Top Stories’Usually Court Not Required To Examine Merits Of Interpretation Provided In Award By Arbitrator, If Such Interpretation Was Reasonably Possible’: SC [Read Judgment] Mehal Jain14 May 2020 10:25 PMShare This – xIn setting aside an arbitral award, the Supreme Court recently suggested that courts may not examine the merits of the interpretation provided in the award by the arbitrator, unless they were of the view that such an interpretation was reasonably not possible. The Court was faced with the question whether the interpretation provided to the contract in the award of the Tribunal was…Your free access to Live Law has expiredTo read the article, get a premium account.Your Subscription Supports Independent JournalismSubscription starts from ₹ 599+GST (For 6 Months)View PlansPremium account gives you:Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.Subscribe NowAlready a subscriber?LoginIn setting aside an arbitral award, the Supreme Court recently suggested that courts may not examine the merits of the interpretation provided in the award by the arbitrator, unless they were of the view that such an interpretation was reasonably not possible. The Court was faced with the question 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. Delving into the ambit and scope of the court’s jurisdiction under Section 34 of the Arbitration Act (Application for setting aside arbitral award), the bench headed by Justice N. V. Ramana acknowledged that it is a settled position that a Court can set aside the award only on the grounds as provided in the Arbitration Act. “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”, stated the bench. However, in the present case, Oil India Ltd. had argued that the view taken by the Arbitral Tribunal was not even a possible interpretation, therefore the award being unreasonable and unfair suffers from perversity. Hence, the respondent had 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”, clarified the bench Facts of the case The Appellant was awarded the work order pursuant to a tender floated by the Respondent-government enterprise in 1994. The contract agreement was for the purpose of well drilling and other auxiliary operations in Assam. 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. The said Clause 23 is entitled ‘Subsequently Enacted Laws’, and reads, “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”. 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. While the District Court, in a challenge under section 34, upheld the award, the Gauhati High Court, on appeal under section 37 of the Arbitration Act, set aside the award. “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 pari materia 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”, ruled the High Court. Conclusions of the Apex Court In as much as the High Court suggested that Clause 23 is akin to a force majeure clause, the bench proceeded to discuss “the utility and implications of a force majeure clause”- “Under Indian contract law, the consequences of a force majeure event are provided for under Section 56 of the Contract Act, which states that on the occurrence of an event which renders the performance impossible, the contract becomes void thereafter. 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” The Apex Court continued to observe that the Contract Act had already recognised 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, which imposes the Obligation of restitution on the person who has received advantage under the void agreement or the contract that becomes void. The Court also noted that, in the present case, the contract has explicitly recognised force majeure events to include “systems and acts and regulations of the Government of India and other clauses”. “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”, reads the judgment. “Having regards to the law discussed herein, we do not subscribe to either the reasons provided by the Arbitral Tribunal or the High Court. 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”, held the bench. As regards the Arbitral Tribunal, the three-judge bench remarked, “The majority award utilises ‘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”. The top court reflected that 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. “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.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”, inferred the bench. “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”, it ruled. The Supreme Court reached the conclusion that 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, taking note of the other contractual terms which also suggest that such interpretation of the clause is 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 contractor, 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”, decided the Court.Click Here To Download Judgment[Read Judgment]Next Story
In the northern Scotia Sea, the main pathway of Circumpolar Deep Water (CPDW) flows north to pass through a deep gap in the North Scotia Ridge before turning east into the Falkland Trough. A sediment drift has developed on the seabed since the early-middle Miocene, coincident with the opening of Drake Passage and the inception of deep-water flow. Seismic and acoustic surveys show that the drift covers an area of 10,500 km 2 and forms a broadly asymmetrical mound up to 800 m thick. There is a zone of sediment thinning along the northwestern margin, the result of accentuated CPDW flow around rough ocean floor topography. Small debris flows originating around the margins of the drift suggest localized instability and high sediment supply. Four cores 3-9 m long have been recovered from the crest and margins of the drift in water depths of 3900-4300 m. Biostratigraphy and chemostratigraphy reveal that the longest core extends down to oxygen isotope stage 10 (approx. 370 ka). The sediments are predominantly fine-grained contourites and diatom-rich hemipelagites, capped by sandy-silty contourites rich in the planktonic foraminifer Neogloboquadrina pachyderma. Grain-size analysis of the fine fraction, finer than 4 phi (63 mm), combined with radiocarbon (AMS) dating and magnetic susceptibility, provide an indication of relative CPDW strength over the last 18 ka. Shortly after the last glacial maximum (LGM), at approximately 17 ka, silt modes fluctuated from 5.5 phi to up to 6.25 phi; this increased current winnowing is indicative of an unstable CPDW, with stormier glacial benthic conditions producing sporadic, high-energy currents across the drift crest and flanks. At approximately 12,280 ka, an increase in sediment sorting is noted, indicative of a strong flow of CPDW over the drift crest, suggesting an unstable and fluctuating deep-water flow. During deglaciation and into the Holocene, at approximately 10 ka, CPDW flow stabilized, becoming less vigorous across the drift crest and flanks with silt modes from 6 phi to 5.5 phi accompanied by increased sorting of the sediments. The gross average sedimentation rate from the crest of the drift is 11.2 cm/ky compared to 2.3 cm/ky on the southeastern flank. The unsteadiness of CPDW during glacials compared to interglacial periods may be the result of stronger wind forcing and a northward shift in the Polar Front. Older CPDW flow records from the cores suggest variable and cyclic bottom-current flow corresponding to glacial-interglacial episodes. Modern CPDW flow across the crest of the drift averages 11.6 cm s (super -1) but with intermittent benthic storm activity resuspending the fines.
By Bharat Sharma Greater Noida, Aug 25 (PTI) Leading womens squash players, Joshna Chinappa and Dipika Pallikal, are very much capable of breaking into the top five of the world rankings, believes Indias Egyptian coach Achraf El Karagui. Both Chinappa and Pallikal have broken the top-10 barrier in the past (they remain the only two Indians to do so) but have been unable to cement their place in the elite club. They are currently ranked 14th and 22nd respectively. “They definitely have it in them to be in the top five. Joshna is playing better than ever, she is supremely fit. Dipika too is supremely talented and has been working hard of late to improve her fitness,” Karagui told PTI on the sidelines of the Senior Nationals here today. “I see both of them playing for the next five, six years. Dipika mind you is only 25 despite being on the pro tour for a long time. Joshna is 30 and in squash you tend to peak when you are in your 30s. She has been playing brilliant in the last 12 months or so,” said the foreign coach, who has been in India for over an year now. Results have too come too since Karagui took charge of the senior and junior teams in July last year. Most notable performances came from Chinappa, who made the top 10 for the first time before winning the prestigious Asian Championships earlier this year, and Velavan Senthilkumar, who won the coveted British Junior Open beating compatriot Abhay Singh inthe U-19 final. According to world number 27 and countrys number one male player, Saurav Ghosal, Indian squash is in the middle of a golden generation. However, Karagui feels a lot more needs to be done and achieved. “All the leading Indians including Saurav can be world beaters but they must know how to win close matches against the top players. And thats what I have been focusing on in the last 12 months. “They have all the strokes in the book but they need to get better at the tactical side of the game. Modern squash is fiercely competitive and you should be able to play in different ways depending on what the situation demands. Like when to attack and when to slow things down,” said Karagui, who is also a chemical engineer. Karagui, whose contract is extended till 2019, is primarily targeting a pool of 6-7 world class players. And he wants Indians to be worlds best and not just be satisfied with medals at Asian and Commonwealth Games. “When I came here, I could sense there was a lot of focus on doing well in Asian and Commonwealth Games. But with that approach, you cannot be world beaters. You have to aim to be the best. And that is where I want India to be,” said Karagui. The Alexandria-based coach cited the example of his own country Egypt in that respect. “1996 was the time when we changed the structure of squash back home. Our president Hosni Mubarak also played a big role in developing the sport which is now number two after football. “What changed in 96 was that we created a league structure which covered age groups from 11 to 23. So in every age group, we started grooming players. Initially it was tough but once cycle started running smooth, we began churning out players in a phased way,” he said. “I am in talks with the federation of creating a similar structure in India. But since it is a huge country, the task will be anything but easy,” Karagui added. PTI BS SSC SSCadvertisement