2002 (5) TMI 842 - SC - Indian Laws

Whether the amendment dated 4.9.1986 applies to the general conditions of contract as applicable to the parties, and therefore, the arbitration clause should have been read as amended casting an obligation on the arbitrator to give a reasoned award? Held that - The arbitration clause is contained in the contract entered into between the parties. Its terms could not have been varied except by mutual agreement. Moreover the amendment dated 4.9.1986 itself provides for its coming into effect from 3.10.1986, i.e. on 30th day after the date of the amendment. That amendment clearly cannot have any relevance for interpreting the arbitration clause contained in the contract entered into between the parties much before the date of amendment coming into effect. In the objection petition there is a vague and general plea raised that rejecting the claims forming subject matter of cross objection and allowing the claim of the appellant without assigning any reason was bad. Such an omnibus and general plea cannot be read as submitting that the amendment dated 4.9.1986 applied to the contract between the parties and that in view of the amended arbitration clause the unreasoned award was bad. In the objection petition there is a vague and general plea raised that rejecting the claims forming subject matter of cross objection and allowing the claim of the appellant without assigning any reason was bad. Such an omnibus and general plea cannot be read as submitting that the amendment dated 4.9.1986 applied to the contract between the parties and that in view of the amended arbitration clause the unreasoned award was bad. Appeal allowed.

Summary

Issues:
1. Interpretation of an arbitration clause in a contract.
2. Applicability of an amendment to the general conditions of a contract.
3. Obligation of an arbitrator to provide a reasoned award.

Detailed Analysis:
1. The case involved a dispute regarding the interpretation of an arbitration clause in a contract entered into between the parties. The contract contained an arbitration clause requiring disputes to be referred to the sole arbitration of an Engineer Officer. However, the clause did not specify an obligation for the arbitrator to provide a reasoned award. The central issue was whether an amendment dated 4.9.1986, requiring the arbitrator to give reasons for the award if the value of claims exceeded a certain amount, applied to the contract.

2. The respondents argued that the amendment applied to the contract, as the appellant's acceptance letter authorized modifications to the general conditions of the contract. The appellant contended that the acceptance letter did not grant authority for unilateral modifications by the respondents. The Court analyzed the acceptance letter and found that it did not explicitly authorize modifications without mutual agreement. Additionally, the amendment itself specified its effective date, which postdated the contract between the parties, further supporting the appellant's position.

3. The Court considered previous legal precedents cited by the respondents, emphasizing the need for careful examination of contract terms regarding unilateral variations. However, it concluded that the acceptance letter did not confer authority for unilateral modifications. The Court highlighted that the respondents did not raise the issue of the arbitrator's obligation to provide reasons during previous stages of the dispute resolution process. Ultimately, the Court allowed the appeal, setting aside the Division Bench's decision and restoring the Single Judge's ruling in favor of the appellant. The Court rejected the respondents' request for further consideration of objections to the award, as no additional substantive pleas were raised during the proceedings.

In conclusion, the Supreme Court's judgment clarified the interpretation of the arbitration clause, the applicability of contract amendments, and the obligation of an arbitrator to provide a reasoned award, ultimately ruling in favor of the appellant based on the analysis of the contract terms and legal principles.