G H SOUTH EAST ASIA MARINE ENGINEERING AND CONSTRUCTIONS LTD. (SEAMEC LTD.) versus OIL INDIA LIMITED

Citation: [2020] 4 S.C.R. 254 · Decided: 11-05-2020 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Disposed off

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 4 S.C.R.
SOUTH EAST ASIA MARINE ENGINEERING AND
CONSTRUCTIONS LTD. (SEAMEC LTD.)
v.
OIL INDIA LIMITED
(Civil Appeal No. 673 of 2012)
MAY 11, 2020
[N. V. RAMANA, M. M. SHANTANAGOUDAR
AND AJAY RASTOGI, JJ.]
Contract: Tender floated for well drilling and other auxillary
operations – Work order awarded to appellant – During subsistence
of contract, prices of High Speed Diesel (HSD) one of the essential
materials for carrying out the drilling operations increased through
a circular issued by Government – Appellant raised a claim that
increase in the price of HSD triggered the ‘change in law’ clause
contained in clause 23 under the contract and the respondent
became liable to reimburse them for the same – In terms of Clause
23, if subsequent to the date of price of Bid Opening, there was a
change in or enactment of any law or interpretation of existing law,
which resulted in additional cost/reduction in cost to contractor on
account of the operation under the contract, the contractor would
be entitled to receive such additional/reduced cost actually incurred
– Appellant invoked the arbitration clause – Arbitral Tribunal
allowed the claim holding that Clause 23 must be liberally construed
and any circular of the Government would amount to a change in
law – On appeal, High Court set aside the award – Held: There are
price fluctuations which a prudent contractor would take into
margin, while bidding in the tender – Such price fluctuations cannot
be brought under ‘change in law’ clause unless specific language
points to the inclusion – The contract in question was based on a
fixed rate – The party, before entering the tender process, entered
the contract after mitigating the risk of such an increase – The
interpretation of Arbitral Tribunal to expand the meaning of Clause
23 to include change in rate of HSD was not a possible interpretation
of this contract as the appellant did not introduce any evidence to
prove same – Arbitral award set aside – Contract Act – s.56 –
Arbitration and Conciliation Act, 1996 – s.34 – Doctrine of Force
Majeure.
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[2020] 4 S.C.R. 254
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Arbitration and Conciliation Act, 1996: s.34 – Scope of court’s
jurisdiction under s.34, discussed.
Dismissing the appeals, the Court
HELD: 1. It is settled position that a Court can set aside
the award only on the grounds as provided in the Arbitration Act
as interpreted by the Courts. It is also settled law that where two
views are possible, the Court cannot interfere with the plausible
view taken by the arbitrator supported by reasoning. [Paras 12,
13][260-G-H; 261-D]
2. The interpretation of the ‘change in law’ clause 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. In the case at
hand, this basic rule was ignored by the Tribunal while interpreting
the clause. In this case, the contract was based on a fixed rate
basis. The party, before entering the tender process, entered
the contract after mitigating the risk of a price increase. 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. The interpretation of the
Arbitral Tribunal to expand the meaning of the ‘change in law’
clause of the contract to include change in price of HSD is not a
possible interpretation of this contract, as the appellant did not
introduce any evidence which proves the same. [Paras 28, 30
and 31][267-A, D-F]
Sumitomo Heavy Industries Limited v. Oil and Natural
Gas Corporation Limited (2010) 11 SCC 296 : [2010]
9 SCR 176 – Held inapplicable.
Satyabrata Ghose v. Mugneeram Bangur & Co. AIR
1954 SC 44 : [1954] SCR 310; Mcdermott International
Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181 :
[2006] 2 Suppl. SCR 409; Dyna Technologies Pvt. Ltd.
v. Crompton Greaves Ltd. (2019) SCC Online SC 1656
– referred to.
SOUTH EAST ASIA MARINE ENGINEERING AND CONSTRUCTIONS LTD.
(SEAMEC LTD.) v. OIL INDIA LTD.
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SUPREME COURT REPORTS
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Chandler v. Webster [1904] 1 KB 493; Fibrosa Spolka
Akcyjna v. Fairbairn Lawson Combe Barbour Ltd;
[1942] UKHL 4; Cantiare San Rocco SA (Shipbuilding
Company) v. Clyde Shipbuilding and E

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