisting upon adherence to Purchaser's 'General
H Conditions of Purchase' is not far to seek. If several persons submit their
DRESSER RAND SA r. BIN DAL AGRO CHEM. LTD. [RAVEENDRAN, l) 331

offers subjecting them to different terms and conditions of supply, it will be A
difficult or virtually impossible to evaluate them with reference to a common
denominator. The general conditions of purchase act as a common denominator
for all tenderers to base their offers and for evaluation of such offers. Further,
the said General Conditions stipulated by the purchaser enable the tenderer
to assess his obligations and calculate the offer price accordingly. For example, B
there will be a marked difference in the responsibility of a supplier and the
pricing, if the purchaser seeks a three year warranty instead of one year
warranty, or seeks delivery of machinery at site instead of at supplier's factory,
or seeks delivery to be expedited instead of the normal period. Many a time
the supplier is able to persuade the purchaser to agree for modification of the
'conditions of purchase' stipulated by the purchaser, particularly where a C
supplier is in a position of strength and the purchaser is keen to purchase a
particular product of that supplier. There are also several suppliers who
stipulate their own 'conditions of sale' and refuse to go by the conditions of
purchase stipulated by the purchaser. The intending purchaser and the intending
supplier are at liberty to negotiate and agree upon the terms subject to which
offers will be made and accepted. As contrasted from sale of ready Goods D
sold off the shelf across the counter, sale/purchase of complex machinery/
equipment made to order, to suit particular requirements of the purchaser,
have several facets relating to pricing, period of delivery, mode of delivery,
period and nature of warranty, suitability for the intended purpose, patent
rights, packing, insurance, incidental services, consequences of delay and E
breach, rejection/replacement force mejeure etc. Agreeing upon the terms
subject to which offer is to be made and accepted, is itself a complicated and
time consuming process. But, reaching an agreement as to the terms subject
to which a purchase will be made, is not entering into an agreement to
purchase.
F
26. Therefore, when DR suggested modifications to the general
conditions of purchase, and when BIN DAL agreed to them, and both parties
initialled Revision No. 4 containing the modifications to the General Conditions
of Purchase, on 10.6. 1991, no contract or agreement came into exist1:nce as
it did not involve either an offer or acceptance or performance of any promise.
"Revision No.4" dated 10.6.1991 only consisted of the modifications to the
G.
General Conditions of Purchase, subject to which it was willing to enter into
a contract with BINDAL for sale of machinery. Revision No.4 dated 10.6.1991
cleared the decks by finalizing the general conditions which would be
applicable if and when BlNDAL decided to place a purchase order. In other
words. the 'General Conditions of Purchase' and Revision No.4 dated H
332 SUPREME COURT REPORTS (2006 J I S.C.R.

A I0.6.1991 containing the modifications thereto. merely set out the terms on
which the parties were ready to do business with each other if and when
purchase order was placed by BINDAL. Parties merely agreed that when an
order was placed or contract was entered for supply of a machinery by DR
to BINDAL, it will be subject to the 'General Conditions of Purchase'
B stipulated by BINDAL as modified by Revision No.4 dated I0.6.1991 agreed
by both parties.

27. The following observations of this Court in Chatturbhuj Vithaldas
Jasani v. Moreshwar Parashram, AIR (1954) SC 236 though in a different
context, are apposite :
c " ... The letters merely set out the terms on which the parties were
ready to do business with each other if and when orders were placed
and executed. As soon as an order was placed and accepted a contract
arose. It is true this contract wou Id be governed by the terms set out
in the letters but until an order was placed and accepted there was no
D contract."

In Rickmers Verwaltung (supra), the appellant contended that though the
agreement drawn up on 11.11. I 993 was not formally signed by the parties,
the contemporaneous correspondence between them showed that a binding
contract came into existence between the parties in terms of such draft dated
E 11.11.1993 and clause 53 of the said 'agreement' provided for arbitration and
therefore, the claim raised by the appellant had to be settled by reference to
arbitration. The first Respondent (Indian Oil Corporation Ltd) on the other
hand contended that no arbitration agreement had been executed between the
parties and the correspondence between the parties did not bring about any
enforceable contract between the parties, because the fundamental conditions
F of the terms of the bargain were neither agreed upon nor fulfilled by the
parties. This Court accepted the contention by the first respondent that there
was no 'arbitration agreement' on the following reasoning:-

"From a careful perusal of the entire correspondence on the record,
we are of the opinion that no concluded bargain had been reached
G
between the parties as the terms of the standby letter of credit and
performance guarantee were not accepted by the respective parties. In
the absence of acceptance of the standby letter of credit and
performance guarantee by the parties, no enforceable agreement could
be said to have come into existence. The correspondence exchanged
H between the parties shows that there is nothing expressly agreed
f
DRESSER RANDS.A. v. BIN DAL AGRO CHEM.LTD. [RAVEENDRAN . .11 333

between the parties and no concluded enforceable and binding A
agreement come into existence between them. Apart from the
correspondence relied upon by the learned single Judge of the High
Court, the Fax messages exchan3ed between the parties, referred to
above, go to show that the parties were only negotiating and had not
arrived at any agreement. There is a vast difference between B
negotiating a bargain and entering into a binding contract. After
negotiation of bargain in the present case, the stage never reached
when the negotiations were completed giving rise to a binding contract.
The learned single Judge of the High Court was, therefore, perfectly
justified in holding that Clause 53 of the Charter Par~v relating to
Arbitration had no existence in the eye of law, because no concluded C
and binding contract ever came into existence between the parties."

[Emphasis supplied}

28. Parties agreeing upon the terms subject to which a contract will be
governed, when made, is not the same as entering into the contract itself. D
Similarly, agreeing upon the terms which will govern a purchase when a
purchase order is placed, is not the same as placing a purchase order. A
prelude to a contract should not be confused with the contract itself. The
purpose of Revision No. 4 dated I0.6.1991 was that if and when a purchase
order was placed by BINDAL, that would be governed by the "general E
conditions of purchase" of BINDAL, as modified by Revision No.4. But
when no purchase order was placed, neither the 'general conditions of
purchase' nor the arbitration clause in the 'General Conditions of Purchase'
became effective or enforceable. Therefore, initialling of' Revision No. 4' by
DR and BINDAL on 10.6.1991 containing the modifications to General
Conditions of Purchase, did not bring into existence any arbitration agreement F
to settle disputes between parties.

Whether Lellers of Intent dated 12. 6.1991 contain an arbitration
agreement.

29. We will next examine whether any arbitration agreement came into G
existence by issue of Letters of Intent dated 12.6.1991 by KGK countersigned
by DR and if so who are the parties to such arbitration agreement.

30. The circumstances in which the Letters of Intent dated 12.6.1991
by KGK 'surfaced' is strange and illogical if not mysterious. It is admitted H
334 SUPREME COURT REPORTS 120061 I S.C.R.

A by DR that at no point of time, it held any negotiation or discussion or
exchanged correspondence with KGK in this matter. The case of DR is that
BINDAL was corresponding and negotiating with it for purchase of certain
types of compressors for its Shahjahanpur Fertilizers Project; that neither
BINDAL nor KGK ever informed DR that KGK was the agent/consultant of
B BINDAL; and that the modifications to 'General Conditions of Purchase'
were discussed and finalized on I0.6.1991, as per Revision No 4 initialled
by the representatives of DR and BINDAL. In the circumstances, there appears
to be no logical reason for two letters of intent being prepared and issued on
the letterhead of KGK on 12.6.1991 out of the blue, particularly when no
representative of KGK was present during discussions on 12.6.1991 nor were
C the Letters of Intent signed by anyone on behalf of KGK in the presence of
DR's representatives. According to DR, the representative of BINDAL handed
over the Letters of intent issued on the letterhead of KG K stating that though
the Letters of intent were issued by KGK, the compressors were for BIN DAL
and payment and performance will be the BINDAL. No one has chosen to
D explain why the letters of intent were not issued by BINDAL or why the
letters of intent were issued by KGK. What is strange is the acceptance of
such letters of intent by DR without protest and without insisting that the
letters of intent should be issued by BIN DAL or at least that BIN DAL should
confirm in writing that the KGK was issuing the letters of intent on its behalf.
If BIN DAL had delivered the letters of intent prepared on the letterhead of
E KGK instead of its own, clearly it was with some ulterior motive. But we are
not considering the business ethics of BINDAL nor the negligence on the
part of DR in not insisting upon something in writing from BIN DAL to show
that Letters of Intent of KGK were issued on its behalf. The question for
consideration is whether there is an arbitration agreement in the Letters of
F Intent.

31. There is sufficient material to show that BINDAL proceeded on the
basis that KGK 's letters of intent dated 12.6.1991 were issued on its behalf,
though there is no direct reference to the Letters of Intent dated 12.6.1991 in
any of BINDAL 's correspondence. We may briefly refer to the following
G circumstances which clearly lead to an inference as that KGK's Letters of
Intent, were on behalf of BINDAL :-

(i) In its letter dated 23.12.1991, the Chairman of BINDAL refers
to DR 's intention to revise the prices due to BIN DAL not opening
the LCs in time.
H
(ii) In BINDAL's communications dated 13.2.1992, there is a
DRESSER RAND SA v. BINDALAGROCHEM. LTD. [RAVEENDRAN. l] 335

reference to BINDAL's proposal to rewrite LOls by labelling A
them as purchase orders and consequently, Clauses C, F. H, I
and L of letters of intent undergoing changes, in view of the
Bank requiring purchase orders instead of letters of intent, for
opening the letters of credit. In the absence of any letter of intent
by BINDAL itself, it has to be inferred that the letters of intent B
referred by BINDAL are the letters of intent dated 12.6.1991
issued by KGK.

(iii) When DR sent notices dated 9.1.1993 to BINDAL and KGK,
alleging that KGK acted as agent of BINDAL in issuing the
Letters of Intent dated 12.6.1991, there was no denial either by C
BINDAL or KGK.

(iv) When DR lodged a request for arbitration with ICC making a
claim jointly against BINDAL and KGK specifically alleged that
KG K acted as agent of BIN DAL in issuing of Letters of Credit,
and when copies of such request for arbitration were forwarded D
by ICC to BINDAL and KGK, significantly, BINDAL and KGK
sent a common reply through a common counsel (Mr. Bishwajit
Bhattacharyya) stating that both (BINDAL and KGK) were
proposing to jointly nominate an Arbitrator.

(v) Even when BINDAL and KGK subsequently decided to challenge E
the arbitration agreement and issued separate notices dated
27.4.1993 and 28.4.1993 though different counsel, such notices
were sent through two counsel who shared the same office and
telephones.

The conduct ofBINDAL subsequent to 12.6.1991 leads to an inescapable F
inference that letters of intent issued by KGK on 12.6.1991 were on behalf
of BINDAL. In fact, even otherwise, we will assume for the purpose of this
case that KGK was acting on behalf of BINDAL as its agent or consultant
in issuing the letters of intent dated 12.6.1991. The question is whether that
will take DR any further in establishing that there is an arbitration agreement.
G
32. The Preamble to the Letters of Intent states that KGK "hereby
confirms its intention to place an order on Dresser Rand". This is further
t
made clear from Clause (I) of each letter of intent which provides that "this
letter of intent" will be followed by a regular and detailed purchase order to
be issued by KGK simultaneous with the establishment of the Letter of Credit H
336 SUPREME COURT REPORTS [20061 I S.C.R.

A mentioned in Para B of letter of intent. This makes it clear that the letter of
intent is only a prelude to the purchase order and not itself the purchase
order. The last para of Leners of Intent requires DR to sign and return the
duplicate copy of the letter as token acceptance of DR having agreed to the
Letters of Intent. This would mean that the person issuing the Leners of
B Intent wanted concurrence of DR to the terms contained in the Letter of
Intent so that it can place an order in terms of the conditions mentioned in
the Letters of Intent. The concurrence sought was to the contents of Letters
of Intent and not acceptance of any order for supply.

33. Clause 'C' of Letters of Intent provides that the Purchase Order
C shall be subject to the "General Conditions of Purchase" included in the
inquiry, as amended by DR's comments thereto, Revision 4 dated 10.6.1991 ".
Therefore, the General Conditions of Purchase which contains the arbitration
clause, is not made a part of the Letters of Intent nor are the Letters of Intent
made subject to the General Conditions of Purchase. The Letters of Intent
merely provide that if and when the purchase order is placed, the purchase
D order will be subject to the General Conditions of Purchase, as modified by
Revision No.4. Therefore, the point of time at which the General Conditions
of Purchase will become applicable, is the point when the purchase order is
placed and not earlier. Consequently, Clause 27.4.2 of the General Conditions
of Purchase containing the arbitration clause would become applicable and
E available to the parties only when the purchase order was placed and not
earlier. The term ·purchase order' has a specific meaning and connotation.
The purchase order is the "agreement entered into between BINDAL and the
prospective supplier as recorded in the purchase order form (prepared in the
form of Attachment-VII to the General Conditions of Purchase) signed by the
parties, including all Attachments and annexures thereto and all documents
F incorporated by reference therein together with any subsequent modifications
thereof in writing." Admittedly, no such purchase order was placed by either
BINDAL or any one authorized by BINDAL. It is also evident from Clause
(I) of the Letters of Intent that the purchase order was to be issued
simultaneously with the Letter of Credit. Clause (M) made it clear that the
G Letters of Intent were being issued subject to necessary approvals being
given by the Authorities of the Indian Government. These provisions clearly
indicate that the Letters of Intent were only a step leading to purchase orders
and were not, by themselves. purchase orders. Therefore, issue the Letters of
Intent by KGK, assuming that it was done on behalf of BINDAL, did not
H mean that the General Conditions of Purchase which contains the provision
DRESSER RAND SA 1•. BINDAL AGRO CHEM.LTD. [RA VEENDRAN. J.] 33 7
I
for arbitration became a part of the Letters of Intent or became enforceable. A
34. It is now well-settled that a Letter of Intent merely indicates a
party's intention to enter into a contract with the other party in future. A
Letter of Intent is not intended to bind either party ultimately to enter into
any contract. This Court while considering the nature of a Letter of Intent,
observed thus in Rajasthan Co-operative Dairy Federation Ltd. v. Maha B
laxmi Mingrate Marketing Service Pvt. ltd., [1996] 10 SCC 405 :

"... The Letter of Intent merely expressed an intention to enter into
a contract. There was no binding legal relationship between the
appellant and Respondent I at this stage and the appellant was entitled
to look at the totality of circumstances in deciding whether to enter C
into a binding contract with Respondent I or not."

It is no doubt true that a Letter of Intent may be construed as a letter of
acceptance if such intention is evident from its terms. It is not uncommon in
contracts involving detailed procedure, in order to save time. to issue a letter D
of intent communicating the acceptance of the offer and asking the contractor
to start the work with a stipulation that the detailed contract would be drawn
up later. If such a letter is issued to the contractor, though it may be termed
as a Letter of Intent, it may amount to acceptance of the offer resulting in a
concluded contract between the parties. But the question whether the letter of
intent is merely an expression of an intention to place an order in future or E
whether is a final acceptance of the offer thereby leading to a contract, is a
matter that has to be decided with reference to the terms of the lette:. Chitty
~ on Contracts (Para 2.115 in Volume I- 28th Edition) observes that where
parties to a transaction exchanged letters of intent, the terms of such letters
may, of course, negative contractual intention; but, on the other hand, where
the language does not negative contractual intention, it is open to the courts F
to hold the parties are bound by the document; and the courts will, in particular,
be inclined to do so where the parties have acted on the document for a long
period of time or have expended considerable sums of money in reliance on
it. Be that as it may.
G
35. Learned counsel for DR referred to Clauses (B), (D), (F), and (L)
( ,, of the Letters of Intent to contend that they were the purchase orders. Clause
(B) mentioned the total price exclusive of taxes and duties payable and
provided that the Letter of Credit should be opened by 31.8.1991 by a bank
acceptable to DR. Clause (D) provided that delivery date shall be IS'li months
from the date of receipt of the Letter of Intent by DR. Clause (F) stated that H
338 SUPREME COURT REPORTS (2006] I S.C.R.

A '"this Letter of Intent shall serve as DR's authorization to proceed with this
order". Clause (L) stated that 'This contract will come into force upon receipt
of this letter of intent by supplier'. DR contends that as the Letters of Intent
were referred to as '"this order" and ·this contract' in clauses (F) and (L), and
as clause (F) authorized DR to proceed with the order. the Letters of Intent
B were, in fact, purchase orders.

36. When all the terms of the Letter of Intent are harmoniously read,
what is clear is that Letters of intent merely required the supplier to keep the ;.·
offer open till 31.8.1991 with reference to the price and delivery schedule.
They also made it clear that ifthe purchase orders were not placed and Letter
C of Credit was not opened by 31.8.1991, DR was at liberty to alter the price
and the delivery schedule. In other words, the effect of Letters of intent was
that if the Purchase Orders were placed and LCs were opened by 3 1.8.1991,
DR would be bound to effect supply within 151 Yi months, at the prices stated
in the Letter of Intent. Therefore, it may not be possible to treat the Letters
of Intent as Purchase Orders.
D
37. Even if we assume that the Letters of Intent were intended to
contracts for supply of machinery in accordance with the terms contained
therein, it may only enable DR to sue for damages or sue for the expenses
incurred in anticipation of the order and opening of LC. But that will not be
of any assistance to contend that there was an arbitration agreement between
E the parties.

38. We have already noticed that the letters of intent dated 12.6.1991,
do not contain any arbitration clause. The contention of DR is that arbitration
clause in the General Conditions of Purchase is incorporated by referen~e.
F having regard to clause (C) of Letters of Intent. But clause (C) specifically
provided that 'the purchase order' shall be subject to General Conditions of
Purchase as amended by Revision No. 4. Clause (C) did not say that "this
letter of intent is subject to the general conditions of purchase as amended in
Revision No. 4". One other aspect may be noticed. Clause (C) refers to
Revision No. 4 initialled by DR and KGK. It is now admitted by DR that
G there is no document (Revision No. 4 or otherwise) modifying the general
conditions of purchase, which is initialled by DR and KGK. The Revision
No. 4 was initialled only by DR and BINDAL. Therefore, the general
conditions of purchase containing the arbitration clause, never became a term
of the letters of intent dated 12.6.1991. Clause (C) of the letters of intent
H made it clear that it is only the purchase orders which were to be placed in
DRESSER RAND SA 1·. BIN DAL AGRO CHEM.LTD. [RA VEENDRAN, J] 339
! future on or before 31.8.1991 (along with opening of LC) that was to be A
subject to the General Conditions of Purchase. Therefore, we hold that the
letters of intent, even if assumed to result in any binding contract, did not
provide for arbitration.

39. The learned cou.nsel for DR next contended that the words "the
purchase order" in Clause (C) should be read as "this purchase order". For B
this purpose, he referred to several· provisions of the General Conditions of
Purchase, some of which use the words "the purchase order" whereas other
use the words "this purchase order". He contended that the words "the" and
"this" are loosely used in the General Conditions of Purchase and in the
Letters of Intent and are, therefore, interchangeable. We cannot agree. Firstly, C
it is not open to us to change the terms of any document. Secondly, the use
of the words "this purchase order" in some clauses of the General Conditions
of Purchase was not inappropriate. It should be remembered that the General
Conditions of Purchase, in entirety, were intended to be treated as a part to
the purchase order as and when the purchase order was placed. Therefore,
when the General Conditions of Purchase were read as part of the purchase D
order, use of the words 'this purchase order' in the 'General Conditions of
Purchase' would be appropriate. Therefore, it is impermissible to read the
words 'the purchase order' in clause (C) of Letters of Intent as 'this purchase
order.

40. Thus, neither the General Conditions of Purchase forming part of E
Invitation of Bid nor Revision No. 4 dated 10.6.I991, nor the Letters of
Intent dated 12.6.1991 contain any arbitration agreement. There is also no
.J other document or correspondence which can be read as containing a provision
that can be interpreted as an agreement to resolve disputes by arbitration. We
are, therefore, of the view, though for slightly different reasons, that the F
decision of the learned Single Judge and the Division Bench of the High
Court holding that there is no arbitration agreement, does not suffer from any
infirmity.

Re: Point No. (iii) :
G
41. DR contends that the conduct of BIN DAL and KGK clearly showed
that they proceeded on the basis that there was an arbitration agreement. DR
referred to the notices dated 9.1.1993, 29. I. I993 and 4.2.1993 issued by its
Counsel culminating in the final notice dated 5.2.1993 seeking reference to
arbitration. It is pointed out that neither BINDAL nor KGK issued any reply
to the said nctice dated 5.2.1993 thereby indicating an implied acceptance of H
340 SUPREME COURT REPORTS 12006] I S.C.R.

A an arbitration agreement. DR also points out that when notice was sent by
ICC to BIN DAL and KGK in respect of the request for arbitration lodged by
DR, Mr. Bhattacharyya, Advocate, sent a reply dated 11.4.1993 acting on
behalf of both BINDAL and KGK, stating that they are in the process of
jointly nominating an arbitrator. It is contended that if there was really no
arbitration agreement, the counsel for BINDAL and KGK would not have
B stated that they were in the process of nominating an arbitrator. It is contended
that only by way of an afterthought, BINDAL and KGK changed their stand
to contend that there was no arbitration agreement, when their changed the
counsel and sent a further reply dated 27.4.1993 and 28.4.1993 respectively.
It is submitted that there is acquiescence on the part of BINDAL and KGK
C in regard to arbitration.

43. This is countered by BINDAL and KGK by pointing out that Mr.
Bhattacharyya had stated that an Arbitrator will be appointed by BINDAL
and KGK without examining or knowing the full facts, while sending the
letter dated 11.4.1993. They point out that immediately thereafter, by issuing
D notices dated 27.4.1993 and 28.4.1993, they made it clear that there was no
arbitration agreement. It is contended that even if Mr. Bhattacharyya had
stated that an arbitrator was being appointed, that would not come in the way
of either BINDAL or KGK subsequently pointing out that there was no
arbitration agreement, when they examined the legal position or when an
E application under section 3 of Foreign Awards Act was filed.
44. In UP. Rajkiya Nirman Nigam ltd. v. Indure Pvt. lid., [I <;'96 J 2
SCC 667 negativing a contention based on acquiescence in matters concerning
challenge to arbitrability, this Court observed thus :-

"Acquiescence does not confer jurisdiction ........................ The clear
F settled law thus is that the existence or validity of an arbitration
agreement shall be decided by the Court alone. Arbitrators, therefore,
have no power or jurisdiction to decide or adjudicate conclusively by
themselves the question since it is the very foundation on which the
arbitrators proceed to adjudicate the disputes. Therefore, it is rightly
G pointed out by Shri Adarsh Kumar Goel, learned counsel for the
appellant that they had by mistake agreed fvr reference and that
arbitrators could not decide the existence of the arbitration agreement
or arbitrability of the disputes without prejudice to their stand that no
valid agreement existed. Shri Nariman contended that having agreed
to refer the dispute, the appellant had acquiesced lo the jurisdiction
H
DRESSER RANDS.A. 1·. BIN DAL AGRO CHEM.LTD. (RA VEENDRAN. J.] 34 J
of the arbitrators and, therefore, they cannot exercise the right under A
Section 33 of the Act. We find no force in the contention. As seen, the
appellant is claiming adjudication under Section 33 which the Court
alone has jurisdiction and power to decide whether any valid agreement
is existing between the parties. Mere acceptance or acquiescing to the
jurisdiction of the arbitrators for adjudication of the disputes as to the B
existence of the arbitration agreement or arbitrability of the dispute
does not disentitle the appellant to have the remedy under Section 33
through the Court. In our considered view the remedy under Section
33 is the only right royal way for deciding the controversy."

[Emphasis supplied] C
What is stated above with reference to section 33 of Arbitration Act,
1940, will apply with equal force in regard to section 3 of Foreign Awards
Act. Therefore, the fact that at some point of time, BINDAL or KGK had
stated that they would appoint an Arbitrator will not come in the way of their
·r demonstrating that there is no arbitration agreement when the matter comes D
up before the court under section 3 of the Foreign Awards Act. Therefore,
there is no question of either waiver or acquiescence.

Conclusion

45. We, therefore, do not find any reason to interfere with the decision E
of the Division Bench of the High Court. The appeals are, therefore, dismissed.
Parties to bear their respective costs.

N.J. Appeals dismissed.