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In a groundbreaking decision, the Kerala High Court has emphasized that even in the absence of a formal agreement, parties can be bound by specified terms and conditions, solidifying the existence of a concluded contract. This ruling comes in response to a dispute between M/S Anantham Online Pvt. Ltd. and the Senior Divisional Commercial Manager of Southern Railway regarding a two-year work contract for operating the Vehicle Parking Facility at Thiruvananthapuram Central Railway Station. Here, we delve into the details of this significant legal development.
Justice Devan Ramachandran, while accepting the arbitration request and appointing an arbitrator for the aforementioned dispute, made a pivotal observation. He noted that despite the absence of a formal agreement, Annexure A1 and A6 unequivocally stated that the terms of the Letter of Award (LOA) and any subsequently imposed conditions would apply. Therefore, the parties were obligated to adhere to these conditions, rendering the argument for the absence of a concluded contract baseless.
The dispute arose when the respondents invited tenders for operating the Vehicle Parking Facility at Thiruvananthapuram Central Railway Station through a Tender Document. Clause 19(1) of the document stipulated that any delay in executing the agreement would result in the terms of the tender notification and the LOA becoming binding and treated as an agreement. Additionally, Clause 57 dictated that any disputes between the parties would be subject to the Arbitration and Conciliation Act, 1956, and its subsequent amendments, along with the General Conditions of Contract (GCC).
In response to the petitioner's tender submission, the respondent issued the LOA, which specified that the contract's duration would commence either from the actual start of managing the Vehicle Parking Facility or from the 30th day of the document, whichever was earlier. This sets the stage for the subsequent dispute concerning unauthorized vehicle parking near the Railway Station.
The heart of the matter revolves around the respondent's alleged inaction in addressing unauthorized vehicle parking. The petitioner claimed that despite their requests for guidance in resolving the issue, the respondent terminated the contract and demanded a list of parked vehicles. The respondent's stance was that the petitioner had not paid the license fee for the second quarter and insisted on executing a formal agreement within a week. Ultimately, the respondents terminated the contract through another letter.
Faced with these developments, the petitioner approached the court with an arbitration request, citing the Tender Document as an integral part of the contract. They argued that all disputes between the parties must be resolved through arbitration as per the document's provisions.
Southern Railway's Standing Counsel, S. Biju, contested the existence of a concluded contract, referring to a letter issued by the respondent. This letter directed the petitioner to execute the agreement within a week, but no action had been taken. As a result, Biju contended that the petitioner could not seek arbitration based on a non-existent arbitration clause.
Upon reviewing the documents, the court found that the LOA had deemed the contract's commencement without the necessity of a formal agreement. While Clause 3 of the document mandated the execution of an agreement on a non-judicial stamp paper of Rs. 500 within 15 days, the court emphasized that the petitioner had indeed abided by the terms of the LOA.
The court further noted that a Letter of Award had been issued to the petitioner, reiterating the requirement to follow the General and Special Conditions of Contract without explicitly mandating a formal contract. This strongly supported the conclusion that the parties had bound themselves to specific terms and conditions, and a concluded contract did exist.
The court specifically pointed to the Letter of Award, which explicitly mentioned that a 'contract' had been awarded to the petitioner, emphasizing the need to adhere to the general and special conditions.
Furthermore, the court reiterated that the Tender Document itself mandated arbitration for dispute resolution in Clause 57. Although the court noted the absence of the actual General Conditions of Contract (GCC), it firmly established that provisions for arbitration between the parties did exist.
In light of these findings, the court granted the arbitration request and appointed Advocate K.K. Raziya as the sole arbitrator to adjudicate and resolve the disputes and differences between the parties. This ruling underscores the significance of implied contracts, even in the absence of formal agreements, and solidifies the importance of adhering to specified terms and conditions.
In this significant legal development, the Kerala High Court's ruling has clarified the validity of implied contracts, even when formal agreements are absent. This decision not only benefits Anantham Online Pvt. Ltd. but also establishes a precedent for similar cases in the future. The importance of adhering to specified terms and conditions in business dealings cannot be overstated, as this case exemplifies.
