The interpretation of contracts by arbitral tribunals cannot violate their explicit terms; arbitrators cannot alter agreements based on changes in market conditions.

JUDGMENT

Vibhu Bakhru, J. The petitioners have filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the `A&C Act') impugning the arbitral award dated 01.03.2019 (hereafter the `impugned award') rendered by the Arbitral Tribunal comprising of a Sole Arbitrator (hereafter the `Arbitral Tribunal').

2. The impugned award was rendered in the context of disputes that had arisen between the parties in connection with an agreement dated 12.06.2015 entered into between petitioner no.1 (hereafter `the Railways') and the respondent (hereafter `JRIL').

Factual Background

3. JRIL is, inter alia, engaged in the manufacture of Railway Rolling Stock for the Indian Railways.

4. On 13.01.2015, the Railways issued a `Bid Invitation and Schedule of Requirement' [E-Tender bearing no 2014/RS(I)/954/36 (TC)] followed by the Corrigendum dated 25.03.2015, inviting electronic bids, for the manufacture and supply of the following wagons:

5. Clause 2 of the Bid Invitation and Schedule of Requirement stipulated that the aforementioned quantity was tentative, and the Railways reserved its right, without assigning any reason, to either decrease the tender quantity or discharge the tender entirely or not order some of the wagon types indicated in the tender quantity.

6. Pursuant to the said invitation for tenders, JRIL submitted its bid and the same was opened on 20.04.2015. JRIL was accepted as the lowest bidder (L-1 bidder). On 02.06.2015, the Railways issued the Letter of Acceptance (hereafter `the LoA') communicating its decision to place an order on JRIL for supply of the following wagons at the price as quoted by JRIL:

In terms of the LoA, the orders for supply of wagons would be released in two tranches.

7. Thereafter, on 12.06.2015, the parties entered into the Contract bearing no. 2015/RS(I)/954/44/1777 (hereinafter the `Agreement'). In terms of the Agreement, the Railways issued an order for manufacture and supply of 1403 numbers of wagons for a total contract price of Rs.151,52,40,000/- without excise duty and VAT, as the first tranche. The order for the balance 468 numbers of wagons was withheld and required to be released in the second tranche.

8. In terms of the Optional Clause under the Agreement (Clause 2.4 renumbered as Clause 2.8 of the Agreement), the Railways reserved the right to increase/decrease the ordered quantity up to 30% of the ordered quantity during the currency of the Agreement, on the same price and terms and conditions, with a suitable extension in the delivery period for the optional quantity. Further, in terms of Clause 6 of the Agreement (the Delivery Schedule), the supplies had to be completed within a period of twelve months from the date of placement of the Agreement. The said Agreement was accepted by JRIL on 18.06.2015.

9. The Agreement was amended several times. On 31.07.2015, Amendment no. I to the Agreement was issued by the Railways. In terms of Amendment no. I, certain clauses were incorporated in the Agreement. Clause