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Issues: (i) whether the arbitral finding that there was a change in law justifying recourse to the contractual change-in-law clause was sustainable; (ii) whether the arbitral tribunal could convert the contract from a royalty model to a revenue-sharing model.
Issue (i): whether the arbitral finding that there was a change in law justifying recourse to the contractual change-in-law clause was sustainable.
Analysis: The contractual and contemporaneous materials showed that when the bid was invited and the contract was concluded, there was no policy recognising royalty as a pass-through cost for tariff fixation. The later tariff and policy materials did not establish an existing legal position in favour of such pass-through. The finding that royalty had earlier been treated as admissible cost, and that a change in law occurred in 2003 and 2005, ignored vital evidence and was based on no evidence, making it perverse and vulnerable under the limited grounds of interference applicable to arbitral awards.
Conclusion: The finding of change in law was not sustainable and was rightly interfered with.
Issue (ii): whether the arbitral tribunal could convert the contract from a royalty model to a revenue-sharing model.
Analysis: The agreement was entered into on a royalty basis, and the record showed that one party never consented to substitution of that bargain. An arbitral tribunal is confined to the contract and cannot foist a new contractual arrangement on an unwilling party. By substituting revenue sharing for royalty, the award rewrote the contract and travelled beyond the tribunal's jurisdiction, offending basic principles of contractual autonomy and justice.
Conclusion: The tribunal could not lawfully substitute a revenue-sharing model for the agreed royalty model.
Final Conclusion: The award suffered from patent illegality and the High Court's interference was upheld, resulting in dismissal of the appeals.
Ratio Decidendi: Under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, an arbitral award may be set aside where it is perverse or patently illegal, including when it is based on no evidence, ignores vital evidence, or rewrites the contract by imposing a term not agreed between the parties.
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