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2012 Supreme(Bom) 975
High Court of Judicature at Bombay
ANOOP V. MOHTA, J.
M/s. Oil and Natural Gas Corporation Ltd. & Another
Versus
M/s. Dolphin Drilling Limited & Another
Arbitration Petition No. 1063 of 2010 Along With Arbitration Petition No. 1065 of 2010
Decided on : 09-05-2012
For the Petitioners:Kevic Setalvad, Senior Advocate with Ms. Rashna Khan with Ms. Daizy Dubash with Abhishek Singh with Satchit Bavlekar i/by M/s. Mulla & Mulla, Advocates.
For the Respondents:Pradeep Sancheti, Senior Advocate with Aziz Khan with Vinay Bhanushali i/by M/s. Divya Shah Associates, Advocates.
The central legal point established in the judgment is that the interpretation of contract terms and the clear allocation of responsibilities and payment obligations influenced the court's decision to reject the claims and set aside the Arbitration Award.
Headnote:
Arbitration Act - Challenge to Arbitration Award - Section 34 - Wellhead Tools & Services - Section 31(7)(b) of the Arbitration & Conciliation Act, 1996
Fact of the Case:
Dolphin Drilling Limited (DDL) challenged the Arbitration Award under Section 34 of the Arbitration Act, specifically contesting the denial of interest on unpaid invoices. Oil and Natural Gas Corporation Limited (ONGC) also challenged the Award on various grounds. The dispute arose from a contract for the hire of DDL's drilling unit by ONGC, with disagreements over invoices and payments.
Finding of the Court:
The court found that ONGC was not obligated to make separate payments for wellhead tools and services, as the contract specified that DDL was responsible for providing and bearing the cost of such items. The court also noted that ONGC had not approved nor paid for the specific items claimed by DDL, and therefore, rejected DDL's claim for interest and additional payments. The court set aside the Arbitration Award and modified the cost of arbitration to be shared equally by both parties.
Issues: The main issues revolved around the interpretation of the contract terms, specifically regarding the payment obligations for wellhead tools and services, as well as the validity of the invoices and the entitlement to interest on unpaid amounts.
Ratio Decidendi: The court's decision was influenced by the clear terms of the contract, which placed the responsibility for providing and bearing the cost of wellhead tools and services on DDL. The court emphasized that ONGC had not approved nor agreed to pay for the specific items claimed by DDL, and therefore, rejected DDL's claim for interest and additional payments.
Final Decision: The court set aside the Arbitration Award and modified the cost of arbitration to be shared equally by both parties. The Petitions were accordingly disposed of.
1. Both the parties, original claimants and the Respondents have challenged the impugned Award under Section 34 of the Arbitration and Conciliation Act, 1996 (the Arbitration Act) passed by the Arbitral Tribunal dated 7 April 2010 by raising respective grounds from their point of view.
2. The operative part of the Award is as under :
“(i) The Respondent do pay to the Claimant a sum of US $ 2,699,235.63 on account of providing wellhead tools & services to the Respondent.
(ii) The Respondent do pay the Claimant a sum of Rs.71,68,723/by way of cost of arbitration.
(iii) The Respondent do pay the Claimant interest on the sum directed to be paid to the Claimant by this award from the date of the award till the date of payment at the statutory rate of 18% p.a as set out in section 31(7)(b) of the Arbitration & Conciliation Act, 1996.”
3. The original claimant was a Dolphin Drilling Limited (DDL). Oil and Natural Gas Corporation Limited (ONGC) was the original Respondent. DDL has challenged the Award only to the extent of denial of interest on the amount of the unpaid invoices from the accrual of the cause of action up to the date of the Award and related aspect as contemplated under Section 31(7) (a) and (b) of the Arbitration Act read with Section 34 of the Code of Civil Procedure (CPC). DDL has supported the rest of the Award on all the counts.
4. ONGC has challenged the Award on various grounds.
5. ONGC is a public sector undertaking. DDL is a company incorporated under the English Companies Act and governed by the laws of United Kingdom having their registered office at London (England). Their business is also of oil drilling and offshore operations of the Indian coast.
6. Both the parties entered into a contract on 17 October 2003 (the Contract) for hire of DDL's drilling unit “Bedford Dolphin” (the Rig) by ONGC.
7. DDL (the Contractor) agreed to carry on operations of installation of Well Head on the offshore hydrocarbon wells, for & on behalf of the ONGC (the operator) on charter hire basis with drilling unit and integrated services on the “turn key” basis along with it's personnel. The contract was for three years with effect from 1 August 2003. The drilling operation commenced on 30 November 2003. The time was extended under the contract upto 10 April 2007.
8. As per the contract, as permissible, during the ongoing contract work, DDL raised various invoices from 26 March 2004 upto 28 July 2004 and demanded reimbursement for rental of Well Head running Tools and services over the Rig day rate from 14 January 2004 to 4 May 2007 collectively aggregating to US $ 518,026 i.e. approximately Rs.2,699,235.63 over the Rig day rate. ONGC disputed the invoices. On 20 September 2004 DDL therefore gave notice to ONGC & demanded the amount with 12% p.a. Interest and thereby also invoked clause 28 of the agreement, if no payment is received. DDL, by letter dated 18 October 2004, by invoking arbitration clause, appointed their arbitrator and forwarded a statement of claim amounting to US $ 1,020,163.20. ONGC appointed their Arbitrator vide letter dated 13 January 2005. Both these Arbitrators appointed a Presiding Officer. The offer to resolve the dispute through the conciliation was failed as not accepted by DDL on 23 November 2004.
9. The statement of claim was taken on record. The written statement was filed and so also the rejoinder. The following issues were framed :
(1) Whether the claimants are entitled to be paid separately for Well Head Running tools and services, in addition to the payments for Wellheads, as contemplated in paragraphs 5, 7 and 12 of the Statement of Claim? If yes, in what amount?
(2) Whether the costs of the Well head running tools and services are included in the day rate as contended by the Respondents in paragraph 6 of the Written Statement?
(3) Whether the costs of the Well head running tools and services have already been paid as service charges as contended by the Respondents in paragraph
