A Supreme Court bench on Wednesday held that a unilateral alteration in a contract can never be forced upon an unwilling party and set aside the arbitral award.
Justices R F Nariman and Naveen Sinha in Ssangyong Engineering and Construction Co. Ltd. V National Highways Authority of India (NHAI) have held that, in exceptional circumstances, court can interfere with the arbitral award when justice has not been done.
A 2005 contract between the parties contained a price adjusting formula. In 2013, NHAI adopted a new formula applying a ‘linking factor’ based on the year 2009-10 and released a circular regarding the same. The contractor was dissatisfied as NHAI modified the formula without their consent. The matter was referred to arbitration. The arbitral award (Sec 34 of the Arbitration and Conciliation Act, 1996) had held that the 2013 circular was validly implemented.
The Supreme Court has however observed that the circular issued by NHAI was unilaterally issued and could not bind the contractor without their consent.
Setting aside the arbitral award, court did not remand the dispute back to arbitration. Instead the bench invoked its powers under Article 142 of the Constitution to do complete justice to the case. Court observed: “A fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party.”
—India Legal Bureau