TMI Blog2003 (10) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, cannot be said to have been travelled beyond jurisdiction to making the award. - CIVIL APPEAL NO. 6478 OF 2001 - - - Dated:- 9-10-2003 - V.N. KHARE AND S.B. SINHA, JJ. Dipankar P. Gupta and Ashok Mathur for the Appellant. Mukul Rohtagi, Saurabh Kirpal, Subhash Oberoi, C.M. Gopal and K.V. Mohan for the Respondent. JUDGMENT S.B. Sinha, J. - Whether jurisdiction of an arbitrator to interpret a contract can be subject-matter of an objection under section 30 of the Arbitration Act, 1940 (hereinafter referred to as the Act , for the sake of brevity) is in question in this appeal which arises out of the judgment and order dated 24-2-2000 of the High Court of Judicature at Bombay in Appeal No. 612 of 1996 arising out of a judgment and order of a learned Single Judge dated 13-10-1995 dismissing the said objection of the respondent. 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 prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, 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 thereagainst w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndranathan v. State of Kerala [1998] 9 SCC 410, P.V. Subba Naidu v. Government of A.P. [1998] 9 SCC 407, H.P. State Electricity Board v. R.J. Shah Co. [1999] 4 SCC 214, Shyama Charan Agarwala Sons v. Union of India [2002] 6 SCC 201. 11. The learned counsel would further argue that for the purpose of interpretation of a contract not only the terms thereof but also the conduct of the parties and surrounding circumstances are relevant. Reliance has been placed on Khardah Co. Ltd. v. Raymon Co. (India) (P.) Ltd. [1963] 3 SCR 183. In any event, the learned counsel would contend that the respondent was bound by the policy decision of the Central Government in the matter of payment of difference in the rupee value owing to fluctuation in the rate of US dollar. 12. Mr. Mukul Rohtagi, learned Additional Solicitor General, on the other hand, would submit that the bid price for supply of Helium gas made by the appellant herein in terms of the contract being firm, the appellant was not entitled to any escalation in the price and, thus, in the event, the contention of the appellant is accepted, the same would run counter to the clause in the contract prohibiting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to indigenous manufacturer will be as under : Extent of domesticExtent of price preference value 1.Up to 20% Nil 2.More than 20% up to 50%up to 15% 3.More than 50% and up to 70% up to 25% 4.More than 70%up to 35% 2.6 Bidder shall quote a firm price and they shall be bound to keep this price firm without any escalation for any ground whatsoever until they compete the work against this tender or any extension thereof. 2.7 The prices shall be given in the currency of the country of the bidder. If the bidder expects to incur a portion of this expenditure in currencies other than those stated in his bid, and so indicates in his bid payment of the corresponding portion of the prices as so expended will be made in these other currencies. 6.2 In case the price quoted by two or more domestic bidders are within the price preference limits and only Indian bidders remain in contention for award of contract, then the foreign exchange component of their bid would be loaded by a factor of 25% for the purpose of relative compensation of such domestic bids. Domestic bidders are required to quote the prices in the price schedule and indicate the import content in their offer. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage and either party may be represented by persons not admitted to practice law in India. 23. In the event of any change or amendment of any Act or law including Indian Income-tax Acts, rules or regulations of Govt. of India or Public Body or any change in the interpretation or enforcement of any said Act or law, rules or regulations by Indian Govt. or public body which becomes effective after the date as advised by the Commission for submission of final price bid for this contract and which results in increased cost of works under the contract, through increased cost by the Commission subject to production of documentary proof to the satisfaction of the Commission to the extent which is directly attributable to such change or amendment as mentioned above. Similarly, if any change or amendment of any Act or law including Indian Income Tax Acts, Rules or Regulation of any Government or Public Body or any change in the interpretation or enforcement of any said Act or law, rules or regulations by Indian Govt. or public body becomes effective after the date as advised by the Commission for submissions of final price bid for this Contract and which results in any decrees in the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25-9-1989 has the force of law and the respondent is not entitled to act in violation of the same. 5.That it is further submitted that this very respondent has in other suppliers entered into prior to the conclusion of this contract applied this notification in the manner in which it ought to have been applied and has given due benefit to various other suppliers. It is also significant that the respondent has had no hesitation in applying the said notification to the claimant s benefit in a subsequent contract. 6.That without prejudice to what is stated above, it is further submitted that the contract between the claimant and respondent was concluded subsequent to the issuance of the notification and, therefore, any endeavour on the part of the respondent to construe the effective date of the notification as subsequent thereto is misconceived and factually incorrect. 7.It is submitted that exchange rate fluctuations brought into effect in exercise of powers conferred on the Reserve Bank of India under section 40 of the Reserve Bank of India Act, 1934 and upon directions given by the Government of India has the complete force of law. That being the position, any change arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective dated of devaluation of the Indian Rupees, namely 8-7-1991 and 28-2-1998 and not on payments made before the said dates. Accordingly we direct that the Respondent do pay to the Claimants a sum of Rs. 1,03,41,309 only (in words Rupees One crore three lakhs forty one thousand three hundred and nine) Rs. 24,97,905 under Invoice dated 9-10-1991, Rs. 25,20,160 under Invoice dated 15-1-1998 and Rs. 53,23,241 under Invoice dated 22-6-1998) in full and final settlement of their claim under their aforesaid three invoices. 2.Respondents do further pay to the Claimants interest at the rate of section 185 ( sic ) per annum on the aforesaid three amounts awarded to them under the said invoices from the respective dates of those invoices till the date of this Award." Objections to the award by the Respondent : (1)The subject-matter of the arbitration was not arbitrable in view of the terms of the contract: (2)The appellant was not entitled to any escalation in price. Impugned Judgment : 18. The Division Bench of the High Court set aside the award holding that the same was without jurisdiction wherefor two questions were framed. ( a )Whether a claim of the nature pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. 25. A dispute as regard the construction of clause 23 of the contract vis- -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined merely to any question of interpretation of the contract. It also covers any matter or thing arising thereunder. Therefore, all disputes which arise as a result of the contract would be covered by the arbitration clause. The last two lines of the arbitration clause also make it clear that the arbitrator has power to open up, review and revise any certificate, opinion, decision, requisition or notice except in regard to those matters which are expressly excepted under the contract, and that the arbitrator has jurisdiction to determine all matters in dispute which shall be submitted to the arbitrator and of which notice shall have been given. 5. In the present case all the claims in question were expressly referred to arbitrator and were raised before the arbitrator. The High Court was, therefore, not right in examining the terms of the contract or interpreting them for the purpose of deciding whether these claims were covered by the terms of the contract." 28. The same view has been reiterated in H.P. State Electricity Board s case ( supra ). Upon taking into consideration a large number of decisions and referring to K.R. Raveendranathan s case ( supra ), this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Contractor s 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 the claim." (p. 221) Analysis of the case Laws : 33. 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. 34. The upshot of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. That 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 wherefor only the foreign exchange component in the price had to be disclosed. 40. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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