Holding

The arbitrators possessed jurisdiction to interpret the contract and award compensation for exchange‑rate fluctuations, and no specific contractual bar existed; therefore the award is enforceable.

Summary

Pure Helium India Ltd. won the lowest bid to supply helium gas to ONGC, quoting a composite price of Rs.149 per cubic meter that included a US$4.60 foreign‑exchange component. When the dollar appreciated, Pure Helium claimed compensation for the exchange‑rate difference, and a three‑member arbitral tribunal awarded it a sum of Rs.1,03,41,309 with interest. ONGC challenged the award under Section 30 of the Arbitration Act, 1940, arguing that the contract’s clause 2.6 prohibited any price escalation and thus the claim was barred. The Bombay High Court Division Bench set aside the award, but Pure Helium appealed to the Supreme Court. The Supreme Court held that the arbitrators were entitled to interpret the contract, that no specific bar existed in the agreement to preclude the claim, and therefore the award was within the arbitrators’ jurisdiction. Consequently, the High Court’s order was set aside, the award was restored, and the interest rate was modified to 6% per annum. The appeal was allowed.

Issues considered

Whether the claim for compensation of foreign‑exchange rate fluctuation is barred by the contract’s ‘no escalation’ clause.
Whether the arbitrators had jurisdiction to interpret the contract and award such compensation.
Whether Section 30 of the Arbitration Act, 1940 permits setting aside the award on the ground of alleged lack of jurisdiction.

Legislation cited

Arbitration Act, 1940s. 30
Reserve Bank of India Act, 1934s. 40

Subjects

ArbitrationSection 30Award setting asideContract interpretationForeign exchange fluctuationEscalation clauseNon‑speaking awardJurisdiction of arbitratorsIndian Arbitration Act 1940Reserve Bank of India Act

Judgment

PURE HELIUM INDIA PVT. LTD. A
v.
OIL AND NATURAL GAS COMMISSION

OCTOBER 9, ·2003

(V.N, KHARE, CJ. AND S.B. SINHA, rJ
B

Arbitration Act, 1940-Section 30-Setting aside award-Grounds
for-Jurisdiction ofCourts-Arbitrator giving non-speaking award holding
that appellant was entitled to higher price due to escalation in price of
dollar -Respondent challenging award on ground that contract did not C
prcvide for any benefit to appellant due to escalation in price-Held,
interpretation of contract was within the scope of arbitration agreement-
No infirmity in award.

A notice inviting global tender for supply of helium gas was issued D
by the respondent. Clause 1.16.1 of the tender stipulated that where
payments were required in Indian rupees, the bidder should indicate
if it would need any foreign exchange for completing the supplies/
services that may be ordered on it. The bidder was required to quote
the total price along with its breakdown between Indian currency E
portion and the foreign currency. Clause 2.6 of the tender required the
bidder to quote a firm price and no escalation was pe_rmissible. Under
Clause 21 any dispute, difference or question which arose between the
parties in respect of the agreement or concerning any thing contained
or arising out of the agreement or as to the rights, liabilities or duties
of the parties under the agreement, was to be referred for arbitration. F

The appellant submitted the lowest bid. After negotiations, the
appellant agreed to supply the gas at Rs. 149 per cubic meter out of
which US $ 4.60 was to be the foreign exchange component. Contract
was awarded to the appellant. During the subsistence of the contract, G
there was an increase in the value of US dollar yis-a-vis Indian rupees
and the appellant claimed from the respondent the difference of price
of dollar as on the date of the contract and the date of supply. The claim
of the appellant was recommended by the Government. The respondent,
however, rejected the claim. H
561
562 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A The appellant invoked the arbitration agreement between the
parties. The arbitrators made a non-speaking award holding the
respondent liable to compensate the appellant for exchange rate
fluctuation.

B The respondent filed a petition under Section 30 of the Arbitration
Act, t 940 questioning the validity of the award on the ground that the
contract provided did not provide for any escalation in price and thus,
the award made by the arbitrators was against the provisions of the
contract. The Single Judge of the High Court dismissed the petition
filed by the respondent. The respondent thereafte1 preferred an appeal
C before the Division Bench of the High Court. The Division Bench
allowed the appeal.

The appellant challenged the judgment and order of the Division
Bench. Allowing the appeal, the Court
D HELD. : 1.1. The jurisdiction of the court in interfer-ing with the
non-speaking award is limited. 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 jurisdirtion under
E Section 30 of the Arbitration Act, 1940. [583-A-C)

State of U. P. v. Allied Constructions, [2003] 6 SCALE 265; K. R.
Raveendranathl'ln v. State ofKerala, (1998) 9 SCC 410; P. V. SubbaNaidu
and Others v. Government ofA. P. and Others, [1998) 9 SCC 407; H.P.
p State Electricity Board v. R. J Shah and Company, [1999) 4 SCC 214;
W. B. State Warehousing Corporation and Another v. Sushi! Kumar Kayan
and Others, [2002) 5 SCC 679; Bharat Coking Coal Ltd. v. Mis Annapurna
Construction, [2003] 7 SCALE 20; Rajasthan State Mines & Minerals Ltd.
v. Eastern Engineering Enterprises and Another, [1999) 9 SCC 283; Food
G Corporation of India v. Surendra, Devendra & Mahendra Transport Co.,
[2003) 4 SCC 80 2nd Shyama Charan Agarwala & Sons Ltd. v. Union
of India Etc., [2002) 6 SC~ 201, referred to.

1.2. Construction of the contract agreement was within the
jurisdiction of the learned arbitrators having regard to the wide
H nature, scope and ambit of the arbitration agreement and they cannot .
\
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. 563

be said to have misdirected themselves in passing the award by taking A
into consideration the conduct of the parties as also the circumstantial
evidence. [577-F]

1.3. It is trite that the terms of the contract can be expressed or
implied. The conduct of the parties would also be a relevant factor in B
the matter of construction_of a contract. (577-AJ

1.4. Massachusetts B. & Insurance Co. v. U. S. (1956) 352 US 128
and Khardah Company Ltd. v. Raymon & Co. (India) Private Ltd., (1963]
3 SCR 183, referred to.
c
1.5. 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. D
The arbitrators were called upon to determine a legal issue which
included interpretation of the contract. The arbitrators, therefore,
cannot be said to have travelled beyond jurisdiction in making the
award. [585-D-E]

2.1. The appellant quoted the foreign exchange component in its
E
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 F
the event the respondent was required to pay in foreign currency, the
same would have an impact on the cost factor. (583-F]

2.2. In the instant case, the appellant did not ask for any
enhancement in the price. It only asked for the difference in price G
occurred owing to fluctuation in the rate of dollar. 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 H
564 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A therefor. [583-D-E]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6478 of
2001.

From the Judgment and Order dated 24.2.2000 of the Bombay High
B Court in A. No. 612/96 in Arbitration Petition No. 52/94 in Award No. 200
of 1993.

Dip~nkar P. Gupta and Ashok Mathur for the Appellant.

C Mukul Rohtagi, Additional Solicitor General, Saurabh Kirpal, Subhash
Oberoi, C.M. Gopal and K.V. Mohan for the Respondent.

The Judgment of the Court was delivered by

D 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
E 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
F 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
G 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 te~ders, the
H tenderers submitted their .technical bids. The bidding. was to be in two
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 565
stages; in terms whereof the technical bids were to be opened first A
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. l 50 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 B
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 C
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 D
stating :

"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 of3,00,000 M3 of Helium Gas E
from Mis 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 F
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 G
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 H
566 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.
A appellant for Exchange Rate Fluctuation in the sum ofRs.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
B 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
C allowed. The appellant is, thus, in appeal before us.

SUBMISSIONS :

Mr. Dipankar P. Gupta, learned Senior Counsel appearing on behalf
D of the appellant, would contend that the Division Bench o.f 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
E 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
F 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
G 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
denying the just claim of the appellant must be held to be arbitrary and
H unfair insofar as payments on similar terms as claimed by the appellant had
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 567

been made not only to the foreign bidders but in fact had been made to A
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 B
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 v. Sushi! Kumar Kayan
and Others, [2002] 5 SCC 679, KR. Raveendranathan v. State of Kera/a, C
[1998] 9 SCC 410, P. V Subba Naidu and Others v. Government of A.P.
and Others, [1998] 9 SCC 407, H.P. State Electricity Board v. R.J. Shah
and Company, [1999] 4 SCC 214, Shyama Charan Agarwala & Sons Etc.
v. Union of India Etc., [2002] 6 SCC 201.
D
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. v. 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 E
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 F
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 G
component in the price to be paid in Indian curr~ncy 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 de with the
payment of the pric,e for supply of Helium gas to the appellant. In support
of his contention, Mr. Rohtagi relied upon Rajasthan State Mines & H
568 SUPREME COURT REPORTS (2003] SUPP. 4 S.C.R.
A Minerals Ltd. v. Eastern E'1gineering Enterprises and Another, (1999] 9
sec 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
B otherwise.

RELEVANT CLAUSES JN THE CONTRACT:

"1.16 Prices:

c 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
D indicating the specific currency.

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/
E 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.
F
In case the bidder would require any assistance/
certification from ONGC to help him secure the required
foreign exchanges it should be so stated."

"I. I 6.3 Price preference for supplies :
G
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
H in international competition.
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 569

The criteria for giving price preference is domestic value A
added. Domestic value added to an indigenous offer will
be as follows :

CIF price of lowest Direct import requirement
Acceptable foreign of raw material components B
Tendered & consumable of Indian bidder

Domestic value = -----------,.----------------------------------------
CIF price of lower acceptable foreign tender

The price preference admissible to indigenous manufacturer will
c
be as under:

Extent of domestic Extent of price
Value preference
D

I. Upto 20% Nil

2. More than 20% upto 50% upto 15%
E
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 · F
keep this price firm without any escalation for any ground
whatsoever until they compete the work against this tender
or any extension thereqf.

2. 7 The prices shall be given in the currency of the country of G
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. H
570 SliPREME COURT REPORTS [2003) SUPP. 4 S.C.R.

A 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
B 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
c Rs.149 p~r 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)
D
712 B, Vasudhara Bhavan, Bandra (E), Bombay-400
051.

a) The quantity of gas received duly certified
by Commission's representative.
E
b) The computer analysis of the gas
chromatograph showing the purity of the gas."

"21. Arbitration

F 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
G 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
H the other party. Before entering upon the arbitration, the two
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 571

arbitrators shall appoint the Umpires. In case either of the parties A
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. B
The decision of the arbitration and in the event of the arbitrators
failing to regain an agreed decision then the deci::ion of Umpire
shall be final and binding on the parties hereto.

The arbitration proceedings shall be held in accordance with the C
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 D
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 and publish their or
his award. Arbitration will be conducted in English language and E
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. F
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 G
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 H
572 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A change in the interpretation or enforcement of any said Act or Jaw,
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
iii any decrees in the cost of the project through reduced liability
·B 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, Company shall
not bear any liability in respect of:
c
i) Personnel taxes, customs, duty and corporate tax".

RELEVANT PARAGRAPHS OF STATEMENT OF CLAIM OF THE
APPELLANT:
D In its statement of claim, the appellant, inter alia, contended :

" ... The claimant has reason to believe that the Bombay Regional
. Office o~the respondent had recommended that the respondent be
made such payments as they rightly believed that such payments
E were legitimately eue 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-1901117/
F
87-0NG-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 :-

G "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
H imported supplies."
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 573
Subsequently, the respondent issued a circular No.74/89 dated 8th A
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
B
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 C
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 D
of law and the respondent is not entitled to act in violation
of the same.

5. That it is further submitted that this very respondent has in
other suppliers entered into prior to the conclusion of this E
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. F

6. That without prejudice to what is stated above, it is further
submitted that the contract between the claimant an6
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 G
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 H
574 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A 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.
B
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
c 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
D rupee would destroy the costing of the Indian suppliers. The
claimant states t~at this interpretation of the contract is
discriminatory against the Indian suppliers, violative of
public policy and against stated government guidelines,
objectives and intentions."·
E
ISSUES BEFORE THE ARBITRATORS :

The respondent in their rejoinder having joined issues with the
aforementioned contentions of the appellant, the following issues which
F were raised by the appellant herein, fell for consideration by the learned
arbitrators.

"l. 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
G 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
H compensated for all exchange rate variations between the
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 575

date of the submission of the Price Bid and the completion A
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. B

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

"I. 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 D
to the Claimants on the from the respective date of devaluation
of the Indian Rupee, namely 8.7.1991and28.2.1998 and not
on payments made before the said dates. Accordingly we
direct that the Respondent do pay to the Claimants a sum of
Rs.l,03,41,309 only (in words Rupee One crore three lakhs E
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.l.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.
F
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."
G
OBJECTIONS TO THE AWARD BY THE RESPONDENT:

(1) The subject-matter of the arbitration was not arbitrable in view
of the terms of the contract;

(2) The appellant was not entitled to any escalation in price. H
576 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.
A 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
B
specifically barred under the contract?

(b) Whether there is any clause in the contract, under which such
a claim could be preferred?

C 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
D 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 ~idders 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.
E
. .
Before the arbitrators apart from construction of the contract agreement,
the questions which, inter a/ia, 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.
F
Construction of a deed s()metimes pose a great problem ..

Justice Frankfurter said : "there is no surer way to misread a document
than t-0 read it literally." Massachusetts B. & Insurance Co. v. U.S. [1956]
G 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
H arbitrators exceeded their jurisdiction in making the award.
PURE HELIUM INDIA PVT. LTD. v. 0.N.G.C. [SINHA, J.) 577

The learned arbitrators, as noticed hereinbefore, in making the award A
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.
B
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 C
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 parties
had agreed on a particular term, there is nothing in law which D
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 E
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 F
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-a-vis the notification issued under Section 40 of the Reserve Bank of G
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. H
578 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A CASE LAWS ON THE POINT :
In State of U.P. v. Allied Constructions, [2003] 6 SCALE 265, this
Court held :

" .. .Interpretation of a contract, it is trite, is a matter for arbitrator
B to determine (see Mis Sudarsan Trading Co. v. The Government
of Kera/a, 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
c 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
D 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... "

E 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
F 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 l 0 of the judgment and the portion extracted from the
decision in Sudarsan Trading Co. case Sudarsan Trading Co. v.
Govt. of Kera/a, [1989] 2 SCC 38 wherein it was said that by
purporting to construe the contract the Court could not take upon
G itself the burden of saying that this was contrary to the contract
and, as such, beyond jurisdiction. That is exactly what the Court I-
has done in the instant case ... "

K.R. Raveendranathan (supra) has been followed by this Court in
H P. V. Subba Naidu (supra) stating :
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 579·

-4'
"4. The entire thrust of the judgment is on examining the terms A
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 B
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 C
submitted to the arbitrator arid 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 D
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 E
(supra). Upon taking into consideration a large number of decisions and
referring to K.R. Raveendranathan (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 F
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 G
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 H
580 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

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 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
B
seeing whether the arbitrator has the jurisdiction to decide the
claim made in the arbitration proceedings."

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

c " .. .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 Jaw which does not permit the parties
to raise a point before the arbitrator and if there is a specific bar
D 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 c~msidered by us
in Bharat Coking Coal Ltd. v. Mis Annapurna Construction, [2003] 7
E 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
F 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
G 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
H at his conclusion.
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 581

(b) It is not open to the Court to admit to probe the mental process A
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 B
adjudication then the Court cannot interf;re.

(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 C
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.
D
(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 travelled beyond his E
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 F
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 G
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). H
582 SUPREME COURT REPORTS (2003] SUPP. 4 S.C.R.

A 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.
B
To the same effe~t is the decision of this Court in Food Corporation
of India v. Surendra, Devendra & Mahendra Transport Co., (2003] 4 SCC
80.

c 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.
D
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
E 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.
F 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
G reasonably possible view and therefore the High Court
rightly declined to set aside the award insofar as the quantity of
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
H the claim."
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. [SINHA, J.] 583

ANALYSIS OF THE CASE LAWS : A
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 B
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 C
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.
D
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. E
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 F
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 G
manner so that effoct 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 H
584 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.
A 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.

B The very fact that three different types of quotations were invited
from the bidders itself is suggestive of the fact that each o~e 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
a
C 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
D 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.

Furthermore, the circular letter dated 25.9.1989 issued by the
E 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.
F
It is further not in dispute t4at the respondent is bound by the
directives issued by the Union of India. In fact from the letter dated
2 l .5 .1990 it is evident that even for the puq)ose of entering into the
contract approval of the Central Government was sought for and granted.
G 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 ~ his contention that such condition was
required to be incorporated in the NIT inasmuch as from a plain reading
H of the said letter, it is evident that such a clause was to be incorporated
PURE HELIUM INDIA PVT. LTD. v. O.N.G.C. (SINHA, J.] 585

in the notice inviting tenders ex majori cautela. A
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
jurisaiction to decide the same, subject of course to application of correct B
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 C
would be sufficient to uphold the award.

The court, having regard to the proposition oflaw 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 D
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.
E
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 :
F
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 G
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. H
586 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A In order to do the complete justice to the parties, in exercise of our
jurisdiction under Article 142 of the Constitution of India, we 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.
B For the reasons aforementioned, the impugned judgment is set aside.
The appeal is allowed with the aforementioned modificati<?ns. However,
in the facts and circumstances of the case, there shall be no order as to costs.

B.K.M. Appeal allowed.

...
~·