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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
AKIL KURESHI, A.Y. KOGJE, JJ.
OIL AND NATURAL GAS CORPROATION LTD. - Appellant
Vs.
INDUSTRIAL SECURITY SERVICES - Respondent
FIRST APPEAL NO. 646 of 2014 With CIVIL APPLICATION NO. 7326 of 2017 In FIRST APPEAL NO. 646 of 2014
Decided On : 31-01-2018
Arbitration and Conciliation Act, 1996 – Section 37 – Appealable orders – Award – Appeal against the judgment and order in Civil Miscellaneous Application by the learned 4th Additional District Judge confirmed the arbitral award passed by the sole arbitrator – appellant – Oil and Natural Gas Corporation (hereinafter referred to in short as ‘ONGC’) had entered into a contract after carrying out the due tender bidding process with the respondent for providing security personnel for safeguarding various installations/assets of the appellant. The contract which was initially for a period of six months was extended from time to time and at least for 75 times till expiry of the last contract – agreement entered into between the parties contained the arbitration clause and hence by a communication dated 10.04.2004, disputes were sought to be referred to the Arbitrator. The disputes raised were pertaining to the bonus required to be paid to the employees who were working for ONGC through the respondent Contractor. The dispute also referred to the payment of service tax – Held, Arbitrator is therefore referred to the litigation between the employees under the Contractor and ONGC and the orders passed by this Court from time to time – Contract had started from the year 1993 and for the period from 1993 to 1998, apparently no bonus was paid by the contractor nor was it paid by ONGC which led the Arbitrator to conclude that both the Contractor and ONGC were believed that the bonus was not payable and was therefore not provided in the lump sum amount paid. A reference is made to the internal communication which are on record where ONGC has communicated to the Contractor to comply with payment of bonus which was the statutory requirement and the communication in response by the Contractor to pay the bonus only if ONGC reimburses. With this rival stand taken, ONGC proceeded to pay the bonus directly to the workers, and hence, it can be inferred that the lump sum amount negotiated at the time of Contract did not contain the component of bonus – Therefore Court directed the deposit of amount awarded by the Arbitrator to take care of submissions made on behalf of ONGC and which in the opinion of the Court deserves due consideration that the service tax has not been actually paid by the respondent Contractor to Government of India and therefore, amount may not be disbursed or paid to the respondent Contractor – This contention of ONGC per se cannot be accepted – Contractor could not pay service tax because ONGC stopped paying it to the Contractor – Whatever service tax component the contractor may now receive as per the award of the arbitrator, must be directly deposited with the service tax department in the name of the contractor and the contractor may be left to such refund if there is any excess – It is directed that the service tax payable by ONGC to Contractor alongwith interest may be deposited by the Registry before the Service Tax/VAT Department of the State in the name of the Contractor – no interference is required in the judgment and order of the District Court and the Arbitral Award of the Arbitrator – Directions issued – First Appeal, Civil Application disposed of. (Paras 16, 17 and 18)
A.Y. KOGJE, J.
1. This Appeal is preferred under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to in short as ‘the Act’) against the judgment and order dated 20.11.2013 in Civil Miscellaneous Application No.12/2009 by the learned 4th Additional District Judge, Gandhinagar wherein the District Court has confirmed the arbitral award dated 29.09.2007 passed by the sole arbitrator.
2. The facts in brief are that the appellant – Oil and Natural Gas Corporation (hereinafter referred to in short as ‘ONGC’) had entered into a contract after carrying out the due tender bidding process with the respondent for providing security personnel for safeguarding various installations/assets of the appellant. The contract which was initially for a period of six months was extended from time to time and at least for 75 times till expiry of the last contract on 14.02.2002.
(a) A fresh contract for the same purpose was awarded to the respondent on 03.04.2002 for a period of two years. The second contract was a rate contract. The agreement entered into between the parties contained the arbitration clause and hence by a communication dated 10.04.2004, disputes were sought to be referred to the Arbitrator. The disputes raised were pertaining to the bonus required to be paid to the employees who were working for ONGC through the respondent Contractor. The dispute also referred to the payment of service tax.
3. This Court in an order passed in an Arbitration Petition No.54/2005 appointed an Arbitrator for adjudication of claims specified as :
(i) Security Deposit
(ii) Bonus Amounts
(iii) Service Tax
4. The arbitration proceedings were proceeded on 15 points for determination and the Arbitrator gave findings on each of the points for determination and ultimately gave the following award :-
“154. Accordingly the Award is passed in the following terms :-
(i) The respondent ONGC do pay to the claimant within three months from today a sum of Rs.1,23,86,258.06 (Rupees one crore, twenty-three lacs, eighty-six thousand, two hundred fifty-eight and paise six) within running interest as follows :
- On Rs.84,91,787-06 P on account of Service Tax: at the rate of 13% (thirteen) per annum from the due dates of payments of Service Tax. The interest to be calculated from month to month from 16/10/1998 on the Service Tax amount due for each month, till realisation and payment by ONGC to the claimant or directly to the Service Tax Authority in the relevant account of the claimant.
- On Rs.38,94,471-00 P on account of bonus at the rate of 12% (twelve) per annum from 10/04/2004 till payment and realisation.
(ii) The counter claim (Rs.6,32,034/-) of the Respondent is rejected.
(iii) The claim of Rs.10,28,065-15 P. being the amount of Service Tax difference of 3% is rejected.
(iv) The respondent shall also pay costs to the claimant Rs.77,000/- on account of arbitration fees and arbitration expenses within three months from today.”
5. Aggrieved by the arbitral award, ONGC challenged the legality and validity before the District Court at Gandhinagar. The District Court also dismissed the application.
6. Learned Advocate for the appellant ONGC submitted that the Arbitrator as well as the District Court have not interpreted the agreement between the parties in the correct perspective inasmuch as the Contract entered was for a specific purpose of providing security personnel and under the contract, extension of appointment was to be made on agreed Terms. Other liabilities which now the Contractor wants to burden the ONGC with were not part of the agreement and so were, required to be borne by the respondent Contractor as the clause regarding payment in the agreement were specified regarding fixed rate contract. No other payment can be awarded. It is submitted that at the time of entering of the agreement, the price quoted by the contractor was inclusive of the statutory charges which are applicable to any work contract. Therefore, the burden of paying bonu
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