Contract: Tender floated for well drilling and other auxillary operations – Work order awarded to appellant – During subsistence of contract, prices of High Speed Diesel (HSD) one of the essential materials for carrying out the drilling operations increased through a circular issued by Government – Appellant raised a claim that increase in the price of HSD triggered the ‘change in law’ clause contained in clause 23 under the contract and the respondent became liable to reimburse them for the same – In terms of Clause 23, if subsequent to the date of price of Bid Opening, there was a change in or enactment of any law or interpretation of existing law, which resulted in additional cost/reduction in cost to contractor on account of the operation under the contract, the contractor would be entitled to receive such additional/reduced cost actually incurred – Appellant invoked the arbitration clause – Arbitral Tribunal allowed the claim holding that Clause 23 must be liberally construed and any circular of the Government would amount to a change in law – On appeal, High Court set aside the award – Held: There are price fluctuations which a prudent contractor would take into margin, while bidding in the tender – Such price fluctuations cannot be brought under ‘change in law’ clause unless specific language points to the inclusion – The contract in question was based on a fixed rate – The party, before entering the tender process, entered the contract after mitigating the risk of such an increase – The interpretation of Arbitral Tribunal to expand the meaning of Clause 23 to include change in rate of HSD was not a possible interpretation of this contract as the appellant did not introduce any evidence to prove same – Arbitral award set aside – Contract Act – s.56 – Arbitration and Conciliation Act, 1996 – s.34 – Doctrine of Force Majeure.

Arbitration and Conciliation Act, 1996: s.34 – Scope of court’s jurisdiction under s.34, discussed.