Case Brief |Rajasthan State Electricity vs Dayal WoodWork

Citations: 1998 (2) ALD 599, 1998 (3) ALT 160 

Bench: B Raikote 

Facts of the case: 

In this case, the appellants are the defendants. The plaintiff filed a suit for recovery of Rs.  17,434/- from the defendants. As per the plaintiff, an amount of Rs. 16,200/- was deposited with the defendants vide Demand Draft No. 539627 towards security deposit as per the negotiations that took place between the plaintiff and the defendants for the supply of sleepers by the plaintiff to the defendants as per the tender notification issued by the defendants.  

The contract was not concluded as per the tender offered by the plaintiff and as such the plaintiff was entitled to a refund of Rs. 16,200/- with interest, which comes out to be Rs.  17,434/-. The plaintiff further gave a legal notice but the defendants failed to refund the same so he was forced to file a suit. 

The defendants contended that the tender was submitted by M/s. Dayal Wood Works and as per the request of M/s. Dayal Wood Works, the defendants sent a copy of the general conditions of the contract with a copy of technical specifications for the sleepers. In pursuance of the same,  M/s. Dayal Wood Works submitted their quotation by registered post and after considering the offer.

The Superintendent of the defendants then sent a telegram and asked M/s. Dayal Wood  Works to depute their representative for negotiations with two per cent security deposits and accordingly M/s.Dayal Wood Works agreed in writing the terms and conditions concerning the supply of 6,000 wooden sleepers, and thereafter the conclusion of the contract, Rs. 16,200/- was deposited as security. 

The plaintiff contended that t was agreed between the parties that the rate per sleeper would be at Rs. 134.56 pc. It was further agreed that the price quoted in the letter shall remain firm.

But after sending the purchase order, the defendants refused to accept the purchase order stating that the terms in the purchase order were entirely different from what was agreed upon between the parties.  

ISSUES BEFORE THE COURT: 

1. Whether the plaintiff is entitled to the refund of Rs.16,200/-? 

2. Whether there was a presentation by the plaintiff to the defendants? 

3. Whether the plaintiff deposited the security money of Rs. 16,200/-with the defendant? 

4. Whether there is an arbitration clause in the agreement between the parties and if so whether the suit is not maintainable?

JUDGEMENT: 

DECISION OF LOWER COURT 

The lower court was of the view that the defendants have themselves admitted the deposit of  Rs. 16,200/-. It was also held that valid tender was presented by the plaintiff to the defendants. On material issues, the Court below held that no contract was concluded between the parties.  Further, the defendants were not entitled to costs of Rs. 3,000/- from the plaintiff.  

Since there was no contract was concluded between the parties, the arbitration clause couldn’t be invoked by the defendants. So the Court granted a decree for Rs. 18,200/- with costs and further interest at 6 per cent per annum. So the defendants decided to appeal. 

DECISION OF HIGH COURT 

The Counsel for the appellants-defendants that there was an error made by the lower Court in holding that the contract between the plaintiff and defendants was not concluded. He submitted that the contract was concluded between the parties.  

The counsel appearing for the respondent-plaintiff contended that the purchase order stipulated new terms, which the plaintiff never accepted and in this view the contract was not concluded between them. He further submitted that since the contract was not concluded between them,  the defendants cannot invoke the arbitration clause.  

The Managing Partner of the plaintiff firm stated that the defendant called for tenders for the supply of Sal Wood Sleepers and he accordingly requested the defendant to send the tender schedule and he sent the tender schedule by post.

He further stated that a telegram was sent to participate in the negotiations for the settlement of commercial terms and conditions. He deposed that thereafter he received a purchase order by post from the defendant he found that the purchase order was not in conformity with the negotiated terms and conditions offered. Then plaintiff sent a letter refusing to accept the purchase order.  

Under Clause 28 of the purchase order, it was stated that the acceptance of the detailed purchase order should be conveyed to the Superintendent within seven days from receipt of the purchase order. In case no communication was received within that seven days,  it will be presumed that the plaintiff accepts the order in toto, including all the terms and conditions stipulated. 

He stated that since the plaintiff sent a letter refusing to accept the purchase, order, the contract was not concluded. He stated that when the plaintiff" requested the defendants to refund the deposited amount and thereafter he also got issued a legal notice.

The learned Counsel for the appellants-defendants contended that with the acceptance letter of the plaintiff, the contract stands concluded. Under the contract, it is stated that "agreement will be executed on receipt of your/detailed purchase order". Paragraph 28 of the purchase order stated as follows: 

“The acceptance of this detailed purchase order shall be conveyed to the Superintending within seven days of the date of receipt of the order. In case no communication is received  within the above specified period, it will be presumed that the supplier accepts the order in toto  including all the terms and conditions stipulated therein.”

The plaintiff stated that he was not ready to accept the clauses other than the ones stipulated in the letter sent by the plaintiff. The number of terms and conditions for the first time inserted in the purchase order was not agreed upon between the parties.  

The learned Counsel for the plaintiff submitted that because of these circumstances, the plaintiff did not accept the purchase order and as such the contract remains concluded. The security deposit is to be given for completing the contract. 

As the supplier refused to accept the purchase order, stating the instances of variations made in the terms and conditions which were never agreed upon between the parties. This states that the contract was not concluded between the plaintiff and the defendants, regarding the supply of sleepers by the plaintiff to the defendants.  

Under clause 2.03.3 of General Conditions, if the supplier fails or neglects to observe or perform the contract, it will be lawful for the purchaser to forfeit either in whole or part of the security deposit furnished. In the instant case, since the contract was not concluded, the question of forfeiting the security deposit should not arise. 

If there was no concluded contract between the parties, then the arbitration clause said to be contained in the contract could have no existence. Since there was no concluded contract between the parties and hence no arbitration agreement binding upon them.  

Since the negotiation for the supply of sleepers by the plaintiff to the defendants failed and no contract came into existence between the plaintiff and the defendants, the plaintiff was entitled to a refund of the security deposit, which he had deposited with the defendants. The appeal was therefore dismissed by the Hon’ble court. 

LEGAL PRINCIPLE INVOLVED: 

A Tender is a legal offer or proposal to do or abstain from doing an act and it binds the party to perform to the party to whom the offer is made. A tender can be made concerning money or specific articles. If the tender is not an offer then it falls in the same category as a  quotation of price.

When the tender is accepted it becomes a standing offer. A contract can arise only when an offer is made based on the tender. 

Requisites of valid tender 

A tender is an offer. It is something that you invited and communicated to notify acceptance.  In general terms, the following are the requirements of a valid offer: 

1. It must be unconditional. 

2. It must be done in the right place. 

3. They must conform to the terms of the obligation. 

4. It must be done at the right time. 

5. It must be done properly. 

6. The person making the bid must be able and willing to fulfil their obligation. 7. There must be a reasonable opportunity for inspection.

8. The tender must be made to the right person. 9. It must be of the total amount.