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2004 Supreme(AP) 1094
Andhra Pradesh High Court
Judges : GOPALA KRISHNA TAMADA, T.MEENA KUMARI
Hindustan Shipyard Limited - Appellant
Versus
ESSAR OILS LIMITED - Respondent
Decided On : 09-29-04
Headnote:Arbitration & Conciliation Act, 1996 - Section 34(2)(a)(iv) - Arbitral Award - Setting aside of - Award can be set aside only if award deals with a dispute not contemplated by or not falling within terms of submission to arbitration or contains decisions on matters beyond scope of submission to arbitration.
Held : In view of the findings arrived at it has to be held that the Arbitrary Tribunal acted beyond the scope of its jurisdiction and this court feels that there is no need to go into the merits of the claims. Further, the record which has been produced before the arbitrators goes to show that the ONGC has acted as per Exhibit E by making certain payments to the first respondent company. Further, that part of the evidence has not been looked into by the Arbitrator to arrive at a just and fair conclusion as to the existence of privity of contract between the parties as a result of which it has to be held that the arbitral Tribunal has violated the provisions of substantive law of India i. e. , Indian contract Act and the Indian Evidence Act. Further, it shows that the ONGC by acting upon Exhibit E paid some amounts directly to the first respondent, and hence it cannot be said by the first respondent that there is no privity of contract between them and the ongc.
Considering the fact that the ONGC has made payments directly to the first respondent and in view of the fact that the first respondent has sought amendment of the conditions of the terms of contract with regard to mode of direct payment from the ongc and considering the fact that the role of the appellant is confined only to the extent of certification of the invoices and also considering the fact that the ONGC has withheld the payments to the first respondent even after certification made by the appellant, it has to be held that the agreement in question is a tripartite one i. e. , privity of contract exists between the appellant company, ONGC and the first respondent company and not a bilateral one and hence this Court is of the view that the ongc is a proper and necessary party to the dispute before the Arbitral Tribunal and as the ONGC is not made as a party by the first respondent before the Arbitral Tribunal, and as the award is passed without making a proper and necessary party as party to the dispute, the same has to be set aside as the award is violative of provisions of the substantive law of India i. e. the Indian contract Act. The learned District Judge also failed to appreciate the said fact and hence the Arbitral Awards as well as the judgments in O. Ps. with regard to the claims made by the first respondent have to be set aside and accordingly set aside.
( 1 ) AS the parties in both the CMAs are one and the same and the issue involved in those CMAs are identical, they are being disposed of by this common order.
( 2 ) CMANO. 255 of 2003 has been directed against the decree and order dated 10-10-2002 in OP. No. 989 of 2001 on the file of the Principal District Judge s Court, visakhapatnam whereas CMANo. 624 of 2003 has been filed against the decree and order dated 1 -11 -2002 in O. P. No. 96 of 2002 on the file of the Principal District Judge s court, Visakhapatnam.
( 3 ) THE appellant herein is the petitioner in ops and the respondents herein are the respondents in the OPs. The appellant in both the OPs is Hindustan Shipyard Limited rep. by its Chairman and Managing Director through Deputy Manager (Legal) whereas the first respondent in both the OPs is m/s. Essar Oil Limited and the second respondent is the Chairman of the Arbitrary tribunal and respondents 3 and 4 are the arbitrators of the said Tribunal.
( 4 ) THE brief facts that led to the filing of the above CMAs are as follows: the Oil and Natural Gas Commission limited has awarded a contract to the appellant herein for carrying out works of fabrication, skidding, load out, sea fastening, transportation, installation, book up, testing and pre-commissioning of PB PD and PE and RV 10 and RV 17 platforms at PANNA and RAVVA fields respectively. The appellant herein awarded the said contract to the first respondent herein by different agreements. According to the pricing formula between the parties, the appellant company has to get from the owners actual cost paid to the Contractor plus mark up ranging from 7 1/2 to 10%. Later, it was agreed, at the instance of the first respondent, to make payments directly to the first respondent by the owners and a copy would be marked to the appellant- company. Later, the first respondent commenced the work of the assigned contract to it by the appellant and consequently the first respondent invoked the arbitration clause by its letter and appointed the third respondent as their arbitrator and the appellant appointed the fourth respondent as its arbitrator and both the arbitrators appointed the second respondent as its Chairman of the Arbitrary tribunal as stipulated in the contract. As far as the said arrangement, there is no dispute raised by either parties. Various substantial claims besides costs of the arbitration proceedings have been placed by the first respondent before the Arbitration Tribunal relating to both the projects. The majority view of the Arbitrary Tribunal is that there is no privity of contract between ONGC and eol and the appellant is contractually liable to pay the outstanding amounts as may be found due to the first respondent which remain unpaid by ONGC and there was no ground on the basis of which the first respondent could validly sue ONGC for the unpaid amounts due to them nor can such a suit lie under law. On the other hand, the dissenting view is that there was privity of contract exists between the first respondent and the ONGC. The Arbitrary Tribunal passed the award in those matters after adjudication. Questioning the said awards, the appellant herein filed O. P. Nos. 989 of 2001 and 96 of 2002 before the Principal district Judge, Visakhapatnam on various grounds.
( 5 ) THE Award passed in the case of ravva project has been challenged before the learned District Judge on the following. grounds: (i) The award, in question, is not a reasoned award; (ii) The arbitrators have failed to decide the matter according to law; (iii) Various claims were beyond the contract and the arbitrators ignored the express terms of the contract; (iv) The arbitrators erred in holding that there is no privity of contract between the ONGC and the first respondent; (v) The majority view of the arbitrators is manifestly contrary to law of the land and also terms of the contract; (vi) That the arbitrators allowed the claims contrary to law, to the evidence and the
