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2019 Supreme(Bom) 1200
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
PRADEEP NANDRAJOG, NITIN JAMDAR, JJ.
Mercator Oil & Gas Limited - Appellant
Versus
Oil & Natural Gas Corporation Limited - Respondent
Appeal No. 318 of 2019 In Arbitration Petition (L) No. 1085 of 2018
Decided On : 29-07-2019
For the Appellant :Mr. Janak Dwarkadas, Sr. Advocate a/w Mr. Sharan Jagtiani, Mr. Prateek Bagaria, Ms. Jimisha Dalal & Mr. Chiranjeev Saboo i/b Singularity Legal LLP.
For the Respondent: Mr. D.J. Khambata, Sr. Adv. a/w Mr. Pheroze Mehta, Mr. Amir Arsiwala, Mr. Omprakash Jha, Ms. Shivani Kumbhojkar i/b, Mr. K.A. Suryanarayanan a/w Mr. Rajkumar Gaikwad, Adv.
Headnote:
Arbitration and Conciliation, 1996 – Section 9 - Terminating contract - Seeking to restrain - Oil & Gas Limited had filed two Arbitration Petitions under section 9 of the Arbitration and Conciliation, 1996 - Arbitration Petition (L) was filed to restrain Oil & Natural Gas Corporation Limited from terminating contract between the parties and to restrain it from invoking bank guarantees - Arbitration Petition was filed seeking to restrain ONGC from giving effect to termination of the contract - Learned Single Judge rejected both these petitions - This appeal is filed under section 37 of the Act of 1996 challenging the order passed in Arbitration Petition regarding the invocation of bank guarantees - Senior Advocate, argued for Appellant; Senior Advocate for the Respondent No.1-ONGC for Respondent No.2- Bank - Issue to be decided is in a narrow compass - Whether the ingredients required to restrain invocation and payments under bank guarantees are present - These ingredients are by now well defined - They are the existence of fraud and special equities that may arise - To discover if these grounds exist, a narration of facts leading to this appeal is necessary - Oil & Natural Gas Corporation Limited, ONGC for short, has various ocean-going vessels used for petroleum operations - It is one of the first offshore drilling rigs in India - Project was to be entrusted on turn-key basis - ONGC invited a tender for the work - Whether ingredients required to restrain invocation and payments under bank guarantees are present – Held, learned single Judge has exercised his discretion to refuse an injunction - Court are considering an appeal challenging a discretionary order passed - According to learned single Judge, bank guarantees are unconditional - Extensions were granted by ONGC, which showed there was a serious problem in the execution of contract - Disputes had arisen between the Consortium members - Consortium was having financial difficulties - Fraud as alleged by Mercator was not to knowledge of bank, and there was nothing wrong by ONGC to invoke bank guarantees - Grant of balance work to GPC was a commercial decision taken in the larger interest of the project - As court discussion shows that these conclusions are correct, it is further settled that the appellate court will not interfere with exercise of discretion of trial court and substitute its discretion unless discretion is exercised arbitrarily, capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions - As per settled law governing invocation of bank guarantee, discretion used by the learned single Judge in refusing to grant an injunction, in this case, cannot be held to be arbitrary - To conclude, no case is made out by Mercator for issuance of an injunction restraining invocation of bank guarantees - No perversity is committed by learned single Judge in refusing to grant an injunction - Appeal is dismissed.
JUDGMENT :
Nitin Jamdar, J.
Mercator Oil & Gas Limited, having failed to get an order of injunction from the learned Single Judge to restrain the Respondent no.1 Oil & Natural Gas Corporation from encashing the bank guarantees, has approached us with this appeal.
2. Mercator Oil & Gas Limited had filed two Arbitration Petitions under section 9 of the Arbitration and Conciliation, 1996. Arbitration Petition (L) No.1085/2018 was filed to restrain Oil & Natural Gas Corporation Limited from terminating the contract between the parties and to restrain it from invoking the bank guarantees. Arbitration Petition (L) No.1162/2018 was filed seeking to restrain ONGC from giving effect to the termination of the contract. The learned Single Judge rejected both these petitions on 3 June 2019. This appeal is filed under section 37 of the Act of 1996 challenging the order passed in Arbitration Petition (L) No.1085/2018 regarding the invocation of bank guarantees.
3. Mr. Janak Dwarkadas, Senior Advocate, argued for the Appellant; Mr. D.J. Khambata, Senior Advocate for the Respondent No.1-ONGC and Mr.K.A.Suryanarayanan for Respondent No.2- Bank. The issue to be decided is in a narrow compass. Whether the ingredients required to restrain invocation and payments under bank guarantees are present. These ingredients are by now well defined. They are the existence of fraud and special equities that may arise. To discover if these grounds exist, a narration of facts leading to this appeal is necessary.
4. Oil & Natural Gas Corporation Limited, ONGC for short, has various ocean-going vessels used for petroleum operations. Sagar Samrat, a jack-up self-elevating drillship, is one of them. Sagar Samrat struck oil in February 1974. It is one of the first offshore drilling rigs in India. ONGC wanted to carry out extensive work to Sagar Samrat. ONGC called this work as -Sagar Samrat Conversion Project. The Project was to be entrusted on turn-key basis. ONGC invited a tender on 26 April 2011 for the work.
5. Mercator Oil & Gas Limited is a Mumbai based company. Mercator Offshore (P) Ltd, its sister company is incorporated under the laws of Singapore. Gulf Piping Co. W.L.L is incorporated under the laws of the United Arab Emirates. Mercator Oil & Gas Limited, Mercator Offshore (P) Ltd and Gulf Piping Co. W.L.L, formed a consortium for undertaking the Sagar Samrat Project work.
6. The Consortium Agreement was signed on 15 December 2011. The object of the agreement was stated as for execution and undertaking the project work and of regulating their inter se relationship. Signing a pre-bid agreement on 26 July 2011 with ONGC and that a notice of award for the Project on 17 November 2011 was received was noted. Clause 2.2 of the Consortium Agreement provided that the Consortium shall be construed and deemed to be for the single purpose of carrying out the contract and shall not be deemed to be a separate entity for any other purpose. It was not to be construed to create a permanent partnership or co-operation among the parties or to authorize the parties to act as a general agent for other parties. Mercator Oil & Gas Limited, Mercator for short (the Appellant) was to be the lead member of the Consortium. The parties agreed that they, as a consortium, would co-operate with each other for the execution of the project. They also agreed that they would not make a commitment or agreement with ONGC, which affect the Respondents' liabilities and rights of other parties without prior discussion and agreement with other parties. They agreed to cooperate with each other during the project. The agreement listed out various standard conditions.
7. ONGC entered into an agreement with the Consortium on 15 December 2011. Clause 2.1.1 defined the scope of work. The scope of work was substantial. It included to surveys, preengineering, pre-construction and pre jack-up, post jack-up, design, engineering, procurement, fabrication, transportation, hook-up, testing, certification/inspection,
