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2012 Supreme(Bom) 2260
High Court of Judicature at Bombay
R.D. DHANUKA, J.
Dai-Ichi Karkaria Limited & Another
Versus
Oil and Natural Gas Corporation Limited & Another
ARBITRATION PETITION NO. 488 OF 2006 WITH INTERIM PETITION NO. 4 OF 2007 WITH ARBITRATION PETITION NO. 102 OF 2007
Decided on : 06-12-2012
For the Petitioners:Zuben Behram Kamdin along with Ms. Natasha Bopaiah and Ms. Parinaz Vakil i/by M/s. Bharucha and Parnetrs, Advocates.
For the Respondents:Ms. Snehalata Paranjape alongwith J. Kapadia, F. Lakdawala i/by M/s. Little & Co., Advocates.
The court upheld the arbitrator's decision based on the interpretation of the contract terms and evidence presented.
Headnote:
Arbitration Act - Dispute over dosage compensation - Sections 30 - 2, 8(c), 13(a) of the supply order - The court upheld the arbitrator's decision to reject ONGC's claim for dosage compensation based on the interpretation of the contract terms and evidence presented. The court also upheld the arbitrator's decision to allow the claim for bank guarantee charges incurred by the contractor.
Fact of the Case:
Dispute over dosage compensation and bank guarantee charges between ONGC and Contractor. The arbitrator directed ONGC to pay the contractor the sum of Rs.3,20,666/- for excess deduction made on account of dosage compensation and bank commission paid by the contractor.
Finding of the Court:
The court rejected ONGC's challenge to the arbitrator's decision and dismissed the petition. The contractor's cross petition was also dismissed as not pressed.
Issues: Dispute over dosage compensation and bank guarantee charges. Challenge to the arbitrator's decision.
Ratio Decidendi: The court upheld the arbitrator's decision based on the interpretation of the contract terms and evidence presented. The court found no merit in ONGC's submissions and refused the application for stay.
Final Decision: Arbitration Petition No. 102 of 2007 is dismissed. No order as to costs. Arbitration Petition No. 488 of 2006 filed by the contractor is dismissed as not pressed. Interim Petition No. 49 of 2007 is disposed off. Application for stay is refused. Decree in terms of the award under Rule 787(5) of the Bombay High Court (Original Side) Rules. No order as to costs.
1. Both parties have filed petitions under section 30 of the Arbitration Act, 1940 and seek to challenge the impugned award dated 25th September, 2006. Arbitration Petition No. 102 of 2007 has been filed by M/s. Oil and Natural Gas Corporation Limited (hereinafter referred to as “ONGC”). Arbitration Petition No. 488 of 2006 has been filed by M/s. Dai Ichi Karkaria Ltd. (hereinafter referred to as “Contractor”). Some of the relevant facts for the purpose of deciding these petitions are as under:
2. On 23rd April, 1985 ONGC floated tenders for supply of 9,500 MT of Pour Point Depressant/Flow Improver. The tender submitted by the contractor was found favourable. On 9/12th September, 1986 the contractor placed supply order No. C-1438 B&A for supply of total 3500 MT of PPD by supplying its product “Diatrolate MNF 1206”. On or about 29th January, 1987 the contractor completed the entire supply of PPD namely 1500 MT in total eight lots. The samples from the first two lots were tested by the ONGC on 18th October, 1986 and the test results were intimated to the contractor. It is the case of ONGC that by letter dated 20th October, 1986, the contractor accepted the condition of payment of excess dosage compensation at a higher dose in the field use beyond 300 ppm as specified in the supply order. It is the case of ONGC that during the period 12th November, 1986 and 23rd November, 1986, the PPD offered in the first lot was put to field use, at BHS offshore platform of the ONGC it achieved pour point of 18ºC at the dosage ranging from 325 ppm to 368 ppm. It is the case of ONGC that the sampling/bonding of the subsequent three lots, that is, third lot of 100.40 MT, fourth lot of 207.90 MT and fifth lot of 207.54 MT were carried out on 4th, 6th and 7th November, 1986. The aforesaid lots failed even in preliminary test that is Onshore laboratory test, vide Laboratory Test report which were communicated by the ONGC to the contractor. It is the case of ONGC that the PPD offered in the third, fourth and fifth lots were withdrawn and re-offered by the contractor which were sampled/bonded on 14th and 15th December, 1986. It is the case of ONGC that on 2nd January, 1987, the samples passed on Onshore Laboratory test were tested on loop line where these three lots achieved a pour point of 21 degree centigrade to 18ºC at 356 ppm, 355 ppm and 352 ppm respectively. The subsequent lot No. 6 according to ONGC was also sampled/bonded and the said PPD was tested on loop line test and achieved a pour point of 18ºC at 390 ppm, 393 ppm and 393 ppm respectively. According to ONGC the contractor refused to pay any dosage compensation on 23rd February, 1987 on the ground that all the lots were performed at 329 ppm, i.e. within reasonable limit considering the alleged variations in crude oil at BHS and also asked for refund of Rs.32,56,763/-deducted by ONGC from the invoices of PPD in respect of the last lots of 507.60 MT. It is not in dispute that ONGC had deducted sum of Rs.32,56,763/-towards penalty from the invoices issued by the contractor.
3. The dispute arose between the parties and was referred to arbitration. There was a dispute in respect of the right of ONGC to collect such compensation. In view of the said dispute, the contractor was required to extend the bank guarantees from time to time.
4. The contractor filed statement of claim. ONGC filed counter claim before the learned arbitrator.
5. By award dated 25th September, 2006 the learned arbitrator directed ONGC to pay to the contractor the sum of Rs.3,20,666/-being the excess deduction made by it on account of dosage compensation with interest at the rate of 9% from the date of deduction that is 19th January, 1987 till the date of payment. The learned arbitrator also directed ONGC to pay to the contractor amount of Rs.25,68,661/-being the bank commission paid by the contractor to the bank for keeping the two bank guarantees alive with interest at the rate of 9% p.a., on different amounts p
