IMPORTANT POINTS
Interpretation of contract is primarily for an Arbitrator or Arbitral Tribunal to do.
If interpretation of arbitral tribunal is a possible one, court will not interfere.

JUDGMENT :

Uday U. Lalit, J.

1. These appeals by special leave arise out of common judgment and order dated 20.12.2013 passed by the High Court of Delhi at New Delhi in FAO (OS) 588 of 2013 and in FAO (OS) 590 of 2013. The questions raised in these appeals being identical, the appeals are dealt with by this common judgment and for the sake of convenience, the facts leading to the filing of FAO (OS) 588 of 2013 are dealt with in detail.

2. Contract No.TNHP/2, Construction Package II-C for a contract price of Rs.295.53 crores for executing the work of 4-laning and strengthening of the existing 2 lanes sections between km 38 to km 115 on National Highway-2 in Uttar Pradesh was awarded to the Respondent on 12.03.2001.

3. Clause 14.3 of “Instruction to Bidder” was as under:-

“All duties, taxes and other levies payable by the Contractor under the contract, or for any other cause, as of the date 28 days prior to the deadline for submission of bids, shall be included in the rates and prices and the total Bid Price submitted by the bidder.”

The parties adopted FIDIC form of conditions of contract with some changes which are called Conditions of Particular Application (“COPA”, for short). Clauses in COPA in the present case are identical to those dealt with by this Court in National Highways Authority of India Versus ITD Cementation India Ltd., 2015(6) SCR 107. Clause 70.8 dealing with effect of “Subsequent Legislation” was as under:-

“Clause 70.8: Subsequent Legislation

If, after the date 28 days prior to the closing date for submission of bids for the Contract there are changes to any National or State Statute, Ordinance, Decree or other Law or any regulation or by-law of any local or other duly constituted authority or the introduction of any such State Statute, Ordinance, Decree, Law, regulation or by-law in India or States of India which causes additional or reduced cost to the Contractor, other than under the preceding Sub-Clauses of this clauses in the execution of the contract, such additional or reduced cost shall, after due consultation with the Employer and the Contractor, be determined by the Engineer and shall be added to or deducted from the Contract Price and the Engineer shall notify the Contractor accordingly with a copy to the Employer. Notwithstanding the foregoing, such additional or reduced cost shall not be separately paid or credited if the same shall already have been taken into account in the indexing of any inputs to the Price Adjustment Formulae in accordance with the provisions of Sub-Clauses 70.1 to 70.7 of this Clause.”

4. Disputes having arisen between the parties, the matter was referred to the Arbitral Tribunal. Two claims were raised by the respondent namely:

“(i) Dispute No. 1 Compensation for additional cost on account of increase in Service Tax on the Insurance Premium under the Insurance Policy for the Project.

(ii) Dispute No. 2 Compensation for additional cost on account of Service Tax on the Bank Guarantee charges.”

5. It was submitted by the respondent-claimant that in terms of Clause 21.1 of General Conditions of contract, for the works awarded under the contract, an insurance policy was required to be taken w.e.f. 1.4.2001 initially for a period to 13.09.2006 which was later extended to 30.09.2009. It was submitted that General Insurance Policies including insurance for works were subject to levy of service tax which would be collected by the Insurance Company along with premium chargeable. There being revisions in the rate of service tax from 5% to 10.30%, over a period of time, according to the claimant service tax paid in excess of 5% was reimbursible by the appellant under Clause 70.8 of COPA. Similarly, in terms of the Clause 10.1 of COPA, the respondent-claimant was required to furnish Bank Guarantee for due execution of the contract by way of performance security. Service tax in relation to the Bank Guarantee as collected by the Bank had risen from 5% to 10.30% during the course of the contract and