ORDER

R.V. Raveendran J.

Under a contract dated 14.7.1981 between appellant and the respondent, the respondent agreed to supply the equipment and engineering drawings and provide the project management and construction supervision to M/s Paul Lindenau GmbH to assist with the design, building, equipping and launching of a drillship known as 'Sagar Prabhat' purchased by the appellant. The appellant had simultaneously entered into an agreement with M/s Paul Nindenau GmbH for purchase of the said drillship. The said drillship equipped and mobilised by the respondent reached Bombay on 5.6.1982. American Bureau of Shipping ("ABS" for short) vide certificate dated 25.6.1982 certified that the machinery of the drillship and the stability of the drillship were in accordance with its rules and standards. On the basis of the said certificate dated 25.6.1982, the appellant took delivery of the Drill-ship on 29.6.1982. The appellant thereafter found some defects in the drill-ship and therefore withheld the payment to the respondent. ABS revised its certificate on 18.6.1985, stating that its earlier certificate dated 25.6.1982 was based on incorrect data supplied by Paul Lindenau GmbH (builder of the drillship) and the respondent (designer, equipment supplier and construction supervisor of the drillship).

2. The respondent initiated arbitration proceedings in respect of the dispute relating to non payment of the balance price. An award was made against ONGC, in regard to the balance price due to the respondent. Certain counter claims by ONGC were also allowed. It is stated that challenge by ONGC to the said award is pending adjudication in court. During the pendency of the said arbitration, ONGC sought to raise the issue of defective stability of the Drill-ship. As that issue was beyond the reference of the ongoing arbitration, it was decided that a separate reference would be made in regard to dispute relating to the stability/defects of the drillship.

3. As the respondent disputed the claim of ONGC that the Drill-ship was defective and the defects affected its stability, it issued a notice dated 1.8.1986 stating that a dispute had arisen in regard to the claim of the appellant about the defects/ deficiencies in the stability of the Drill-ship. The said dispute was referred to arbitration by an Arbitral Tribunal with Shri K.H. Bhabha, Senior Advocate and Vice-Admiral Shri N.P. Datta as members. The said Arbitral Tribunal entered upon the reference on 4.9.1986.

4. ONGC filed its Statement of Claim on 2.12.1987 in regard to its claim relating to defects/deficiencies in regard to the stability of the Drill-ship. Para 27 thereof containing the claim and prayer of the appellant is extracted below:

"27. The Respondents submit that the consequences arising from the entire situation aforesaid would be either that the drillship be directed to be returned to the claimants on the conditions that the claimants return all the amounts received by them from the Respondents including US $ 55 million/and interest @ 12% per annum under the contract dated 14th July, 1981 in addition they pay adequate damages to the Respondent or that the claimants bring the drillship to the required state and condition as indicated hereinabove. The Respondents state and submit that tentatively and on prima facie considerations the amounts required to bring the drillship to the desired state and condition would be Rs. 3.50 crores which does not include non-use of the Drillship for the period during which the said adjustment, alterations or necessary things required to be done to the Drillship to bring it to the proper state and conditions would involve. This costs would be calculated at the rates current when the modifications are carried out. However, the same is tentatively estimated as per the current prevailing rate of U.S.$ 20,000/- per day, So calculated for 90 days the same would work out to U.S.$ 1,80,000/-.

The Respondent, therefore, pray:

(a) That the claimants be directed