G H SOUTH EAST ASIA MARINE ENGINEERING AND CONSTRUCTIONS LTD. (SEAMEC LTD.) versus OIL INDIA LIMITED
[2020] 4 S.C.R. 254, Supreme Court of India, 2020
Outcome: Disposed off
Segment: Ratio
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SOUTH EAST ASIA MARINE ENGINEERING AND
CONSTRUCTIONS LTD. (SEAMEC LTD.)
v.
OIL INDIA LIMITED
(Civil Appeal No. 673 of 2012)
MAY 11, 2020
[N. V. RAMANA, M. M. SHANTANAGOUDAR
AND AJAY RASTOGI, JJ.]
Contract: Tender floated for well drilling and other auxillary
operations – Work order awarded to appellant – During subsistence
of contract, prices of High Speed Diesel (HSD) one of the essential
materials for carrying out the drilling operations increased through
a circular issued by Government – Appellant raised a claim that
increase in the price of HSD triggered the ‘change in law’ clause
contained in clause 23 under the contract and the respondent
became liable to reimburse them for the same – In terms of Clause
23, if subsequent to the date of price of Bid Opening, there was a
change in or enactment of any law or interpretation of existing law,
which resulted in additional cost/reduction in cost to contractor on
account of the operation under the contract, the contractor would
be entitled to receive such additional/reduced cost actually incurred
– Appellant invoked the arbitration clause – Arbitral Tribunal
allowed the claim holding that Clause 23 must be liberally construed
and any circular of the Government would amount to a change in
law – On appeal, High Court set aside the award – Held: There are
price fluctuations which a prudent contractor would take into
margin, while bidding in the tender – Such price
fluctuations cannot
be brought under ‘change in law’ clause unless specific language
points to the inclusion – The contract in question was based on a
fixed rate – The party, before entering the tender process, entered
the contract after mitigating the risk of such an increase – The
interpretation of Arbitral Tribunal to expand the meaning of Clause
23 to include change in rate of HSD was not a possible interpretation
of this contract as the appellant did not introduce any evidence to
prove same – Arbitral award set aside – Contract Act – s.56 –
Arbitration and Conciliation Act, 1996 – s.34 – Doctrine of Force
Majeure.
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Arbitration and Conciliation Act, 1996: s.34 – Scope of court’s
jurisdiction under s.34, discussed.
Dismissing the appeals, the Court
HELD: 1. It is settled position that a Court can set aside
the award only on the grounds as provided in the Arbitration Act
as interpreted by the Courts. It is also settled law that where two
views are possible, the Court cannot interfere with the plausible
view taken by the arbitrator supported by reasoning. [Paras 12,
13][260-G-H; 261-D]
2. The interpretation of the ‘change in law’ clause of the
contract by the Arbitral Tribunal, to provide a wide interpretation,
cannot be accepted, as the thumb rule of interpretation is that
the document forming a written contract should be read as a whole
and so far as possible as mutually explanatory. In the case at
hand, this basic rule was ignored by the Tribunal while interpreting
the clause. In this case, the contract was based on a fixed rate
basis. The party, before entering the tender process, entered
the contract after mitigating the risk of a price increase. If the
purpose of the tender was to limit the risks of price variations,
then the interpretation placed by the Arbitral Tribunal cannot be
said to be possible one, as it would completely defeat the explicit
wordings and purpose of the contract. The interpretation of the
Arbitral Tribunal to expand the meaning of the ‘change in law’
clause of the contract to include change in price of HSD is not a
possible interpretation of
this contract, as the appellant did not
introduce any evidence which proves the same. [Paras 28, 30
and 31][267-A, D-F]
Sumitomo Heavy Industries Limited v. Oil and Natural
Gas Corporation Limited (2010) 11 SCC 296 : [2010]
9 SCR 176 – Held inapplicable.
Satyabrata Ghose v. Mugneeram Bangur & Co. AIR
1954 SC 44 : [1954] SCR 310; Mcdermott International
Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181 :
[2006] 2 Suppl. SCR 409; Dyna Technologies Pvt. Ltd.
v. Crompton Greaves Ltd. (2019) SCC Online SC 1656
– referred to.
SOUTH EAST ASIA MARINE ENGINEERING AND CONSTRUCTIONS LTD.
(SEAMEC LTD.) v. OIL INDIA LTD.
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Chandler v. Webster [1904] 1 KB 493; Fibrosa Spolka
Akcyjna v. Fairbairn Lawson Combe Barbour Ltd;
[1942] UKHL 4; Cantiare San Rocco SA (Shipbuilding
Company) v. Clyde Shipbuilding and Engineering Co.
Ltd., [1924] AC 226 – referred to.
Case Law Reference
[2006] 2 Suppl. SCR 409
referred
Para 8
[1954] SCR 310
relied on
Para 20
[2010] 9 SCR 176
relied on
Para 27
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 673 of
2012.
From the Judgment and Order dated 13.12.2007 of the High Court
of Gauhati in Arbitration Appeal No. 11 of 2006.
With
Civil Appeal No. 900 of 2012.
Dr. Manish Singhvi, Sr. Adv., D.K. Devesh, Abhinav S.
Raghuwanshi, Piyush Upadhyay, Hitesh Vats, Somiran Sharma, Biju P.
Raman K.R. Sasiprabhu, Advs. for the appearing parties.
The Judgment of the Court was delivered by
N. V. RAMANA, J.
Civil Appeal No. 673 of 2012
1. The present appeal arises out of impugned judgment and order
dated 13.12.2007 in Arbitration Appeal No. 11 of 2006 passed by the
Gauhati High Court, wherein the High Court allowed the appeal preferred
by the Respondent under Section 37 of the Arbitration and Conciliation
Act, 1996 (hereinafter the “Arbitration Act”), and set aside the arbitral
award dated 19.12.2003.
2. Brief facts necessary for the disposal of this case are as follows:
appellant was awarded the work order dated 20.07.1995 pursuant to a
tender floated by the Respondent in 1994. The contract agreement was
for the purpose of well
drilling and other auxiliary operations in Assam,
and the same was effectuated from 05.06.1996.Although, the contract
was initially only for a period of two years, the same was extended for
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two successive periods of one year each by mutual agreement, and
finally the contract expired on 04.10.2000.
3. During the subsistence of the contract, the prices of High-
Speed Diesel (“HSD”), one of the essential materials for carrying out
the drilling operations, increased. Appellant raised a claim that increase
in the price of HSD, an essential component for carrying out the contract
triggered the “change in law” clause under the contract (i.e., Clause 23)
and the Respondent became liable to reimburse them for the same. When
the Respondent kept on rejecting the claim, the Appellant eventually
invoked the arbitration clause vide letter dated 01.03.1999. The
disputewas referred to an Arbitral Tribunal comprising of three arbitrators.
4. On 19.12.2003,the Arbitral Tribunal issued the award in A.P
No. 8 of 1999. The majority opinion allowed the claim of the Appellant
and awarded a sum of Rs. 98,89,564.33with interest @10% per annum
from the date of the award till the recovery of award money. The amount
was subsequently revised to Rs. 1,32,32,126.36 on 11.03.2005. The
Arbitral Tribunal held that while an increase in HSD price through a
circular issued under the authority of State or Union is not a “law” in the
literal sense, but has the “force of law” and thus falls within the ambit of
Clause 23.On the other hand, the minority held that the executive orders
do not come within the ambit of Clause 23 of the Contract.
5. Aggrieved by the award, the Respondent
challenged the same
under Section 34 of the Arbitration Act before the District Judge. On
04.07.2006, the learned District Judge, upheld the award and held that
the findings of the tribunal were not without basis or against the public
policy of India or patently illegal and did not warrant judicial interference.
6. The Respondent challenged the order of the District Judge by
filing an appeal under Section 37 of the Arbitration Act, before the High
Court. By the impugned judgment,the High Court, allowed the appeal
and set aside the award passed by the Arbitral Tribunal.
7. The High Court held that the interpretation of the terms of the
contract by the Arbitral Tribunal is erroneous and is against the public
policy of India. On the scope of judicial review under Section 37 of the
Arbitration Act, the High Court held that the Court had the power to set
aside the award as it was passed overlooking the terms and conditions
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of the contract. Aggrieved by the same, the appellant has filed this present
appeal by the way of special leave petition against the impugned judgment.
8. Learned Counsel for the Appellant assailing the impugned
ordercontends that
a.
The High Court has imparted its own personal view as to the
intent for inclusion of Clause 23 and has sat in appeal over the
award of the Arbitral Tribunal. The construction of Clause 23,
he submitted, is a matter of interpretation and has been correctly
interpreted by the Arbitral Tribunal based on the authorities
cited before it.
b.
If two views are possible on a question of law, the High Court
cannot substitute one view and deference should be given to
the plausible view of the Arbitral Tribunal. Learned counsel
has relied upon a judgment of this Court in McDermott
International Inc. v. Burn Standard Co. Ltd. [(2006) 11
SCC 181] to support his contention.
c.
The question of law decided by the Arbitral Tribunalis beyond
judicial review and thus theHigh Court could not have interfered
with a reasoned award which was neither against public policy
of India nor patently illegal.
9. In response, the learned counsel for the Respondent, supporting
the findings of the High Court, submits that
a.
the award passed by the Arbitral Tribunal is contrary to the
terms of the contract and essentially re-writes the contract.
The Arbitral Tribunal has to adjudicate the dispute within the
four corners of
the contract and thus awarding additional
reimbursement not contemplated under Clause 23 is perverse
and patently illegal.
b.
Overlooking the terms and conditions of a contract is violative
of Section 28 of the Arbitration Act and thus the tribunal has
exceeded its jurisdiction.
c.
This is not a case where the Arbitral Tribunal accepted one
interpretation of the terms of the contract where two
interpretations were possible. Findings of the Tribunal are
perverse and unreasonable as the Tribunal did not consider
the contract as a whole and failed to follow the cardinal
principle of interpretation of contract.
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d. The Arbitral Tribunal has re-written the contract in the guise
of interpretation and such interpretation being in conflict with
the terms of the contract, is in conflict with the public policy
of India.
10. We have heard the learned counsels for the parties and perused
the materials on record.
11. In order to answer the questions raised in this appeal we first
need to delve into the ambit and scope of the court’s jurisdiction under
Section 34 of the Arbitration Act. Section 34 of the Arbitration Act
provides as under –
34. Application for setting aside arbitral award. — (1)
Recourse to a Court against an arbitral award may be made only
by an application for setting aside such award in accordance with
sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to
which the parties have subjected it or, failing any indication
thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case;
or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to
arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of
the parties, unless such agreement was in conflict with a
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provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance
with this Part; or
(b) the Court finds that—
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of
India.
Explanation. —Without prejudice to the generality of sub-clause
(ii) it is hereby declared, for the avoidance of any doubt, that
an award is in conflict with the public policy of India if the
making of the award was induced or affected by fraud or
corruption or was in violation of section 75 or section 81.
(3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making
that application had received the arbitral award or, if a request
had been made under section 33, from the date on which that
request had been disposed of by the arbitral tribunal: Provided
that if the Court is satisfied that the applicant was prevented by
sufficient cause from making the application within the said period
of three months it may entertain the application within a further
period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court
may, where it is appropriate and it is so requested by a party,
adjourn the proceedings for a period of time determined by it in
order to give the
arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in the opinion
of arbitral tribunal will eliminate the grounds for setting aside the
arbitral award.
12. It is a settled position that a Court can set aside the award
only on the grounds as provided in the Arbitration Act as interpreted by
the Courts. Recently, this Court in Dyna Technologies Pvt. Ltd.
v.Crompton Greaves Ltd. [2019 SCC Online SC 1656]laid down
the scope of such interference. ThisCourt observed as follows-
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“26. There is no dispute that Section 34 of the Arbitration Act
limits a challenge to an award only on the grounds provided therein
or as interpreted by various Courts. We need to be cognizant
of the fact that arbitral awards should not be interfered with
in a casual and cavalier manner, unless the Court comes to
a conclusion that the perversity of the award goes to the
root of the matter without there being a possibility of
alternative interpretation which may sustain the arbitral
award. Section 34 is different in its approach and cannot be
equated with a normal appellate jurisdiction. The mandate under
Section 34 is to respect the finality of the arbitral award and the
party autonomy to get their dispute adjudicated by an alternative
forum as provided under the law. If the Courts were to interfere
with the arbitral award in the usual course on factual aspects,
then the commercial wisdom behind opting for alternate dispute
resolution would stand frustrated.”
(emphasis supplied)
13. It is also settled law that where two views are possible, the
Court cannot interfere in the plausible view taken by the arbitrator
supported by reasoning. This Court in Dyna Technologies (supra)
observed as under-
“27. Moreover, umpteen number of judgments of this Court have
categorically held that the Courts should not interfere with an
award merely because an alternative view on facts and
interpretation of contract exists. The Courts need to be cautious
and should defer to
the view taken by the Arbitral Tribunal
even if the reasoning provided in the award is implied unless
such award portrays perversity unpardonable under Section
34 of the Arbitration Act.”
(emphasis supplied)
14. However, the question in the present case is whether the
interpretation provided to the contract in the award of the Tribunal was
reasonable and fair, so that the same passes the muster under Section
34 of the Arbitration Act?
15. In the present case, respondent has argued that the view taken
by the Arbitral Tribunal was not even a possible interpretation, therefore
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the award being unreasonable and unfair suffers from perversity. Hence,
the respondent has pleaded that the award ought to be set aside. In this
context, we may state that usually the Court is not required to examine
the merits of the interpretation provided in the award by the arbitrator, if
it comes to a conclusion that such an interpretation was reasonably
possible.
16. We begin by looking at the clause, i.e Clause 23 which is
extracted below:
SUBSEQUENTLY ENACTED LAWS: -
Subsequent to the date of price of Bid Opening if there is a change
in or enactment of any law or interpretation of existing law,
which results in additional cost/reduction in cost to Contractor on
account of the operation under the Contract, the Company/
Contractor shall reimburse/pay Contractor/Company for such
additional/reduced cost actually incurred.
17. The Arbitral Tribunal held that this clause must be liberally
construed and any circular of the Government of India would amount to
a change in law. The Arbitral Tribunal observed:
“According to Rule of Construction of any document harmonious
approach should be made reading or taking the document as a
whole and exclusion should not be readily inferred unless it is
clearly stated in the particular clause of the document. This is
according to Rule of Interpretation. A consistent interpretation
should be given with a view to smooth working of the system,
which the document purports to regulate.
The word, which makes
it inconsistent or unworkable, should be avoided. This is known as
beneficial construction and a construction should be made which
suppress the mischief and advance the remedies. So, the increase
in the operational cost due to enhanced price of the diesel is one
of the subject matters of the contract as enshrined in Cl. 23. It
may be said that Cl. 23 may be termed as ‘‘Habendum Clause”.
In the deed of the contract containing various granting clauses
and the habendum signifying the intention of, the grantor.
That Cl. 23 requires liberal interpretation for interpreting the
expression ‘law’ or change in law etc. will also be evident from
the facts that the respondents Oil India Ltd. through its witness
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Mr. Pasrija has clearly stated that the change in diesel price or
any other oil price was never done and by way of any statutory
enactment either by Parliament or by State Legislature So, it is
clear that at the time when the Cl. 23 was incorporated in the
agreement the Oil India Ltd. was very much aware that change
in oil price was never made by any Statutory Legislation but only
by virtue of Government Order, Resolution, Instruction, as the
case may be, on accepting that a condition of the appropriate
committee namely O.P.C. it is also clear to apply when there is
change in oil price, here HSD, by the Government and its statutory
authority as enacted in the above without resorting any statutory
enactment. Therefore that the interpretation of expression ‘law’
or change in law etc. requires this extended meaning to include
the statutory law, or any order, instruction and resolution issued
by the Central Government in its Ministry of Petroleum and Natural
Gas.”
The majority award utilizes ‘liberal interpretation rule’ to construe
the contract, so that the price escalation of HSD could be brought under
the Clause 23 of the contract. Further the Arbitral Tribunal identifies the
aforesaid clause to be a ‘Habendum Clause’, wherein the rights granted
to the appellant are required to be construed broadly.
18. On the other hand, the High Court in the impugned order,
interpreted the same clause as follows:
“27…I am of the firm view that clause 23 was inserted in
the
agreement to meet such uncertain and unforeseen eventualities
and certainly not for revising a fixed rate of contract. I also find
that both parties had agreed to keep “force majeure” clause in
the agreement. Under this doctrine of commercial law, a contract
agreement can be rescinded for acts of God, etc. Under clause
44.3 of the agreement, ‘force majeure” has been clearly defined,
which includes acts and regulations of the Government to rescind
a contract.In this way, clause 23 is very close and akin to the
“force majeure clause”. Besides this, I may also declare that clause
23 is parimateria to the “doctrine of frustration and supervening
impossibility”. In other words, under clause 23 rights and obligations
of both the parties have been saved due to any change in the
existing law or enactment of a new law or on the ground of new
interpretation of the existing law. In my opinion, clause 23 must
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have been made a part of the agreement keeping in mind section
56 of the Indian Contract Act, 1872 sans any other intention.”
19. The High Court, in its reasoning, suggests that Clause 23 is
akin to a force majeure clause.We need to understand the utility and
implications of a force majeure clause. Under Indian contract law, the
consequences of a force majeure event areprovided for under Section
56 of the Contract Act, which states thaton the occurrence of an event
which renders the performance impossible, the contract becomes void
thereafter. Section 56 of the Contract Act stands as follows:
56. Agreement to do impossible act.—An agreement to do
an act impossible in itself is void.
Contract to do act afterwards becoming impossible or
unlawful—A contract to do an act which, after the contract is
made, becomes impossible, or, by reason of some event which
the promisor could not prevent, unlawful, becomes void when the
act becomes impossible or unlawful.
20. When the parties have not provided for what would take place
when an event which renders the performance of the contract impossible,
then Section 56 of the Contract Act applies. When the act contracted
for becomes impossible, then under Section 56, the parties are exempted
from further performance and the contract becomes void. As held by
this Court in Satyabrata Ghose v. Mugneeram Bangur & Co., AIR
1954 SC 44:
“15. These differences in the way of formulating legal
theories
really do not concern us so long as we have a statutory provision
in the Indian Contract Act. In deciding cases in India the only
doctrine that we have to go by is that of supervening impossibility
or illegality as laid down in Section 56 of the Contract Act, taking
the word “impossible” in its practical and not literal sense. It must
be borne in mind, however, that Section 56 lays down a
rule of positive law and does not leave the matter to be
determined according to the intention of the parties.”
(emphasis supplied)
However, there is no doubt that the parties may instead choose
the consequences that would flow on the happening of an uncertain
future event, under Section 32 of the Contract Act.
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21. On the other hand, the common law at one point interpreted
the consequence of such frustration to fall on the party who sustained
loss before the frustrating event.The best example of such an
interpretation can be seen in the line of cases which came to be known
as ‘coronation cases’. In Chandler v. Webster, [1904] 1 KB 493, Mr.
Chandler rented space from Mr. Webster for viewing the coronation
procession of King Edward VII to be held on 26th June 1902. Mr. Chandler
had paid part consideration for the same. However, due to the King
falling ill, the coronation was postponed. As Mr. Webster insisted on
payment of his consideration, the case was brought to the Court. The
Court of Appeals rejected the claims of both Mr. Chandler as well as
Mr. Webster. The essence of the ruling was that once frustration of
contract happens, there cannot be any enforcement and the loss falls on
the person who sustained it before the force majeure took place.
22. This formulation was over-ruled by the House of Lords in the
historic decision of Fibrosa Spolka Akcyjna v. Fairbairn Lawson
Combe Barbour Ltd., [1942] UKHL 4, wherein the harsh consequences
of frustration as per the old doctrine was moderated by the introduction
of the law of restitution. Interestingly, Lord Shaw in Cantiare San Rocco
SA (Shipbuilding Company) v. Clyde Shipbuilding and Engineering
Co. Ltd., [1924] AC 226, had observed that English law of leaving the
loss to where it fell unless the contract
provided otherwise was, he said,
appropriate only ‘among tricksters, gamblers and thieves’. The UK
Parliament took notice of the aforesaid judgment and legislated Law
Reform (Frustrated Contracts) Act, 1943.
23. In India, the Contract Act had already recognized the harsh
consequences of such frustration to some extent and had provided for a
limited mechanism to ameliorate the same under Section 65 of the
Contract Act. Section 65 provides as under:
65.Obligation of person who has received advantage under
void agreement, or contract that becomes void
When an agreement is discovered to be void, or when a contract
becomes void, any person who has received any advantage under
such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.
The aforesaid clause provides the basis of restitution for ‘failure
of basis’. We are cognizant that the aforesaid provision addresses limited
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circumstances wherein an agreement is void ab initio or the contract
becomes subsequently void.
24. Coming back to the case, the contract has explicitly recognized
force majeure events in Clause 44.3 in the following manner:
For purpose of this clause “Force Majeure” means an act of God,
war, revolt, riots, strikes, bandh, fire, flood, sabotage, failure or
destruction of roads, systems and acts and regulations of the
Government of India and other clauses (but not due to
employment problem of the contractor) beyond the reasonable
control of the parties.
Further, under Clause 22.23, the parties had agreed for a payment
of force majeure rate to tide over any force majeure event, which is
temporary in nature.
25. Having regards to the law discussed herein, we do not subscribe
to either the reasons provided by the Arbitral Tribunalor the High Court.
Although, the Arbitral Tribunal correctly held that a contract needs to be
interpreted taking into consideration all the clauses of the contract,it failed
to apply the same standard while interpreting Clause 23 of the Contract.
26. We also do not completely subscribe to the reasoning of the
High Court holding that Clause 23 was inserted in furtherance of the
doctrine of frustration. Rather, under Indian contract law, the effect of
the doctrine of frustration is that it discharges all the parties from future
obligations. In order to mitigate the harsh consequences of frustration
and to uphold the sanctity of the contract, the parties with their commercial
wisdom, chose to mitigate the risk under Clause 23 of the contract.
27. Our attention was drawn to Sumitomo Heavy Industries
Limited v. Oil and Natural Gas Corporation Limited, (2010) 11 SCC
296, where this Court interpreted an indemnity clause and found that an
additional tax burden could be recovered under such clause. Based on
an appreciation of the evidence, the Court ruled that additional tax burden
could be recovered under the clause as such an interpretation was a
plausible view that a reasonable person could take and accordingly
sustained the award. However, we are of the opinion that the aforesaid
case and ratio may not be applicable herein as the evidence on record
does not suggest that the parties had agreed to a broad interpretation to
the clause in question.
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28. In this context, the interpretation of Clause 23 of the Contract
by the Arbitral Tribunal, to provide a wide interpretation cannot be
accepted, as the thumb rule of interpretation is that the document forming
a written contract should be read as a whole and so far as possible as
mutually explanatory. In the case at hand, this basic rule was ignored by
the Tribunal while interpreting the clause.
29. The contract was entered into between the parties in
furtherance of a tender issued by the Respondent herein. After considering
the tender bids, the Appellant issued a Letter of Intent. In furtherance of
the Letter of Intent, the contract (Contract No. CCO/FC/0040/95) was
for drilling oil wells and auxiliary operations. It is important to note that
the contract price was payable to the ‘contractor’ for full and proper
performance of its contractual obligations. Further, Clauses 14.7 and
14.11 of the Contract states that the rates, terms and conditions were to
be in force until the completion or abandonment of the last well being
drilled.
30. From the aforesaid discussion, it can be said that the contract
was based on a fixed rate. The party, before entering the tender process,
entered the contract after mitigating the risk of such an increase. If the
purpose of the tender was to limit the risks of price variations, then the
interpretation placed by the Arbitral Tribunal cannot be said to be possible
one, as it would completely defeat the explicit wordings
and purpose of
the contract.There is no gainsaying that there will be price fluctuations
which a prudent contractor would have taken into margin, while bidding
in the tender. Such price fluctuations cannot be brought under Clause 23
unless specific language points to the inclusion.
31. The interpretation of the Arbitral Tribunal to expand the meaning
of Clause 23 to include change in rate of HSD is not a possible
interpretation of this contract, as the appellant did not introduce any
evidence which proves the same.
32. The other contractual terms also suggest that the interpretation
of the clause, as suggested by the Arbitral Tribunal, is perverse. For
instance, Item 1 of List II (Consumables) of Exhibit C (Consolidated
Statement of Equipment and Services Furnished by Contractor or
Operator for the Onshore Rig Operation), indicates that fuel would be
supplied by the contactor, at his expense. The existence of such a clause
shows that the interpretation of the contract by the Arbitral Tribunal is
not a possible interpretation of the contract.
SOUTH EAST ASIA MARINE ENGINEERING ONSTRUCTIONS
LTD. (SEAMEC LTD.) v. OIL INDIA LIMITED [N. V. RAMANA, J.]
A
B
C
D
E
F
G
H
268
SUPREME COURT REPORTS
[2020] 4 S.C.R.
33. For the aforesaid reasons, we are not inclined to interfere
with the impugned judgment and order of the High Court setting aside
the award. The appeal is accordingly dismissed. There shall be no order
as to costs.
CIVIL APPEAL NO. 900 OF 2012
34. In view of the judgment pronounced in C.A. No. 673 of 2012,
the aforesaid matter is disposed of in the aforesaid terms.
Devika Gujral
Appeals disposed of.