Soumen Sen, J.

1. The appeal is arising out of a judgment and order passed by the learned Single Judge in connection with an application filed by the appellant for setting aside of an award made and published on 17th March, 2016 by the Arbitral Tribunal.

2. The Arbitral Tribunal had partly allowed the claim of the parties.

3. In the arbitration proceeding Steel Authority of India (in short ‘SAIL’) was the claimant. The respondent HTC in the said proceeding filed a counter-statement with a counter claim.

4. On a set off being allowed the appellant had suffered an award of Rs.7,45,56,134/- together with interest @ 18% per annum on the amount from the date of the award till payment apart from the costs and expenses of the arbitration.

5. The arbitral tribunal was consisted of three former Hon’ble Judges of this court.

6. It was a unanimous award.

7. The learned Single Judge on consideration of the submissions made on behalf of the respective parties upheld the award and dismissed the application for setting aside of the award.

8. This order is now under challenge.

9. Before we delve into the issues raised on behalf of the parties we feel it necessary to indicate the relevant facts.

10. Pursuant to an invitation to tender notice dated 5th/6th August, 1996 for handling iron and steel materials at the Stock-yard of SAIL located at Paharpur, 20 Coal Berth and DP-II siding of Calcutta the respondent participated in the said tender and after due evaluation of all the tenders submitted by different parties, the contract was awarded to HTC Engineering Pvt. Ltd. (in short “HTC”) with effect from 23rd November, 1996. One of the stipulations made in the said tender was that the prospective contractors must have an experience of handling at least 125 lacs MT of Steel materials in any of the preceding five financial years. The tenderer must own at least 50 per cent of the equipment specified at clauses 2.1 of Instructions to Tenderers in its own name.

11. The estimated quantities proposed to be handled during the 1st year of operation of the contract are mentioned in Clause 4. The said Clause is reproduced below:

4. The estimated quantities proposed to be handled during the first year of operation of the contract are expected to be as under (calculation based on sales plan):

Particulars	Receipt	Delivery
Pig Iron	5000	5000
Tool	2,50,000	2,50,000
Total	2,55,000	2,55,000

(Emphasis supplied)

12. Clause 5 states that the estimated quantities are only for the purpose of finding out the value of the tender and SAIL would not be anyway liable if the actual quantity of the work differs from the estimated quantity indicated in Clause 4. The said Clause reads:

“5. The estimated quantities for the first year of operation of contract are only for the purpose of finding out the value of the tender and SAIL is in no way liable if the actual quantity of work differs from estimated quantity indicated above.” (emphasis supplied)

13. In Clause 9 of the Tender Notice for appointment of Handling Contractor it is stated:

“This Tender is subject to the interim order passed by the Hon’ble Calcutta High Court on 24th July, 1995 in FMAT No.1460 of 94 (Steel Authority of India Ltd. & Ors. vs. Sheonayak Murai & Ors. by which the Hon’ble Calcutta High Court directed to maintain the status quo of the employment of the contract labour working in the Paharpur Stockyard till the disposal of the said Appeal.” (emphasis supplied)

14. The Clauses 3, 3.2 and 4.0 of the Instruction to Tenderers Schedule of Operation and Rates are mentioned. The said Clauses read:

3. Schedule of operation and payment:

3.2. The rates quoted will be deemed to be inclusive of the cost of discharging all the general duties for performing the work efficiently.

4.0. To enable the Tenderer to assess the quantum of work the estimated quantities proposed to be handled during the first year of operation are indicated below: (emphasis supplied)

	Receipt	Delivery
Steel	2,50,000 M/T	2,50,000 M/T
Pig Iron	5000 M/T	5000 M/T

15. Clause 11.1 of the “Instructions to Tenderers” refer to the documents that shall constitute the contract. They are:-

i) The advertisement for tender

ii) Instructions to tenders,

iii) Terms and conditions of contract along with all its enclosures etc. and any other letters exchanged with the successful tenderer shall form part of the contract.

16. The agreement/contract for handling iron and steel materials executed on 23rd November, 1996 in Clause 2 refers to thirteen documents as annexures 1 to 13 which shall constitute the contract for the purpose of construction, interpretation and effect thereof. They are:

a)	Annexure - 1	Contractor’s letter
b)	Annexure – 2	Invitation to tender.
c)	Annexure – 3	Instructions to tenderers.
d)	Annexure – 4	Terms and conditions of contract for handling Iron & Steel materials.
e)	Annexure – 5	: Terms and conditions for crane(s) and/or other equipment (s) to be hired out by the Co.
f)	Annexure – 6	Custody & Indemnity bond.
g)	Annexure – 7	Equipment utilization statement form.
h)	Annexure – 8	Guarantee Bond.
i)	Annexure – 9	Check lists for cranes.
j)	Annexure – 10	Schedule of rates for general operation in yard.
K)	Annexure – 11	Schedule of items : Pig Iron, Schedule – A, Schedule – B
l)	Annexure – 12	Schedule of cutting charges.
m)	Annexure – 13	(i) List of road transport; (ii) List of mechanical handling equipment.

17. The Handling Contractor in terms of Clause 2 of Terms and conditions of Contract for Handling Iron and Steel Materials in the stockyards of Steel Authority of India Limited at Paharpur, 20 Coal Berth and DP-II Siding shall handle the arrivals, deliveries and despatches of Iron and Steel materials. The nature of the handling work will be as indicated in the Schedule of Operations and Rates.

18. The Liabilities of the Contractor is mentioned in Clause 4.8 of the aforesaid terms which states:

4.8 In the event of the contractor’s failure or default to provide sufficient equipment and for timely labour at any time to do any of the jobs entrusted with to under the contract or in the event of the Contractor unilaterally terminating the contract, the company shall have the right to get the work done by directly employing labour, equipments or by employing another Agency and all charges and expenses incurred by the Company in this behalf shall be recovered from the Contractor either form his bills or from any other amount payable to the Contractor either under this contract or any other contract.” (emphasis supplied

19. The rates payable and escalation are mentioned in Clause 6.2 of the aforesaid terms. It reads:

6.2 ...... The rates quoted in the Schedule of Operation and Rates annexed hereto for major items as mentioned above will be deemed to comprise of various components as follows:

Composition of the rates and weightage of various

Components of work involved

Components	Traditional Wing		Mechanised Wing	Transportation
	Sch –A Items + Pig Iron	Sch-B Items		Sch –A Items + Pig Iron	Sch – B Items
Labour	60	10	10	10	10
Fuel	-	35	-	45	35
Overheads	25	40	40	30	40
Profit	15	15	15	15	15
Total	100	100	100	100	100

20. The Tenure of the contract is mentioned in Clause 7.1 of the aforesaid terms. It would be effective from the date of commencement of the work as mentioned in the work order initially for a period of two years with the option to extend the same at the sole discretion of the Company for a further period of one year on the same rates and terms and conditions. The company will also have the option to terminate the Contract at any time during the period of Contract by giving 30 days’ notice in writing without assigning any reason whatsoever and without payment of any compensation. In the event of Contractor’s failure to discharge duties strictly in the manner stipulated in the Contract, the Company may terminate the same summarily and without notice. The decision of the Company or its representative regarding Contractor’s failure to discharge his obligations strictly under the Contract shall be final and binding upon the Contractor.

21. Clauses 8.3 and 8.7 deals with the relative rights of the parties with regard to guaranteed quantities. The said clauses are mentioned under the general terms and are reproduced below:

8.3 “The mere mention of any item or work in the contract does not by itself confer the right upon the contractor to demand that item of work at all times.

8.7. The company gives no guarantee about the reasonable volume of work to be entrusted with the contractor at any time or even throughout of tenure of the contract.” (emphasis supplied)

22. The contract was awarded to HTC with effect from 23rd November, 1996 in the background of HTC’s past experience and good performance as Steel material handling contractors in SAIL’s stock-yard continuously for 14 years and most importantly because of the competitive price/rate quoted by HTC.

23. Dispute arose between the parties with regard to supply of minimum quantity of materials to be handled by the contractor under the tender.

24. The arbitration proceeding was initiated by SAIL on 1st July, 1999 against HTC claiming inter alia, damages on account of alleged non performance of HTC for the period from 23rd November, 1996 to 31st March, 1999. SAIL appears to have extended the duration of the contract unilaterally for a further period of one year with effect from 22nd November, 1998. SAIL enhanced their original claim with an additional claim for balance period, that is, up to 22nd November, 1999.

25. SAIL made the following claims:-

Item of Claim	Original Claim (Calculated upto 31.3.99)	Supplementary Claim (Calculated upto 22.11.99)
a. unpaid wages to the Contract Labour	Rs.3,48,86,400.00	Rs.1,67,29,600.00
b. PF ques of the Contract Labour	Rs.96,01,947.00	Rs.32,44,270.00
c. Unpaid bonus to the contract labour with effect from 23.11.96	Rs.75,29,508.00	Rs.15,30,064.00
d. Unpaid gratuity to the Contract labour with effect from 23.11.96	Rs.30,16,629.00	Rs.10,26,683.78
e. Unpaid Privilege leave salary to the contract Labour with effect from 23.11.96	Rs.52,28,825.00	Rs.13,43,108.33
f. Claim towards interest on outstanding advance	Rs.22,80,893.00
g. Claim towards liquidated damages		Rs.28,36,53,203.00
h. Contingent liabilities	Rs.90,46,969.00	Rs.40,09,777.00
i.Workmen’s compensation	Rs.30,000.00
j. Loss due to total stoppage in delivery of materials from Paharpur Coal Berth Stock yards from 1.1.99 to 31.3.99	Rs.99,70,030.00
Total	Rs.36,52,04,404.00	Rs.2,78,83,503.11

26. Most of the claims mentioned aforesaid, pertains to the contract labourers apart from liquidated damages.

27. HTC made a counter claim against SAIL in the sum of Rs. 15,42,98,768/- the particulars whereof are mentioned below:

PARTICULARS

1) Non supply of promised and/or assured quantity of materials to be handled	Rs.12,40,93,043.00
2. Wrongful detention of machinery	Rs.36,99,500.00
3. Additional claims made on account of 224 contract labours	Rs.1,79,00,4000.00
4.Outstanding bills and interest	Rs.86,05,825.00
5. Refund of security deposit and performance guarantee by way of bank guarantee	Rs.11,50,000.00
Total	Rs.15,54,48,768.00

28. The aforesaid claim of HTC from 1st May, 1998 to 22nd November, 1999 spanning over a period of 19 months was taken up for consideration by the Arbitral Tribunal along with the claim of SAIL.

29. After the completion of pleadings on consideration of the issues raised by the parties the arbitral tribunal settled eleven issues. The issues are indicated below:

1. (a) Was not the claimant under the contract obliged to supply 21250 MT totalling 42500 MT per month on an average

(b) If yes, did the claimant commit breach of such obligation

2. (a) Is the claimant entitled to a sum of Rs.5,16,000.00 as enhanced up to 2nd November, 1999 or any other sum on account of alleged unpaid wages to the contract labourers claimed in Claim no.A of paragraph 27 in the Statement of claim and Annexure I of paragraph 14 to the Rejoinder to the counter statement of facts

(b) Is the claimant entitled to a sum of Rs.1,28,46,217.00 as enhanced up to 22nd November, 1999 or any other sum on account of alleged Provident Fund dues of contract labourers as claimed in Claim No.B of paragraph 27 of the Statement of claim and Annexure II of paragraph 16 to the Rejoinder to the counter statement of facts

(c) Is the claimant entitled to a sum of Rs.74,40,240.00 enhanced up to 22nd November, 1999 or any other sum on account of alleged bonus to the contract labourers with effect from 23rd November, 1996 as claimed in claim No.C of paragraph 27 of the Statement of claim and Annexure III of paragraph 16 to the Rejoinder to the counter statement of facts

(d) Is the claimant entitled to a sum of Rs.40,43,312.78 as enhanced upto 22nd November, 1999 or any other sum on account of alleged unpaid gratuity to the contract labourers with effect from 23rd November, 1996 as claimed in claim No. D of paragraph 27 of the Statement of claim and Annexure IV of paragraph 16 to the rejoinder to the counter statement of facts

(e) Is the claimant entitled to a sum of Rs.65,71,933.33 as enhanced up to 22nd November, 1999 or any other sum on account of unpaid alleged privilege leave salary of the contract labourers with effect from 23rd November, 1996 as claimed in claim no.E of paragraph 27 of the Statement of claim and Annexure V of paragraph 16 to the rejoinder to the counter statement of facts

(f) Is entitled to an alleged sum of Rs.14,37,273.00 or any other sum towards alleged interest on advance as claimed in claim no.F of paragraph 27 of the Statement of claim

(g) Is the claimant entitled to a sum of Rs.28,36,53,203.00 or any other sum on account of alleged liquidated damages as claimed in claim no.G of paragraph 27 of the Statement of claim

(h) Is the claimant entitled to a sum of Rs.1,29,26,188.00 as enhanced up to 22nd November, 1999 or any other sum on account of alleged contingent liabilities as claimed in claim no.H of paragraph 27 of the Statement of claim and Annexure VIII of paragraph 16 to the rejoinder to the counter statement of facts

(i) Is the claimant entitled to a sum of Rs.30,000.00 or any other sum on account of alleged worker’s compensation as claimed in as claimed in Claim No. I of paragraph 27 of the Statement of claim

(j) Is the claimant entitled to a sum of Rs.99,70,030.00 due to loss on account of alleged stoppage in delivery of materials from paharpur and Coal Berth Stock yards from 1.1.99 to 31.03.99 as claimed in claim no.J of paragraph 27 of the Statement of claim

3. Is the claimant entitled to interest at the rate of 18 per cent per annum as claimed in paragraph 31 of the Statement of claim

4. To what reliefs, if any, is the claimant entitled to

5. Is the respondent entitled to a sum of Rs.12,40,93,043.00 on account of non supply of promised and/or assured quantity of materials to be handled during the period of 1st May, 1998 to 22nd November, 1999 as pleaded in paragraph 29 of the counter claim

6. Is the respondent entitled to a sum of Rs.36,99,500.00 on account of wrongful detention of machinery as pleaded in paragraph 31 of the counter claim

7. Is the respondent entitled to a sum of Rs.1,79,00,400.00 towards additional claims made on account of 224 contract labours as pleaded in paragraphs 32 and 33 of the counter claim

8. Is the respondent entitled to a sum of Rs.86,05,825.00 on account of outstanding bills and interest as pleaded in paragraph 34 of the counter claim

9. Is the respondent entitled to a sum of Rs.11,50,000.00 on account of refund of security deposit and performance guarantee by way of bank guarantee as pleaded in paragraph 35 of the counter claim

10. is the respondent entitled to interest at the rate of 24 per cent per annum as claimed in paragraph 39 of the counter claim

11. To what reliefs, if any, is the respondent entitled to

30. The Arbitral Tribunal on consideration of the respective claims passed an award on March 17, 2006 in favour of HTC for a sum of Rs.7,48,56,134.00. The summary of the award is in paragraph 26, which is as under:

SAIL (Claimant)	HTC Engineering (1958) Private Ltd. (Respondent)
Amount awarded on account of reimbursement  of  advance  paid  to the contract labours including wages for the  period  23rd  November,  1996 to 31st November, 1999 Rs.3,28,71,200.00	SAIL was under an obligation to provide at least 581737 MT of materials to be  handled  by  HTC during                     the                       period     under consideration i.e.  1st  May,  1988  to 22nd  November, 1999. HTC is entitled to loss and damages suffered by it for failure of SAIL to supply the said minimum quantity of materials to be handled by HTC. Rs.9,51,63,982.00
	Award on account wrongful detention of machinery and equipment. Rs.36,99,982.00
	Award   on    account    of   outstanding bills and interest Rs.77,99,500.00
	Award on account of  refund  of security deposit and performance guarantee Rs.11,50,000.00
TOTAL: Rs.3,28,71,200.00	TOTAL : Rs.10,77,27,334.00

Rs.10,77,27,334.00 – Rs.3,28,71,200.00 = 7,48,56,134.00”

31. Thereafter, in paragraph 27 and 30 of the award it is stated:

“27. From the above it will be evident that SAIL will have to pay Rs.7,48,56,134.00 to HTC. We therefore, make an award of Rs.7,48,56,134.00 in favour of HTC against SAIL. SAIL will pay interest at the rate of 18% per annum on the awarded amount from the date of the award till payment.

30. The costs and expenses of this arbitration are hereby fixed at Rs.6,65,000/- (Rupees six lac sixty-five thousand only), Rs.1,66,250/- (including conveyance of Rs.10,000/-) being each arbitrator’s fee and Rs.1,66,250/- being the administrative fee of the Indian Council of Arbitration (ICA). The above payments shall be made out of the deposits made by the parties with the ICA.”

32. Presently, we are only concerned with the award allowing the claim of HTC for a sum of Rs.10,77,27,334/- which on a set off stands reduced to Rs.7,48,56,134/-.

Submissions on behalf of SAIL

33. Mr. Anindya Kumar Mitra Sr. Advocate appearing on behalf of SAIL has submitted that the award is liable to be set aside because of the following reasons:

i) It contains decision on matters beyond the scope of the submission of the arbitration and not falling within the terms of the arbitration.

ii) The award is without jurisdiction

iii)The arbitrator has made out a new case by adding a new term in the contract by ostensible means of interpretation.

iv) The implied terms read into the contract is contrary to the settled law of the land.

34. Mr. Mitra has submitted that under the guise of interpretation of the contract certain terms have been introduced as implied terms and those terms have been interpreted in a manner which contradict the express terms of the contract. It is well settled that implied terms cannot be read into in a contract where there is an express clause governing the transactions. The terms are clear and certain. There is no ambiguity for which any implied term could have been read into in the contract. The learned Arbitral Tribunal has not considered clauses 5 and 8.7 which clearly define the obligation between the parties and non-consideration of such relevant clauses leads to legal perversity. In ignoring the aforesaid clauses and solely relying upon clause 4 for the purpose of giving benefits to the award holder is a clear case of legal perversity. The Tribunal has wrongly applied the principles of business efficacy in interpreting clause 4 and the other clauses of the contract. When the terms are definite and clear the concept of business efficacy could not have been applied by necessary implication as they were never intended by the parties to be read into the contract at the time of entering the contract and in conducting themselves during the contract period. In any event the quantification of the compensation is also based on conjecture and surmise. Moreover the basis of such quantification is vague.

35. Mr. Mitra has submitted that the award was passed in complete misconstruction and misinterpretation of Clause 4 of the invitation of tender as it has ignored Clause 5. The contract was initially for a period of two years with liberty to extend the period by one year. The Tribunal construed the aforesaid Clauses and more particularly Clause 5 to hold that reasonable quantity was to be read into the said clause and that reasonable quantity were to be made available to HTC by SAIL during the second and third year. The reasonable quantity was assessed by the Tribunal at 6,12,072 MT for the period from 1st May, 1998 to 22nd November, 1999 which includes part of second year and whole of third year being 73 per cent of the expected quantity of the material as mentioned in Clause 4 to be supplied in the first year. In other words HTC had received only 30,335 MT from SAIL as against 7,96,900 MT which was estimated and expected to be handled during the aforesaid period by HTC in terms of Clause 4 of the terms and conditions of the contract.

36. Mr. Mitra submits that the Tribunal has completely overlooked that the quantities to be supplied in Clause 4 is qualified by Clause 5 and to that extent the findings in the award in paragraph 7.1, 7.4 and 7.5 are perverse. It is submitted that the award has three broad features, namely,

Firstly, it assumes guaranteed supply of reasonable quantity in the contract.

Secondly, such reasonable quantity was assessed by the Tribunal at quantities arrived at from Clause 4, and

Thirdly, damage was awarded to the contractor on the basis of net profit as also amount of cost and expenses estimated to have been incurred by the contractor for earning such profit.

It is submitted that HTC in its statement of claim has not at all referred to any claim on the aforesaid basis. The Arbitral Tribunal invented new disputes that were not referred to arbitration, namely, the claimant would be entitled to reasonable quantity for handle and such reasonable quantity would be determined by the Tribunal and further that the contractor would get compensation on the basis of profit @ 15% together with the cost involved in earning such profits. This is not permissible in view of the decisions in Booz Allen & Hamilton Inc v. SBI Home Finance Limited & Ors., 2011 (5) SCC 532 which clearly states that dispute not submitted to arbitration cannot be decided.

37. Mr. Mitra submits that since the assumption of jurisdiction by the Tribunal is wrong the award is wholly without jurisdiction. The arbitral tribunal based its award on its decision on disputes not falling within the terms of submission to arbitration and accordingly is liable to be set aside under Section 34 (2)(iv) of the Arbitration and Conciliation Act, 1996.

38. Apart from the aforesaid, it is submitted that the Tribunal has inserted new clause and sentence into the contract namely in Clause 5 and Clause 8.7. Insertion of such clauses in the existing clauses violated the very integrity of the contract and resulted in a contract which the parties have never contemplated at the time of entering into the contract. The expansive interpretation of Clauses 4, 5 and 8.7 is perverse and is not a possible interpretation of the contract.

39. Mr. Mitra submits that by reason of the interpretation given to the aforesaid two clauses, Clause 5 of the invitation to tender and Clause 8.7 of the terms and conditions of the contract they would now read as under:

“Clause 5: The estimated quantities for the first year of operation of contract are only for the purpose of finding out the value of the tender & SAIL is in no way liable if the actual quantity of work differs from estimated quantity indicated above. But the company (SAIL) would be liable if a reasonable quantity of work is not provided to the contractor throughout the tenure of the contract.

Clause 8.7: The company gives no guarantee about the definite volume of work to be entrusted with the contractor at any time or even throughout of tenure of the contract. But a reasonable volume of work is guaranteed by the company during the tenure of the contract.”

40. The underlined portions are additions which according to Mr. Mitra have been added by way of necessary implication by the Tribunal based on the business efficacy rule.

41. Mr. Mitra submits that the aforesaid additions which we have underlined would now if added to clause 5 and 8.7 as per the award of the Arbitral Tribunal by necessary implication would result in a new contract for the parties which they never intended to enter and on this ground alone the award is liable to be set aside as it is without jurisdiction. These clauses being specific clauses creating a no liability in favour of SAIL the interpretation of the contract by the Arbitral Tribunal is contrary to the well settled cannons of interpretation.

42. Mr. Mitra has relied upon the decision in the Moorcock case (1864) LR 14 PD 64 (CA) which has been adopted by Supreme Court in The Union of India (UOI) v. D.N. Revri and Co. & Ors., reported in 1976(4) SCC 147, Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) & Anr., 2018 (11) SCC 508 and Adani Power (Mundra) Limited v. Gujarat Electricity Regulatory Commission & Ors., 2019(19) SCC 9 to emphasise that there are five prerequisite criteria and all the five conditions are required to be fulfilled before any term could be implied into a written contract. The law requires that all the five conditions have to be fulfilled and not some of the five conditions. It is submitted that even if considered reasonable or equitable or necessary to give business efficacy, a term cannot be implied in violation of -

i). Officious Bystander test,

ii) Not specified and

iii) In contradiction of any express term of the contract.

43. It is submitted that in Adani Power (super) it has been clearly stated that the contract is to be interpreted giving the actual meaning of the words contained in the contract and it is not permissible for the court to make a new contract, however, reasonable, if the parties have not made it themselves. Mr. Mitra submits that it was not open for the tribunal to substitute ‘reasonable’ in place of ‘estimated’ quality disregarding the no guarantee clause. The parties have never intended that the SAIL would have any obligation to supply the estimated quantity and hence the business efficacy test would not be applicable. This distorted interpretation has resulted in a new contract. The contract has to be interpreted without any external aid and without altering the nature of the contract.

44. In elaborating his submission on the three tier test to assail the award it is submitted that:

(i) The condition added to the contract is in contradiction of express terms and conditions of contract namely, clause 5 of “Invitation to Tender” and clause 8.7 of the “Terms and Conditions of the Contract”. It is settled law that no term which contradicts an express term of the contract can be implied into the contract. Secondly, the Arbitral Tribunal does not have the jurisdiction to override an express condition in the contract which is the fountain of its jurisdiction.

45. The arbitrator in view of Section 28(3) of the 1996 Act is required to decide in accordance with the terms of the contract. The nonconsideration of prohibitory and no guarantee clauses vitiates the award. Any award contrary to the terms of the contract would suffer from patent illegality as held in Hisdustan Zinc Ltd. v. Friends Coal Carbonisation, 2006(4) SCC 445. Mr. Mitra submits that paragraph 14 of the Judgment makes it clear that it is open to the court to consider whether the award is against the specific terms of the contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India. This view has been reiterated and reaffirmed in State of Chattisgarh & Anr v. SAL Udyog Private Limited, 2022 (2) SCC 275 in which it has been clearly stated that failure on the part of the sole arbitrator to decide in accordance with the terms of the contract governing the parties, would attract the “patent illegality ground” as the said oversight amounts to gross contravention of Section 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal to take into account the terms of the contract while making an award. It goes to the very root of the matter.

(ii) The Tribunal has implied the above term solely relying upon clause 4 of the Invitation to Tender but did not advert to clause 5 of the Invitation to Tender and Clause 8.7 of General Terms and Conditions while interpreting clause 4. Non-consideration of relevant clauses of the contract amounts to perversity and vitiates the Award.

(iii) The above addition of terms by strenuous interpretation is in contradiction of 2nd portion of clause 5, namely, “SAIL is in no way liable if the actual quantity of work differs from the estimated quantity indicated above.” (emphasis supplied). On the basis of the said clause it is not possible to interpret that SAIL would be liable to supply the estimated quantity. The interpretation of the Arbitral Tribunal of expand the meaning of estimated quantity Clauses 4 and 5 of NIT as reasonable quantity is perverse and is not a possible interpretation of the contract. Any unreasonable interpretation of the terms and considerations of the contract would be a ground for setting aside of the award as observed in South East Asia Marine Engineering & Constructions Limited (Seamec Limited) v. Oil India Limited, 2020 (5) SCC 164.

(iv) The Tribunal have made out a new contract between the parties and the purported Award is beyond jurisdiction, because such case or dispute was not submitted to reference.

(v) The Tribunal did not hold that implying of the above condition is by way of necessary implication. Merely that insertion of such terms appeared to be reasonable per se, without there being a requirement of necessary implication cannot support addition of a term into the contract or modification of the Contract.

(vi) The criterion for implied term is that the term sought to be implied must not be vague but must be specific. The term “reasonable quantity” is not specific and cannot be implied into the contract.

46. In so far as the assessment of reasonable quantity at 5,81,736 MT for the period from 1st May, 1998 to 22nd November, 1999 i.e. 18 months 22 days, it is submitted that:

(i) The contract does not provide any term or provision for calculation of reasonable quantity since the contract does not at all provide for any reasonable quantity being made available to the contractor. The Arbitral Tribunal acted completely without jurisdiction in acting de hors the contract.

(ii) The Arbitral Tribunal had made out a new case for the parties. The claimant did not submit to arbitration any dispute that if SAIL had provided less than reasonable quantity during the relevant period, SAIL would be liable to compensate HTC. HTC did not even base its claim on any reasonable quantity basis.

(iii) In their Counter Statement in paragraph 25, HTC had submitted that terms and conditions of the tender documents gave rise to a “legitimate and bonafide expectation” that during the first year of handling at least 5.10 lacs MT would be required to be handled. This question was not raised by HTC at the hearing before Arbitral Tribunal. This plea was thus abandoned. In paragraph 29 of the Counter Statement the respondent HTC claimed that in view of the clauses in “Instruction to Invitation”, SAIL had ‘promised’ a quantity and the promised quantity was at 3,90,339 Metric Ton to be received and 3,76,000 Metric Ton to be delivered by the handling contractor during the period from 1.5.1998 to 22.11.1999. The case of promise and/or assurance of a definite quantity has been changed into a reasonable quantity by the Arbitral Tribunal, although not referred to arbitration and in this regard attention of the court is drawn to Paragraphs 25 and 29 and Annexure B of the reply of HTC to SAIL’s rejoinder and also counter claim. The said paragraphs read:

“25. Accordingly the respondents submit as follows:-

(a) The jural and /or contractual relationship between the Respondent and Claimant was entered into pursuant to a notice inviting Tender which was published on 5th /6th August, 1996.

(b) In the said Notice Inviting Tender, it was provided that the criteria for eligibility to be considered was an experienced of handling Steel and Iron materials on at least 1,25,000 Metric Tonnes during any of the proceeding five financial years.

(c) It is also pertinent to note that one of the salient terms and conditions of the tender document handed over to the Respondent was clause 4 where under estimated quantities proposed to be handled per year of operation was given and the quantity mentioned was 2,55,000 Metric Tonnes of materials being the Receipt and an equivalent amount on account of delivery.

(d) In order to ensure the capability of the contractor to handle the aforesaid quantity of materials per year, the contractor was obliged to possess the various equipments more specifically set out in the contract documents and also employ the workmen at the Paharpur Stockyard as per the interim order passed by the Hon,ble Calcutta High Court dated 25th July, 1995 in F.MAT. No. 1460 of 1995.

(e) The Respondent humbly submits that in the terms of the said provision of the tender document a clear representation was made by the Claimant which gave rise to a legitimate and bonafide expectation on behalf of the Respondent that during the First year of handling at least 5,10,000 Metric Tonnes of materials would be required to be handled. Considering such huge quantity of materials to be handled, the Respondent had given quotations.”

29. The Respondent submits that in view of the clear instruction, Respondent, however, had to acquire, keep ready men, materials and machinery, so as to be able to handle the said promised and/or reasonable expected quantity of materials. However, the Claimant every year starting with 23rd November, 1996 till date, had failed and neglected to place for disposal the promised quantity and, as such the mobilization of men, materials and machineries became onerous. In fact, the Respondent had suffered loss and damages during the period of 1st May, 1998 to 22nd November, 1999, on account of Non-Supply of promised and/or assured quantity of materials to be handled. The Respondent assesses such loss at Rs. 12,40,93,043/-, details whereof are specified in ANNEXURE-B hereof.”

47. Mr. Mitra has submitted that the assessment of 5,81,737 Metric Ton as reasonable quantity is de hors the submission to reference, the pleadings and the contract. The basis for assessing the quantity at 5,81,737 Metric Ton is given in paragraphs 7.1 to 7.5 of the Award which is not supported by any provision of the contract and is wholly arbitrary, unreasonable and perverse.

48. Mr. Mitra was critical about the assessment of damages. It is submitted that: a new case of loss of profit at the rate of 15% has been made out by the Arbitral Tribunal which was contrary to the case of HTC as made in its submission to arbitration. HTC claimed loss and damages “on account of non-supply of promised and/or assured quantity of materials to be handled”, on the basis of total amount of handling charges to be received at the contractual rate at Rs.9,00,31,650/-. In this regard attention of the court was drawn to Annexure “B” to the Counter Statement and paragraph 29 of the Counter Statement.

49. It is submitted that awarding of damages on the basis of loss of profit is contrary to the claim of HTC and is wholly without jurisdiction.

50. Even if it is assumed that damages could be awarded on the basis of loss of profit, it is submitted that a contractor cannot claim loss of profit and also the amounts of expenses which the contractor would be required to spend for earning that profit. The Arbitral Tribunal in paragraphs 19.11 to 19.14 of the award have granted both, by double counting, which is ex facie illegal and void, and contrary to law and Public Policy of India.

51. HTC has never claimed loss of profit @ 15% of total handling charges (receiving and delivery). The Tribunal has made out a new case. The Tribunal has added the amount to be reimbursed to SAIL by HTC to overhead costs assumed to have been incurred by HTC, without an iota of proof for handling of 5,81,737 MT.

Submission on behalf of HTC

52. Per contra, Mr. Debashis Kundu learned Senior Counsel representing the award holder has submitted that Clause 11.1 of the “instruction of tenderers” referred to the document that shall constitute the contract. The terms and conditions of the tender are worded in such a manner that the contractor upon going through the terms and conditions and after taking into account of “estimated quantity” to be supplied by SAIL in the first year of contract would have to quote the rates for various items which were to be handled by HTC. In other words the instructions to tenders had given an estimate of materials to be handled by an incoming contractor on basic terms and conditions which were more fully elaborated and from the basis of an informed decision with regard to the rates to be quoted for each items. Mr. Kundu has submitted that the tenderer would also be required to take into account before quoting its price the estimated quantity to be handled which would not be different from what was stated in Clause 4 NIT. This clause is in the nature of an enabling clause as it would enable the contractor to quote the price of each items based on an estimated quantity.

53. The various schedules of operation and quantity have been fixed by SAIL and on that basis a potential contractor would be required to quote its rates for consideration by SAIL during the selecting of a successful bidder. It is a commercial contract and ordinarily in commercial transactions a contractor ordinarily to quote rates/prices keeping in mind the quantity to be supplied or handled and the prices likely to be quoted by the highest/lowest bidder. The higher the quantum of materials to be handled the lower would be the handling charge per unit.

54. Mr. Kundu accordingly submits that HTC having been declared by SAIL to be the successful bidder could not now turn around and say that it was not obliged to give the estimated amount of material to be handled as stated both in the instructions to tender and NIT. In both the cases the quantum of materials is one and the same. Mr. Kundu has referred to paragraph 6.18 of the award where the learned tribunal has observed that unless minimum quantity is known and ascertained it would be impossible for the contractor to quote the rates.

55. The rates of unloading as accepted by SAIL under the Schedule of Operation and Rates in the Traditional Wing of the stockyard was for 2,56,000 MT of steel/pig iron. Similarly, the transportation costs were also required to be paid by the bidder on the basis of the expected quantity which was fixed by SAIL.

56. The details of rates of various materials which were supposed to be delivered by SAIL and handled by HTC were fixed by SAIL and bidder had only to quote its rate on the basis of the estimated quantity fixed by SAIL, i.e., 2,55,000 MT.

57. The rates of unloading as accepted by SAIL under the Schedule of Operation and Rates in the Traditional wing of the stockyard was 2,56,000 MT of steel/pig iron.

58. The quantity of delivery as accepted by SAIL under the schedule of operation and rates in the Traditional wing of the stockyard was 2,56,000 MT of steel/pig iron.

59. In the NIT it was stipulated that handling agent would have to unload 2,56,000 MT of material as also to deliver 2,56,000 MT of material amounting to 5,12,000 MT per year as required under Clause 4 of the NIT.

60. Mr. Kundu has submitted that SAIL itself had obtained a confirmation from HTC to the effect that –“we (HTC) hereby agree to abide by instructions to tenderers and fulfil your “Terms and Conditions: of the contact for handling Iron and Steel materials in your stockyard at Paharpur and Coal Berth which shall be deemed to form an integral part of this offer...................”. It was further stated that “HTC hereby note that this tender and you (SAIL) acceptance after our full compliance with the requirements specified in your letter of intent shall constitute a valid and binding contract between us”.

61. The aforesaid terms and conditions constitute a binding contract between the parties SAIL cannot resile for the said terms and exonerate itself from not supplying the estimated quantity stated in the said tender on the basis whereof HTC had quoted its rates and SAIL had accepted such rates and awarded the contract to HTC. Mr. Kundu has submitted that a bare reading of Clause 4 of the Instruction to Tender, clause 8.4 of the NIT and clause 8.7 of the Terms and Conditions of the tender does not lead to a conclusion where SAIL can claim that it has no obligation to give any amount of materials to HTC at all. In fact, the learned Arbitral tribunal had correctly harmonised all the aforesaid three clauses and thereafter had come to a conclusion that SAIL was obliged to supply a particular quantity of materials after elaborate discussion on the aforesaid clauses. The calculations however has not been challenged by SAIL.

62. Upon any reasonable person properly instructed in law and facts after going through the entire terms and conditions and various clauses of the entire contract could not have come to a conclusion that the instant award is erroneous for the reasons which have been argued on behalf of SAIL neither was the Learned Arbitral Tribunal guilty of inserting a new clause or had created new implied terms and conditions which the parties had never agreed to at the time of singing of the contract. Clause 8.3 could not be said to override all the other terms and conditions of the contract as has been emphatically argued by Mr. Mitra the learned Counsel for SAIL. If such an argument were to be accepted, in that event SAIL would have incorporated a non-obstante clause before the Clause 8.3 in which event the potential bidders might not have been inclined to quote for the tender due to such a clause. Since it was never the intention of SAIL to give paramount importance to Clause 8.7 by overlooking all the other terms and conditions of the contract the contention of the award holder with regard to its claim for estimate quantity is justified upon a reasonable and harmonious interpretation of the contract. The Tribunal applied the accepted principles for interpretation of contract in order to give business efficacy to the contract. In Adani's case (Supra) at paragraph 24 which was relied on by SAIL, a cursory reading of the same would on the contrary show that the said paragraph under reference fully support the case of HTC. The five conditions so laid down for invoking the business efficacy test and carving out an implied condition not expressly found in the language of the contract has to satisfy the five conditions which was laid down in Nabha Power Ltd. (Supra), namely,

i) Reasonable and equitable;

ii) Necessary to give business efficacy to the contract;

iii)The Officious Bystander Test,

iv) Capable of clear expression; and

v) Must not contradict any express tem of the contract.

63. The above five conditions, from a cursory reading of the award and the judgement passed by the Learned Single Judge, would clearly show that all the conditions have been fully satisfied and hence importing business efficacy as a means to sustain the contract which was otherwise sought to be opposed by SAIL merely on the basis of Clause 8.7 of the contract was justified.

64. In this context, it is stated that any person being an Officious Bystander when asked that in view of Clause 8.7 of the Terms and Conditions of the Contract, which stipulated that SAIL did not give any guarantee to supply definite volume of work to be entrusted with the contractor at any time or even throughout the tenure of the contract; whether the contractor could have claimed supply of 5,10,000 MT of materials more or less from SAIL in view of Clause 4 and 5 of the Instructions to the Tenderer and Clauses 4 of NIT, the Officious Bystander would have certainly said "Oh yes".

65. It is submitted that the appellant could not also demonstrate the basis on which the award would be deemed to be patently illegal. This case has not been made out in the pleading.

66. Mr. Kundu has submitted that certain differences will appear from the two clauses which have been incorporated in NIT and in “Instructions to Tenderer”. Clause 4 of NIT refers to the “estimated quantity proposed to be handled during the first year of operation of the contract are expected to be as under”........ whereas clause 5 refers to “the estimated quantities ....... are only for the purpose of finding out the value of the tender.....” It thus makes it clear that SAIL would not be liable if the actual quantity of work differs from the estimated quantity indicated above. However, clause 4 of the “Instruction to Tenderer” stipulates that “to enable the tender to assess the quantum of work the estimated quantity proposed to be handled during the first year of operation are indicated below.............:”

67. Mr. Kundu submits that from reading of the aforesaid clauses it would be evident that the wordings in NIT are vastly different from the terms and conditions as appearing in the “Instructions to Tenderers”. However both the NIT and the “Instructions to Tenderers” are part of the contract. The “Instructions to Tenderer” does not record that SAIL shall not be liable for any short supply of materials. It was in this context of any conflict between the two clauses, namely, Clause 4 and 5 in the NIT and “Instruction to Tenderer” and the general clauses namely, 8.3 and 8.7 of the terms and conditions of the contract. Clauses 4 and 5 are to be read having an overriding effect over the general clauses.

68. Mr. Kundu has referred to the oral evidence of Sushanta Kumar Bala and Raj Kumar on behalf of SAIL duly recorded in paragraph 6.14 and 6.15 in the award. Mr. Kundu has specifically referred to paragraph 6.5 if the award where after appraisal of the evidence the arbitrator came to the conclusion that the main commercial purpose of the contract was not for evaluation but for performance and the contractor is entitled to proceed relying on the representation made regarding the quantity of materials to be handled and for that purpose tenderer made all arrangements including infrastructure in accordance with the requirement of the contract. Mere omission to mention specific quantity does not mean that the contract cannot be harmoniously construed if the contractor does not rely on the contractual stipulations then no offer could have been made and any contract based on without having specific quantity be it "minimum" or "maximum" would not be capable of execution or at all.

69. It is submitted that the arbitrator also reprimanded SAIL for its conduct as would appear from paragraph 6.8, 6.19, 6.23, 6.24 of the award. The arbitrator has interpreted the word “expectation and estimation” at paragraph 6.8 of the award. Mr. Kundu has referred to clause 8.7 of the general conditions of the contract and the observation made by the arbitrator in interpreting the relevant clauses in paragraphs 6.14, 6.17 and 6.18 of the award.

70. It is submitted that in the event it is found that some of the clauses in a contract are at variance with each other, it is the bounden duty of the court/tribunal to ensure that a harmonious construction be given to the apparently conflicting and inconsistent clauses of the contact so that contract can be upheld and make it efficacious.

71. The Court will not readily set aside a contract merely because one of the clauses differs from the meaning and contents of another clause unless the two clauses cannot be reconciled in any manner whatsoever.

72. In the instant case, the learned Arbitral Tribunal after examining all the relevant clauses of the contact and without considering Clause 8.7 in isolation harmoniously interpreted the said terms based on the principle of business efficacy upon noticing the terms of the contract which are inter related and compliance of which would only ensure performance of the contract and not otherwise. The Arbitral Tribunal has interpreted the contact in a manner which was within their jurisdiction to do and has not incorporated any fresh terms or conditions or implied any terms to make out a new case as has been attempted to be argued by the appellant. The Arbitrators have harmoniously interpreted various terms and conditions of the contract and arrived at a finding in favour of HTC with regard to its reasonable entitlement and such an interpretation made by the Arbitrators cannot be faulted and interfered with, since such an interpretation was well within the jurisdiction of the Arbitrators.

73. Mr. Kundu has referred to few passages from the Interpretation of Contract (Third Edition) by Kim Lawison more particularly paragraph 8.3, 9.08 and 9.19 to emphasis that the endeavour of the court should be given certainty to the contract and in the case of repugnancy the earlier clauses must prevail. In certain circumstances the later clause can be read as qualifying rather than destroying the effect of the earlier clause. The main object of the contract has to be ascertained on a whole reading of the contract.

74. The paragraphs relied upon by Mr. Kundu are stated below:

“8.13 "Where parties have entered into what they believe to be a binding agreement the court is most reluctant to hold that their agreement is void for uncertainty, and will only do so as a last resort."

“9.08 "If a clause in a contract is followed by a later clause which destroys the effect of the first clause, the later clause is to be rejected as repugnant and the earlier clause prevails. If, however, the later clause can be read as qualifying rather than destroying the effect of the earlier clause, then the two are to be read together, and effect given to both."

“9.09 "Words and even whole clauses may be rejected if they are inconsistent with the main object of the contract, as ascertained from a reading of it as a whole."

75. Mr. Kundu has also referred to Law of Contract, 3rd Edn. Butterworths series 369 clause 2.181 on the interpretation of a clause giving right of an option. The relevant portions of the clause relied upon by Mr. Kundu reads:

"However a clause which purports to give one party an option not only as to the mode of performance but whether or not to perform at all will have the effect of denying the contract of an obligative effect and a court must therefore, either find that it negates any intention to create legal relation or reject the clause as repugnant to the main purpose of the contract.”

76. It is submitted that the interpretation of the contract of the arbitral tribunal has been accepted by Justice Tandon. The paragraphs from the judgment relied upon in this regard are:

"I am not unmindful of the proposition that each terms of the contract must be construed and given effect to the plain and simple meanings of the words irrespective of the fact that it may not harshly on the parties as held in case of Central Bank of India Limited v. Hartford Fire Insurance Company Limited reported in AIR 1965 SC 1288.................”

"The distinction must be drawn between an error in construction of the contract and an addition and / or incorporation of some words within the contract as in case of former, it is an error within the jurisdiction but in later case, it is jurisdictional error which may invite an interference in the award by the Court under Section 34 of the Act. ..............”

“There may be a situation where the Arbitral Tribunal have proceeded to pass an award in total disregard to the express terms of the contract and therefore acts arbitrarily, capriciously and without jurisdiction.”

“No Guarantee Clause" envisaged under Clause 8.7 of the terms and condition of the contract was taken into account by the Arbitral Tribunal which is reflected from the following observations made in Paragraph 6.14 of the impugned award.”

“It is, therefore manifest that the Arbitral Tribunal have not proceeded in complete disregard to the express terms of the contract rather took into account those clauses for the purpose of the interpretation and gathering an intention of the contracting parties. In paragraph 6.18 of impugned award the Arbitral Tribunal held that if there is any ambiguity regarding a term relating to quantity, an obligation may have to be implied to uphold the contract and to do justice to the parties on a true reading and construction of the contract.”

“In case of McDermott International Inc. -Vs- Burn Standard Co. Ltd. & Ors. reported in (2006)11 SCC 181 the Supreme Court held that the Court should be slow in interfering with the award if the arbitrator have given due regard to the various terms of the contract and provided the reasons relating to construction thereof which cannot be impinged on perversity or contrary to law. It would be apt to quote the observations recorded in paragraph 111 and 112 of the said report...”

“This court is, therefore cannot accept the contention of the Petitioner that the Arbitral Tribunal have unnoticed Clause 4 of the Invitation to Tender and Clause 8.3 and 8.7 of the terms and conditions of the contract. The interpretation of the contract is within the realm of the Arbitral Tribunal and if the view expressed therein is plausible one it does not invite interference merely because another view is possible. The Court does not act as an Appellate Court where the entire issue is at large nor exercises the review jurisdiction for the purpose of finding error in the award.”

“Though the relevant clauses contemplate that the Petitioner does not guarantee the definite quantities of work to be entrusted upon the Respondent during the tenure of the contract which cannot mean that the Petitioner is exonerated and/or relieved of providing no quantity of work”

“The arbitrator further noticed that there was no work entrusted upon the respondent for last 11 months of the extended period and during the relevant period which forms subject matter of dispute there was an entrustment of 3.8% of the materials for handling. It cannot be said that such interpretation is perverse and contrary to law.”

77. Mr. Kundu has submittred that while interpreting the terms of the contract the learned Arbitral Tribunal has taken into consideration all the relevant clauses and has interpreted the said terms with which Justice Tandon has concerned.

78. The award can be interfered only on the limited grounds as envisaged under the Act. Moreover, when the view taken by the arbitrator is a possible view the court in deciding an application for setting aside the award shall not interfere with such a view. Once the interpretation given by the arbitrators are backed by logic and are reasonable the same is required to be upheld as held in:

i) MMTC Ltd. v. Vedanta Ltd. reported in 2019(4) SCC 163 paragraph 14

ii) UHL Power Company Ltd. v. Stae of Himachal Pradesh reported at 2022(4) SCC 116 paragraphs 18 and 22.

79. Mr. Kundu has submitted that in the instant case the arbitral tribunal has taken an overall view of the terms and conditions of the contract and not any particular clauses as an exclusionary clause as it would render the contract ineffective and such an interpretation has been accepted by the Hon’ble supreme Court in Welspun Specialty Solutions Ltd. v. ONGC reported in 2022(2) SCC 382 paragraph 11.

80. It is submitted that in absence of any perversity in its reasoning an award cannot be set aside as observed in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. reported in 2019(20)SCC 1 (paragraphs 24 , 25, 34, 35 and 37).

81. Moreover in deciding an application for setting aside of the award the court is not exercising its appellate jurisdiction and unless the award is perverse and contrary to the evidence on record the award is required to be upheld as held in Parsa Kente Collieries Ltd. v. Rajasthan Rajya Bidyut Utpadan Nigam Ltd. reported in 2019(7) SCC 236.

82. Mr. Kundu has referred to the decision of the Hon’ble Supreme court in Punjab Sikh Regular Motor Service, Moudhapara v. The Regional Transport Authority, Raipur and Ors. reported in AIR 1966 SC 1318 and Sub-Committee of Judicial Accountability and Ors. vs. Union of India (UOI) & Ors., reported in AIR 1992 SC 320 at 352 to show that the enabling words are construed as compulsory whenever the object of the power is to effectuate a legal right.

83. Even if the words used in the statute are prima facie enabling, the Courts will readily infer a duty to exercise power which is invested in aid of enforcement of a right of public or private citizen as observed in L. Hirday Narain vs. Income Tax Officer, Bareilly reported in AIR 1971 SC 33 at 36; (1970) 2 SCC 355 (Paragraphs 13,14)

84. The aforesaid judgements, therefore, clearly lays down the law that an enabling statute/clause does not give a discretionary power to the authority rather an enabling statute/clause makes it mandatory to ensure that the clause is of enabling nature invested in aid of enforcement of a right to public or a private citizen.

85. In the instant case HTC indeed had a legal right to expect that SAIL would adhere to its assurance/promise to enable and ensure that 5,10,000 MT of materials would be handled by HTC and for that purpose the “Instructions to Tenderers” was worded differently from the NIT with a view to incorporate such promise so that donee of the enabling provisions may exercise or effectuate its right.

86. In other words, by using the word "enabling” in the “Instructions to Tenderers” in clause 4 thereof, SAIL was indeed liable by virtue of the doctrine of promissory estoppel to ensure that HTC was entitled to handle 5,10,000 MT of material in the manner elaborately stated in the various schedules regarding operation and rates which was a part of the contract and HTC thus had a legitimate expectation to the same. This expectation can neither be contrary to the public policy nor perverse and the arbitral tribunal in coming to a finding that SAIL was required to offer 73% of the expected quantity on the basis of calculation, which has not been challenged by SAIL, cannot be said to have committed any error beyond its jurisdiction or having made out a new clause or re-writing the contract between the parties warranting interference by this Court under section 34 or 37 of the 1996 Act.

Analysis and Reasoning

87. In the application for setting aside of the award, the appellant had raised the contentions that:

(i) The arbitrators had not considered the prohibitory and “no guarantee clauses”; and

(ii)The arbitrators had interpreted the contract by going beyond the terms of the contract which he was not entitled to do.

88. As a matter of law, if the arbitrator had indeed not considered the prohibitory and no-guarantee clauses, it may be successfully contended that the arbitrator failed to consider a relevant material that was needed to be considered and thus the award could be set aside on the ground of illegality. Further if it is found, in spite of the big leeway given to the remit of the arbitrator, that the arbitrator did indeed go beyond the terms of the contract, it could be said that the arbitrator had misdirected himself and the award could be set aside on the count on the ground of arbitrariness (see Steel Authority of India Ltd. v. J.C. Budharaja, government and Mining Contractor, (1999) 8 SCC 122). However, if it is found that a clause or fact situation was capable of being interpreted in two ways and the arbitrator had taken a view that was a possible one, if not a plausible one, the setting aside courts would veer on the side of caution and give the benefit of the doubt to the arbitrator since in such a circumstance it would not be possible to say that the arbitrator travelled outside his jurisdiction.

89. For deciding the issues relevant in this appeal it is to be seen if the arbitrator has looked into the contract and considered all the relevant clauses of the contract between the parties. Clause 11.1 of the Instruction to tenderer makes it clear that the advertisement for tender, instructions to terderers, terms and conditions of the contract along with all enclosures and the letters exchanged between the parties shall form part of the contract. In the document titled ‘Invitation to Tender’ Clause 2 and Clause 4 speaks of the estimated quantities proposed to be handled by the respondent during the first year of operation of the contract based on the calculation of the sales plan. An applicant was required to be capable of handling this volume in order to be eligible for the tender process. Clause 5 is a clarificatory clause clarifying that clause 4 was for the purpose of finding out the value of the tender and the appellant was in no way responsible if the actual quantity of work differed from the estimated quantity. Clause 6.2 of the terms and conditions contained the rates of the estimated value that the respondent could expect to be handling. As against this, Clause 8.3 of the General Terms and conditions (referred to as the “prohibitory clause”) and Clause 8.7 of the General Terms and conditions (referred to as the “non-guarantee clause”) provides that the respondent could not claim against the appellant if the appellant was not able to provide a definite volume of work in accordance with the estimated quantity referred to earlier.

90. The Arbitral Tribunal rationalised its decision for accepting “expected quantities” in place of “estimated quantities” in paragraphs 6.8 and 6.9. It states:

6.8 Clause-5 of the Invitation to Tender on which reliance has been placed by SAIL provides as follows:-

“The estimated quantities for the first year of operation of the contracts are only for the purpose of finding out the value of the tender" and SAIL is no way liable if the actual quantity of work differs from the estimated quantity indicated above.

In our view it cannot be disputed that the contract would be for a large assignment having regard to number of workers, number of equipments and expected quantities of materials. Moreover, Clause 2.2 of Invitation to Tender states that "Tenderers should be of sound financial standing and experience." Clause 6 of the Invitation to Tender provides that "by submitting a quotation the Tenderer shall be deemed to have fully familiarised himself with all requisite data including those indicated above and contained in Clause-4 of Invitation to Tender and Clause 4 of Instructions to Tenderers including terms and conditions of the Contract and have fully satisfied himself/itself of his/its capabilities to undertake and perform the jobs to the satisfaction of SAIL. In our opinion this requirement cannot be an one way traffic. A contractor having made all arrangements as required by SAIL to execute the work cannot be denied materials sufficient for utilisation of all such equipments and the work force. matter of fact under Clause-9 of the Instructions to Tenderers a declaration has to be made by each Tenderer to the effect that he has successfully carried out large assignment of iron and steel handling of this nature and has adequate organisation, resources and experienced personnel to handle the type and magnitude of the subject tender. It is, therefore, clear that SAIL represented that the contractor would be required to handle at least 5,10,000 MT as mentioned in clause 4 of the Invitation to Tender and clause 4 of Instructions to Tenderers as aforesaid.

The aforesaid clauses of the Invitation to Tender and Instruction to Tenderers make it clear that the estimated quantity proposed to be handled in the first year expected to be 5,10,000 MT and under clause 6 of the Invitation to Tender the contractor must be capable of performing the job i.e. handling of 5,10,000 MT of materials per annum. The contractor would not be eligible even to submit a tender if it is not capable of performing the job of handling 5,10,000 MT materials. It must have equipments and work force and financial resources to cope with the assignment of handling 5,10,000 MT of materials per annum.

SAIL have sought to urge with reference to Clause 5 of the Invitation to Tender which has been reproduced hereinbefore that the estimated quantities for the 1st year of operation of the contract are only for the purpose of finding out the value of the tender and SAIL is no way liable if the actual quantity of work differs from the aforesaid estimated quantity of 5,10,000 MT. According to SAIL finding out of the value of the tender is the sole object for specifying the estimated quantities for the first year of operation but the records do not say for what purpose it is necessary to find out the value of the tender. The implementation of tender is based on the expected quantities of the materials to be handled by the contractor.

In the context of the facts and circumstances of the case expectation must be based on certain objective facts. Concise Oxford Dictionary says that 'expect' means what is regarded as likely. It is highly probable depending on the facts and circumstances of the case. If the word 'estimate' is considered, it means approximate judgement of number, amount etc. (see Concise Oxford Dictionary, 7th Edition). It cannot be arbitrary. The estimate is made by the technical experts which forms the bed-rock upon which the entire tender or contract is based.

6.9 A few other facts having relevant bearing on the issues have to be mentioned. Firstly the rates quoted by the Tenderer must depend on the quantity of materials which are required to be handled by a contractor. The rates could only be quoted on the basis of materials to be supplied by SAIL. There must be some factual basis regarding work force and materials which would enable the contractor to submit rate for several components of the jobs involved. A rate offered by a contractor has to be based and calculated on the quantities of materials to be handled. Once the quantum is fixed for the purpose of quoting the rate of different jobs pertaining to receipt and delivery of materials, it cannot be changed to the detriment of the contractor. More the materials to be handled lesser would be the rate.”

91. The respondent had claimed successfully before the arbitrator that the terms of the contract indicating the estimated value of work that could be handled by the respondent could be acted on in case of its breach since the prohibitory and the no-guarantee clauses may be construed as a bar to claim the exact estimated quantity of the work but could not be construed as a bar to at least claim a minimum quantity known to the commercial workings of the parties of any similar nature of work in order to offset the fixed costs that the respondent had to bear for maintaining equipments, labour charge and other costs that would be incurred by it during the term of the contract. The arbitrator had agreed with the respondent’s contention and held that the respondent was entitled to claim this minimum quantity of work.

92. In the instant case, the Arbitral Tribunal has considered and construed the relevant clauses as would appear from its findings in paragraphs 6.16 to 7.5. For the sake of convenience the said paragraphs are reproduced below:

“6.16 It is the contention of HTC that according to sale performance (i.e. delivery factor) it has been proved beyond doubt the pattern of quantum of handling materials of subject stock-yard in the past 10 years. It gives a firm indication about the certainty of receipt of similar quantities in accordance with sales performance. It is also the contention that the commercial document or immediate past records could definitely be relied upon by any participating intending bidder who was entitled to presume that the estimated or proposed quantities contained in clause 4 was not illusory or the same should not or could not be taken into account by the Tenderers for quoting their rates. It has been contended, by HTC in our view rightly, that the main commercial purpose of the contract was not for evaluation but for performance and a contractor is entitled to proceed relying on the representation made regarding the quantity of the materials to be handled and for that purpose tenderer made all arrangements including infrastructure etc. in accordance with the requirements of the contract. Mere omission to mention specific quantity does not mean that the contract cannot be harmoniously construed. If the contractor does not rely on the contractual stipulations, then no offer could have been made and any contract based on without having specific quantity be it minimum or maximum would not be capable of execution at all.

6.17 Having regard to the facts and circumstances of this case as narrated herein before we are of the view that commercial working of any similar nature of work has to provide for a certain minimum quantity of goods to be handled since the fixed costs would be too high if very little quantity of goods are allowed to be handled. In such circumstances it would not be possible for anyone to submit a bonafide tender and enter into a contract unless a reasonable and harmonious construction of the contract is made by the Tribunal. If the Claimant have found that the rates quoted by the HTC were not viable and recklessly quoted, in that event it ought not to have accepted the said rates. But on the contrary it has been admitted that SAIL has internally assessed the rates quoted by HTC as reasonable and thereafter decided to award the contract to HTC.

6.18 We are of the view that unless a minimum quantity is known and ascertained it would be impossible for the contractor to quote the rates. The contract may also be void for uncertainty. For 11 months (January, 1999 to November, 1999) there was no supply of materials at all either by way of receipt or delivery. SAIL may not have guaranteed 510000 MT but that does not mean that month after month there would be no supply at all. Further we do not think that the parties ever agreed that total quantity being supplied between May, 1998 to March, 1999 would be 3.80% of the estimated quantity. The Court always endeavours to uphold a contractual document. Even if HTC is not entitled to 510000 MT annually, it must have obtained a reasonable quantity to recoup the fixed costs, labour costs and also retain profit of at least 15% as provided in the contract itself. If there is any ambiguity regarding a term relating to quantity, an obligation may have to be implied to uphold the contract and to do justice to the parties on a true reading and construction of the contract. In the light of all the documents and surrounding circumstance, we have to consider a reasonable and equitable way to resolve the disputes.

6.19 We do not support the stand taken by SAIL. They ought to have fairly stated that to work out the instant contract at least a particular quantity of materials have to be supplied to the contractor having regard to the magnitude of the investment made in equipment, work force, infrastructure. It is surprising that SAIL having knowledge and notice of rapid diminishing curve of supply, extended the term of the contract for one year and for eleven months of the extended period there was no supply of material at all. SAIL ought to have allowed the contract to expire. It appears that SAIL had been trying to abolish the subject stock-yard due to ongoing litigation with approximately 560 contract labourers but the Government have turned down the prayer of SAIL for redeployment of its surplus labourers working at the said stockyards and no Court had allowed the prayer of SAIL to close down the subject stock-yards. It was also within the knowledge of SAIL that since 1981 and onwards there was a decrease in the export from Kolkata Port, as a result, handling of materials from the stock-yard was on the down-ward trend. Handling of materials by manual labourers were increasingly being replaced by mechanised equipments and by cranes. In this context letter dated 13th February, 1989 of A.K. Das Gupta, Zonal Manager of SAIL and letter dated 18th August, 1989 of the then General Manager of SAIL are relevant (Vol. 1A PP 111 and127). In the first letter addressed to the Joint Labour Commissioners it has been said that there would not be any requirement of manual labours for handling of steel materials under the head of export and import. In the second letter addressed to the Labour Minister, it is said that there being surplus labour to the Steel Plants, it was necessary to redeployment of surplus personnel from Steel Plants. It was categorically said SAIL was not in a position to add any more manpower. However, in spite of the said information being in their possession SAIL did not feel it necessary to reduce the number of workers at the said stock-yards. On the other hand SAIL invited the tender by giving a stipulation and/or promise of handling of approximately 5,10,000 MT of materials and entered into the instant contract promising supply of assured quantity of materials.

6.20 It may be true that due to change in the market condition or trend and the mode of disposal of the materials has contributed to the drastic reduction in the quantity of supply of materials to HTC for being handled. It would be evident from the judgement dated 25th April, 1996 in F.M.A.T. No. 1460 of 1994 that the High Court had directed SAIL "that any tender which is accepted by SAIL in respect of the stock-yards in question must not in any way affect the interim order passed by the Appellate Court or the Supreme Court and the Tenderers should be put on notice by SAIL before acceptance of the tender."

6.21 After the application of SAIL to close down the stock-yard was rejected by the Division Bench of the High Court, the SAIL had unilaterally taken decision not to despatch any materials to the stock-yard and on the other hand invoked Section 21(4) of the Contract Labour (Regulation and Abolition) Act on the ground that the HTC had failed to perform its obligations. We do not appreciate the stand of SAIL. When for continuous 11 months not a single gram of materials was given, no question of performance of contract could arise. There was nothing to perform, nonetheless contract was extended by one year more.

6.22 SAIL said there is a change in the policy decision of SAIL in attempting to close down the stock-yard and shifting the entire work to elsewhere (Dankuni Stock-yard) the result was that the contractor was not supplied with agreed material month after month which otherwise would have been given to the subject stock-yards. The contract was not subject to any change of policy. It is well settled that no term of a contract can be altered by reason of a unilateral decision of the contracting party. The terms of the contract can only be altered by consent of both the parties. After SAIL had decided to alter its policy and go for direct sell HTC is not to suffer therefor. It has been contended that the customers of SAIL were more interested in taking direct delivery and not through stock-yards. This contention has no bearing on the issue whether or not the customers of SAIL wanted to take delivery of goods directly or through stock-yard does not concern the contractor. Our attention has been drawn to a decision of the Supreme Court in the case of Thawards Dheriumal & Anr. -vUnion of India reported in AIR 1955 SC 468 where the Supreme Court has held that "a party having contracted he cannot go back on his agreement simply because it does not suit him to abide by it and the party can be held responsible for damages occasioned by breach of the contract." Our attention has also been drawn to another decision of the Supreme Court in the case of M/s. Alapi Porshad and Sons Ltd. - v- Union of India reported in AIR 1960 SC 588 where the Supreme Court held that "there is no general liberty reserved to the Court to absolve a party from the liability to perform his part of the contract merely because on account of a uncontemplated term or event the purpose of the contract may become onerous." (emphasis supplied)

6.23 A contention was raised that HTC was not capable of performing its obligation which is not borne from records and no such allegation was made earlier. For eleven months at a stretch not a single gram of material was given to HTC, no question of non- performance therefore arises. There is no contemporaneous correspondence or complaint stating that HTC was unable to discharge its obligations. On the contrary SAIL, by not supplying material as assured, failed to discharge its obligation.

6.24 Having considered the facts and circumstances of the case in detail we are of the view that the stipulation regarding the quantity in clause 4 of Invitation to Tender and clause 4 of the Instructions to Tenderer cannot be held to be only an estimate not amounting to any assurance of, if not definite, but reasonable volume for meaningful performance of work, with equipment, work force and infrastructure. The quantity must be reasonable having regard to the various requirements which had to be complied with by the contractor regarding the equipments, labour force and other infrastructure etc. The submissions made with reference to the different documents which we have mentioned earlier cannot in our view lead to the conclusion that no specific quantity was agreed to be supplied to HTC. This cannot be the intention of the contract. SAIL could not resile from the contractual commitment regarding expected supply of the quantities on the basis of which HTC had quoted its rates and maintained more than sufficient men and machinery for handling of those materials in performance of the contract. For eleven months there was nothing to be performed at all. No quotation could have been accepted by SAIL if no specific quantity to be handled by the HTC was mentioned for all purposes of execution of the contract. HTC has shown its readiness in complying with the provisions of the contract. They have quoted rates on the basis of the quantities proposed or expected to be handled, bought and brought the equipment as mentioned, retained the labour force over and above its requirement. In such circumstances reasonable construction of the contract has to be made. It cannot be disputed that for construction of contract intention of the parties has to be gathered from the words used in the agreement. It cannot be said that since contract does not mention specific quantity, the Court cannot supply any omission in the contract. But it is not a question of omission in the contract, it is a question of interpretation and harmonisation between the different parts of the contract which would be liable for execution by both the parties. It is pertinent to mention that in the 1st arbitration the Learned Single Judge of the High Court observed that "it was specifically indicated that HTC was required to handle 5,10,000 MT. Hence HTC was obliged to keep infrastructure for the above quantity ready for the entire contractual period being its men or by it machinery.' Stipulation in the contract to such extent should be given a harmonious construction along with all the terms and conditions including notice for inviting tender. The Learned Judge also dealt with the contention regarding change of policy. The Learned Judge held that after the allotment of the work and after the contract was entered into, SAIL changed its policy which resulted in substantial decrease of work." It is not the case where SAIL did not allot the work because of the inability of HTC to handle such work. If it had been so the contract would not have been allowed by SAIL to be continued for the entire contractual period and may be after the extended period according to HTC. However whether such change in policy was an inevitable fact or whether such change in policy could be considered as a breach on the part of SAIL under the contract was a matter to be gone into by the Tribunal. In the instant case the Tribunal came to a finding that SAIL was responsible for such breach and awarded damages in favour of HTC."

7. It is evident from the facts stated hereinabove that continuously for 11 months no material at all was provided to HTC and prior to that also insignificant quantity was supplied by SAIL. This could not have been the intention of the contracting parties having regard to the magnitude of involvement of men, equipments, resources and overheads. When the job of HTC is to handle the materials, can it be said that SAIL had no obligation whatsoever to ever supply a reasonable quantity but even nil quantity would be good enough in terms of the contract. We cannot accept this extreme view propounded by SAIL. A handling contractor is not expected to sit idle months after months incurring the fixed overhead costs and cost of labour and equipments and suffering loss. We are of the view that in the facts and circumstances of this case SAIL has committed breach of the contract in not supplying a reasonable quantity of materials and HTC is entitled to damages therefore.

7.1 The question now is as to the determination of the reasonable quantity of materials that HTC was entitled to handle (both receipt and delivery) in the light of facts and circumstances and the contract documents as aforesaid. During the period between 1st May, 1998 and 22nd November, 1999 that is for nearly 18 months HTC had been supplied only 30335 MT of steel materials as against 796900 MT which was estimated and expected to be handled during the said period by HTC in terms of Clause 4 of the terms and conditions of the contract. Thus for the said 18 months HTC did not get 766565 MT of materials (Expected 796.900 MTActual receipt 30355 MT) which is equivalent to 96.20% of the expected quantity. Again during the first half of the present contract that is from 23rd November, 1996 till 30th November, 1998 HTC had handled approximately 54.86% of the estimated or expected quantity as provided in Clause 4 of the tender/contract document.

7.2 Our attention has been drawn to the fact that the earlier arbitral proceeding which was initiated by HTC (Respondent herein) against SAIL (Claimant herein) an award was passed by the Learned Arbitral Tribunal holding that the Respondent (Claimant therein) was entitled on year to year basis the entirety i.e. 100% of the quantity which was specified in Clause 4 of the contract document subject to 5% deviation therefrom.

7.3 We, however, propose to deal with the matter differently. Upon a careful analysis of the contractual terms and conditions and on perusal of all documents of both sides we have no hesitation in holding that Claimant was obliged to provide the Respondent to handle such quantity of materials which would have been sufficient to compensate the Respondent because it had to incur cost in keeping men and equipments and the infrastructure in readiness throughout the term of the contract. That apart the Respondent is also entitled to profit on such quantity of materials which the Respondent was expected to handle. The main question therefore is what is the quantity of materials which the Claimant was obliged to provide to the Respondent for handling in terms of the contract. There is no fool proof formula for determining such quantum. However, we propose to base our judgement on the facts and figures as brought to light.

7.4 Admittedly the Claimant has supplied 54.85% materials of the estimated or expected quantity during the first 18 months of the contract to the Respondent. Assuming that the Respondent is entitled to 100% supply of the quantity which has been specified in clause 4 of the contract document (which we term as 'notional quantity) the average of the actual supply made during the first half of the contract and the notional supply would, in our opinion, be deemed to be the quantum of materials which at least the Claimant was obliged to supply to the Respondent during the said period. Accordingly, we hold that the average of 54.80% (actual supply) and 100% (notional quantity) comes to 77.4% (rounded off to 77%) is to be reckoned as actual percentage of the materials of the expected or notional quantity which ought to have been supplied by the Claimant to the Respondent. However, for the period under reference i.e. 1st May, 1998 to 22nd November, 1999 the Respondent had already received 3.80% of such materials. The same has to be deducted from the above and thus the applicable percentage comes to 77% (-3.8%) = 73.20% (rounded off to 73%). We, therefore, hold that SAIL had the obligation to provide the Respondent with materials to be handled by HTC during the said period i.e. 1st May, 1998 to 22nd November, 1999 at least 581737 MT being 73% of the expected or notional quantity of the material as provided in clause 4 of the tender documents.

7.5 In the premises aforesaid we hold that the Claimant committed breach of its obligation of providing reasonable quantity of materials to be handled by HTC in performance of the contract and we assess in the light of the surrounding circumstances including contract documents and other evidence brought on record that reasonable quantity would be 581737 MT for the period 1st May, 1998 to 22nd November, 1999. We answer the issues 1(a) and 1(b) accordingly.

93. In an application for setting aside of the award under Section 34 of the Arbitration and Conciliation Act, 1996 it is now well settled by catena of decisions that the Court does not act and function as a court of appeal over the arbitral award and may interfere on merits limited to the grounds mentioned in Section 34 (2) of the said Act. It is relevant to note that by way of amendment in 2016 Sub-section (2A) has been inserted in Section 34 which provided that in case of domestic arbitration violation of public policy of India would also include patent illegal ex facie must appear on the face of the award. However, the ground of patent illegality would not be available in the event an application for setting aside of the award is filed prior to amendment in 2005 i.e. 23rd October, 2015 (See Ssangyong Engineering and Construction Co. Ltd. vs. National Highways Authority of India (NHAI) 2019(15) SCC 131). The application for setting aside of the award was filed in June 2006. By way of clarification in the amendment it was made clear that the award shall not be set aside merely on the ground of an erroneous application of law or by re-appreciation of evidence which is merely a reiteration of the earlier views expressed by the Hon’ble Supreme Court that in deciding the application for setting aside the award the court is not exercising its jurisdiction as an appellate authority and the powers of the appellate court would not be available to a court deciding such an application. The scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction. The powers of the Court are circumscribed by the limited grounds as mentioned in Section 34. The reason being that the arbitration proceedings are not considered and comparable to judicial proceedings before the Court and a party can opt for an arbitration before any person who is not required to have a degree in law or any prior legal experience. Once the parties have consented to an appointment of an arbitrator it should be presumed that they have bestowed their faith and trust on the arbitrator and wanted a decision in an informal manner. This was recognised in Dyna Technologies Private Limited (supra) in which it is observed: “The intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration” and reiterated in K. Suguman vs. Hindustan Corporation Limited 2020(12) SCC 539 at 540 in the words: “When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum”. In Vidya Drolia and Ors. v. Durga Trading Corporation reported in 2021(2) SCC 1 it is stated:

“Arbitration is a private dispute resolution mechanism whereby two or more parties agree to resolve their current or future disputes by an Arbitral Tribunal, as an alternative to adjudication by the Court or a public forum established by law. Parties by mutual agreement forgo their right in law to have their disputes adjudicated in the courts/public forum. Arbitration agreement gives contractual authority to the Arbitral Tribunal to adjudicate the disputes and bind the parties.”

94. This view has been reiterated in Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking reported in 2023 INSC 742: 2023 SCC Online SC 1020.

95. In view of the nature of proceeding interference to an arbitral award is extremely limited and would be justified only in cases of commission of by an arbitrator misconduct which can find manifestation in different forms including exercise of legal perversity by the arbitrator. (See K. Sugumar (supra). This insulation of an award acts as a guard-wall from an assault on the award on the ground of misappreciation of evidence or interpretation of the contract or application of erroneous legal principle. It is for this protection and immunity that an award enjoys the courts have held that :

(i) construction of the contract is primarily for an arbitrator to decide unless the arbitrator contracts the contract in such a way that it can be said to be something that no fair-minded or reasonable person could do. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award (Per Justice M.R. Shah in Parsa Kenta Collieries Ltd.(supra).

(ii) Court should not interfere with an award merely because an alternative view on facts and interpretation of contract exists (Dyna Technologies (supra).

(iii) Unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award an arbitral award should not be interfered with in a casual and cavalier manner (Dyna Technologies (supra).

(iv) It is well settled law that where two views are possible, the court cannot interfere if the plausible view taken by the arbitrator is supported by reasoning. In other words if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one interpretation as against the other. (Dyna Technologies (supra) followed in South East Asia Marine Engineering and Construction Ltd. (SEAMEC Ltd.) v. Oil India Limited; 2020(5) SCC 164 and UHL Power Company Ltd. (supra).

96. In the instant case, the limited grounds of challenge was reading into “reasonable quantity” in the “estimated quantity” and it is being argued that by substituting or incorporating the said term by way of interpretation in the original contract between the parties the contract has been rewritten and a new contract has come into existence.

97. We need to decide if the award is assailable within the limited grounds under Section 34 of the 1996 Act prior to amendment in 2015. The approach of the court in interfering with the award is limited and circumscribed by the grounds mentioned in Section 34 of the 1996 Act.

98. There were various changes which were brought about in the 1996 Act from the 1940 Act. The purpose of the new Act was to have speedy disposal through the forum of arbitration.

99. Section 34 introduces itself by saying that the grounds mentioned thereunder are the “only” grounds on which an arbitral award may be set aside. However, apart from the grounds mentioned under S.34, the Act also provides for other grounds as under S.13, S.16, S.75 and S.81 on the basis of which the award can be set aside.

100. The grounds given under S.34(2)(a) are crisp and precise and lay the law as it is without the inclusion of any open-ended expression which otherwise would have given the courts an opportunity to widen their scope of interference with the arbitral awards. The only open-ended expression which can be and has been of concern is the ground of public policy of India. It has been under many cases defined as an unruly horse thus giving the interpretation that it can never be defined or be a certain thing. However, for the purpose of achieving the aim of the new Act, the Act of 1996 – the legislature while drafting the Act limited the scope of public policy in its explanation restricted it to:-

a) Fraud

b) Corruption

c) S.75 or S.81 (confidentiality breach or admissibility of evidence)

101. The scope of public policy was, however, widened after Supreme Court in its decision of Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003 (5) SCC 705) (also referred to as : “Saw Pipes Case”) interpreted it to include “patent illegality” in its definition.

102. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. It is a settled law that interpretation of the contract and appreciation of the evidence by the arbitral tribunal cannot be reopened by arguing that the award is contrary to the contract. Arbitration is consensual and some amount of laxity should be given while scrutinizing an award. A sense of informality is attached to such proceeding. It cannot be scrutinized with an Eagle’s eye or eye of a needle and as an appellate authority. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.

103. Once it is found that the arbitrator’s approach is not arbitrary or capricious it has to be accepted. He is the last word on facts. The construction of the terms of the contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person would do, of course, the arbitrator cannot wander outside the contract and deals with the matters not forming the subject matter or allotted to him as in that case he would commit jurisdictional error. (See Delhi Airport Metro Express (P) Ltd. v. DMRC, 2022 (1) SCC 131)

104. In Delhi Development Authority v. R.S. Sharma, 2008(13) SCC 80 the Hon’ble Supreme Court summarized the law thus:

“From the above decisions, the following principles emerge:

(a) An Award, which is

(i) Contrary to substantive provisions of law; or

(ii) The provisions of the Arbitration and Conciliation Act, 1996; or

(iii) Against the terms of the respective contract; or

(iv) Patently illegal, or

(v) Prejudicial to the rights of the parties, is open to interference by the Court under S.34(2) of the Act.

(b) Award could be set aside if it is contrary to:

(i) Fundamental policy of Indian Law; or

(ii) The interest of India; or

(iii) Justice or morality;

(iv) The Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court;

(v) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.”

105. The Supreme Court in Mc Dermott International v. Burn Standard Co. Ltd.; 2006 (11) SCC 181, has commented on the scope of the powers of the arbitrator to interpret terms of the contract, and the permissible interference by the courts on the assessment of the arbitrator. It was held:-

“It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. The 1996 Act makes the provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the Court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrator, violation of natural justice, etc. The court cannot correct the errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court’s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.”

106. The Court will not judge the reasonableness of a particular interpretation accorded by the arbitrator to the terms of the contract. Even an error in interpretation, unless patently illegal, will only amount to an error within the jurisdiction of the arbitrator.

107. In KV Mohd. Zakir v. Regional Sports Centre reported at AIR 2009 SC (Supp) 2517 it held that the courts should not interfere unless reasons given are outrageous in their defiance of logic or if the arbitrator has acted beyond his/her jurisdiction.

108. In P.R. Shah Shares & Stock Brothers v. M/s. B.H.H. Securities (P) Ltd.; 2012 (1) SCC 594 it is clearly stated that a court does not sit in appeal over the award of an arbitral tribunal by re-assessing or reapproaching the evidence. An award can be challenged only on the grounds mentioned in S.34(2) of the Act.

109. The decision of the Arbitral Tribunal in the instant case is a possible view and an acceptable outcome which is clearly defensible in respect of the facts and law.

110. In Associate Engineering Builders v. Delhi Development Authority reported in 2015(3) SCC 49 the Supreme Court has laid down the principle on which an award can be held to be perverse. The Apex Court held:

“32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officer-cum- Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it was held: (SCC p. 317, "7. ... It is, no doubt, true that if a finding of fact is para 7) arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."

In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC 10: 1999 SCC (L&S) 429], it was held: (SCC p. 14, para 10)

"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with

33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.”

111. Once it is found that the arbitrators’ approach is not arbitrary or capricious then he is the last word on facts.

112. Reasonableness of the decision cannot be a matter of judicial review in deciding an application for setting aside and award.

113. Once the arbitrator has come to a finding the Court should not interfere with the award unless reasons given are outrageous in their defiance of logic or if the arbitrator has acted beyond his jurisdiction. Moreover, the Court does not sit in appeal over the award of the arbitral tribunal by re-assessing, re-approaching or re-appreciating the evidence. It is well settled that the Court does not sit in appeal over an award. It is not for this Court to reassess the evidence on record. It is also not for this Court to weigh the quality and quantity of the evidence put forward before the Arbitration. In Ravindra Kumar Gupta & Co. v. Union of India reported at 2010 (1) SCC 409 it is reiterated that reappraisal of evidence by the Court is not permissible. Where the reasons have been given by the arbitrator in making the award the court cannot examine the reasonableness of the reasons. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a Judge on the evidence before the arbitrator. The award can be challenged only on the ground mentioned in Section 34(2) of the Act.

114. An erroneous application of the law by itself is not a ground to challenge an award under Section 34 of the Arbitration and Conciliation Act. For an award to be set aside there must be a patent illegality, an error which goes to the very root of the matter and affects the jurisdiction of the arbitrator in deciding a dispute. If the arbitrator lacks the authority to decide the dispute the award is a nullity. If the disputes are by nature nonarbitrable the assumption of jurisdiction would be an illegality.

115. The judgment in Associate Builders (supra), which was passed in relation to a domestic award also recognized and reaffirmed the settled law that where a cause or matters in differences are referred to an arbitrator, whether lawyer or layman, he is considered to be the sole and final judge of all questions of law and of fact obviously with the limited grounds of interference, namely, if it is opposed to fundamental policy of Indian Law, interest of India, justice or morality and patent illegality.

116. A patent illegality would mean an illegality which goes to the root of the matter and not a mere erroneous application of the law is the view in Associated Builders (supra) which was reiterated in SSangyong Engineering & Construction Company Ltd. v. National Highway Authority of India, reported in 2019(15) SCC 131 in paragraphs 37, 39, 40 and 41 of the said report which reads:

“37. Insofar as domestic awards made in India are concerned, an additional ground is now available Under Sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

39. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added Under Section 34(2A).

41. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.”

117. We are unable to accept the said submission on behalf of the appellant that it is assailable under Section 34(2)(a)(iv). The tender inviting bid was not for a fun or humour. SAIL had expended huge amount in floating a tender inviting bidders for to act as handling contractor. In this regard the observation of the Arbitral Tribunal in paragraph 6.10 and 6.11 are apposite:

“6.10. In our view in a large assignment like the present one materials to be handled could not have been approximately 55% or 4% of the expected quantities. Sudden fall of the supply of materials has not been justified by SAIL excepting taking shelter behind the clauses which say that no guarantee was given regarding the quantities to be supplied or SAIL is not responsible for actual short fall of estimated quantifies on the basis whereof the contract was arrived at.

6.11. Another factor is to be taken into account. It is on record that the Tender Committee took into account the schedule of operations evaluating the quotations of the Tenderers. From the schedule of operations annexed to the statement of claim, it is clear that the materials which were to be received at the stockyard would aggregate at least 2,56,000/- MT per annum. Similarly the said schedule of operations relating to delivery (annexed to the Statement of claim) shows that the aggregate amount of delivery mentioned is 2,55,000/- MT. The pattern of the quantum of handling materials in the past shows that the same stockyard had handled more than 21250 MT. (separately receipt and delivery) of materials per month. As a matter of fact the contractor who was operating just before the present contract was awarded to HTC obtained the following quantities of materials.

Statement of Receipt & Delivery A/C: Paharpur and Coal Berth Stockyard, Financial Year 1996-97 handled by Bardhan & Co. (Handling Contractor) Private Ltd.

Month	Receipt (in M.T.)	Delivery (in M.T.)
April, 1996	24580	16127
May, 1996	16188	16127
June, 1996	21282	28180
July, 1996	21235	19566
August, 1996	16694	13167
September, 1996	16864	13064
October, 1996	19322	14453
Upto      22nd               November, 1996	13383	6856
TOTAL	159548	125854

Average quantities handled:-

20586 M.T. (Receipt) 16239 M.T. (Delivery)

It may be mentioned that for the financial year 1995-96 Bardhan & Co. (Handling Contractors) Pvt. Ltd. received 250142 MT. and delivery 247710 MT. Average quantities handled during the aforesaid period are 20854 MT (Receipt) and 20642 MT (Delivery).

118. The phrase “implied term” can be said to denote a term inherent in the nature of the contract which the law will imply in every case unless the parties agree to vary or exclude it. (See Sterling Engineering Co. V. Patchett (1955) AC. 534 at p. 547 per Lord Reid).

119. If all the documents are read as a whole it can be reasonably inferred that the contract documents are capable creating a reasonable and legitimate expectation in the mind of the contractor to receive if not the entirety of the estimated amount but a reasonable quantity which would enable a contractor to earn a profit of 15%. “Oh yes” could be anybody’s reaction on reading the contract documents of a reasonable quantity. This expectedly could be the reaction in a commercial transaction of this nature. The court is usually 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 [See South East Asia Marine Engineering & Construction Ltd. (supra)].

120. The thumb rule as to the interpretation of a contract is that the document forming a written contract should be read as a whole and so far as possible as mutually explanatory. The terms and conditions clearly stipulate that the contractor would be entitled to 15% profit and that is possible only when a reasonable quantity is handled by the contractor. The construction of the documents cannot lead to an inference that the quantity will be nil for the entire duration of the contract. SAIL had the option not to renew the contract after two years. The learned Arbitral Tribunal consisting of three retired experienced judges of this Court had interpreted the contract and arrived at a conclusion that the relevant clauses to which reference have been made earlier are to be construed in a commercial manner as any other interpretation would cause hardship, lead to absurdity and made the contract nugatory. While the words “estimated quantity” with “no guarantee clause” may lead to inference that the contractor may not have any claim in the event of short supply but this cannot lead to an inference of no supply. The contractor for the purpose of performing and discharging its responsibilities are required to incur substantial expenses as failure to perform the contract would entail serious consequences as provided in clause 4.8 of the contract document. It required a continued presence of man, material and infrastructure. The contractor is supposed to be ready with its men, material, workforce and equipment for due performance of the contract. If the interpretation of SAIL with regard to the contract is accepted then it would mean that SAIL would have no obligation at all to supply any quantity although SAIL would expect the contractor to keep its labour, equipment, infrastructure ready throughout the life of the contract which would result in colossal loss for the contractor which the parties have never intended at the time of making the contract. The requirement of supply of a reasonable quantity is implicit in the contract. It is so obvious that it goes without saying that the parties intended to supply reasonable quantity. Any other interpretation would make the contract onerous. The contract does not make any business sense without the term “reasonable” as interpreted by the Arbitral Tribunal to give it a business efficacy. To borrow the language of Mackinnon L.J. in Shirlaw v. Southern Founderies Ltd. [1939] 2 K.B. 226 at 227:

“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in the agreement, they would testily suppress him with a common ‘oh, of course’.”

As pithly put by Diplock L.J. in Hongkong Fir Shipping v. Kawasaki Kisen Kaisha [1962] 2 Q.B. 26 at p. 69: “It goes without saying”.

This has been justified, in relation to business contracts, on the ground that the law desires to give such business efficacy to a transaction as must have been intended at all events by both parties who are businessmen, and this can only be does by allowing such terms. [See The Moorcock (1889) 14 P.D. 64].

Brown L. J. in The Moorcock (supra) sums up the position:

“....In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are businessmen; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.”

121. This has been followed in Satya Jain v. Anis Ahmed Rushdie, 2013(8) SCC 131, Nabhi Power Ltd. (supra) and Adani Power (supra). The Arbitral Tribunal in fact in fact, has considered the aforesaid principles in paragraphs 6.16, 6,18, 6.24 and 7 in particular.

122. The said interpretation does not make any commercial sense at all. Moreover, business efficacy test requires that a term can only be implied if it is necessary to give business efficacy to the contract to avoid such a failure of consideration that the parties cannot as reasonable businessmen have intended and for that purpose the most limited term should be implied – the bare minimum to achieve this goal (Per Ranjon Gogoi, J. in Satya Jain (supra).

123. The jurisdiction of the court under section 37 of the Act, as clarified in MMTC (supra) and reiterated in Konkan Railway Corporation Ltd. (supra) is akin to the jurisdiction of the court under Section 34 of the Act. The scope of interference by a court in an appeal under Section 37 of the Act, in examining an order setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal’s view is perverse or manifestly arbitrary. (See Konkan Railways Corporation Ltd. (supra) The views expressed by the tribunal was accepted by Justice Tandon.

124. I am convinced that the interpretation of the Arbitral Tribunal was clearly a possible and plausible view and rightly accepted by the learned Single Judge. The views of the Tribunal was “reasonable and fair minded” in approach.

125. The learned Single Judge has rightly accepted such findings of the Arbitral Tribunal to be fair, plausible and reasonable.

126. The award is upheld. The appeal and the application stand dismissed. However, there shall be no order as to costs.

Ravi Krishan Kapur, J.

127. I have read the draft judgment of my Learned Brother. With utmost respect, I find myself unable to agree with my Learned Brother and therefore, I am writing this separate judgment.

128. This appeal arises from a judgment dated 25th April, 2016 dismissing an application under section 34 of the Arbitration and Conciliation Act, 1996 (the Act).

129. The disputes between the parties arise out of a contract for handling iron and steel materials at the appellant’s stock yard and office located at Paharpur, 20, Coal Berth and DP-II siding at the Calcutta branch respectively.

130. Clause 11.1 of the Instructions to the Tender is as follows:-

(i) The advertisement for tender.

(ii) Instructions to tenderers,

(iii) Terms and conditions of contract along with all its enclosures etc. and any other letters exchanged with the successful tenderer shall form part of the contract.

131. Salient clauses of the contract inter alia provide as follows:

CLAUSE-4:

The estimated quantities proposed to be handled during the first year of operation of the contract are expected to be as under (calculation based on sales plan)

	Receipt	Delivery
Pig Iron	5000 M.T	5000 M.T
Tool	2,50,000 M.T	2,50,000 M.T
Total	2,55,000 M.T	2,55,000 M.T

CLAUSE-5

“The estimated quantities for the first year of operation of the contract are only for the purpose of finding out the value of the tender & SAIL is in no way liable if the actual quantity of work differs from estimated quantity indicated above”.

CLAUSE-8.3

The mere mention of any item or work in the contract does not by itself confer the right upon the contractor to demand that item of work at all times.

CLAUSE-8.7

The company gives no guarantee about the definite volume of work to be entrusted with the contractor at any time or even throughout the tenure of the contract.

132. The claim for damages by the claimant was on the ground that there was a shortfall in providing materials by the appellant at the stock yard between the period 1 May, 1998 and 22 November, 1999 (18 months 22 days). It is contended that during this period the appellant had only made available 30,335 MT of materials. On behalf of the appellant it is contended that there is no question of shortfall as the contract between the parties does not provide for any minimum quantity of materials which the appellant is obliged to provide under the contract.

133. The Arbitral Tribunal passed an award dated 17 March, 2006 (the award) and implied a condition to the effect that the appellant would make available to the respondent for handling (receiving and delivery) a reasonable quantity of materials per year for the remaining two years of the contract. In this context, Clause 6.24 of the award is as follows:

6.24. Having considered the facts and circumstances of the case in detail we are of the view that the stipulation regarding the quantity in clause 4 Invitation to Tender and clause 4 of the Instructions to Tenderer cannot be held to be only an estimate not amounting to any assurance of, if not definite, but reasonable volume for meaningful performance of work, with equipment, work force and infrastructure. The quantity must be reasonable having regard to the various requirements which had to be complied with by the contractor regarding the equipments, labour force and other infrastructure etc. The submissions made with reference to the different documents which we have mentioned earlier cannot in our view lead to the conclusion that no specific quantity was agreed to be supplied to HTC. This cannot be the intention of the contract. SAIL could not resile from the contractual commitment regarding expected supply of the quantities on the basis of which HTC had quoted its rates and maintained more than sufficient men and machinery for handling of those materials in performance of the contract. For eleven months there was nothing to be performed at all. No quotation could have been accepted by SAIL if no specific quantity to be handled by the HTC was mentioned for all purposes of execution of the contract. HTC has shown its readiness in complying with the provisions of the contract. They have quoted rates on the basis of the quantities proposed or expected to be handled, bought and brought the equipment as mentioned, retained the labour force over and above its requirement. In such circumstances a reasonable construction of the contract has to be made. It cannot be disputed that for construction of contract intention of the parties has to be gathered from the words used in the agreement. It cannot be said that since contract does not mention specific quantity, the Court cannot supply any omission in the contract. But it is not a question of omission in the contract, it is a question of interpretation and harmonisation between the different parts of the contract which would be liable for execution by both the parties. It is pertinent to mention that in the 1st arbitration the Learned Single Judge of the High court observed that “it was specifically indicated that HTC was required to handle 5,10,000 MT. Hence HTC was obliged to keep infrastructure for the above quantity ready for the entire contractual period being its men or by it machinery.’ Stipulation in the contract to such extent should be given a harmonious construction along with all the terms and conditions including notice for inviting tender. The Learned Judge also dealt with the contention regarding change of policy. The Learned Judge held that “after the allotment of the work and after the contract was entered into, SAIL changed its policy which resulted in substantial decrease of work.” It is not the case where SAIL did not allot the work because of the inability of HTC to handle such work. If it had been so the contract would not have been allowed by SAIL to be continued for the entire contractual period and may be after the extended period according to HTC. However whether such change in policy was an inevitable fact or whether such change in policy could be considered as a breach on the part of SAIL under the contract was a matter to be gone into by the Tribunal. In the instant case the Tribunal came to a finding that SAIL was responsible for such breach and awarded damages in favour of HTC.”

134. A reasonable quantity was assessed by the Arbitral Tribunal at 6,12,072 MT for the period from 1st April, 1998 to 26th November, 1999 being 77% of the expected quantity for the first year as stipulated in clause 4 taken to be 7,96,900 MT. The relevant portion of the award is as follows:

7.1 The question now is as to the determination of the reasonable quantity of materials that HTC was entitled to handle (both receipt and delivery) in the light of facts and circumstances and the contract documents as aforesaid. During the period between 1st May, 1998 and 22nd November, 1999 that is for nearly 18 months HTC had been supplied only 30335 MT of steel materials as against 796900 MT which was estimated and expected to be handled during the said period by HTC in terms of Clause 4 of the terms and conditions of the contract. Thus for the said 18 months HTC did not get 766565 MT of materials (Expected 796.900 MT- Actual receipt 30355 MT) which is equivalent to 69.20% of the expected quantity. Again during the first half of the present contract that is from 23rdNovember, 1998 HTC had handled approximately 54.86% of the estimated or expected quantity as provided in Clause 4 of the tender/contract document.

7.2 Our attention has been drawn to the fact that the earlier arbitral proceedings which was initiated by HTC against SAIL an award was passed by the Learned Arbitral Tribunal holding that the respondent was entitled on year to year basis the entirety i.e. 100% of the quantity which was specified in clause 4 of the contract document subject to 5% deviation therefrom.

7.5 In the premises aforesaid we hold that the claimant committed breach of its obligation of providing reasonable quantity of materials to be handled by HTC in performance of the contract and we assess in the light of the surrounding circumstances including contract documents and other evidence brought on record that reasonable quantity would be 581737 MT for the period 1st May, 1998 to 22nd November, 1999. We answer issues 1(a) and 1(b) accordingly.

135. Thereafter, the Arbitral Tribunal fixed the profit of the respondent @ 15% of the total price amount payable for receiving and delivery namely Rs.490/- for 2(two) MT (Rs.265/- + Rs.225/-) which is Rs.73.5/2=Rs.36.75/- per MT. The Arbitral Tribunal held as follows:

19.1) Issue No.5 deals with the counter claim arising out of the failure of SAIL to provide entirety of expected quantity of materials. The respondent HTC has claimed on account of shortfall quantities of materials relating to Group-A and Group-B both for receipt and delivery by taking into account handling charges at Rs.9,00,31,650.00. We have under issue Nos. 1(a) and 1(b) discussed in detail the question as to the obligation of SAIL to provide HTC with reasonable quantity of materials to compensate the loss of profit or any other loss, if any, connected with handling job. In our considered view the reasonable quantity of materials which ought to have been given to HTC by SAIL would be 581737 MT for the period 1st May, 1998 to 22nd November, 1999 as against the claim of respondent of 796900 MT. Thus, the claimant has filed to provide the respondent at least 581737 MT of materials being 73% of the expected or estimated quantity of 796900 MT in terms of clause 4 of the contract document.

136. In effect, the Arbitral Tribunal implied a term of minimum guarantee of a reasonable quantity into the contract i.e. 6,12,072 MT – 30,335 MT aggregating to 5,81,737 MT x Rs.36.75 per MT amounting to Rs.2,13,78,834.75/-.

137. It is contended by the appellant that in passing the award the Arbitral Tribunal erred in implying such a term the effect of which was to contradict the express terms of the contract. The condition for implying a term is also contradictory to clause 5 of the Invitation to Tender and clause 8.7 of the Terms and Condition of the Contract. The Arbitral Tribunal also formulated new disputes which were not referred to arbitration namely that the claimant would be entitled to a reasonable quantity for handling the materials. Consequently, the Arbitral Tribunal erred in awarding compensation @ 15% plus the costs involved in earning such profits. The assessment of the quantity of 5,81,737 MT was arbitrary, unreasonable and perverse. The award is also contrary to public policy as well as in excess of jurisdiction. Hence, the entire award is vitiated and is liable to be set aside inter alia under section 34(2)(a)(iv) of the Act. In support of their contentions, the appellant placed reliance on B.P. Refinery (Westernport) Proprietary Limited vs. The President Councilors and Ratepayers of the Shire of Hastings (1977) 52 A.L.J.R 20, Nabha Power Ltd. v. Punjab SPCL (2018) 11 SCC 508, Adani Power (Mundra) Limited v. Gujrat Electricity Regulatory Commission (2019) 19 SCC 9, State of Chhattisgarh and Anr. v. SAL Udyog Private Limited (2022) SCC 275, Boozallen and Hamilton Inc. v. SBI Home Finance Limited and Others (2011) 5 SCC 532, South East Asia Marine Engineering and Constructions Limited (SEAMEC Limited) v. Oil India Ltd. (2020) 5 SCC 164, Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445, Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131) and Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) (2019) 15 SCC 131.

138. On behalf of the respondent, it is submitted that there are no grounds made out warranting any interference with the award. The award is adequately reasoned and all issues raised by the parties have been dealt with by the Arbitral Tribunal. The Arbitral Tribunal has given a reasonable and plausible interpretation to the contract which cannot be described as perverse. The respondent was required to maintain infrastructure, materials, labourers etc. throughout the period of contract and was not given any materials for the last 11 months of the contract. In this background, there are no grounds which warrant interference with the impugned order or the impugned award and the appeal should be dismissed.

139. Section 9 of the Indian Contract Act, 1872 provides as follows:

Promises, express and implied.—In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.

140. A contract may be expressed or implied. The question whether a contract is express or implied is one of inference to be borne from the facts and circumstances of each case. In certain circumstances, the Court imports into the contract a term to give effect to the intention, the presumed intention of the parties. The underlying reasoning being that a Court is not making a new contract for the parties but is implementing their intentions because this is something as reasonable parties they must have intended. The test is a strict test. The touchstone for implying a term is not only reasonableness but also necessity. A contract can only be implied when there is meeting of minds. As held by Lord Atkin in Bell vs. Lever Brothers [1932] AC 161:

“Nothing is more dangerous to allow oneself the liberty to construct for the parties contracts which they have not in terms made by importing implications which would appear to make the contract more businesslike or more just. The implications to be made are to be no more than are ‘necessary’ for giving business efficacy to the transaction… a condition should not be implied unless the new state of facts makes the contract something different in kind from the contract in the original state of facts.”

141. The crux of the dispute even in the narrow and circumspect jurisdiction of the Act is whether in the facts and circumstances of this case the Arbitral Tribunal could have implied a term of minimum guarantee in the contract. In Philips Electronique Grand Public Sa and Anr. v. British Sky Broadcasting Ltd. (1995) EMLR at Page 481 it has been held as follows:

The Courts’ usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially instrusive that the law imposes strict constraints on the exercise of this extraordinary power.

142. In Deviprasad Khandelwal v. Union of India, AIR 1969 Bom 163 it has been held as follows:

12. It is a matter of a common experience that no perfect contract can be made, because the parties to it may not at the stage of making it, envisage or provide for all the contingencies that may arise. Several times the parties to a contract may either through forgetfulness or through bad drafting fail to incorporate into the contract terms which, had they adverted to the situation, they would certainly have inserted to complete the contract. In such cases, in order to give efficacy to the contract, the Court will imply into a contract terms which the parties have not themselves expressly inserted. It is true that it is not the function of the Court to make contracts for the parties, but only to interpret contracts already made. Nevertheless, in certain circumstances, the Court will imply terms. Such terms should neither be contrary to, nor inconsistent with the express terms of the contract contained in the terms and conditions of agreement.

143. In Nabha Power Ltd. v. Punjab SPCL, (2018) 11 SCC 508 it has been held as follows:

49. We now proceed to apply the aforesaid principles which have evolved for interpreting the terms of a commercial contract in question. Parties indulging in commerce act in a commercial sense. It is this ground rule which is the basis of The Moorcock [The Moorcock, (1889) LR 14 PD 64 (CA)] test of giving “business efficacy” to the transaction, as must have been intended at all events by both business parties. The development of law saw the “five condition test” for an implied condition to be read into the contract including the “business efficacy” test. It also sought to incorporate “the Officious Bystander Test” [Shirlaw v. Southern Foundries (1926) Ltd. [Shirlaw v. Southern Foundries (1926) Ltd., (1939) 2 KB 206 : (1939) 2 All ER 113 (CA)] ]. This test has been set out in B.P. Refinery (Westernport) Proprietary Ltd. v. Shire of Hastings [B.P. Refinery (Westernport) Proprietary Ltd. v. Shire of Hastings, 1977 UKPC 13 : (1977) 180 CLR 266 (Aus)] requiring the requisite conditions to be satisfied: (1) reasonable and equitable; (2) necessary to give business efficacy to the contract; (3) it goes without saying i.e. the Officious Bystander Test; (4) capable of clear expression; and (5) must not contradict any express term of the contract. The same penta-principles find reference also in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [Investors Compensation Scheme Ltd. v. West Bromwich Building Society, (1998) 1 WLR 896 : (1998) 1 All ER 98 (HL)] and Attorney General of Belize v. Belize Telecom Ltd. [Attorney General of Belize v. Belize Telecom Ltd., (2009) 1 WLR 1988 (PC)] Needless to say that the application of these principles would not be to substitute this Court's own view of the presumed understanding of commercial terms by the parties if the terms are explicit in their expression. 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.

144. In Adani Power (Mundra) Ltd. v. Gujarat ERC, (2019) 19 SCC 9 it has been held as follows:

24. It could thus be seen that it is more than well settled that the clauses in the agreement ought to be given the plain, literal and grammatical meaning of the expression used in the same. No doubt, that the courts will also try to gather as to what intention the parties wanted to give them. The principle of business efficacy could be invoked only if by a plain literal interpretation of the term in the agreement or the contract, it is not possible to achieve the result or the consequence intended by the parties acting as prudent businessmen. This test requires that a term can only be implied, if it is necessary to give business efficacy to the contract, to avoid such a failure of consideration that the parties cannot as reasonable businessmen have intended. If the contract makes business sense without the term, the Courts will not imply the same. It is amply clear that Courts can imply a clause only if it is found that the plain and literal meaning given to the expression used in the terms is not in a position to make out the intention of the parties. Reading an unexpressed term in an agreement would be justified on the basis that such a term was always and obviously intended by and between the parties thereto. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract. It is not enough for the Court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them. It must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, although tacit, forms part of the contract. As held in Nabha Power Ltd. [Nabha Power Ltd. v. Punjab SPCL, (2018) 11 SCC 508 : (2018) 5 SCC (Civ) 1] , for invoking the business efficacy test and carving out an implied condition, not expressly found in the language of the contract, the following five conditions will have to be satisfied: (SCC p. 540, para 49)

(1) Reasonable and equitable;

(2) Necessary to give business efficacy to the contract;

(3) It goes without saying i.e. the Officious Bystander Test;

(4) Capable of clear expression; and

(5) Must not contradict any express term of the contract.

145. It is a cardinal rule that no term can be implied into a contract, if it contradicts or is inconsistent with an express term of the contract. A Court or Arbitral Tribunal will not improve the contract which the parties have made for themselves, however desirable the improvement might be. Neither does the Court imply terms based on its idea of what it thinks ought to be the contractual relationship between the parties. On a combined reading of Clauses 4 and 5 of the Invitation to Tender and Clauses 8.3 and 8.7 of the General Clauses, the parties at the time of entering into of the contract only provided for an estimate quantity for the first year of operations. In fact, on a plain reading of clauses 8.3 and 8.7 above any minimum guarantee about the definite volume of the work during any time of the contract or even throughout the tenure of the contract was deliberately excluded and expressly prohibited. In such circumstances, there could be no question of any minimum quantity being guaranteed under the contract. It is obvious that there was no meeting of minds of the parties at the time of entering into the contract insofar as any minimum guarantee for the volume of the work was concerned. Any other interpretation would contradict the express terms of the contract. Trollope & Colls Ltd. vs. North West Metropolitan Regional Hospital Board (1973) 1 WLR 601, Naihati Jute Mills Ltd. vs. Khyaliram Jagannath AIR 1968 SC 522 and Food Corporation of India vs. Chandu Construction and Anr (2007) 4 SCC 697.

146. It is also not permissible for the Court to make a new contract, however reasonable, which the parties have not made themselves. A term cannot be implied simply because it is reasonable to do so or that it would make the performance of the contract more just, convenient or beneficial to one party. The subject contract had been entered into in detail and was a carefully drafted commercial contract. Accordingly, implying a term of minimum guarantee by the Arbitral Tribunal has resulted in re-writing the contract. The professed object of the Court or the Arbitral Tribunal in interpreting the contract is to discover the mutual intention of the parties and not to re-write the same. It is not the intent of a single party which is to be taken into consideration but the joint intention of the both parties which can only be discovered from the terms of the contract. The contract was a business transaction which both parties had consciously undertaken. The parties at the time of entering into the contract were best placed to judge and protect their interests in the bargaining process. Freedom of contract is the general rule. There is nothing obvious about the implied term which must be incorporated by necessary implication without which the whole contract would become meaningless. Consequently, resort to the principle of business efficacy to read an implied term into the contract was wholly unfair and unreasonable. [Satya Jain (Dead) Through Lrs. & Ors. v. Anis Ahmed Rushdie (Dead) Through Lrs. & Ors. (2013) 8 SCC 131].

147. For the above reasons, the implied term as to minimum guarantee and a reasonable quantity by the Arbitral Tribunal is patently illegal. The language of clauses 4, 5, 8.3 and 8.7 were explicit, clear and unambiguous. There was no scope for drawing upon hypothetical considerations or supposed intentions of the parties. It was not open to the Arbitral Tribunal to ignore the express terms of the contract which were binding on the contracting parties. There is no discretion in a Court on the Arbitral Tribunal to make a new contract for the parties. In fact, it would be contrary to law to impose on the appellant an obligation of minimum guarantee which they were not contractually obliged to perform. A fundamental addition or alteration of a contract can never by foisted upon an unwilling party, nor can a party to an agreement be liable to perform a bargain not entered into with the other party. Upon incorporation of the implied term in the contract by the Arbitral Tribunal, clause 5 of the Invitation to Tender and Clause 8.7 of the terms and conditions of the contract were modified to read as follows:

Clause 5: the estimated quantities for the first year of operation of contract are only for the purpose of finding out the value of the tender & SAIL is in no way liable if the actual quantity of work differs from estimated quantity indicated above. But the company (SAIL) would be liable if a reasonable quantity of work is not provided to the contractor throughout the tenure of the contract.

Clause 8.7: The company gives no guarantee about the definite volume of work to be entrusted with the contractor at any time or even throughout of tenure of the contract. But a reasonable volume of work is guaranteed by the company during the tenure of the contract.

148. In passing the award, the Arbitral Tribunal has also acted in manifest disregard to the terms of the contract and in excess of jurisdiction. The interpretation of the Arbitral Tribunal cannot be said to be a possible one as it would defeat the explicit terms and purpose of the contract [South East Asia Marine Engineering & Constructions Ltd v. Oil India Ltd (2020) 5 SCC 164]. The construction of the contract by the Arbitral Tribunal is neither reasonable nor plausible but manifestly arbitrary and patently illegal. The quantity claimed by the respondent in their pleading was for a specific quantity calculated on the basis of clause 4 for the 2nd and 3rd years. The Arbitral Tribunal has also made out a new case beyond the pleadings of the respondent. In view of the fact that the Arbitral Tribunal erred in implying a term as to guarantee of a reasonable quantity to be incorporated into the contract, the remaining portion of the award in respect of assessment damages on the basis of net profit is against all notions of justice and liable to be set aside inter alia under sections 34(2a)(iv) and 34(2b)(ii) of the Act.

149. In Union of India and Ors. v. Bharat Enterprise 2023 SCC OnLine 369 it has been held that:

The Arbitrator comes on the scene as a result of the agreement between the parties. Not unnaturally, the fundamental and primary foundation for the Arbitrator to settle the dispute is the contract between the parties. An Arbitrator is a creature, in other words, of the parties and the contract. It is elementary that as Arbitrator he cannot stray outside the contours of the contract. He is bound to act within its confines. A disregard of the specific provisions of the contract would incur the wrath of the Award being imperilled. This position cannot be in the region of dispute.

150. The impugned order refers to numerous authorities under section 34 of the Act without adverting to the facts of this case. The mere mentioning of clause 4, 5, 8.3 and 8.7 in the impugned order without any discussion or relevancy of the same is ex facie erroneous. In passing the impugned order, the Learned Judge has failed to appreciate the scope, purport and ambit of clauses 4, 5, 8.3 and 8.7 or even discuss the same. The finding in the impugned order that “this is not certainly a case where the Arbitral Tribunal have incorporated the implied term into the contract which is inconsistent and repugnant to the express terms” is a conclusion bereft of any reasoning. For the above reasons, even in view of the extremely limited jurisdiction under the Act and the respect for party autonomy, the impugned order and the award are unsustainable and set aside. (Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445, Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), (2019) 15 SCC 131, Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131) and State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275.

151. For the above reasons, the appeal succeeds APO 356 of 2016 stands allowed.

Later, the Court:

152. In view of the difference of opinion the matter shall be placed before the Hon’ble the Chief Justice under Clause 36 of the Letters Patent.