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1999 Supreme(Bom) 584
BOMBAY HIGH COURT
S. Radhakrishnan, J.
OIL & NATURAL GAS COMMISSION - PETITIONER
v.
MCDERMOTT INTERNATIONAL INC. - RESPONDENT
Arbitration Petition No. 53 of 1994 in Award No. 211 of 1993,
Decided on: August 10 & 11, 1999
Sh. R. A. Dada with Sh. C. Balsara & Sh. B. Shroff, Advocates i/by Little & Co., for the Petitioners.
Sh. D. D. Madon with Sh. B. Colabawala & Sh. Jijina, Advocates i/by Mulla & Mulla & Craigie Blunt & Caroe, for the Respondents.
Arbitrators have no jurisdiction to award interest for the pre-reference period, and mobilization and demobilization costs are not payable under a Contract if they are not specifically provided for.
Headnote:
The Court set aside the impugned Award in part and upheld the remaining part of the Award. The Court held that the Arbitrators erred in awarding the claim for loss incurred due to fluctuation in foreign exchange, interest during the pre-reference period, and mobilization and demobilization costs. The Court found that the Arbitrators had no jurisdiction to award interest for the pre-reference period, and that the mobilization and demobilization costs were not payable under the Contract. The Court also directed the respondents to refund to the petitioners the amount deposited in Court along with interest at the rate of 12% per annum from the date of deposit till payment and/or realization.
Fact of the Case:
The petitioners, an oil and natural gas corporation, entered into a contract with the respondents, a McDermott International Inc., for the development of its Bombay High Field. Disputes arose between the parties and the matter was referred to arbitration. The Arbitrators made an Award in favor of the respondents, which the petitioners challenged by filing an arbitration petition.
Finding of the Court:
The Court found that the Arbitrators had erred in awarding the claim for loss incurred due to fluctuation in foreign exchange, interest during the pre-reference period, and mobilization and demobilization costs. The Court held that the Arbitrators had no jurisdiction to award interest for the pre-reference period, and that the mobilization and demobilization costs were not payable under the Contract.
Issues: 1. Whether the Arbitrators erred in awarding the claim for loss incurred due to fluctuation in foreign exchange? 2. Whether the Arbitrators erred in awarding interest during the pre-reference period? 3. Whether the Arbitrators erred in awarding mobilization and demobilization costs?
Ratio Decidendi: 1. The Court held that the Arbitrators erred in awarding the claim for loss incurred due to fluctuation in foreign exchange because: a. The Arbitrators had found that there was a valid deduction of US $ 2,76,308 in respect of surtax and the same was not illegal or invalid. b. The entire amount of US $ 2,76,308 was paid to the Tax Authorities. c. The petitioners were discharged qua the respondents for US $ 2,76,308. d. The petitioners cannot be asked to pay the sum of US $ 74,999 as a representative assessee, and they cannot be asked to pay monies if there is a variation/fluctuation in foreign exchange between the date of deduction and the date of actual payment. 2. The Court held that the Arbitrators erred in awarding interest during the pre-reference period because: a. The Contract between the parties provided that interest could be awarded only with regard to the undisputed amounts. b. The claims were disputed and as such, no interest could be awarded under the Contract. c. The Interest Act, 1978 does not apply to disputed amounts. 3. The Court held that the Arbitrators erred in awarding mobilization and demobilization costs because: a. The petitioners had entered into a contract with the respondents only with regard to IJK Project and not with regard to FGH Project. b. The petitioners were not a party to any contract with the respondents with regard to the platforms of FGH Project. c. The respondents had not even disclosed the Contract that they had entered with Samsung Heavy Industries. d. The petitioners are only concerned with IJK Platforms, and clauses in the Contract with regard to the mobilisation and demobilisation costs make it dear that the charges are to be borne from the place of origin to the place of demobilisation.
Final Decision: The Court set aside the impugned Award in part and upheld the remaining part of the Award. The Court held that the Arbitrators erred in awarding the claim for loss incurred due to fluctuation in foreign exchange, interest during the pre-reference period, and mobilization and demobilization costs. The Court found that the Arbitrators had no jurisdiction to award interest for the pre-reference period, and that the mobilization and demobilization costs were not payable under the Contract. The Court also directed the respondents to refund to the petitioners the amount deposited in Court along with interest at the rate of 12% per annum from the date of deposit till payment and/or realization.
S. Radhakrishnan, J. - Heard the learned Counsel for the petitioners and the learned Counsel for the respondents at length. By the petition, the petitioners the Oil and Natural Gas Corporation Limited, is challenging an Award dated 30th September, 1993 on various grounds. The brief facts leading to this case are as follows:
2. Sometime in the mid of 1970, the petitioners herein, viz., the ONGC, had started the development of its Bombay High Field, and as a part of its continuing development, the petitioners herein, on 17th June, 1985 had published its tender notice No. BOP/SP/PPL/IJK/11(1)/85 inviting bids on the design, procurement, fabrication, inspection, testing and pre-commissioning load out sea fastening tow out, transportation, and installation at offshore site and pre-commissioning and pay other work necessary for the final completion of the well-head platforms II. IJ and IK (collectively) known as "IJK" Platforms in the Bombay High field.
3. The petitioners herein, viz., the ONGC by its initial tender notice had invited two separate bids for the total work to be performed in the construction of the IJK Platforms. Part I of the said tender was for the supply, fabrication, transportation and installation of jacket piles and appurtenances, including installation engineering, but excluding detailed design for jacket piles and appurtenances. Part II of the said tender was for supply, fabrication, transportation, installation, hook up, pre-commissioning and commissioning, including design detailed engineering transportation and installation, engineering of the platform debts. The aforesaid Part II also covered the pre-construction survey of pipeline routes, supply corrosion and weight coating with anode installation on the pipelines and the transportation, installation of flow lines and risers, hook up testing and commissioning and burial of the pipelines
4. It appears that on 12th July, 1985, the petitioners had published an addendum to the tender notification and invited bids on a turnkey basis for the entire works in addition to separate bids for Part I and Part II. Therefore, the Commercial and Technical bids were submitted on 13th September, 1985. It appears that the petitioners had also published an addenda to the bid package, which extended the date for submission of bids to 18th November, 1985. The respondents herein, therefore submitted its revised commercial bid on 18th November, 1985. Thereafter, by reviewing the competing bid and meeting with the prospective contractors, the petitioners-ONGC sent a telex of intent on 11th July, 1986 awarding the respondents herein, the said contract for the entire scope of work. The said contract was duly signed by both the parties on 18th November, 1986.
5. While executing the said contract, certain disputes had arisen between the parties and therefore, in accordance with Clause 16.2 of the terms of the contract, the disputes were referred for arbitration. Before the learned Arbitrators, the respondents herein had filed their claim and the petitioners had also filed their counter claim. Finally, after recording evidence and perusing various documents produced before them, the learned Arbitrators, passed the aforesaid Award dated 30th September, 1993 which is being challenged in the present petition.
6. The learned Arbitrators had formulated as many as 16 issues and made and published the aforesaid Award on 30th September, 1993. The petitioners herein have challenged the said impugned Award in the following three aspects, broadly:
A. The claim regarding loss incurred due to fluctuation in foreign exchange, in respect of deductions of surtax.
B. The various amounts of interest awarded during the pre-reference period.
C. The mobilization and demobilization costs.
7. With regard to the first objection viz., the claim regarding the loss incurred due to fluctuation in foreign exchange in respect of deductions of surtax, the learned Counsel for the petitioners contended that
