Multi-Clause Contracts Should Be Interpreted So That A View On Any Particular Clause Doesn't Violate Another Part Of The Contract: Delhi HC

The Delhi High Court bench of Justices Vibhhu Bakhru and Sachin Datta affirmed that the explicit terms of a contract are always the final word with regard to the intention of the parties. The multi-clause contract inter se the parties has, thus, to be understood and interpreted in a manner that any view, on a particular clause of the contract, should not do violence to another part of the contract. In this case, the court while hearing appeal under section 37 of the Arbitration Act upheld the impugned judgment passed by the court under section 34 of the Arbitration Act. Brief Facts The appellant (hereafter GAIL), has filed the present intra court appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereafter the A&C Act) impugning a judgment dated 26.11.2010 (hereafter the impugned judgment) passed by the learned Single Judge of this Court in OMP (COMM) No.264/2003. SPL (Saw Pipes Limited) was awarded the contract pursuant to being successful in a competitive bidding process initiated by GAIL by floating a global tender. GAIL issued a Purchase Order dated 31.10.1994 (hereafter the PO) for supply of pipes. Section III of the bid document contains the General Conditions of the Contract (hereafter GCC). Article 1.2 of GCC defines the Contract to include the Purchase Order and all attached exhibits and documents thereto. The disputes arose between the parties as GAIL withheld the payment of amounts due to SPL under the Contract. It is the case of GAIL that the amounts were withheld towards damages for delay in delivery of the pipes attributable to SPL. Article 28 of the GCC contained an arbitration clause, whereby the disputes in relation to the Contract were agreed to be resolved by arbitration under the rules of the Conciliation and Arbitration of International Chamber of Commerce (ICC) by one or more arbitrators. The venue of arbitration proceedings was agreed to be New Delhi. SPL approached the ICC for commencement of the arbitration proceedings in regard to the disputes/claims of SPL arising out of the Contract.GAIL objected to the said reference. GAIL contended that the ICC does not have the jurisdiction to commence the arbitration proceedings as the contract was awarded to SPL, which is an Indian concern. However, the ICC rejected GAIL's objection and proceeded with the arbitration. The arbitral tribunal also rejected GAIL's objection to the jurisdiction of the arbitral tribunal by a detailed order dated 11.02.1998. SPL filed a civil suit before this Court for an injunction restraining GAIL from encashing the performance bank guarantee furnished by SPL in terms of the Contract. In the said proceedings the parties agreed for the arbitration to be conducted under the A&C Act in place of the ICC Rules. Further, a new arbitral tribunal was constituted for adjudication of the disputes between the parties. This Court further directed that the Arbitral Tribunal shall take up the matter from the stage already reached and that the aforementioned bank guarantee would be kept alive. The Arbitral Tribunal held that GAIL was responsible for the delay by not taking the delivery of the goods even when large quantities of finished and coated pipes were available with SPL. Therefore, GAIL was not entitled to reduce the price payable for the pipes, on account of delay on the part of SPL. Accordingly, the Arbitral Tribunal allowed SPL's claim for the amount withheld by GAIL and awarded the said amount along with the interest. The learned Single Judge also rejected GAIL's petition to set aside the impugned award as the Court found that the Arbitral Tribunal's interpretation of the Contract was reasonable and its view was plausible one. Contentions The appellant submitted that SPL was not able to meet the production targets on account of its own defaults. GAIL contended that there is no stipulated schedule for lifting of pipes and it had no obligation to lift pipes to match SPL's production schedule.It also followed that SPL was required to arrange for storage of pipes for a reasonable period till GAIL lifted the stocks. That Article 13.10 of the GCC expressly provided that all tests and trials in general would be witnessed by an Inspector and SPL would confirm to the consultant the exact date of inspection by a thirty days' prior notice. It was obvious that SPL was required to make arrangements for storage equivalent to production capacity of at least thirty days. Since the storage facilities available with SPL were only equivalent of eight days production, it was evident that the bottleneck resulting in the delay in supplies was for reasons attributable to SPL. That its decision to apply the price reduction formula under Article 24.1 of the GCC is not arbitrable and that SPL has waived its right to raise such claims as it had not raised any claim during the currency of the Contract. Reliance was placed...

Multi-Clause Contracts Should Be Interpreted So That A View On Any Particular Clause Doesn't Violate Another Part Of The Contract: Delhi HC

Mohd Malik Chauhan

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Multi-Clause Contracts Should Be Interpreted So That A View On Any Particular Clause Doesn't Violate Another Part Of The Contract: Delhi HC

Mohd Malik Chauhan

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INR 1099+GST

This is a premium content
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