Contract – Clause therein, putting bar on reimbursement of certain payments on account of escalation – Interpretation of – Contract between appellant and respondent-Contractor– During the subsistence of contract, notification issued by which minimum wages of the labour was increased– Along with the final bill, the respondent also claimed reimbursement of wages in view of such increase in wages of labour – Claim of additional amount rejected by appellant– Dispute referred to arbitration – Award passed by arbitrator in favour of the respondent – Challenge by appellant, rejected by High Court – On appeal, held: Parties are free to decide their own terms and conditions in case of a contract and the same are to be construed by the courts after having regard to the intention of the parties – In the instant case, in view of Cl.19 no reimbursement regarding any escalation whatsoever was to be made to the contractor if any such escalation took place during the subsistence of the contract – The word “whatsoever” as used in Cl.19 suggests that any escalation taking place even due to the action of the government was also not to be reimbursed – Further, on reading of Cl.6.3 which also deals with the issue in question, it is evident that no escalation was to be reimbursed – Hence, in the presence of such clauses, which respondent voluntarily agreed before accepting the contract, any departure cannot be allowed – Respondent cannot claim reimbursement of excess of minimum wages on account of hike due to the Notification as it would be against Cl.19 r/w. Cl.6.3– Arbitration and Conciliation Act, 1996 – ss.5, 34.
Arbitration – Proceedings under – Object of – Discussed – Arbitration and Conciliation Act, 1996.
Allowing the appeals, the Court
HELD: 1.1 The primary object of the arbitration is to reach a final disposition in a speedy, effective, inexpensive and expeditious manner. In order to regulate the law regarding arbitration, legislature came up with legislation which is known as Arbitration and Conciliation Act, 1996. In order to make arbitration process more effective, legislature restricted the role of courts in case where matter is subject to the arbitration. Section
5 of the 1996 Act specifically restricted the interference of the courts to some extent. In other words, it is only in exceptional circumstances, as provided by this Act, the court is entitled to intervene in the dispute which is subject matter of arbitration. Such intervention may be before, at or after the arbitration proceeding, as the case may be. In short, court shall not intervene with the subject matter of arbitration unless injustice is caused to either of the parties. [Para 8] [592-A-C]
1.2 It is well-settled cannon of law that parties are free to decide their own terms and conditions in case of a contract. In the instant case, Clause 19 of the special conditions deal with issue of bar on reimbursement of certain payments on account of escalation. On a plain reading of said clause, prima facie, it appears that the appellant made it clear that the contractor shall quote their rate after having regard to this clause that no reimbursement regarding any escalation whatsoever be made to the contractor if any such escalation takes place during the subsistence of the contract which the respondent with open eyes had agreed. The word “whatsoever” as used in Clause 19 suggests that even any escalation takes place due to the action of the government would also not be reimbursed. [Para 9] [592-D, F-G]
1.3 Further, Clause 6.3 of special conditions, particularly, deals with the present issue. On a plain reading of Clause 6.3 read with Clause 19, it is evident that it was particularly made clear that no escalation would be reimbursed even in the case of a regulation. Hence, in the presence of such clauses, which respondent voluntarily agreed before accepting the contract, any departure cannot be allowed. In other words, now the respondent cannot claim reimbursement of excess of minimum wages on account of hike due to the Notification of the Government of Haryana. If any departure would be allowed from the terms and conditions of the contract, then it would destroy the basic purpose of the contract provided such conditions shall not be arbitrary. [Para 10] [592-G; 593-D-E]
1.4 It is a settled law that the process of interpretation is based on the objective view of a reasonable person, given the context in which the contracting parties made their agreement. The terms of the contract shall be construed by the courts after having regard to the intention of the parties. Courts ought not to take any hypothetical view as it may cause prejudice to either of the parties. [Para 12] [594-B, D]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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