Alopi Parshad & Sons Ltd. v. Union of India

A firm of army ghee-buying agents asked for higher rates after wartime prices rose, although the rates were fixed in writing. The Supreme Court held that fixed rates cannot be ignored. The award of extra money was set aside as wrong on its face.

Quick Revision

Parties

M/s. Alopi Parshad & Sons, Ltd. — appellants; the agents appointed to purchase and supply ghee for Army personnel. The judgment calls them the Agents.

The Union of India — respondent; the Government of India, which appointed the Agents (originally the Governor-General for India in Council).

Nigam — not a party; the arbitrator named by the Agents.

Rangi Lal — not a party; the arbitrator named by the Government of India.

Lala Achru Ram — not a party; the umpire in the first arbitration.

Procedural History

1. By letter dated July 1, 1946, the Agents named Nigam as arbitrator (a private decision-maker for a dispute) under cl. 20 of the 1937 agreement. By letter dated July 10, 1946, the Government named Rangi Lal.
2. The arbitrators did not agree, and the dispute went to Lala Achru Ram as umpire (the person who decides when arbitrators differ). He upheld the agreement of June 20, 1942 and rejected the claim in Schedule A. He held that Schedules B and C did not arise out of the agreement and that Schedule D was outside the reference.
3. The award was filed in the court of the Subordinate Judge, First Class, Delhi. The Agents applied to set it aside for misconduct by the umpire and for his errors on Schedules B, C and D.
4. The Subordinate Judge held that the umpire erred in leaving Schedules B and D undetermined. He held that Schedule C was rightly left undecided as outside the reference. He also found judicial misconduct, because the Agents lacked sufficient opportunity to present their case. He set the award aside but did not supersede the reference.
5. The Union of India appealed to the High Court of East Punjab. Khosla J. confirmed the order and agreed on judicial misconduct. He observed that Schedules B and C were not beyond the arbitration agreement. This Court said he presumably committed some error on Schedule C, because he gave no reasons for disagreeing with the Subordinate Judge.
6. By letter dated August 9, 1952, the Agents called on the Government to appoint an arbitrator again, and again named Nigam. On August 14, 1952, the Government replied that the appeal was pending. Without prejudice to its rights, it again appointed Rangi Lal.
7. Appeal 31 of 1953 under the Letters Patent was dismissed by a Division Bench. It observed that Schedule B arose out of the contract. It said it was unnecessary to decide whether the umpire rightly ruled out Schedule C. It was decided on December 16, 1953.
8. After December 16, 1953, the arbitrators entered on the reference. They made an award on May 2, 1954.
9. The award was filed in the court of the Commercial Subordinate Judge, Delhi, on June 2, 1954. The Government applied under ss. 30 and 33 of the Indian Arbitration Act to set it aside as invalid, improperly procured and vitiated by judicial misconduct.
10. The Commercial Subordinate Judge held that the arbitrators had committed an error apparent on the face of the award in ordering additional remuneration and financing and overhead charges. He held, however, that specific questions had been expressly referred, so the award bound the parties. He rejected the application.
11. The Union of India appealed to the High Court of East Punjab at Chandigarh. Counsel for the Agents argued that specific questions were referred and that the award could stand on quantum meruit. The High Court held that no specific question of law was referred. It held that the award was vitiated by errors apparent on its face and that there was no "legal basis for awarding any compensation". It reversed the order and set aside the award (order dated May 25, 1956, F.A.C. No. 89/D of 55).
12. The Agents appealed to this Court with leave of the High Court under Art. 133(1)(a) of the Constitution (Civil Appeal No. 693 of 1957). Judgment was delivered on January 20, 1960.

Facts

1. On May 3, 1937, the Agents were appointed under a written agreement, from October 1, 1937, as agents for purchasing ghee for Army personnel.
2. By cl. 12, the Government undertook to pay the actual expenses of purchasing ghee. These included the cost of empty tins, clearance of Government tins from the railway, export land-customs duty on ghee from Indian States, octroi, terminal tax and certain other charges.
3. The Government also agreed to pay, at rates specified in the agreement, three items. These were the financing and overhead (mandi) charges in the buying markets, the cost of establishments and contingencies, and the buying remuneration.
4. By cl. 13, the Agents undertook to provide working capital and bear the costs and charges of buying ghee in the market, including financing and overhead charges. In return, the Government would pay Re. 1 and anna 1 per hundred pounds nett weight of finally accepted ghee as combined mandi charges.
5. By cl. 14, the Agents undertook to bear establishment and contingency charges. The Government agreed to pay annas 14 and pies 6 per hundred pounds of accepted ghee for this.
6. The Government agreed to pay buying remuneration of one rupee per hundred pounds nett weight of accepted ghee.
7. The Agents supplied ghee to the Government from time to time.
8. In September 1939, World War II broke out. The Government's demand for ghee rose enormously.
9. On June 20, 1942, the agreement was revised by mutual consent. For establishment and contingencies, a graded scale replaced the uniform rate. It was Re. 0-14-6 per hundred pounds for the first 5 thousand tons, annas 8 for the next 5 thousand tons, and annas 4 for supplies above 10 thousand tons.
10. Buying remuneration was also put on a graded scale. It was Re. 1 per hundred pounds for the first 5 thousand tons, annas 8 for the next 5 thousand tons, and annas 4 above 10 thousand tons. The change took effect from September 11, 1940.
11. By their communication dated December 6, 1943, the Agents demanded higher rates. They asked for a 25 per cent increase in buying remuneration, 20 per cent in establishment and contingencies, and 112 per cent in mandi and financing charges. They said the peacetime rates were entirely superseded by the totally altered conditions in war time.
12. The Government gave no immediate reply. The Agents continued to supply ghee until May 1945.
13. On May 17, 1945, the Government, using its option under cl. 9, gave notice terminating the agreement.
14. On May 22, 1945, the Chief Director of Purchases replied to the letter of December 6, 1943. He said that normally no claim to revise rates could be entertained during the agreement, especially with retrospective effect. A claim for ex-gratia compensation (a payment made as a favour, not as a right) for actual loss might be entertained if the Agents showed circumstances justifying it. He asked for the auditors' report on the agency accounts and a detailed statement of actual expenditure.
15. The notice of May 17, 1945 was waived by mutual consent. Under an arrangement dated May 16, 1946, the Agents agreed to supply five thousand tons of ghee by October 31, 1946. On that date the agreement of May 3, 1937 was to end.
16. In the first arbitration, the Agents claimed under four heads. Schedule A claimed Rs. 23,08,372-8-0, the difference between the 1937 rates and the amounts received, on the plea that the June 20, 1942 agreement did not bind them.
17. Schedule B claimed a revision of the establishment and contingency rates and an additional Rs. 6,91,600-4-0, if the 1942 agreement was binding. Schedule C claimed revision of the mandi charges and an additional Rs. 14,47,204-6-3. Schedule D claimed Rs. 2,41,235 as damages for wrongful termination of the agreement in October 1946.
18. In the second arbitration, on March 1, 1954, the Agents again said the supplementary agreement of June 20, 1942 was void and not binding.
19. They said that, on their representations from December 6, 1943 and later, the Chief Director of Purchases assured them their claim would be favourably considered. Relying on this, they continued to supply ghee in the quantities demanded and incurred heavy extra expenditure.
20. They said the Chief Director, duly authorized, gave repeated verbal assurances that their demands on mandi and financing charges would be met. He asked them to continue supplies for the successful prosecution of the war.
21. They pleaded that the Government was estopped (barred from going back on its assurances) from repudiating their claim in Schedules B and C. They prayed for a declaration that the 1942 agreement was void. They asked for Rs. 27,48,515 with interest at 6 per cent per annum from March 1, 1954, or alternatively Rs. 25,63,037-7-3 with the same interest.
22. The Government denied that the Director of Purchases gave any assurances or that the Agents relied on them. It said the Agents kept supplying without insisting on any change because they found it profitable under the 1942 terms.
23. The Government denied the claims for additional buying remuneration, mandi charges and establishment and contingency charges. It also said these claims were not covered by cl. 20, so the arbitrators had no jurisdiction over them.
24. The arbitrators framed the points of contest as issues. By the award of May 2, 1954, they rejected the primary claim. They held that the supplementary agreement of June 20, 1942 was for consideration and bound the Agents.
25. On the alternative claim, the arbitrators awarded Rs. 80,994-12-6 under establishment and contingencies, as the actual loss in their view. They awarded Rs. 11,27,965-11-3 more for mandi and financing charges. In all they awarded Rs. 13,03,676-12-6, with future interest from November 15, 1949 until realization, and costs.
26. The arbitrators found that the Government had paid Rs. 6,04,700-9-0 under establishment and contingencies, while the Agents' accounts showed Rs. 6,77,542-0-3 spent.
27. Before the arbitrators, a number of arhatias (commission agents) who supplied ghee to the Agents produced extracts from their books. They also produced charts showing amounts due to each arhatia under each head of expenditure.
28. The arbitrators were satisfied that the statements showed a general rise in prices and cost of labour. Other persons were buying ghee at rates well above the stipulated rates. The arbitrators therefore held that the Agents should be reimbursed Rs. 11,27,965-11-3.

Issues Raised

1. Was the reference to the arbitrators a specific reference on a question of law, or a general reference?
2. If the reference was general, was the award erroneous on its face, so that it could be set aside?
3. Could the arbitrators award establishment and contingency charges above the rates stipulated in the contract?
4. Could the arbitrators award mandi and financing charges above the stipulated rates, because the outbreak of war displaced the circumstances in which the contract was made?
5. Could the arbitrators ignore the express terms and award compensation on the basis of quantum meruit?
6. Did Section 222 of the Indian Contract Act, or the alleged assurances of the Director of Purchases, support the award?
7. Was the Government barred by res judicata (a matter already decided) by the Letters Patent appeal decision of December 16, 1953?

Arguments Contended

For the appellants (the Agents):

• Questions had been specifically referred to the arbitrators, so the award bound the parties even if erroneous.
• The circumstances when the contract terms were settled in May 1937 were entirely displaced by the Second World War. These events were never in the parties' contemplation, so the terms could not bind the Agents (Mr. Chatterjee).
• In England, a rule has evolved in recent years that does not give contracts the same sanctity as before. The Agents relied on the observations of Denning L.J. in British Movietonews Ltd. v. London and District Cinemas Ltd., (1951) 1 K.B.D. 190.
• The arbitrators could proceed on quantum meruit, even if the express terms fixed the rates.
• A claim for quantum meruit arises out of the agreement within the meaning of cl. 20, so the arbitrators could adjudicate it.
• Relying on Section 222 of the Indian Contract Act (the employer's duty to indemnify the agent), the award of compensation was justified.
• The Director of Purchases gave assurances, and the Agents relied on them. The Government was estopped.
• The decision in Letters Patent Appeal No. 31 of 1953 barred the Government by res judicata.

For the respondent (the Union of India):

• The award was invalid, improperly procured and vitiated by judicial misconduct of the arbitrators (the grounds in its application under ss. 30 and 33 of the Indian Arbitration Act).
• The contract and its 1942 modification fixed the rates. The Agents kept supplying ghee because they found it profitable.
• No assurances were given by the Director of Purchases. The Agents did not continue supplying in reliance on any assurance.
• The claims for additional remuneration, mandi charges and establishment and contingencies were not covered by cl. 20, so the arbitrators had no jurisdiction over them.
• The judgment does not record any further arguments or authorities for the respondent.

Court's Reasoning

Opinion of Shah J. (for the Court: J.C. Shah, S.K. Das and K.N. Wanchoo)

Part 1: When an award can be set aside

1. Noted: The court's power to set aside an award for error in making it is well defined.
2. Noted: An award may be set aside for an error on its face only in one case. The award, or a document incorporated with it, must state a legal proposition that is the basis of the award and is erroneous. A note appended by the arbitrators giving reasons is an example. The Court relied on Champsey Bhara and Company v. Jivaraj Balloo Spinning and Weaving Company.
3. Noted: A specific question may be submitted to the arbitrator, and he answers it. An erroneous answer on a point of law then does not make the award bad on its face. The Court relied on King and Duveen and on Government of Kelantan v. Duff Development Company.
4. Held: The first question is whether the reference was specific, inviting the arbitrators to decide certain questions of law. If it was, the award binds the parties even if erroneous.

Part 2: General reference

1. Noted: The reference by the Agents' letter of July 1, 1946 and the Government's reply of July 10, 1946 was a general reference of the dispute under cl. 20.
2. Noted: The Subordinate Judge set that award aside but did not supersede the arbitration. He kept the reference alive and let the parties appoint fresh arbitrators. By the letters of August 2, 1952 and August 14, 1952, a general reference was again made.
3. Noted: Paragraph 14 of the Agents' letter of August 2, 1952 shows an intention to give notice under cl. 20.
4. Noted: The arbitrators framed issues, presumably to focus the parties on the points for decision. The Agents made their claim, and the claim and the arbitrators' jurisdiction were denied. The arbitrators were authorized only to adjudicate the disputes raised.
5. Held: There is no foundation for the view that a specific reference submitting a question of law was made. The Court agreed with the High Court that the reference was general, not specific on any question of law.
6. Held: The award may therefore be set aside if it is shown to be erroneous on its face.

Part 3: Establishment and contingency charges

1. Noted: The 1937 agreement was modified by the supplementary agreement of June 20, 1942. The arbitrators held the modified agreement binding. It fixed graded scales for establishment and contingencies and for mandi charges and overhead expenses.
2. Noted: The arbitrators still awarded an additional amount for establishment and contingencies and another for mandi charges.
3. Noted: By cl. 14(a) read with cl. 12(b)(2), the rate for establishment and contingency charges was expressly stipulated. There was no dispute that the Government paid at that rate for the ghee actually purchased.
4. Noted: The Government had paid Rs. 6,04,700-9-0, while the Agents said they spent Rs. 6,77,542-0-3.
5. Held: Granting that the Agents spent more, the contract expressly fixed the rates. The Court could not see on what ground the arbitrators could ignore the express covenants and award amounts the Government had not agreed to pay.
6. Held: The award of additional establishment and contingency expenses, with interest, is erroneous on its face.

Part 4: Mandi and financing charges

1. Noted: The arbitrators accepted the arhatias' statements as showing a general rise in prices and labour cost. They held the Agents entitled to reimbursement of Rs. 11,27,965-11-3 because others bought ghee well above the stipulated rates.
2. Held: The contract terms fixing the rate for financing and overhead charges under cl. 13(a) read with cl. 12(b) stayed binding until the contract was abandoned or altered by mutual agreement. The arbitrators had no authority to award more than the stipulated amount.
3. Noted: Mr. Chatterjee argued that the 1937 circumstances were entirely displaced by the outbreak of war. He said the contract terms could not bind the Agents after events never contemplated by the parties.
4. Held: This argument is "untrue in fact and unsupportable in law".
5. Why (in fact): The contract was modified by mutual consent on June 20, 1942, nearly three years after hostilities began. The Agents knew of the altered circumstances when they agreed the modified schedule for overhead charges, contingencies and buying remuneration.
6. Why (in law): a contract is not frustrated merely because the circumstances in which it was made have changed.

Part 5: Section 56 and the limits of equity

1. Noted: The Court set out Section 56 of the Indian Contract Act. A contract to do an act that becomes impossible after the contract is made becomes void when the act becomes impossible or unlawful. It is also void if the act becomes unlawful by an event the promisor could not prevent.
2. Held: Performance had not become impossible or unlawful. The Agents in fact performed the contract and received the remuneration expressly stipulated.
3. Held: The Indian Contract Act does not let a party ignore the express covenants and claim consideration at rates different from the stipulated rates on some vague plea of equity.
4. Noted: The Court quoted a passage on contracts not yet fully performed. Parties may meet an unexpected turn of events, such as a wholly abnormal rise or fall in prices, a sudden fall in currency value, or an unexpected obstacle. This does not in itself affect the bargain.
5. Noted: Read with the circumstances when it was made, the terms may show that the parties never agreed to be bound in a fundamentally different situation. The contract then ceases to bind. The reason is that, on its true construction, it does not apply. The court's own view of what is just does not decide the matter.
6. Noted: Lord Wright in Constantine's case spoke of a result that is just and reasonable. Lord Sumner in Hirji Mulji spoke of one which justice demands. They meant a just construction of the contract. That construction rests on an implication from the presumed common intention of the parties, as Lord Simon said in British Movietonews.
7. Held: "There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract", merely because performance became onerous through an uncontemplated turn of events. This is the law in India and England.
8. Held: No general rule lets a party ignore the express covenants because of an uncontemplated turn of events after the contract date.

Part 6: The English cases

1. Noted: Mr. Chatterjee argued that English law has recently evolved a rule that does not attach the same sanctity to contracts. He relied on Denning L.J. in British Movietonews (1951) 1 K.B.D. 190, 201.
2. Noted: Denning L.J. said that, even if the words of a contract literally cover what has happened, the court will read them in a qualified sense. This applies if the turn of events was so completely outside the parties' contemplation that reasonable people cannot have intended the contract to apply. The court will then restrict the words to the circumstances contemplated and do what is just and reasonable.
3. Held: Denning L.J.'s observations proceeded substantially on a misapprehension of Parkinson and Co. Ld. v. Commissioners of Works (1949) 2 K.B.D. 632. His view was negatived on appeal in the House of Lords in British Movietonews, (1952) A.C. 166.
4. Held: Indian codified contract law gives no support to one view. That view is that a change of circumstances completely outside the parties' contemplation lets a court depart from the express terms while holding the parties bound.
5. Noted: In Parkinson, the contract was interpreted on its true meaning. The contractor's profits were restricted to a fixed amount only if the extra work did not substantially exceed a specified sum. The Court implied a term that the Commissioners could not require work materially above that sum. It did not proceed on the general principle Denning L.J. assumed.
6. Held: The Court could not agree that the arbitrators were justified in ignoring the express terms fixing the Agents' remuneration and proceeding on quantum meruit.

Part 7: Section 222, assurances and quantum meruit

1. Noted: Section 222 of the Indian Contract Act places a duty on the employer. The employer must indemnify the agent against the consequences of all lawful acts done under the authority given.
2. Held: On Section 222, the arbitrators could not award compensation above the expressly stipulated consideration. The Agents' claim was not for indemnity (compensation for loss) for the consequences of lawful acts on the Government's behalf. It was a claim for charges above those stipulated, which is a claim to raise the rate of the agreed consideration.
3. Held: Even assuming the Agents relied on assurances from the Director in charge of Purchases, vague assurances could not modify the contract without an express covenant modifying it.
4. Held: Ghee was supplied under the contract, so the Agents' right was to remuneration under that contract.
5. Held: Compensation by way of quantum meruit is awarded for work done or services rendered when a contract does not fix the price.
6. Held: For work done under a contract, quantum meruit compensation cannot be awarded where the contract provides the consideration payable.
7. Why: Quantum meruit is only reasonable compensation awarded on an implied contract to remunerate. An express stipulation governing the parties' relations cannot be displaced by assuming the stipulation is unreasonable.
8. Noted: It was unnecessary to consider whether a quantum meruit claim arises out of the agreement within cl. 20. Granting that arbitrators could adjudicate it under cl. 20, compensation on that basis could not be claimed here.

Part 8: Res judicata and outcome

1. Held: The plea of res judicata from Letters Patent Appeal No. 31 of 1953 has no force.
2. Noted: The Subordinate Judge set the earlier award aside for the umpire's judicial misconduct. He also held that Schedules B and D were not outside the arbitrators' competence. The High Court in the Letters Patent appeal confirmed the setting aside. But there was no binding decision between the parties that Schedule B, the establishment and contingency claim, was within the arbitrators' competence under cl. 20.
3. Noted: In that appeal, the High Court said it was unnecessary to decide whether Schedule C was within the arbitrators' competence. Schedule D does not appear to have been pressed in the second arbitration.
4. Held: The Court agreed with the High Court that the award was liable to be set aside for an error apparent on its face.

Authorities

• Champsey Bhara and Company v. Jivaraj Balloo Spinning and Weaving Company Ltd., L.R. 50 I.A. 324. Relied on for the rule that an award is bad on its face only if a legal proposition forming its basis is stated and erroneous.
• In the matter of an arbitration between King and Duveen, L.R. (1913) 2 K.B.D. 32. Relied on for the rule that an erroneous answer to a specific question referred does not make the award bad on its face.
• Government of Kelantan v. Duff Development Company Ltd., L.R. 1923 A.C. 395. Relied on for the same rule on specific questions.
• Constantine's case, (1942) A.C. 154, 186 (Lord Wright). Referred to for a result just and reasonable, which the Court read as a just construction of the contract.
• Hirji Mulji v. Cheong Yue Steamship Co. Ltd. (the headnote prints it as Hirji Mulji v. Cinemas Ltd. Steamship Co.), (1926) A.C. 497, 510 (Lord Sumner). Referred to for a result which justice demands, read the same way.
• British Movietonews Ltd. v. London and District Cinemas Ltd., L.R. 1952 A.C. 166, 185-186 (House of Lords, Lord Simon). Followed for the presumed common intention of the parties, and because it negatived the Court of Appeal's view.
• British Movietonews Ltd. v. London and District Cinemas Ltd., (1951) 1 K.B.D. 190, 201 (Denning L.J.). Not accepted. The Court held it rested on a misapprehension of Parkinson.
• Parkinson and Co. Ltd. v. Commissioners of Works, (1949) 2 K.B.D. 632. Distinguished. The Court explained it as a case of a term read into the contract on its true interpretation.

Provisions mentioned

• Section 56, Indian Contract Act: an act that becomes impossible, or unlawful by an event the promisor could not prevent, makes the contract void when it happens.
• Section 222, Indian Contract Act: the employer must indemnify the agent against the consequences of lawful acts done under the authority given.
• Sections 30 and 33, Indian Arbitration Act: the Government used these to apply to set the award aside.
• Article 133(1)(a), Constitution: the High Court granted leave to appeal to this Court under it.
• Clauses 9, 12, 13, 14 and 20 of the 1937 agreement: termination option; payment of actual expenses and specified charges; mandi charges; establishment and contingencies; reference of disputes to arbitration.

Judgement

1. The Court agreed with the High Court that the award of the arbitrators was liable to be set aside because of an error apparent on the face of the award.
2. The appeal fails and is dismissed.
3. The Agents must pay the costs of the appeal (the appeal is dismissed with costs).

Legal Principle / Ratio

Where a contract fixes the rates, a court or arbitrator cannot ignore them because prices rose or the contract became onerous. A contract is not frustrated merely because the circumstances in which it was made have changed. Quantum meruit is not available where the contract provides the consideration.

Key holding: "Compensation quantum meruit is awarded for work done or services rendered, when the price thereof is not fixed by a contract."

Obiter: The Court did not decide whether a quantum meruit claim arises out of the agreement within cl. 20. It said that, even if it did, compensation could not be claimed on these facts.

Subsequent Treatment

Energy Watchdog v. CERC

Energy Watchdog v. Central Electricity Regulatory Commission, Supreme Court of India, Civil Appeal Nos. 5399-5400 of 2016 and others; Pinaki Chandra Ghose and R.F. Nariman JJ.; decided April 11, 2017.

• The Court summarized Alopi Parshad. A party cannot ignore express covenants and claim other rates on a vague plea of equity (para 35).
• It noted that an abnormal price rise does not by itself end the bargain (para 35).
• It applied the same approach to coal prices. An unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract (para 40).

ONGC v. Saw Pipes

Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., Supreme Court of India; M.B. Shah and Arun Kumar JJ.; decided April 17, 2003; AIR 2003 SC 2629, 2003 (5) SCC 705. The judgment has no numbered paragraphs.

• The Court quoted Alopi Parshad on the limits of the power to set aside an award for an error on its face.
• It stated that Alopi Parshad held an award could be set aside where there was a general reference and the award was erroneous on its face.
• It stated that Alopi Parshad, applying Section 56, held the arbitrators could not ignore the stipulated remuneration. It added that this law has been followed continuously.

Mahanagar Telephone Nigam v. Tata Communications

Mahanagar Telephone Nigam Ltd. v. Tata Communications Ltd., Supreme Court of India, Civil Appeal No. 1766 of 2019; R.F. Nariman and Vineet Saran JJ.; decided February 27, 2019.

• The Court described Alopi Parshad as setting aside, for an error on the face of the record, an award that gave money on quantum meruit (para 5).
• It quoted the holding that quantum meruit cannot be awarded where the contract provides the consideration (para 5).
• The appeal was dismissed and the TDSAT judgment upheld (para 14).

Present position:

• None of the supplementary judgments overrules Alopi Parshad. Each relies on it.

Comparative Analysis

• Same rule, different context. Energy Watchdog applied the Alopi Parshad rule to rising coal prices under power purchase agreements. Both refused relief for a cost rise.
• Arbitration side. ONGC v. Saw Pipes drew on Alopi Parshad's rules about general and specific references when a court may interfere with an award.
• Quantum meruit side. MTNL v. Tata Communications drew on Alopi Parshad's rule that a claim in quantum meruit fails where the contract governs the relations between the parties.

Critical Analysis

Analysis based on the judgment text.

• The Court kept two questions apart. One was the limited power to review an award. The other was the substantive rule that express rates bind.
• The Court left open whether a quantum meruit claim could go to arbitration under cl. 20. This question is undecided in the judgment.
• The arbitrators found a general price rise and that others paid above the stipulated rates. The Court did not treat that finding as relevant. It rested on the fixed rates and on the 1942 modification.

Significance

• The Court held that increased cost or hardship does not discharge a contract under Section 56.
• It rejected the English just and reasonable approach of Denning L.J. as no part of Indian codified contract law.
• It confirmed that quantum meruit cannot override a fixed contract price.
• It set the test for when an award is bad on its face, with a general reference versus a specific reference.

Exam-Important Points

• Rule: a contract is not frustrated merely because circumstances changed. Trap: hardship, a rise in prices or a bad bargain is not "impossible" under Section 56.
• Rule: no quantum meruit where the contract fixes the price. Trap: quantum meruit fills a gap. It does not rewrite an express rate.
• Rule: an award is bad on its face only if a legal proposition forming its basis is erroneous. Trap: a specific reference of a legal question protects even a wrong answer.
• Rule: English just and reasonable qualification (Denning L.J.) was not accepted. Trap: do not state it as Indian law.
• Rule: vague assurances of an officer cannot modify a written contract. Trap: the plea that the Government was barred by its assurances did not help the Agents here.
• Rule: the plea of res judicata failed because the earlier appeal did not decide that Schedule B was within the arbitrators' competence.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so no paragraph numbers are cited for it; the report is (1960) 2 SCR 793, AIR 1960 SC 588. Later cases are cited by paragraph where their texts are numbered.