Holding

An arbitration agreement existed despite the lack of PGI's signature, and the appeal was allowed.

Summary

M/s Unissi (India) Pvt Ltd entered into a tender with the Post Graduate Institute of Medical Education & Research (PGI) for the purchase of pulse oximeters. The tender documents contained an arbitration clause. PGI accepted the tender, the goods were supplied, installed and used for about a year, after which PGI returned the equipment and forfeited the earnest money. Unissi filed an application under Section 11(4)(a) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator, but the Additional District Judge held that no arbitration agreement existed because PGI had not signed the agreement. On appeal, the Supreme Court examined Section 7 of the Act and held that acceptance of a tender containing an arbitration clause, together with performance of the contract, creates a valid arbitration agreement even without a formal signature. Consequently, the lower court’s order was set aside, the appeal was allowed, and the matter was directed to the Chief Justice of the High Court of Chandigarh to appoint an arbitrator.

Issues considered

Whether an arbitration agreement exists when one party has not signed the agreement but has accepted a tender containing an arbitration clause and performed under it.
Whether, under Section 11(4)(a) of the Arbitration and Conciliation Act, 1996, an arbitrator can be appointed in the absence of a formally signed agreement.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(4)(a), s. 7

Subjects

arbitration agreementtender acceptanceSection 7Section 11appointment of arbitratorcontract performancesignature requirement

Judgment

[2008] 14 S.C.R. 108

("-
A M/S. UNISSI (INDIA) PVT. LTD.
II.
POST GRADUATE INSTITUTE OF MEDICAL EDUCATION
& RESEARCH
(Civil Appeal No. 6039 of 2008)
B OCTOBER 1, 2008
[TARUN CHATTERJEE AND DALVEER BHANDARI, \:---
JJ.]
,_
c Arbitration and Conciliation Act, 1996; Ss. 7, 11(4)(a): I

Arbitration agreement - Tender for purchase of certain
goods - Supply of goods - Rejection thereof by buyer affer ).-
one year on ground that agreement not signed by it - Dispute
- Application for appointment of Arbitrator- Dismissed by trial
D Court holding that there was no agreement executed between
~
the parties - Correctness of- Held: In view of tender offer made
by buyer, respondent issuing supply order and consequently
accepting and using goods so supplied - In such circum-
stances and in view of provisions of law and principles laid ,.....

E down by Supreme Court on the issue, the arbitration agree-
ment did exist and, therefore, the matter should be referred to
an Arbitrator - Hence, the matter be placed before the Chief
Justice of the High Court to appoint an Arbitrator in accordance
with law to resolve the dispute between the parties.
F , The questions which arose for determination in this
appeal before this Court were as to whether in the facts
and circumstances of the case, there exists an agreement
when one of the parties to the agreement had not put its
signature on the same and as to whether in pursuance of ~
G such an agreement, an Arbitrator could be appointed.
...--
Allowing the appeal, the Court
HELD: 1.1 In the instant case, a tender enquiry for
purchase of the goods in question was floated by the re-
H 108
M/S. UNISSI (INDIA) PVT. LTD. v. POST GRADUATE 109
INSTITUTE OF MEDICAL EDU. & RESE.
1 spondent. The tender of the appellant was accepted by A
the respondent for supplying the goods to their different
departments. The tender documents itself contain an ar-
bitration clause and by reason of acceptance of the ten-
der by the respondent, it must be held that there was a
valid arbitration agreement between the parties. The ap- 8
I
pellant supplied the goods and the receipt thereof was
- -I
duly acknowledged on behalf of the respondent on the
delivery challans. (Para -12) [117-F-H, 118-A]
1.2 In the letters issued by the respondent, there was
an apparent acknowledgement of supply of the goods by c
the appellant and also reference to the tender enquiry
number. It is an admitted position that the appellant had
sent the agreement containing the arbitration clause, as
per the format provided by the respondent, after duly sign-
ing the same on requisite value of stamp paper for sign- D
ing of the same by the respondent. The respondent
though admittedly received the same, did not send back
the agreement to the appellant after signing it as per the
agreement between the parties. The respondent admit-
tedly had used the goods in question for about a year E
and thereafter returned the same to the appellant. Subse-
quently, the bank guarantee furnished by the appellant
and the earnest money deposit was encashed and for-
feited by the respondent. (Para - 12) [118-A-D]
'""' \
1.3 In view of the facts and the correspondences be- F
tween the parties, particularly the tender offer made by
the appellant and supply order of the respondent, and, in
view of an arbitration agreement between the parties and
the action taken on behalf of the appellant and in view of
Section 7 of the Arbitration and Conciliation Act and con- G
--{ sidering the principles laid down in the decisions of this
Court, this Court is of the view that the arbitration agree-
ment did exist and therefore the matter should be referred
to an Arbitrator for decision. That apart, the documents
on record apparently show supply of materials by the H
1

110 SUPREME COURT REPORTS [2008] 14 S.C.R.

A appellant and acceptance thereof by the respondent in
pursuance of the tender enquiry by the respondent,
wherein tender of the appellant containing an arbitration
clause was admittedly accepted by the respondent. In that
view of the matter, it cannot be said that the respondent
B , should now be allowed to wriggle out from the arbitration
agreement. (Paras - 12 & 13) [118-D-G]
I-·-
Smita Conductors Ltd. vs. Euro Alloys Ltd. (2001) 7 SCC
728 and Nimet Resources Inc. vs. Essar Steels Ltd. (2000) 7
sec 497 - relied on.
c
2. Although no formal agreement was executed, the
tender documents indicating certain conditions of con-
tract contained an arbitration clause. It is also an admit-
ted position that the appellant gave his tender offer which
D was accepted and the appellant acted upon it. Accord-
ingly, this Court is of the view that the Additional District
Judge, Chandigarh erred in holding that their did not ex-
ist any arbitration agreement between the parties and,
therefore, the order passed by him is liable to be set aside.
The matter may be placed before the Chief Justice of the
E High Court of Chandigarh to appoint an Arbitrator in ac-
cordance with law to resolve the dispute between the .
parties. (Paras - 14 & 15) [119-8-D]
CASE LAW REFERENCE ,-
I
F (2001) 1 sec 728 relied on Para - 9
(2000) 1 sec 497 relied on Para - 11
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 6039
of 2008
G
From the final Judgment and Order dated 3.8.2005 of the
Court of Sh. E. Kishan Mehta, Addi. District Judge, Chandigarh,
in Arbitration Case No. of 2.6.04
Satinder S. Gulati, Kamaldeep Narang and Dr. Kailash
H Chand for the Appellant.
M/S. UNISSI (INDIA) PVT. LTD. v. POST GRADUATE 111
INSTITUTE OF MEDICAL EDU. & RESE.
·~
Dr. A. Francis Julian, Sumit Kumar; A. Mariarputham and A
Aruna Mathur (for M/s. Arputham, Aruna & Co.) for the Respon-
dent.
The Judgment of the Court was delivered by
TARUN CHATTERJEE, J. 1. Delay in filing this special B
leave petition is condoned.
~

2. Leave granted.
.... 3. This appeal is directed against the Judgment and or-
der dated 3rd of August, 2005 in Arbitration Case No. 45 of 2004 c
passed by the Additional District Judge, Chandigarh, dismiss-
ing the application filed by the appellant for appointment of an
Arbitrator on the ground that no Arbitration Clause was in exist-
ence between the parties.
4. The brief facts leading to the filing of this appeal may be D
summarized as under:-
A tender was floated by the Post Graduate Institute of
Medical Education and Research (in short, "the PGI") on 21st of
December, 2000 for the purchase of Pulse Oxymeters, the for-
E
mat of which contained an arbitration clause. The appellant gave
an offer for the tender on 15th of January, 2001, which was ac-
cepted by the PGI. Purchase orders were placed and in com-
pliance with the said order, the appellant had supplied equip-
.....
ments. The delivery of equipments was also accepted by the
PGI and the machineries were installed. The PGI demanded F
the execution of an agreement containing an arbitration clause
on a non-judicial stamp paper duly signed. The appellant signed
the agreement and sent it to the PGI but the signature of the
authorities of the PGI was never acquired. It is true that although
the appellant duly signed the agreement and sent it to PGI but G
the signature on the agreement had never reached the appel-
lants. According to the appellant, an agreement containing an
arbitration clause was executed between the parties. No pay-
ment was made by the PGI against delivery of goods worth Rs.
22, 16,853.60 though the equipments were installed and put in H
112 SUPREME COURT REPORTS [2008] 14 S.C.R.

A use. The PGI, on the other hand, however, forfeited the earnest ~
money of Rs.2, 12, 160/-, which was encashed by them. Even-
tually, the PGI got the equipments lifted and it was found by the
appellant that the equipments had been mis-handled and were
no longei fit to be used/resold in the market. A notice was served
B on behalf of the appellant of the matter to the PGl-but no reply
was received. It was the case of the PGI that no agreement was
,_,...
executed. The appellant was alleged to have committed fraud
on the PGI by representing themselves of being the manufac-
turers of the equipments, which were in fact, according to the ~

'
c PGI, were imported from Korea. A Technical Committee of the
PGI on 141h of January, 2003, however, did not approve the pur-
chase and installation of the equipments and thus, by a letter
issued in the year 2003, the appellant was informed that the
tender was rejected. According to the PGI, the supply, not being
in accordance with the specification, was rejected after use and
D
the appellant was debarred from dealing with the PGI for the
. next two years. Therefore, it was alleged by the PGI that no ar-
bitration agreement was executed between the parties and,
therefore, question of appointing an Arbitrator in the present
case could not arise at all.
E
5. Finding no other alternative, the appellant filed an appli-
cation before the Additional District Court at Chandigarh under
Section 11 (4) (a) of the Arbitration and Conciliation Act, 1996
(in short, "the Act") for a direction upon the PGI to appoint an ~
;
F Arbitrator. The Additional District Judge, Chandigarh, by the
impugned order dated 3rd of August, 2005, held that as there
was no agreement executed between the parties, the question
of appointing an Arbitrator under the Act could not arise at all. It
was held by the learned Addi. District Judge, Chandigarh that
since the photocopy of the proposed agreement bears the sig-
G
nature of only the appellant and not that of the PGI, it could not
be held that an arbitration agreement was executed between
the parties and since there was no signature of the PGI on the
said agreement, which was sent after signature of the appel-
lant, remained only as an offer. Therefore, according to the
H
MIS. UNISSI (INDIA) PVT. LTD. v. POST GRADUATE 113
INSTITUTE OF MEDICAL EDU. & RESE. [TARUN CHATTERJEE, J.)

learned Additional District Judge, Chandigarh, in the agreement A
containing an arbitration clause, it could not be held that the
appellant was entitled to ask for appointment of an Arbitrator
under Section 11 of the Act. It is this order, which is under chal-
lenge in this Court, which on grant of leave, was heard in pres-
ence of the learned counsel for the parties. B
6. This special leave petition, as initially filed, came up for
consideration for admission on gth of May, 2006 when a ques-
tion arose whether the said special leave petition was main-
tainable in this court against an order of the Additional District
Judge, Chandigarh purported to have acted in the exercise of C
its power under Section 11 (4)(a) of the Act. While issuing no-
tice, this Court passed the following order:-
"This special leave petition has been filed by th"e
petitioner against the order dated 3.8.2005 passed by
0
the Addi. District Judge, Chandigarh in Arbitration Case
No. 45 dated 2. 6. 2004. According to the learned counsel
for the petitioner, the special leave petition is
maintainable in view of the recent judgment of the
Constitution Bench in SBP & Co. vs. Patel Engineering
Ltd. & Anr. Reported in (2005) 8 SCC 618. In this regard, E
he invited our attention to paragraph 47 sub-clause
(vii), (x) and (xi). In our view, there is a clear indication in
the said judgment that against the order passed by the
Additional District Judge, the special leave petition under
Article 136 of the Constitution of India is entertainable F
by this Court.
(emphasis supplied)
We, therefore, issue notice to the respondent on the
question of maintainability of the special leave petition G
in this Court against the order passed by the Additional
District Judge, Chandigarh.
Issue notice on the application for condonation of delay
also."
H
114 SUPREME COURT REPORTS [2008] 14 S.C.R.

A 7. On a plain reading of this order passed by this Court on ~
of May, 2006, it is evident that this Court was of the view that
gth

an application under Article 136 of the Constitution was main-
tainable against an order passed by the Additional District
Judge, Chandigarh. Furthermore, the learned counsel appear-
s ing for the parties have also argued the case before us on mer-
its, that is to say, on the question whether an arbitration agree-
ment exists between the parties for which an Arbitrator could
be appointed. Such being the stand taken by the learned coun-
sel for the parties and in view of the aforesaid order passed by
C this Court, we do not intend to go into the question whether a
petition under Article 136 of the Constitution would at all be
entertainable by this Court as the Special Leave petition was
entertained and notice was issued. However, keeping this ques-
tion open for decision in an appropriate case, we would like to
D go into the merits of the case, that is to say, whether an Arbitra-
tor can be appointed in view of existence of an arbitration agree-
ment between the parties, although in such agreement the PGI
had not executed agreement by putting their signature on the
same.
E 8. In view of the aforesaid stand being taken by the learned
counsel for the parties, let us now examine the merits of this
appeal. As noted herein earlier, the learned Additional District
Judge, Chandigarh held that there did not exist any arbitration
agreement between the parties and, therefore, question of ap-
F pointing an Arbitrator could not arise at all. Therefore, in order '
to decide whether the order of the Additional District Judge was
correct or not, we have to consider the relevant facts as well as
Section 7 of the Act for the purpose of coming to a proper con-
clusion whether the agreement containing an arbitration clause
G did exist between the parties or not. Before we proceed further,
we may examine Section 7 of the Act which runs as under :
"Section 7 - Arbitration agreement
(1) In this Part, "arbitration agreement" means an
agreement by the parties to submit to arbitration all or
H
M/S. UNISSI (INDIA) PVT. LTD. v. POST GRADUATE 115
INSTITUTE OF MEDICAL EDU. & RESE. [TARUN CHATTERJEE, J.J

certain disputes which have arisen or which may arise A
between them in respect of a defined legal relationship,
whether contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate
agreement. B
--;\
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-
(a) a document signed by the parties; c
(b) an exchange of letters, telex, telegrams or other
means of telecommunication which provide a record of
the agreement; or
(c) an exchange of statements of claim and defence in D
which the existence of the agreement is alleged by one
party and not denied by the other.
(5) The reference in a contract to a document containing
an arbitration clause constitutes an arbitration agreement
if the contract is in writing and the reference is such as E
to make that arbitration clause part of the contract."
9. We have carefully examined the provisions made un-
der Section 7 of the Ac~ which deals with arbitration agreement.
'
\ In Smita Conductors Ltd. vs. Euro Alloys Ltd. [2001 (7) SCC
728}, Article II Para 2 of New York Convention came up for con- F
sideration before this Court. The provisions of Article II, Para 2
of New York Convention is in pari materia to the aforequoted
provisions of Section 7 of the Act. The provisions of Article 11,
Para 2 of New York Convention is being quoted herein now.
Para 2 runs as under :- G
"Para 2 - The term "agreement in writing" shall include
an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an
exchange of letters or telegrams."
H
116 SUPREME COURT REPORTS [2008] 14 S.C.R.

A 10. This Court, while interpreting the aforequoted para 2 r·
in the New York Convention held in para 6 at pages 734-735 in
Smita Conductors (supra) the following : -
"6. What needs to be understood in this context is that the
agreement to submit to arbitration must be in writing. What
B is an agreement_in writing is explained by para 2 of Article
11. If we break down para 2 into elementary parts, it consists {,..r
of four aspects. It includes an arbitral clause (1) in a
contract containing an arbitration clause signed by the
parties, (2) an arbitration agreement signed by the parties,
c (3) an arbitral clause in a contract contained in exchange
of letters or telegrams, and (4) an arbitral agreement
contained in exchange of letters or telegrams. If an
·arbitration clause falls in any one of these four categories,
it must be treated as an agreement in writing. In the present
D case, we may advert to the fact that there is no letter or
\

telegram confirming the contract as such but there is certain '>.-

correspondence which indicates a reference to the
contract in opening the letters of credit addressed to the
Bank to which we shall presently refer to. There is no
E correspondence between the parties either disagreeing
with the terms of the contract or arbitration clause. Apart
from opening the letters of credit pursuant to the two
contracts, the appellant also addressed a telex message
on 23.4.1990 in which there is a reference to two contracts ,

F bearing Nos. S.142 and S. 336 in which they stated that I
/

they want to invoke force majeure and the arbitration
clauses in both the contracts which are set forth
successively and thus it is clear that the appellant had
these contracts in mind while opening the letters of credit
in the bank and in addressing the letters to the bank in this
G
regard. May be, the appellant may not have addressed
letters to the respondent in this regard but once they state
that they are acting in respect of the contracts pursuant to
which letters of credit had been opened and they are
invoking the force majeure clause in these two contracts,
H
MIS. UNISSI (INDIA) PVT. LTD. v. POST GRADUATE 117
INSTITUTE OF MEDICAL EDU. & RESE. [TARUN CHATTERJEE, J.J
\ it obviously means that they had in mind only these two A
contracts which stood affirmed by reason of these letters
of credit. If the two contracts stood affirmed by reason of
their conduct as indicated in the letters exchanged, it must
be held that there is an agreement in writing between the
parties in this regard. B
11. Again in Nimet Resources Inc. vs. Essar Steels Ltd.
[2000 (7) SCC 497 at Para 5]. this Court observed as follows:-
"If the contract is in writing and the reference is made to
a document containing arbitration clause as part of the c
transaction, which would mean that the arbitration
agreement is part of the contract. Therefore, in a matter
where there has been some transaction between the
parties and the existence of the arbitration agreement is
in challenge, the proper course for the parties is to thrash
D
out such question under Section 16 of the Act and not
under Section 11 of the Act."
12. Keeping the aforesaid principles, as quoted herein-
above, in the aforesaid decisions of this Court in kind, in fact
what constitutes an arbitration agreement between the parties, E
we have to examine whether there exists an arbitration agree-
ment between the parties or not in the facts and circumstances
of the case. Let us, therefore, consider the gist of the facts in-
valved in this case. A tender enquiry No.2PGl/OGL/2K/6281
\
dated 21.12.2000 for purchase of Pulse Oxymeters was floated F
by the PGI. It is an admitted position that the appellant submit-
ted their tender vide their offer No.UIPL/331177/00-01 dated
15.2.2001. The tender of the appellant was accepted by the
PGI vide their letter No.PGl/P-61/02/477/11936-51 dated
29.9.2002 for supplying 41 Pulse Oxymeters to their different
G
departments. The tender documents itself contain an arbitra-
~
tion clause and by reason of acceptance of the tender of the
appellant by the PGI, it must be held that there was a valid arbi-
tration agreement between the parties. The appellant supplied
41 Pulse Oxymeters and the receipt thereof was duly acknowl-
H
118 SUPREME COURT REPORTS [2008] 14 S.C.R.

A edged on behalf of the PGI on the delivery challans. The ser-
vice/installation reports of the aforesaid machines were duly
signed on behalf of the PGI. In the letters issued by the PGI,
there was an apparent acknowledgement of supply of the afore-
said meters by the appellant and also reference to the afore-
B mentioned tender enquiry number. It is an admitted position that
the appellant had sent the agreement containing the arbitration
clause, as per the format provided by the PGI, after duly signing
the same on requisite value of stamp paper for signing of the
same by the PGI. The PGI though admittedly received the same,
c did not send back the agreement to the appellant after signing
it as per the agreement between the parties. The PGI admit-
tedly had used the machines for about an year and thereafter
returned the same to the appellant. Subsequently, the bank guar-
antee furnished by the appellant for Rs.2, 13, 160/- and the ear-
D nest money deposit of Rs.45,000/- was encashed and forfeited
by the PGi. In view of the aforesaid facts and the correspon-
dences between the parties, particularly the tender offer made
by the appellant dated 15.1.2001 and supply order of the PGI
dated 2~.9.2002, and, in our view, to constitute an arbitration
agreement between the parties and the action taken on behalf
E of the appellant and in view of Section 7 of the Act and consid-
ering the principles laid down by the aforesaid two decisions of
this Court, as noted herein earlier, we are of the view that the
arbitration agreement did exist and therefore the matter should
be referred to an Arbitrator for decision. That apart, as we have I

F already noted herein earlier that in this case, the documents on
record, in our view, apparently show supply of materials by the
appellant and acceptance thereof by the PGI in pursuance of
the tender enquiry by the PGI, wherein tender of the appellant
containing an arbitration clause was admittedly accepted by
G the respondent. In that view of the matter, it cannot be said that
the PGI should now be allowed to wriggle out from the arbitra-
tion agreement between them.
13. We may reiterate that in this case admittedly the docu-
ments which are on record apparently show supply of the mate-
H
MIS. UNISSI (INDIA) PVT. LTD. v. POST GRADUATE 119
INSTITUTE OF MEDICAL EDU. & RESE. [TARUN CHATTERJEE, J.]

rial by the appellant to the PGI and acceptance thereof by the A
PGI in pursuance of the tender enquiry by them wherein tender
·of the appellant containing the arbitration clause was admittedly
accepted by the PGI. Accordingly, we hold that arbitration agree-
ment did exist and, therefore, dispute between the parties would
be referred to an Arbitrator for decision. B
14. Therefore, considering the above aspects of the mat-
ter in this case, we must come to this conclusion that although
no formal agreement was executed, the tender documents in-
dicating certain conditions of contract contained an arbitration
clause. It is also an admitted position that the appellant gave C
his tender offer which was accepted and the appellant acted
upon it. Accordingly, we are of the view that the learned Addi-
tional District Judge, Chandigarh erred in holding that their did
not exist any arbitration agreement between the parties and,
therefore, the order passed by him is liable to be set aside. D
-f
15. For the reasons aforesaid, the impugned order is set
aside and the appeal is allowed. We now direct that the matter
may be placed b_efore the Hon'ble Chief Justice of the High
Court of Chandigarh to appoint an Arbitrator in accordance with
law to resolve the dispute between the parties. The appeal is E
thus allowed. There will be no order as to costs.
S.K.S. Appeal allowed.