Arbitrator Treating Increase In Diesel Price By Govt. Circular As “Change In Law” Is Not A Possible Construction- SC Sets Aside Award*
Award set aside as arbitrator’s interpretation of treating increase in High Speed Diesel (HSD) price through govt. circular as “change in law” not possible
SEAMEC LTD vs. OIL INDIA LTD., CA NO. 673/2012, 11.05.2020
Facts
In S. 37 appeal, HC set aside award holding that increase in HSD price through govt. circular is change of law u/cl. 23 of contract (providing payment/reimbursement of additional/reduced cost from change in law).
Appealed.
Issue
Whether arbitral tribunal’s (AT) interpretation of cl. 23 is reasonable & fair to pass muster of s. 34 of arbitration act?
Key findings [Paras 25-32]
- Rejecting HC’s reason that cl. 23 is in furtherance of frustration doctrine, it held that effect of frustration is to discharge parties from future obligations. However, parties chose to mitigate this risk under cl. 23.
- AT ignored thumb rule of interpretation that document forming a written contract to be read as a whole and mutually explanatory.
- Contract was for fixed rate. Price fluctuations, to be factored in the margin by a prudent contractor while bidding, cannot be brought under cl. 23, unless specific language points to it.
- Expanding cl. 23 to include change in HSD rate is not a possible interpretation as also shown from other clauses.
*The article has been authored by our associate office, R&R Law Chambers.