Arbitral Tribunal Cannot Rewrite Contract Or Grant Relief Against Its Terms: Supreme Court

The Legal Issue

The Supreme Court was seized of a matter concerning the scope of an arbitral tribunal's power to interpret and apply contractual terms. The core question was whether an arbitral tribunal could rewrite the terms of a contract or grant relief that was contrary to its express provisions, particularly when the contract's language was plain and unambiguous.

Court's Reasoning

The Supreme Court, in M.D. Frozen Foods Exports Pvt. Ltd. v. Hero Fincorp Ltd., reiterated the well-established principle that an arbitral tribunal derives its authority from the contract itself. Consequently, the tribunal is bound by the terms of the contract and cannot venture beyond them. The Court emphasized that the tribunal's role is to interpret the contract as it stands, giving effect to its plain and unambiguous language. It held that an arbitral tribunal cannot rewrite or modify the contract, nor can it grant relief that is inconsistent with or contrary to the express provisions of the agreement between the parties. To do so would amount to exceeding its jurisdiction and acting contrary to the fundamental principles of contract law and arbitration.

What Follows

The Supreme Court set aside the arbitral award, finding that the tribunal had exceeded its jurisdiction by rewriting the contract and granting relief contrary to its terms. The matter was remanded for fresh consideration in accordance with the principles laid down by the Court, ensuring that any future award would strictly adhere to the contractual provisions.