Can Arbitral Tribunal Rewrite Contract Between Parties? High Court Says No

Delhi High Court said the arbitral tribunal cannot examine the commercial wisdom and rewrite the agreement on the basis of the commercial difficulties faced by a party in performing its obligations.

The Delhi High Court has said that it is impermissible for an arbitral tribunal to re-work the bargain between the parties and rewrite the contract for being commercially difficult for one party to perform.

Justice Vibhu Bakhru, while dealing with a challenge to an arbitral award passed against the Ministry of Railways in relation to its disputes with Jindal Rail Infrastructure Ltd (JRIL), stated that the arbitral tribunal cannot examine the commercial wisdom and rewrite the agreement on the basis of the commercial difficulties faced by a party in performing its obligations.

A commercial contract cannot be avoided if one of the parties subsequently finds it commercially unviable, the court stated.

“A commercial contract between the parties cannot be avoided on the ground that one of the parties subsequently finds it commercially unviable to perform the same. The arbitral tribunal has, essentially, re-worked the bargain between the parties and rewritten the contract. This is, clearly, impermissible,” the court said in its order dated May 23 while setting aside the award passed in the matter.