Bangalore Electricity Supply Company Limited (BESCOM) V. E. S. Solar Power Pvt.ltd & others (Supreme Court May 2021).
Supreme Court while making interpretation of a contract held that the broad principles of interpretation of any contract are broadly settled in Investors Compensation Scheme Limited vs. west Bromwich Building Society 1998 SC . which can be summarized as follows:
- Interpretation is the ascertainment of meaning which the document will convey to a reasonable person having all the knowledge and background which would reasonably be available to the parties at the time when contract was framed.
- The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
- The meaning which document will convey to a reasonable person is not same as meaning of dictionaries and grammars. The meaning of word in document is what parties uses them with their relevant background.
- The rule that words should be given their natural and ordinary meaning reflects the common proposition particularly in formal contracts, but law does not require judge to attribute the meaning which they intend to made.
Supreme court held that while seeking to construe a clause of contract there is no scope for adopting either liberal or a narrow approach to whatever the parties mean. While interpretating the contract court will try to understand the intention of the parties and try to serve the meaning which goes with the terms and objects of the contract.
Supreme court followed Smt. Kamala Devi vs. Seth Takhatmal& Anr 1964 SC, Ashville Investment v. Elmer Contractors 1988 (2) All ER 577 , Bank of India and Anr. V. K. Mohandas and Ors 2009 Sc.