Case: Pure Helium India Pvt. Ltd Vs. Oil and Natural Gas Commission

BACKGROUND FACT :2. The parties hereto entered into a contract for supply of Helium Diving Gas pursuant to a notice inviting global tender dated 2.5.1989. In terms of the said notice inviting tender, the respondent herein was to take supply of Helium gas, which is one of the rare gases being not chemically produced and is mainly extracted from the natural gas wells in mineral form. The said gas is ordinarily imported from U.S.A., Algeria. Poland and Russia. In terms of the said notice inviting tender, three different categories of rates were to be quoted by the tenderers both foreign and Indian. Whereas the foreign tenderers were to quote their prices in foreign currency, the Indian bidders could indicate the nature of payment, i.e. if a part thereof was recoverable having foreign exchange component. Pursuant to or in furtherance of the said notice inviting tenders, the tenderers submitted their technical bids. The bidding was to be in two stages; in terms whereof the technical bids were to be opened first whereafter only final bids were to be considered. The appellants bid was found to be the lowest in that the appellant had bid a price of Rs. 150/- per cubic meter out of which US$ 5 was to be the foreign exchange component. The said bid of the appellant having been found to be the lowest, the parties entered into a negotiation; pursuant to or in furtherance whereof, the appellant lowered its offer to Rs. 149/- per cubic meter, out of which US$ 4.60 was to be the foreign exchange component.3. The respondent having felt the need of Helium gas urgently, pending execution of the contract, placed an order for ad hoc supply of 52000 cubic meters of Helium gas with the appellant. The respondent again placed an order for supply of 300000 cubic meters of Helium gas on 25.5.1990.4. The Ministry of Petroleum and Natural Gas, Government of India, vide its letter dated 21.5.1990 released foreign exchange for procurement of Helium gas, by reason of letter addressed to the respondent stating :I am directed to refer to your letter No. DlH/BOP/OBG/OS/30/90 dated 19.4.90 on the above subject and to convey the approval of the President to the procurement of 3,00,000 M3 of Helium Gas from M/s Pure Helium India Ltd., Bombay at a cost of Rs. 4.47 crores including a foreign exchange component of Rs. 2.38 crores (US $ 1,380 million @ US$ 5.7875 = Rs. 100/-).. The respondent thereafter issued two supply orders on 12.6.1990 to the appellant for supply of 52000 cubic meters and 300000 cubic meters Helium gas respectively at a price of Rs. 149 per cubic meter inclusive of foreign exchange component of US$ 4.60. Having regard to the increase in price of the US dollar, the appellant herein claimed the difference of price of US dollar as on the date of the contract and the date of supply, The claim of the appellant was recommended by the Secretary, Petroleum and Natural Gas Department as well as by certain other senior officers. The respondent, however, rejected the claim on or about 14.7.1992 whereafter the arbitration agreement was invoked, the arbitrators entered into a reference on 1.3.1993. A non-speaking award was made by the arbitrators on 13.8.1993 holding that the respondent was liable to compensate the appellant for Exchange Rate Fluctuation in the sum of Rs. 1,03,41,309/- with interest at the rate of 18% per annum from the date of the invoices till the date of the award. The respondent herein questioned the validity of the said award by filing a petition under Section 30 of the Act before the Bombay High Court which was marked as Arbitration Petition No. 52 of 1994. A learned Single Judge of the High Court of Judicature at Bombay dismissed the said petition and directed the award to be made a rule of the Court by an order dated 13.10.1995.6. Aggrieved by and dissatisfied therewith the respondent preferred an appeal there against which by reason of the impugned judgment has been allowed. The appellant is, thus, in appeal before us.

Reasoning:
OUR CONCLUSION :20. The questions framed are self-contradictory and inconsistent. Whereas in framing question (a) a right approach had been adopted by the Division Bench, a wrong one had been adopted in framing question (b). It is not in dispute that there were three different nature of bids; which were required to be made in terms of the notice inviting tenders : (i) by foreign bidders; (ii) by Indian bidders quoting Indian price with the foreign exchange component therefore as import was required to be made; (iii) payable only in Indian rupee without foreign exchange component.21. Before the arbitrators apart from construction of the contract agreement, the questions which, inter alia, arose were : (a) the effect and purport of circular letter dated 25.8.1989 issued by the Central Government: (b) the conduct of the respondent in making the payments to the persons similarly situated.24. We, however, as discussed in details a little later are strictly not concerned as regard true import and purport of the relevant clauses of the contract agreement. Our concern is merely to see as to whether the learned arbitrators exceeded their jurisdiction in making the award.25. The learned arbitrators, as noticed, hereinbefore, in making the award took into consideration the documentary as well as circumstantial evidence including private pleadings of the parties. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract.26. In Khardah Company Ltd. (supra), this Court held :...We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used herein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term, The terms of a contract can be expressed or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances..... Construction of the contract agreement, therefore, was within the jurisdiction of the learned arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, thus, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties as also the circumstantial evidence.28. A dispute as regard the construction of Clause 23 of the contract vis-a-vis the notification issued under Section 40 of the Reserve Bank of India Act also fell for their consideration. Such a question of law, it is trite, is also arbitrable and was specifically raised by the appellant. The learned arbitrators were further entitled to consider the question as to whether the appellant had been discriminated against insofar as similar claims have been allowed by the respondent.35. Rajasthan State Mines & Minerals Ltd. (supra) whereupon Mr. Rohtagi placed strong reliance, this Court held that the dispute to the arbitrator could not be termed as without jurisdiction but proceeded to consider the question as to whether he will have authority or jurisdiction to grant damages or compensation in the teeth of the stipulation providing that no escalation would be granted and that the contractor would only be entitled to payment of the composite rate as mentioned and no other or further payment of any kind or item whatsoever shall be due and payable by the Company to the contractor.36. It was concluded :(a) It is not open to the Court to speculate, where on reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion.(b) It is not open to the Court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award.(c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then the Court cannot interfere.(d) If no specific question of law is referred, the decision of the Arbitrator on that question is not final, however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. In a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding.(e) In a case of non-speaking award, the jurisdiction of the Court is limited. The award can be set aside if the arbitrator acts beyond his jurisdiction.(f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. Arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award.(g) In order to determine whether arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction.37. With respect we agree with the conclusions arrived at in Rajasthan State Mines & Minerals Ltd. (supra).38. Clause (g) of the conclusion in the said case, as quoted supra, is not applicable in the instant case inasmuch as there does not exist any provision which does not permit or give the arbitrator the power to decide the dispute raised by the claimant nor there exist any specific bar in the contract to raise such claim.39. To the same effect is the decision of this Court in Food Corporation of India v. Surendra, Devendra & Mahendra Transport Co. [2003]1SCR839 .40. In Shyama Charan Agarwala (supra), this Court observed :19. Testing the case on hand on the touchstone of well-settled principles laid down by courts, we are unable to hold that the High Court exceeded its jurisdiction in interfering with the award or failed to exercise the jurisdiction vested in it to set aside the award. The approach of the High Court cannot be said to be contrary to the well-settled principles governing the scope of interference with an award of the arbitrator under the old Act. As regards the first item, the question was whether the contract contemplates the use of stone aggregate and stone metal from the local sources only, the source of supply being silent in the relevant clause. The arbitrator was of the view that the unprecedented situation of the Contractor being put to the necessity of procuring the stone material from far-off places was not visualized and the parties proceeded on the basis that such material was available locally. He further noted that the sample kept in the office of the Engineer concerned, admittedly pertained to the material procured from local sources. A letter addressed by the Chief Engineer in support of the Contractors claim was also relied on in this context. Hence, in these circumstances, the arbitrator can be said to have taken a reasonably possible view and therefore the High Court rightly declined to set aside the award insofar as the quantity of stone aggregate/stone metal brought to the site up to 24-1-1994 is concerned. The arbitrator acted within the confines of the jurisdiction in making the award on this part of theS OF THE CASE LAWS :41. The principles of law laid down in the aforementioned decisions leave no manner of doubt that the jurisdiction of the court in interfering with a non-speaking award is limited.42. The upshot of the above decisions is that if the claim of the claimant is not arbitrable having regard to the bar/prohibition created under the contract; the court can set aside the award but unless such a prohibition/bar is found out the court cannot exercise its jurisdiction under Section 30 of the Act. The High Court, therefore, misdirected itself in law in posing a wrong question. It is true that where such prohibition exists, the court will not hesitate to set aside the award.43. In the instant case, the appellant did not ask for any enhancement in the price. It only asked for the difference in price occurred owing to fluctuation in the rate of dollar.44. It is true that by taking recourse to the interpretation of documents, the appellant did not become entitled to claim a higher amount than Rs. 149/- but, thereby the appellant had not unjustly enriched itself. Had the price of the dollar fallen, the respondent would have become entitled to claim the difference therefore.45. The appellant quoted the foreign exchange component in its bids in terms of the notice inviting tenders. The same was asked for by the respondent itself for a definite purpose. A contract between the parties must be construed keeping in view the fact that the fluctuation in the rate of dollar was required to be kept in mind by the respondent having regard to the fact that the tender was global in nature and in the event the respondent was required to pay in foreign currency, the same would have an impact on the cost factor.46. Clauses 2.5 and 2.7 aforementioned must be construed in such a manner so that effect to both of them may be given. Whereas Clause 2.6 prohibits escalation: Clause 2.7 makes the bidder liable for exchange fluctuations which does not amount to an escalation of the price or disturb their cost evaluation. The bid of the appellant had two components, namely, Indian currency component and US Dollar component. The appellant claimed $ 4-.60 within the total price of Rs. 149/- which was to be paid in Indian currency. In any manner, the claim did not violate clause 2.6. The appellant merely claimed foreign exchange component at the rate of $ 4.80 and no more.47. The very fact that three different types of quotations were invited from the bidders itself is suggestive of the fact that each one of them was required to be construed in such a manner so as to apply in different situations. The submission of Mr. Rohtagi, the learned Additional Solicitor General to the effect that if such a factor was to be taken into consideration, the person who had quoted only in terms of Indian rupee would be at a disadvantage is stated to be rejected. The question as to whether suppliers quoting their bid in Indian currency alone would face disadvantage or not will depend upon the question as to whether they were similarly situated. One bidder may have to import the raw-materials: other may not have to. This itself will lead to a difference. In fact, those who did not bid with the amount of foreign exchange component cannot be placed on equal footing to those who in their bid pursuant to the notice inviting tender disclosed that they would have to make import where for only the foreign exchange component in the price had to be disclosed.48. Furthermore, the circular letter dated 25.9.1989 issued by the Government of India itself clearly shows that a decision had been taken to make such payments. The contract having not been entered into by the parties herein as on the said date, the decision to include the said term would mean that the same shall be incorporated in the contracts which were to be executed in future.49. It is further not in dispute that the respondent is bound by the directives issued by the Union of India. In fact from the letter dated 21.5.1990 it is evident that even for the purpose of entering into the contract approval of the Central Government was sought for and granted. Such a directive of the Central Government was not required to be made by way of a notification nor the same was required to have the force of law as the matter Involved a contract between the parties.50. Mr. Rohtagi is not correct in his contention that such condition was required to be incorporated in the NIT inasmuch as from a plain reading of the said letter, it is evident that such a clause was to be incorporated in the notice inviting tenders ex majority cautela.51. As regard the contention as to whether the notification issued under Section 40 of the Reserve Bank of India would be rules or regulations having an impact in the cost factor is concerned, the arbitrator had jurisdiction to decided the same, subject of course to application of correct principles of law in relation thereto.52. Even assuming that the arbitrators faulted in that regard, it must be borne in mind that such a contention was raised on behalf of the appellant, only for the purpose of showing that several aspects of the matter arose before the learned arbitrators for making the award and any-one of them would be sufficient to uphold the award.53. The court, having regard to the proposition of law that the jurisdiction of the arbitrator will be ousted only in the event that there exists a specific bar in the contract as regard raising of a particular claim must necessarily hold that the award was sustainable. As in the instant case there did not exist any such bar, it is enforceable in law. Furthermore, in the event the ratio of the decision of the High Court is accepted, the same would amount to re-hearing of the entire arguments once over again by the court as regard construction of a contract which is impermissible in law.54. The arbitrators were called upon to determine a legal issue which included interpretation of the contract. The arbitrators, therefore, cannot be said to have been travelled beyond jurisdiction in making the award.