Case: Indian Oil Corporation Ltd. Through its Senior Manager Vs. M/s Shree Ganesh Petroleum Rajgurunagar Through its Proprietor Mr. Laxman Dagdu Thite

a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other partys consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment. 51. In PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Others (2021) SCC Online SC 508 this Court referred to and relied upon SSangyong Engineering and Construction Company Limited (supra) and held: 87. As such, as held by this Court in Ssangyong Engineering and Construction Company Limited (supra), the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category. 52. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court clearly held that the role of the Arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction. 53. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court referred to and relied upon the earlier judgment of this Court in MD. Army Welfare Housing Organization v. Sumangal Service (P) Ltd. (2004) 9 SCC 619 and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae. 54. In Satyanarayana Construction Company v. Union of India and Others (2011) 15 SCC 101, a Bench of this Court of coordinate strength held that once a rate had been fixed in a contract, it was not open to the Arbitrator to rewrite the terms of the contract and award a higher rate. Where an Arbitrator had in effect rewritten the contract and awarded a rate, higher than that agreed in the contract, the High Court was held not to commit any error in setting aside the award. 55. There can be no dispute with the proposition of law enunciated by this Court in Central Inland Water Transport Corporation Limited and Another v. Brojo Nath Ganguly and Another (1986) 3 SCC 156, cited by Mr. Keswani. The judgment, however, has no application in this case. 56. In Brojo Nath Ganguly (supra), this Court held that a term in a contract of employment as also service rules of a Government company providing for termination of services of permanent employees without assigning reasons, on three months notice, or pay in lieu thereof was unconscionable, arbitrary and opposed to public policy. This Court was not concerned with any lease agreement or any dealership agreement in the aforesaid case. 57. In this case, there is no finding by the Arbitral Tribunal that any condition of the dealership agreement was unconscionable and the Arbitral Tribunal has not interfered with termination of the dealership agreement. 58. The Appellant and the Respondent entered into the lease agreement in this case with their eyes open. The Respondent had the option not to lease out its property to the Appellant. The situation of an owner of property, executing a lease agreement in respect of his property cannot be equated with a contract of employment executed by and between an employee and a mighty employer, where the employee has little option but to accept the terms and conditions offered by the employer. 59. It is well settled that a judgment of a Court is precedent for the issue of law which is raised and decided. Words and phrases used in a judgment cannot be read in isolation, out of context. To quote the distinguished author V. Sudhish Pai Judgments and observations in judgments are not to be read as Euclids theorems or as provisions of statute. Judicial utterances/pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to explain not define. Judges interpret statutes, their words are not be interpreted as statutes. Thus, precedents are not to be read as statutes (Constitutional Supremacy-A Revisit, Essays on Constitutionalism, Rule of Law & Constitutional Adjudication by Mr. V. Sudhish Pai).

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]41. The High Court also apparently overlooked the fact that the jurisdiction of the Arbitral Tribunal to increase the monthly lease rent from Rs.1750/- per month to Rs.35,000/- per month was specifically in issue before the learned Arbitrator (Issue No.6) as evident from the impugned award.42. As held by this Court in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49,  cited by Mr. Prasenjit Keswani, learned counsel appearing on behalf of the Respondent, Section 34 in conjunction with Section 5 of the 1996 Act makes it clear that an arbitral award that is governed by Part I of the 1996 Act, can only be set aside on grounds mentioned under Sections 34(2) and (3) of the said Act and not otherwise. The Court considering an application for setting aside an award, under Section 34 of the 1996 Act cannot look into the merits of the award except when the award is in conflict with the public policy of India as provided in Section 34(2)(b)(ii) of the 1996 Act.43. In Associate Builders (supra), this Court held that an award could be said to against the public policy of India in, inter alia, the following circumstances: -(i) When an award is, on its face, in patent violation of a statutory provision.(ii) When the Arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute.(iii) When an award is in violation of the principles of natural justice.(iv) When an award is unreasonable or perverse.(v) When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act.(vi) When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court.44. An Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.47. In Associate Builders (supra), this Court held that an award ignoring the terms of a contract would not be in public interest. In the instant case, the award in respect of the lease rent and the lease term is in patent disregard of the terms and conditions of the lease agreement and thus against public policy. Furthermore, in Associate Builders (supra) the jurisdiction of the Arbitral Tribunal to adjudicate a dispute itself was not in issue. The Court was dealing with the circumstances in which a Court could look into the merits of an award.48. In this case, as observed above, the impugned award insofar as it pertains to lease rent and lease period is patently beyond the scope of the competence of the Arbitrator appointed in terms of the dealership agreement by the Director (Marketing) of the Appellant.49. The lease agreement which was in force for a period of 29 years with effect from 15th April, 2005 specifically provided for monthly lease rent of Rs.1750 per month for the said plot of land on which the retail outlet had been set up. It is well settled that an Arbitral Tribunal, or for that matter, the Court cannot alter the terms and conditions of a valid contract executed between the parties with their eyes open.50. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) (2019) 15 SCC 131,  this Court held:76. However, when it comes to the public policy of India, argument based upon most basic notions of justice, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013 — in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministrys change in the base indices from 1993-1994 to 2004-2005. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other partys consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.51. In PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Others (2021) SCC Online SC 508 this Court referred to and relied upon SSangyong Engineering and Construction Company Limited (supra) and held:87. As such, as held by this Court in Ssangyong Engineering and Construction Company Limited (supra), the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.52. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court clearly held that the role of the Arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.53. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court referred to and relied upon the earlier judgment of this Court in MD. Army Welfare Housing Organization v. Sumangal Service (P) Ltd. (2004) 9 SCC 619  and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae.55. There can be no dispute with the proposition of law enunciated by this Court in Central Inland Water Transport Corporation Limited and Another v. Brojo Nath Ganguly and Another (1986) 3 SCC 156,  cited by Mr. Keswani. The judgment, however, has no application in this case.56. In Brojo Nath Ganguly (supra), this Court held that a term in a contract of employment as also service rules of a Government company providing for termination of services of permanent employees without assigning reasons, on three months notice, or pay in lieu thereof was unconscionable, arbitrary and opposed to public policy. This Court was not concerned with any lease agreement or any dealership agreement in the aforesaid case.57. In this case, there is no finding by the Arbitral Tribunal that any condition of the dealership agreement was unconscionable and the Arbitral Tribunal has not interfered with termination of the dealership agreement.58. The Appellant and the Respondent entered into the lease agreement in this case with their eyes open. The Respondent had the option not to lease out its property to the Appellant. The situation of an owner of property, executing a lease agreement in respect of his property cannot be equated with a contract of employment executed by and between an employee and a mighty employer, where the employee has little option but to accept the terms and conditions offered by the employer.59. It is well settled that a judgment of a Court is precedent for the issue of law which is raised and decided. Words and phrases used in a judgment cannot be read in isolation, out of context. To quote the distinguished author V. Sudhish Pai Judgments and observations in judgments are not to be read as Euclids theorems or as provisions of statute. Judicial utterances/pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to explain not define. Judges interpret statutes, their words are not be interpreted as statutes. Thus, precedents are not to be read as statutes (Constitutional Supremacy-A Revisit, Essays on Constitutionalism, Rule of Law & Constitutional Adjudication by Mr. V. Sudhish Pai).