Cover Story

Contract to be interpreted in the way parties wanted and intended it to be : Supreme Court [Read Judgment]

Ashok KM
31 Jan 2016 7:30 AM GMT
Contract to be interpreted in the way parties wanted and intended it to be : Supreme Court [Read Judgment]
Your free access to Live Law has expired
To read the article, get a premium account.
    Your Subscription Supports Independent Journalism
Subscription starts from
(For 6 Months)
Premium account gives you:
  • Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.
  • Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.
Already a subscriber?

Supreme Court has observed that the terms of the contract, especially Arbitration agreements will have to be understood in the way the parties wanted and intended them to be. Apex Court Bench comprising of Justices Anil R. Dave, Kurian Joseph and Amitava Roy made this observation in Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc.

In Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc., the Apex Court had held that Part I of the Arbitration Act is applicable only to all the arbitrations which take place within the territory of India”, overruling a three-Judge Bench decision in Bhatia International v. Bulk Trading S.A.. Exercising its the power under Article 142 of the Constitution of India, the Constitution Bench however, held that the law declared by it would only operate prospectively and the present case is guided by principles laid down by Three judge Bench.

Observing that the Court cannot interpret a contract between two parties like interpreting a Statute, it said “particularly in agreements of arbitration, where party autonomy is the grundnorm, how the parties worked out the agreement, is one of the indicators to decipher the intention, apart from the plain or grammatical meaning of the expressions and the use of the expressions at the proper places in the agreement. Contextually, it may be noted that in the present case, the respondent had invoked the provisions of English law for the purpose of the initiation of the unsettled disputes. It has hence, while interpreting an agreement, to be kept in mind that the parties, intended to avoid impracticable and inconvenient processes and procedures in working out the agreement.”

Going through the entire agreement, the Court held that the applicable law is not the Indian Law and upheld the High Court order which had held that the application under Section 34 of Arbitration Act is not maintainable.

Read the Judgment here.

Next Story