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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-Ã -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.