Summary
Setting aside the award reimbursing diesel-price increases was upheld. Although courts must defer to a plausible arbitral interpretation, the tribunal’s expansion of the change-in-law clause contradicted the fixed-price contract read as a whole and the contractor’s obligation to supply fuel at its own expense. The Court did not endorse the High Court’s equation of that clause with frustration. The contractor’s appeal was dismissed and the connected appeal disposed of accordingly.
Issues
- Whether the award adopted a reasonably possible construction of the change-in-law clause.
- Whether the contract allocated ordinary diesel-price fluctuations to the contractor.
- Whether the change-in-law clause could be equated with frustration.
Provisions considered
- Section 34, Arbitration and Conciliation Act, 1996Applied the limited review standard while holding that the award’s interpretation was not a possible view of the contract as a whole. (¶¶ 11, 12, 13, 14, 15, 28, 30, 31, 32, 33)
Held
- Section 34 review is not an ordinary appeal. A reasoned, plausible interpretation is not displaced merely because another view exists; intervention requires a defect within the statutory grounds that goes to the root of the award. (¶¶ 11, 12, 13, 14, 15)
- The agreement had to be read as a whole. Fixed rates continuing through performance and the contractor’s express obligation to provide fuel at its own expense allocated ordinary price fluctuation risk to the contractor. Without specific language or supporting evidence, expanding clause 23 to cover diesel-price increases was not a possible contractual interpretation. (¶¶ 16, 25, 27, 28, 29, 30, 31, 32)
- The Court did not adopt the High Court’s reasoning equating clause 23 with frustration. Frustration discharges future performance, whereas the parties used contractual provisions to mitigate risk and preserve the contract. Contractually stipulated consequences of uncertain events must be distinguished from the statutory doctrine. (¶¶ 19, 20, 23, 24, 25, 26)
Result
Civil Appeal 673 of 2012 dismissed, leaving the High Court’s setting aside of the award intact. Civil Appeal 900 of 2012 disposed of in the same terms. No order as to costs.