Deviation From Plain Terms Of Contract Warranted Only When It Serves Business Efficacy Better: Supreme Court
Case: Maharashtra State Electricity Distribution Company Limited v. Ratnagiri Gas and Power Private Limited & Ors.
Coram: Chief Justice of India DY Chandrachud, Justices JB Pardiwala, and Manoj Misra
Case No.: Civil Appeal No. 1922 of 2023
Court Observation: “A commercial document cannot be interpreted in a manner to arrive at a complete variance with what may originally have been the intendment of the parties. Such a situation can only be contemplated when the implied term can be considered necessary to lend efficacy to the terms of the contract. If the contract is capable of interpretation of its plain meaning with regard to the true intention of the parties it will not be prudent to read implied terms on the understanding of a party, or by the court, with regard to business efficacy.”
“RGPPL shall be required to obtain approval of MSEDCL on contracting terms and price before entering into the GSA/GTA contract.”
“The first respondent was compelled to make alternate arrangements in view of the country-wide shortage of domestic gas, making RLNG a viable and contractually permissible alternative.”
“The requirement of an agreement, mandated for an arrangement involving liquid fuel cannot be read into the plain text of the former part of Clause 4.3. Thus, the capacity declaration based on RLNG could be done unilaterally, unencumbered by the requirement of the appellant’s consent in the latter half or the prior approval requirement under Clause 5.9 of the PPA”
“Such a reading goes against the apparent intention of the parties to treat capacity charges as fixed charges under the PPA. The appellant’s arguments would entail reading in implied terms contrary to the contractual provisions which are otherwise clear. Such a reading of implied conditions is permissible only in a narrow set of circumstances”
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Deviation From Plain Terms Of Contract Warranted, Supreme Court
