Contract between the two parties was for the purpose of well drilling. Due to increase in the prices of High-Speed Diesel (HSD), which is essential for carrying out drilling operations, applicant raised a claim for respondent being liable for reimbursement of the excess price since contract triggered the ‘change in law’ clause. Arbitral Tribunals held, though it is not law, it had force of law. District court upheld the law. Gauhati High Court set aside the award, putting the issue under the garb of force majeure as the contract included ‘acts and regulations of the government’ under force majeure, that would rescind the contract. It also declared the clause to be pari materia with doctrine of frustration and supervening impossibility.

Whether the interpretation provided to the contract in the award of the Tribunal was reasonable and fair, so that the same passes under Section 34 of the Arbitration Act.

The contract had expressly given recognition to force majeure events, including clauses of acts and such systems that is brought forth by the Government of India. And the parties had agreed for a payment of force majeure rate to tide over any force majeure event, which is temporary in nature. The court did not completely subscribe to the reasoning of the High Court holding that the clause was inserted in furtherance of the doctrine of frustration. The top court reflected that interpretation of the clause of the Contract by the Arbitral Tribunal provided a broad interpretation. It is unacceptable by the court. That is because of the rule of interpretation being that, such document forming part of a written contract should be read as a whole and also they should be mutually explanatory.

If the purpose of the tender was to limit the risks of price variations, prudent contractor would have taken into it margin. So, price fluctuations cannot be brought under the ambit of the contract, and thus interpretation given by Arbitration Tribunal is impossible. The Supreme Court suggested that courts may not examine the merits of the interpretation provided in the award by the arbitrator, unless believed that such interpretation was reasonably impossible.