In the era of Artificial Intelligence, can AI really be a revolutionary in getting through the complexities of contractual clauses? Well, it seems nobody can outrun humans in this matter, especially when it comes to solving complex legal issues and having a Harvey Specter-like precision in drafting contract clauses and yet again craving out a way to beat one in their own game by using the same clauses against the opponent. In a legal development, a recent case has highlighted that human minds will always outshine AI.
The drafters of Govt. contracts have meticulously drafted the contractual clauses, and they act as bulletproof to the Government institutions from legal disputes. It is drafted in a way that the interests, rights, and obligations of the party are highly protected, and yet in a very subtle way, they have oppressed the rights and interests of subservient contractors who are at the mercy of the government institutions, their contracts that are commercial in nature and binding upon the parties.
The contractor for the very first time in the case of GSR Ventures Pvt Ltd. vs. Union of India has carved out a niche in getting through the contractual clauses by their scrupulous attention to detail and application of mind and safeguarding the rights and interests of subservient contractors against the contractual clauses of Government agreements.
In previous rulings, various courts have upheld that if clauses bar reference to arbitration due to the contractual preconditions and cumulative threshold of 20% the matter cannot be referred for arbitration, The Gauhati High Court in a ruling, in the present scenario had a dissenting view and observed that “the petitioner has sought to overcome both these hurdles’ by ‘the literal interpretation of the contract’ and has appointed a sole arbitrator under Section 11 (6) of the Arbitration and Conciliation Act, 1996(as amended from time to time) by referring the matter to arbitration.
Insights of the case: –
Since times immemorial Government contracts have incorporated clauses wherein, they have the intention of resolving disputes through ADR, yet the clauses in themselves act as a barrier, and the contractor is restricted in a way to make claims towards its legitimate dues. The case in question revolves around the contractual clauses wherein certain disputes arose between the parties and the petitioner invoked the force majeure clause and terminated the contract with the respondents i.e., the Railway authorities, in this case, refused to accept the termination, the petitioner therein invoked Arbitration Clause under clause 64(1)(i) wherein certain prerequisites are listed for referral to arbitration the Respondents refused to do refer the same, the petitioner alternatively invoked clause 48 and 49 of the clauses of the contract. The Railway’s non-cooperation led the petitioner to approach the Hon’ble Gauhati High Court for the appointment of a sole arbitrator.
The issue before the Hon’ble Court was firstly clauses 63 and 64, laying down whether the preconditions for reference to arbitration are rightfully met by the petitioner or not. Secondly, contractual clause 47 states that there is a ceiling limit of 20% despite that can the matter be referred for arbitration.
The Ld. counsel for the petitioner conscientiously pointed out the flaws in the contractual terms and contented that clauses 63 and 64 are redundant due to the usage of terms ‘shall prevail over ‘vide clause 49 and also clause 47 becomes obsolete as it specifically deals with clauses 63 and 64 and thereby limitation of 20% is non-existent and also pointed out one cannot take advantage of their mistakes.
The second contention of the Ld. counsel of the petitioner was clause 47 does not include the word ‘total’ i.e., if the total value of claims exceeds 20% of the contract value, then the matter would not be referred to arbitration thereby each claim is to be dealt with individually using the Odgers rule that lays down guiding principles for interpretation of the contract.
The rival contentions of respondents were that the preconditions were not met by the petitioner, there was oversight of clauses of the contract and the matter is not arbitrable due to 20% as splitting of claims individually is impermissible.
The court observed in the relevant paras:- 45“Though the Railway authorities have sought to clarify the matter by stating that the contents of Clauses 48 and 49 in the present contract with reference Clauses 16.2 and 16.3 have been made wrongly due to oversight instead of referring Clauses 47 and 48, yet, this Court is of the view that such an explanation does not appear to be not permissible inasmuch as it is now well settled that the terms of the contract have to be given their literal meaning even if they are wrongly inserted. If the Railway authorities seek to give a different meaning Page No.# 25/30 by resorting to other instruments/ terms of contracts, the permissibility of such an approach would be required to be examined. Further, if two interpretations are possible, one favourable to the party which drafted the contract agreement and another to the tenderer, the interpretation which is favourable to the tenderer would be preferred by applying the rule of contra proferendum.”
- On plain reading of the terms of the present contract, what comes out is that Clauses 16.2 and 16.3 as reproduced above, does not refer to Clauses 63 and 64 which deal with limitation placed on the value of the arbitral amount and also about the period of notice required to be given by the claimant.
- In the present case, in view of the wrong mentioning of arbitration clauses as also admitted by the Railway authorities in their para 12 of the affidavit-in-opposition as quoted above, certainly a contentious issue has arisen about the arbitrability of the disputes, apart from the plausible view that claims can be raised item-wise, and the claims need not be clubbed together for the purpose of deciding whether the claim is less or more than 20% of the value of the work.
Thus, as to whether the claims can be split to decide arbitrability as contended by the petitioners in all these petitions is a contentious issue which, in the opinion of this Court, should be left to be decided by the Arbitrator. The plea taken by the contractor petitioner that the claims can be individually considered and split and not necessarily clubbed together is also a very plausible interpretation of the contract, which can be best considered by the Arbitral Tribunal.”
Conclusion: –
The intellect shown in this case is commendable, as it portrays that humans have extraordinary minds and the legal industry is safe from AI. Law is about interpretation, if your arguments are tenable you can get through the complexities of such cases and crucially in this case it is erudite as to how such complex contractual clauses could not stop the determined contractor from getting justice.
The decision of the Gauhati High Court will pave the way for contractors who are left in the lurch and suffer irreparable losses as they are deprived of the right to approach the tribunals and resolve their disputes in an efficient way. It is a pathbreaking journey paving the way for future contractors to resolve their genuine disputes and make rightful claims through an alternative dispute mechanism. wherein this contractor has unshackled himself from the contractual clauses and is cleverly out of the maze.
Author:- Adv. Snigdha Bhattacharjee
