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CASE NO.:

Appeal (civil) 6478 of 2001

PETITIONER:

Pure Helium India Pvt. Ltd.

RESPONDENT:

Oil & Natural Gas Commission

DATE OF JUDGMENT: 09/10/2003

BENCH:

CJI & S.B. Sinha.

JUDGMENT:

J U D G M E N T

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 :

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 appellant's 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.

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.

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 :

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"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.

Aggrieved by and dissatisfied therewith the respondent preferred

an appeal thereagainst which by reason of the impugned judgment has been

allowed. The appellant is, thus, in appeal before us.

SUBMISSIONS :

Mr. Dipankar P. Gupta, learned Senior Counsel appearing on behalf

of the appellant, would contend that the Division Bench of the High

Court committed a manifest error insofar as it proceeded to determine

the dispute on the premise that the claim could not have been preferred

under any clause of the contract. The learned counsel would contend that

the arbitrators had, having regard to the scope and purport of the

arbitration agreement entered into by and between the parties were

entitled to go into the question of the construction of contract and

they, thus, having the requisite jurisdiction therefor, the High Court

could not have independently construe the same.

Drawing our attention to various clauses of the contract as also

the claim petition, the learned counsel would contend that the

arbitrator had analyzed the terms and conditions of the contract having

regard to the facts and circumstances of this case as also keeping in

view the pleadings of the parties and in that view of the matter the

High Court while exercising its jurisdiction under Section 30 of the Act

could not have interfered therewith particularly as the award was a non-

speaking one. It was urged that such a claim was also maintainable

having regard to a circular letter dated 25.9.1989 issued by the

Government of India.

Mr. Gupta would submit that the approach of the respondent in

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denying the just claim of the appellant must be held to be arbitrary and

unfair insofar as payments on similar terms as claimed by the appellant

had been made not only to the foreign bidders but in fact had been made

to the other Indian bidders where the price was payable in the Indian

currency. By preferring such a claim, the learned counsel would urge,

the appellant had not asked for any escalation in the price but merely

claimed damages in terms of the provisions of the contract occasioned by

fluctuation in the rate of dollar in terms of the notification issued by

the Reserve Bank of India under Section 40 of the Reserve Bank of India

Act and such revision was permissible also in terms of clause 23 of the

contract.

In support of the said contentions, Mr. Gupta strongly relied

upon W.B. State Warehousing Corporation and Another vs. Sushil Kumar

Kayan and Others [(2002) 5 SCC 679], K.R. Raveendranathan vs. State of

Kerala [(1998) 9 SCC 410], P.V. Subba Naidu and Others vs. Government of

A.P. and Others [(1998) 9 SCC 407], H.P. State Electricity Board vs.

R.J. Shah and Company [(1999) 4 SCC 214], Shyama Charan Agarwala & Sons

etc. vs. Union of India etc. [(2002) 6 SCC 201].

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 Company Ltd. vs. Raymon & Co.

(India) Private 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.

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 escalation in the

price of the goods.

Mr. Rohtagi would contend that disclosure of the foreign exchange

component in the price to be paid in Indian currency was sought for only

for the purpose of evaluation of bids. He would urge that for all

intent and purport, the foreign exchange component had nothing to do

with the payment of the price for supply of Helium gas to the appellant.

In support of his contention, Mr. Rohtagi relied upon Rajasthan State

Mines & Minerals Ltd. Vs. Eastern Engineering Enterprises and Another

[(1999) 9 SCC 283].

The learned counsel would further argue that the notifications

issued by the Reserve Bank of India do not constitute 'any change in

law' in terms of the provision of Section 40 of the Reserve Bank of

India Act or otherwise.

RELEVANT CLAUSES IN THE CONTRACT :

"1.16 Prices :

1.16.1 In cases where payments are required in Indian

Rupees, the bidder should clearly indicate

if it shall need any foreign exchange for

completing the supplies/services that may

be ordered on him. For this purpose they

should quote the total price along with its

breakdown between Indian Currency portion

and the foreign currency indicating the

specific currency.

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The bidder shall also indicate the nature

of payments which it intends to cover

foreign exchange payments, viz., whether it

is towards acquisition/hiring of

equipment/services, payments of personnel

or acquisition of sub-assemblies, spare

parts or purchase of raw materials or for

any other purpose.

A bidder who would not need any foreign

exchange for completion of the order should

state this categorically.

In case the bidder would require any

assistance/certification from ONGC to help

him secure the required foreign exchanges

it should be so stated."

"1.16.3 Price preference for supplies :

Domestic manufactures are entitled to get

price preference over the foreign

supplier.

The price preference is admissible over

the CIF price of the lowest technically

acceptable foreign offer received in

international competition.

The criteria for giving price preference

is domestic value added Domestic value

added to an indigenous offer will be as

follows :

CIF price of lowest

Acceptable foreign

Tendered

Direct import requirement of

raw material components &

consumable of Indian bidder

Domestic value = --------------------------

CIF price of lower acceptable foreign tender

The price preference admissible to indigenous

manufacturer will be as under :

Extent of domestic Extent of price

Value preference ---------

---------- -------------

1. Upto 20% Nil

2. More than 20% upto 50% upto 15%

3. More than 50% and upto 70% upto 25%

4. More than 70% upto 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.

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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. If there is no import content in

the offer then it should be specifically

stated as NIL".

"12. (i) Commission shall pay for Helium at

the rate of Rs.149 per M3 all

inclusive for offshore supply as

indicated in Anneuxre II.

(ii) The invoice with the following

support documents, should be

submitted in triplicate immediately

after receipt of material by

Commission to DGM (F&A) 712 B,

Vasudhara Bhavan, Bandra (E),

Bombay-400 051.

a) The quantity of gas received

duly certified by Commission's

representative.

b) The computer analysis of the

gas chromatograph showing the

purity of the gas."

"21. Arbitration

If any dispute, difference or question shall at

any time arise between the parties herein or

their respective representative or assignees in

respect of these present or concerning anything

hereto contained or arising out of these present

or as to the rights liabilities or duties of the

said parties hereunder which cannot be mutually

resolved by the parties, the same shall be

referred to arbitration, the proceedings of

which shall be held at Bombay, India within

thirty (30) days of the receipt of the notice of

intention of appointing arbitrators.

Each party shall appoint an arbitrator of its

own choice and inform the other party. Before

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entering upon the arbitration, the two

arbitrators shall appoint the Umpires. In case

either of the parties fail to appoint its

arbitrator within thirty (30) days from the date

of receipt of a notice from the other party in

this behalf or the two arbitrator fail to

appoint the Umpire, the Chief Justice of the

Supreme Court of India shall appoint the

arbitrator and/ or the Umpire as the case may

be.

The decision of the arbitration and in the event

of the arbitrators failing to regain an agreed

decision then the decision of Umpire shall be

final and binding on the parties hereto.

The arbitration proceedings shall be held in

accordance with the or provisions of Indian

Arbitration Act, 1940 and the rules made

thereunder as amended from time to time.

The arbitration or the Umpire as the case may be

shall decide by whom and what proportions the

arbitrators or Umpire fee as well as costs

incurred in arbitration shall be borne.

The arbitrator or the Umpire may with the

consent of the parties enlarge the time, from

time to time to make an publish their or his

award. Arbitration will be conducted in English

language 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 Govt. 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 cost of the

project through reduced liability of taxes,

(other than personnel taxes) duties, the

Contractor shall pass on the benefits of such

reduced costs, taxes or duties to the

Commission.

Notwithstanding the abovementioned provisions,

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Company shall not bear any liability in respect

of:

i) Personnel taxes, customs, duty and

corporate tax".

RELEVANT PARAGRAPHS OF STATEMENT OF CLAIM OF THE APPELLANT :

In its statement of claim, the appellant, inter alia, contended :

"...The claimant has reason to believe that the

Bombay Regional Office of the respondent had

recommended that the respondent be made such

payments as they rightly believed that such

payments were legitimately due to the claimant

under the terms of contract.

That apart from the reason that the said amounts

were due to the claimant under the contract

terms itself, the same is also supported by

virtue of a notification of the Government of

India setting out internal guidelines as

contained in Notification No.D-19011/7/87-ONG-

UA(EO) dated 25th of September 1989 issued by the

Ministry of Petroleum and Natural Gas. A copy

of this notification is placed at Document No.27

and its relevant contents are reproduced

hereinbelow :-

"It has now been decided that...the Indian

bidder's foreign exchange component may be

allowed to be quoted in foreign currency for

purposes of actual payment and the actual

payment made in rupee equivalent to the foreign

exchange component as per the BC selling rates

on the date of actual payment for the imported

supplies."

Subsequently, the respondent issued a circular

No.74/89 dated 8th November, 1989 in compliance

of the abovesaid Ministerial Notification, a

copy of which is Documents. This Circular was

to be implemented in all regions and be

applicable to all contracts."

The appellant in the said statement of claim, inter alia, made the

following submissions before the arbitrator :

"2. It is submitted that the foreign exchange

rate fluctuations did not and cannot

result into a price variation/increase.

It is submitted that the firm price

relative to this contract was a composite

price stated in Rupees and Dollars and it

was that which was and has been held firm,

by the claimant. The claimant is not

seeking additional benefit or profit but

is merely seeking to recover a specified

contract consideration.

3. That the ministry notification dated

25.09.1989 has the force of law and the

respondent is not entitled to act in

violation of the same.

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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 arising

therefrom is clearly covered under clause

23 of the Tender Document. Being so, the

respondent is bound under the contract to

compensate the claimant as to such

increased costs arising out of such

exchange rate fluctuations. It is further

submitted that refusal on the part of the

respondent to compensate the claimant

without disclosing any reasons itself is

arbitrary.

8. ...Any interpretation of the contract

wherein foreign suppliers would be paid in

foreign currency at the current rate while

Indian suppliers would be paid at the rate

of exchange prevailing on the date of the

submission of the Price Bid would

discriminate against the Indian suppliers

in as much as any increase in the value of

the dollar against the Indian rupee would

destroy the costing of the Indian

suppliers. The claimant states that this

interpretation of the contract is

discriminatory against the Indian

suppliers, violative of public policy and

against stated government guidelines,

objectives and intentions."

ISSUES BEFORE THE ARBITRATORS :

The respondent in their rejoinder having joined issues with the

aforementioned contentions of the appellant, the following issues which

were raised by the appellant herein, fell for consideration by the

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learned arbitrators.

"1. Whether the proper interpretation of terms

of the contract entitle the claimant to be

compensated for all consequences arising

out of exchange rate variations between

the date of the submission of the Price

Bid and the completion of all supplies.

2. Whether, in addition or in the alternative,

the claimant is, under clause 23 of the

Tender Document entitled to be compensated

for all exchange rate variations between

the date of the submission of the Price Bid

and the completion of all supplies.

3. Whether, in the alternative, the respondent

is bound to effectuate in favour of the

claimant notified State policy as contained

in the Ministerial notification dated

25.09.1989.

4. Whether, the respondent's circular

No.74/89 dated 8th November, 1989 estoppes

the respondent from any interpretation of

the contract contrary thereto."

AWARD :

By reason of the impugned award, the learned arbitrators held :

"1. We hold that the Claimants are entitled to

be compensated for increase in cost

arising out of Foreign Exchange Rate

Fluctuations in respect of payment made by

the Respondents to the Claimants on the

from the respective dated of devaluation

of the Indian Rupee, 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 Rupee One crore three lakhs

forty one thousand three hundred and nine)

Rs.24,97,905/- under Invoice dt.

9.10.1991, Rs.25,20,160/- under Invoice

dt. 15.1.1998 and Rs.53,23,241/- under

Invoice dt. 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 185 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

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view of the terms of the contract;

(2) The appellant was not entitled to any escalation in price.

IMPUGNED JUDGMENT :

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 preferred by the

respondent is specifically barred under the

contract?

(b) Whether there is any clause in the contract, under

which such a claim could be preferred?

OUR CONCLUSION :

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 therefor as import was required to

be made; (iii) payable only in Indian rupee without foreign exchange

component.

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 25.9.1989 issued by the Central

Government: (b) the conduct of the respondent in making the payments to

the persons similarly situated.

Construction of a deed sometimes pose a great problem.

Justice Frankfurter said : "there is no surer way to misread a

document than to read it literally." [Massachusetts B. & Insurance Co.

vs. U.S. (1956) 352 US 128 at p. 138].

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.

The learned arbitrators, as noticed hereinbefore, in making the

award took into consideration the documentary as well as circumstantial

evidence including rival 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.

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

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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.

A dispute as regard the construction of clause 23 of the contract

vis-à-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.

CASE LAWS ON THE POINT :

In State of U.P. vs. Allied Constructions [2003 (6) SCALE 265],

this Court held :

"...Interpretation of a contract, it is trite,

is a matter for arbitrator to determine (see M/s

Sudarsan Trading Co. vs. The Government of

Kerala, AIR 1989 SC 890). Section 30 of the

Arbitration Act, 1940 providing for setting

aside an award is restrictive in its operation.

Unless one or the other condition contained in

Section 30 is satisfied, an award cannot be set

aside. The arbitrator is a Judge chosen by the

parties and his decision is final. The Court is

precluded from reappraising the evidence. Even

in a case where the award contains reasons, the

interference therewith would still be not

available within the jurisdiction of the Court

unless, of course, the reasons are totally

perverse or the judgment is based on a wrong

proposition of law. As error apparent on the

face of the records would not imply closer

scrutiny of the merits of documents and

materials on record. One it is found that the

view of the arbitrator is a plausible one, the

Court will refrain itself from interfering..."

In K.R. Raveendranathan (supra), the law was laid down in the

following terms :

"2. The learned counsel for the appellant points

out that the question in issue in the present

appeals is squarely covered by the decision of

this Court in Hindustan Construction Co. Ltd. v.

State of J&K ((1992) 4 SCC 17). In particular,

it drew our attention to para 10 of the judgment

and the portion extracted from the decision in

Sudarsan Trading Co. case (Sudarsan Trading Co.

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v. Govt. of Kerala, (1989) 2 SCC 38) wherein it

was said that by purporting to construe the

contract the Court could not take upon itself

the burden of saying that this was contrary to

the contract and, as such, beyond jurisdiction.

That is exactly what the Court has done in the

instant case..."

K.R. Raveendranathan (supra) has been followed by this Court in

P.V. Subba Naidu (supra) stating :

"4. The entire thrust of the judgment is on

examining the terms of the contract and

interpreting them. The terms of the arbitration

clause, however, are very wide. The arbitration

clause is not confined 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."

The same view has been reiterated in H.P. State Electricity Board

(supra). Upon taking into consideration a large number of decisions and

referring to K.R.Ravendranathan (supra), this Court held that the court

would not be justified in construing the contract in a different manner

and then to set aside the award by observing that the arbitrator had

exceeded the jurisdiction in making the award, when the arbitrator is

required to construe a contract, only because another view is possible.

It was stated :

"26. In order to determine whether the

arbitrator has acted in excess of jurisdiction

what has to be seen is whether the claimant

could raise a particular dispute or claim before

an arbitrator. If the answer is in the

affirmative then it is clear that the arbitrator

would have the jurisdiction to deal with such a

claim. On the other hand if the arbitration

clause or a specific term in the contract or the

law does not permit or give the arbitrator the

power to decide or to adjudicate on a dispute

raised by the claimant or there is a specific

bar to the raising of a particular dispute or

claim then any decision given by the arbitrator

in respect thereof would clearly be in excess of

jurisdiction. In order to find whether the

arbitrator has acted in excess of jurisdiction

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the court may have to look into some documents

including the contract as well as the reference

of the dispute made to the arbitrators limited

for the purpose of seeing whether the arbitrator

has the jurisdiction to decide the claim made in

the arbitration proceedings."

Yet again in Sushil Kumar Kayan (supra), it was held :

"...In order to determine whether the arbitrator

has acted in excess of his jurisdiction what has

to be seen is whether the claimant can raise a

particular claim before the arbitrator. If there

is a specific term in the contract or the law

which does not permit the parties to raise a

point before the arbitrator and if there is a

specific bar in the contract to the raising of

the point, then the award passed by the

arbitrator in respect thereof would be in excess

of his jurisdiction..."

Some of the aforementioned decisions have been considered by us in

Bharat Coking Coal Ltd. vs. M/s Annapurna Construction [2003 (7) SCALE

20].

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.

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

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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."

With respect we agree with the conclusions arrived at in Rajasthan

State Mines & Minerals Ltd. (supra).

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.

To the same effect is the decision of this Court in Food

Corporation of India vs. Surendra, Devendra & Mahendra Transport Co.

{(2003) 4 SCC 80].

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 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

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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."

ANALYSIS OF THE CASE LAWS :

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.

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.

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.

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 therefor.

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.

Clauses 2.6 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 $ 4.60 and no more.

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 wherefor only the foreign exchange component

in the price had to be disclosed.

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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.

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.

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 majori cautela.

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 decide the same, subject of course to

application of correct principles of law in relation thereto.

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.

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.

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.

CONCLUSION :

We, for the reasons aforementioned, are of the opinion that the

judgment of the High Court is not sustainable.

However, one aspect of the matter which requires our

consideration. The respondent rejected the claim of the appellant as

far back as on 14.7.1992 whereafter the disputes and differences between

the parties were referred to the arbitrators. The arbitrators entered

into the reference on 1.3.1993 and passed an award on 13.8.1993. The

said award was set aside by the High Court. If the award is to be

satisfied in its entirety, the respondent will have to pay a huge amount

by way of interest.

In order to do the complete justice to the parties, in exercise of

our jurisdiction under Article 142 of the Constitution of India, we

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think it appropriate to direct that the award shall carry interest at

the rate of 6% per annum instead and in place of 18% per annum. This

order shall, however, not be treated as precedent.

For the reasons aforementioned, the impugned judgment is set

aside. The appeal is allowed with the aforementioned modifications.

However, in the facts and circumstances of the case, there shall be no

order as to costs.