Plausible contractual interpretation in arbitration: tax exemption benefits had to be passed on, so no patent illegality was found.

The HC held that the arbitral tribunal's reading of the contract was a plausible construction and did not suffer from patent illegality under Section 34. The fixed lump sum price was expressly subject to adjustment under the GCC, and clauses dealing with tax increases, duty exemptions, and tax waivers required the related benefit or refund to be passed on to the employer. Those special provisions could not be ignored or treated as redundant, and the tribunal was entitled to read the contract documents harmoniously. As the tribunal's view did not contradict the express terms, the court declined to interfere merely because another interpretation was possible, and the challenge to the award failed.

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Issues: Whether the arbitral tribunal's interpretation of the contract, holding that the benefit of tax exemptions and duty savings had to be passed on to the employer and that clause 4 of the contract agreement did not limit the employer's entitlement to the declared amount of Rs. 2064 million, suffered from patent illegality warranting interference under Section 34 of the Arbitration and Conciliation Act, 1996.

Analysis: The contract agreement expressly made the fixed lump sum price subject to adjustment in accordance with the GCC. Clause 13.1 of the GCC specifically dealt with increases or decreases in taxes and with exemption or reduction of customs duty, excise duty, sales tax and other levies, requiring the benefit to be passed on to the employer. Clause 26 of the SCC also contemplated waiver of taxes and required remission of the refund to the employer. The Court held that these provisions could not be ignored or treated as redundant, and that the arbitral tribunal had adopted a plausible interpretation by reading the contract documents harmoniously and giving effect to the special provisions governing tax exemptions. The Court further held that the tribunal's view did not contravene the express terms of the contract and therefore did not disclose patent illegality. The scope of interference under Section 34 was held to be confined, and the Court would not substitute its own interpretation merely because another view was possible.

Conclusion: The tribunal's interpretation was upheld as a plausible view, and the objection to the award failed.

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