SC:No need to examine arbitrator’s interpretation if its reasonably possible

The Hon’ble Supreme Court, on 11th May 2020, in the matter of South East Asia Marine Engineering And Constructions Ltd. (SEAMEC Ltd.) v. Oil India Limited pronounced that usually the Court is not required to examine the merits of the interpretation provided in the award by the arbitrator, if it comes to a conclusion that such an interpretation was reasonably possible.

The Hon’ble Supreme Court observed that:

Court can set aside the award only on the grounds as provided in the Arbitration and Conciliation Act, 1996 as interpreted by the Courts. (Para 12)

Where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. (Para 13)

Usually the Court is not required to examine the merits of the interpretation provided in the award by the arbitrator, if it comes to a conclusion that such an interpretation was reasonably possible. (Para 15)

Under Indian contract law, the consequences of a force majeure event are provided for under Section 56 of the Contract Act, which states that on the occurrence of an event which renders the performance impossible, the contract becomes void thereafter. (Para 19)

When the parties have not provided for what would take place when an event which renders the performance of the contract impossible, then Section 56 of the Contract Act applies. When the act contracted for becomes impossible, then under Section 56, the parties are exempted from further performance and the contract becomes void. However, there is no doubt that the parties may instead choose the consequences that would flow on the happening of an uncertain future event, under Section 32 of the Contract Act. (Para 20)  

Under Indian contract law, the effect of the doctrine of frustration is that it discharges all the parties from future obligations. (Para 26)  

The thumb rule of interpretation is that the document forming a written contract should be read as a whole and so far as possible as mutually explanatory. (Para 28)  

Copy of judgement: Judgement_11-May-2020

-Adv. Tushar Kaushik 

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