M-S. BUILD INDIA CONSTRUCTION SYSTEM v. UNION OF INDIA

Citation: [2002] 3 S.C.R. 866

Court: Supreme Court of India

Bench: R.C. LAHOTI, B.N. AGRAWAL

Judgment text

M/S. BUILD INDIA CONSTRUCTION SYSTEM v. -- after that date and in any case the respondents could not have amended the general conditions of contract all by themselves and without the consent of the appellant and, therefore, the arbitration clause governing the parties was the one as contained in the general conditions of contract which existed and were applicable on 29. 5. 1985, the date on which the contract was entered into between the parties. Shri Prateek Jalan, learned counsel for the respondents, has, however, submitted that the acceptance letter signed by the appellant on 22. 2. 1985 should be read and interpreted as the appellant having authorized the respondents to amend the general conditions of contract and also as the appellant having agreed to bind itself by the general conditions of contract as modified from time to time and, therefore, the parties and the arbitrator should all be held bound by the amendment dated 4. 9.

1986 and any award given in breach of the arbitration clause as amended should be held as void. A plain reading of the acceptance letter dated 22. 2. 1985 signed by the appellant clearly suggests a copy of general conditions of contract with (i) errata numbers I to 27, and (ii) amendment numbers 1 to 27 having been supplied by the respondents to the appellants and having been read and ) understood by the appellant followed by appellant's agreement to abide by the terms and conditions thereof. The expression 'as modfied', qualifies the terms and conditions contained in the general conditions of contract as on and till that day.

There is nothing contained in the acceptance letter, either expressly or by necessary implication, to spell out the appellant having authorized the respondents to carry out modifications in the ter~S and conditions of the contract otherwise than by mutual agreement and to hold the appellant bound by such modifications though not consented to by him and though not even brought to his knowledge. The learned counsel for the respondents has placed forceful reliance on a single bench decision of Calcutta High Court in Benode Behary Ray v. The General Assurance Society ltd. , AIR (1950) Calcutta 232, as also on a few other authorities. Benode Behary Roy's case (supra) related to a service dispute. The plaintiff took up an employment with the respondent company the bye"iaws whereof provided for the release of gratuity on retirement. Subsequently the company amended the bye-laws and provision for gratuity was deleted.

The plaintiff laid a claim for gratuity submitting that on the date of plaintiffs entering into contract of employment with the company there was a provision for gratuity and the bye-laws could not have been amended without the consent of the plaintiff so as to take away his right to gratuity. The learned single Judge held that the letter of appointment did not make gratuity an express term in the contract of service and the claim for gratuity could only be based on the bye-laws. The bye-laws contained an express provision that they could be altered or added to at any time by the Board of Directors. The contract did not give the plaintiff any vested right, in fact or . in law, to the gratuity. Right to claiin gratuity depended not on the contract but on the bye-laws and such right could arise only "on retirement".

In this background the learned single Judge of Calcutta High Court laid down the principle that there is nothing repugnant to the law of contract to have as one of the express terms of the contract itself that it will be alterable at the instance of one party alone. If one contracting party gives to the other contracting party the right to alter the terms of the contract between them the Court ought to uphold the sancity of a contract. But then it is necessary for the Courts to examine with care the terms and true construction of such contract; else there is the risk or danger of misdirected righteousness in the name of sanctity of contract. The abovesaid analysis of Benode Behary Roy's case (supra) clearly points out that reliance thereon by learned counsel for the respondents is " entirely misconceived so far as the facts of the present case are concerned. Shri Jalan also invited our attention to a few passages from Anson's Law of ·' Contract (27th Edition, 1998, at p.

494), Treital Law ofContract ( l0th Edition, 1999, at p. 55) and speech of Staughton LJ in Court of Appeal in Lombard Tricity Finance Ltd. v. Paton, (1989) l All ER 919, taking the view that a contra2t may also give one of the parties the power unilaterally to vary the obligations and if such power can be spelled out from the terms of the contract and is held to be lawful then a unilateral variation of obligation by one party shall be binding on the other party to the contract. On principle, there may not be a dispute with the legal proposition so forcefully advanced by the learned counsel. However, the question is of its applicability to the case at hand. As we have already pointed out, the letter of acceptance dated 22. 2. 1985 cannot be so read as to spell out the appellant having conferred any authority on the respondents to modify or alter the terms of the contract except by mutual agreement and to bind itself by such variations.

The arbitration clause is contained in the contract entered into between the parties. Its terms could not have been varied except by mutual agreement. Moreover the amendment dated 4. 9. 1986 itself provides for its coming into effect from 3. 10. 1986, i. e. on 30th day after the date ofthe amendment. That amendment clearly cannot have any relevance for interpreting the arbitration clause contained in the contract entered into between the parties much before the ..... BUILD INDIA CONSTRUCTION SYSTEM v. U. 0. 1. [R. C. LAHOTI, J. ] 873 -> date of amendment coming into effect. There are several other factors which preclude the respondents from urging such a plea. The reference to arbitrator does not suggest an obligation having been cast on the arbitrator to give reasons for the award. Such a plea, --r as has been urged in this Court, was not taken by the respondents before the arbitrator.

Even in the objections filed in the court, the validity of the award has not been specifically questioned on the ground of its having been ' given in breach of any obligation of arbitrator to give reasons as spelled out ~ by the arbitration clause. The judgment of the learned single Judge does not show such a plea having been urged before him. In the objection petition there is a vague and general plea raised that rejecting the claims forming subject matter of cross objection and allowing the claim of the appellant without assigning any reason was bad. Such an omnibus and general plea cannot be read as submitting that the amendment dated 4. 9. 1986 applied to the contract between the parties and that in view of the amended arbitration clause the unreasoned award was bad. It appears that the plea was for the first time raised at the appellate stage before the Division Bench of the High Court.

Unwittingly the Division Bench fell into the error of entertaining such ) a plea and disposing of the appeal by upholding the same though the plea was not even available to the respondents to be raised at that stage. At the end, the learned counsel for the respondents made an alternative submission that assuming the ground which prevailed with the Division Bench for setting aside the award does not ttppeal to this court, then the matter should be sent back to the Division Bench for dealing with such other • obj. ections to the validity of the award as may be available to the respondents. Reliance was placed on Food Corporation of India v. Jagdish Chandra Saha, [1995) Suppl. 4 SCC 521. In the facts and circumstances of this case, .... <:- For the foregoing reasons, the appeal is a11owed. The judgment of the Division Be~ch is set aside and the decision dated 20th October, 1999 by the learned single Judge is restored. F B N. J. Appeal allowed. ! r