Judgment on Contract Dispute: PSA Mumbai Investments PTE. Ltd. v. Jawaharlal Nehru Port Trust

In a recent landmark case, the Supreme Court of India delivered a significant judgment in the matter of a contract dispute between PSA Mumbai Investments PTE. Ltd. and Jawaharlal Nehru Port Trust. The judgment clarifies essential aspects of contract law, including arbitration clauses and contract formation requirements. This case has far-reaching implications for the legal landscape surrounding commercial agreements and arbitration in India.

Facts

The respondent accepted the bid proposal on 05.11.2014 and enclosed a signed copy of the LOA received by fax.
The appellant decided to withdraw the LOA on 04.08.2016 due to the non-availability of the No Objection Certificate from the Khasi Hill Autonomous District Council, which was required for the project.
The appellant had requested a signed copy of the duplicate LOA as acknowledgment within seven days of receiving the LOA, as per the bid document.
The respondent expressed the intention to sign the contract agreement on 13.11.2014, but no progress was made until August 2016.
The guarantees required under the RFP were maintained by the respondent during this period.

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Analysis

The clauses in the RFP, such as the schedule of bidding process, suggest that disputes can only be resolved by the Courts of Delhi and not through arbitration.
The controversy arises around whether the LOA constitutes a binding contract and if the arbitration clause would be applicable.
The Delhi High Court found an arbitration clause in the draft agreement and appointed arbitrators accordingly.
Events have overtaken the respondent as per the terms of the RFP mentioning the execution of the Contract Agreement.
The RFP specifies the sequence of events leading to the formation of a Special Purpose Vehicle and the signing of the Concession Agreement.
In case of non-receipt of the signed LOA by the stipulated date, the Authority may appropriate the BID Security as Damages.
The judgment in INOX Wind Ltd. case does not apply as there is no agreement between the parties in the present case.
The PSA Mumbai Investments PTE. Ltd.’s judgment is considered applicable and governing in the present case.
The bid process may be annulled without providing any reason by Board of Trustees of the Jawaharlal Nehru Port Trust
In order to convert a proposal into a promise, the acceptance must be absolute and unqualified as per Section 7 of the Indian Contract Act, 1872
An exception to the general rule in M.R. Engineers and Contractors Private Limited extends to standard forms between individual persons, not just professional assessments
PSA Mumbai Investments PTE. Ltd.’s case clarified that there is no concluded contract until specific steps are undertaken after the Letter of Award
The judgment in INOX Wind Limited v. Thermocables Limited (2018) 2 SCC 519 was strongly relied upon by Mr. Dave
The BID Security shall be forfeited and appropriated by the Authority as damages payable for various reasons such as non-responsive BID, engagement in corrupt practices, withdrawal of BID, failure to comply with specified requirements, or breach of the Agreement.
The Selected Bidder’s BID Security will be returned upon signing the Contract Agreement and furnishing the Performance Security.
The Authority may adjust the amount of BID Security based on the Performance Security to be provided by the Selected Bidder.
Disqualification and forfeiture of BID Security may occur if any legal, financial, or technical adviser engaged by the Bidder is related to the Project during the Bidding Process or post issuance of LOA or execution of the Agreement.
The Bidding Process is governed by the laws of India, and the Courts at Delhi have jurisdiction over disputes arising in connection with the Bidding Process.
The Selected Bidder is required to execute the Agreement within the prescribed period and cannot seek any deviations or modifications.