Arbitral award set aside for perverse contract interpretation where fuel price escalation was not covered by the reimbursement clause.

An arbitral award may be set aside under Sections 34 and 37 where the tribunal's interpretation is not a possible reading of the contract read as a whole and is therefore perverse. Here, Clause 23 covered subsequent laws or changes in law, while the contract separately allocated force majeure and fixed-rate obligations; an increase in HSD price did not fall within that reimbursement clause. The tribunal's broad construction effectively rewrote the bargain and ignored the contractual risk allocation, so the award could not be sustained. The challenge to the High Court's interference therefore failed.

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Issues: Whether the arbitral award could be sustained where the tribunal construed the contract to treat an increase in HSD price as a reimbursable change in law under Clause 23, and whether the High Court was justified in setting aside the award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.

Analysis: Interference with an arbitral award is limited to the statutory grounds under Section 34, and courts do not sit in appeal over a plausible interpretation adopted by the tribunal. However, the tribunal's view must still be a possible construction of the contract read as a whole. Clause 23 dealt with subsequent laws or changes in law, while the contract separately provided for force majeure and fixed-rate obligations. The escalation in diesel price was not shown to fall within Clause 23, and the tribunal's broad reading effectively rewrote the bargain. The award was therefore found to suffer from perversity and from an impermissible construction inconsistent with the contractual scheme.

Conclusion: The High Court was justified in setting aside the award, and the challenge to that decision failed.

Final Conclusion: The award could not be sustained because the tribunal's interpretation of the reimbursement clause was not a possible construction of the contract and was inconsistent with the agreed allocation of contractual risk.

Ratio Decidendi: An arbitral award may be interfered with under Section 34 where the interpretation adopted is not a possible reading of the contract and is perverse in the sense that it ignores the contract read as a whole.

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