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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Oil India Limited - Appellant
Versus
Techno Canada Inc. - Respondent
O.M.P.(Comm.) 12/2021
Decided On : 08-09-2021
Arbitration - Impugning Arbitral Award - Arbitration and Conciliation Act, 1996 - Section 34 - Claims barred by limitation - Public policy of India - Waiver of right to claim compensation - Interest awarded in excess of claim
Fact of the Case:
Oil India Limited (OIL) filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, impugning an arbitral award rendered by an Arbitral Tribunal. The dispute arose from a contract between OIL and Techno Canada Inc. (TCI) for hiring production testing services. OIL challenged the award primarily on the grounds that TCI's claims were barred by limitation and that TCI had waived its right to claim compensation for delay in mobilization. OIL also contested the award of interest in excess of the claims made by TCI.
Finding of the Court:
The court found that OIL had not raised the defense of limitation in its pleadings before the Arbitral Tribunal and could not raise new defenses at this stage. The court also rejected OIL's contention that TCI had waived its right to claim compensation for delay. The court set aside the award of establishment cost and the interest awarded in excess of the claim made by TCI.
Issues: The issues involved in the case included whether TCI's claims were barred by limitation, whether TCI had waived its right to claim compensation for delay, and the validity of the interest awarded in excess of the claim made by TCI.
Ratio Decidendi: The court held that OIL could not raise new defenses at this stage and rejected the contention that TCI had waived its right to claim compensation. The court also set aside the award of establishment cost and the interest awarded in excess of the claim made by TCI.
Final Decision: The court set aside the award of establishment cost and the interest awarded in excess of the claim made by TCI.
JUDGMENT
Vibhu Bakhru, J. - Introduction
1. Oil India Limited (hereafter 'OIL') has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the A&C Act') impugning an arbitral award dated 01.09.2020 (hereafter 'the impugned award') rendered by an Arbitral Tribunal comprising of a Sole Arbitrator.
2. The respondent (hereafter 'TCI') is an entity incorporated under the laws of Canada and thus, the impugned award was rendered in an International Commercial Arbitration within the meaning of Section 2(1 )(f) of the A&C Act. Concededly, the ground that an arbitral award is vitiated by patent illegality, as set out in Section 34(2 A) of the A&C Act is not available to OIL for setting aside the impugned award. It is OIL's case that the impugned award is in conflict with the public policy of India, to the extent that it allows TCIs claims, and therefore, is liable to be set aside in terms of Section 34(2)(b)(ii) of the A&C Act.
3. OIL's challenge to the impugned award rests primarily on its contention that the claims raised by TCI are barred by limitation and the conclusion of the Arbitral Tribunal to the contrary, is manifestly erroneous. According to OIL, the impugned order is in contravention with the fundamental policy of Indian law on account of this error.
Factual Background
4. In May 2014, OIL issued a notice inviting bids for hiring of production testing services for exploratory wells in NELP-VI Block (MZ-ONN-2004-1) in Mizoram. TCI submitted its offer and by a Letter of Award (hereafter the LOA) dated 13.10.2014, OIL awarded the contract to TCI. Thereafter, on 26.02.2015, the parties entered into a formal agreement captioned "Contract No.: 6205782 for Hiring of Production Testing Services for Exploratory Wells in NELP-VI Block (mz-onn-2004-1) in Mizoram" (hereafter 'the Agreement').
5. Pursuant to the LOA, OIL issued a notice dated 21.10.2014 calling upon TCI to mobilise its resources at the specified site (Well Aibawk-1 at Location MZ-3) by 28.01.2015 (the Mobilisation Notice).
6. OIL had entered into an Agreement as it was desirous of availing certain services described as "Surface Production Testing services, Well Activation/Stimulation/Killing services (using coiled tubing unit & nitrogen pumping unit), Tubing conveyed Perforation service and Slick line service (for bottom-hole PVT sampling and bottom-hole pressure & temperature survey ".
7. The term of the Agreement was for a period of one year extendable for an additional period of one year at the option of OIL. In terms of the Agreement, its duration was to be reckoned from the commencement date till the date of completion of the Well Testing Operations and/or upon issue of the Demobilization Notice by OIL.
8. The total contract price was agreed at USD 4,952,800/-.
9. On 06.01.2015, OIL sent an e-mail requesting TCI to defer mobilisation of equipment till 15.03.2015. OIL also indicated that the delay was on account of 'slow drilling progress'. TCI responded by an e-mail dated 08.01.2015 informing OIL that it was accepting the delay in mobilisation by diverting the consignment and, holding it at various en-route locations. However, TCI also put OIL to notice that the said exercise was costing it demurrage for holding of the said units at various locations.
10. On 30.01.2015, TCI sent a communication, inter alia, stating that it would need clear hundred days for mobilisation from the "Final OIL Approved Mobilisation Notice". This was considering that only sixty-eight days were available for mobilisation after OIL's notice dated 06.01.2015 requiring TCI to defer the same. Apparently, this was not accepted by OIL and by its e-mail dated 06.02.2015, it called upon TCI to confirm the arrangement for mobilisation in accordance with the contract between the parties "as already notified".
11. TCI responded by its letter dated 09.02.2015 highlighting that it had initiated mobilisation of equipment in November, 2014 after receiving OIL's e-mail dat
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