Bombay High Court
Oil And Natural Gas Corporation Ltd vs Comex Services S.A on 3 August, 2011
Author: D.K. Deshmukh
Bench: D.K.Deshmukh, R.G. Ketkar
1 APP1358/98
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.1358 OF 1998
IN
ARBITRATION PETITION NO.107 OF 1997
IN
AWARD NO.89 OF 1997
Oil and Natural Gas Corporation Ltd. ...Appellants
v/s
Comex Services S.A. ...Respondents
Mr Pradeep Sancheti, Sr. Counsel with Mr Raj Kumar
and Ms Hemalik i/b M/s Vyas and Bhalwal for
Appellants.
Mr Hiroo Advani with Mr Dinesh Pednekar, Mr R.S.
Bidkar and Mr Asif Lampwalla i/b M/s Advani and Co.
for Respondents.
CORAM : D.K.DESHMUKH AND R.G. KETKAR JJ.
DATE : 3RD AUGUST 2011.
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2 APP1358/98
ORAL JUDGMENT (PER D.K. DESHMUKH J.) :-
1] The appellants are a Public Sector Company registered under the Indian Companies Act, 1959 engaged in oil exploration, development and production of oil and natural gas. The appellants have their principal office at Tel Bhavan, Dehradun, Uttar Pradesh and Regional Office at BRBC, Bandra, Bombay 400 054. The contract between the parties is governed by the laws of India.
2] By the arbitration petition No.107 of 1997, the appellants petitioners were seeking to set aside the award dated 27th March 1997 in the matter of disputes and differences between the appellants and respondents as the award consists manifest errors, erroneous assumptions on the face of the record.
3] These proceedings had been referred to an ::: Downloaded on - 09/06/2013 17:35:53 ::: 3 APP1358/98 Umpire by the learned Arbitrators on a difference arising between them on some of the issues involved in the case. Both the learned Arbitrators agreed that the appellants wrongfully repudiated the contract between them and the respondents claimants. As a result of which, appellants were liable to pay a sum of USD 1,75,000 to the respondents by way of damages. However, the Arbitrators had ig differed on the question of compensation claimed by the respondents. Whereas one of the Arbitrators, Mr Justice M.N. Chandurkar (Retired) was of the view that the respondents were not entitled to any compensation, the other Arbitrator, Mr J.B. Gadkari was of the view that appellants were liable to pay to the respondents a sum of USD 16,07,000 by way of compensation. The dispute between the respondents and appellants arose on following facts :-
A) By a telex dated 6th June 1988,
appellants placed an order on the
respondents for design engineering,
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fabrication, supply and installation and
testing and commissioning of pipelines for the D-18 field. The telex sets out the terms and conditions of the contract between the respondents and petitioner.
B) Clause 1 of the telex refers to technical specification and scope of work.
These
had to be as per the tender
documents and as clarified through exchange of various telexes and letters .
C) Clause 2 of the telex called delivery schedule provides that the complete scope of the work was to be completed by end of October 1988. The price payable for the total work was FF 2,65,40,000.
D) One of the important terms of the contract is that 10 % of the contract value would be paid to the respondents on their opening the letter of credit on their ::: Downloaded on - 09/06/2013 17:35:53 ::: 5 APP1358/98 vendor for the supply of pipe against equivalent bank guarantee for refund. The respondents were to submit a performance bond in the sum of FF 26,54,000 which was 10 % of the contract value at the time of the signing of the contract.
E) By the said telex, the respondents were asked to collect a draft contract by 22nd June 1988 so that the contract could be signed by 4th July 1988. The telex stated that until the contract was signed by the parties, the telex order shall remain binding on the parties.
F) According to the respondents, their part of the work could not be performed until the supply / installation by appellants of its part of the work and that their scope of work order did not cover installation of FPF, fabricating and supply of buoy chains, plems, anchor chains, piles ::: Downloaded on - 09/06/2013 17:35:53 ::: 6 APP1358/98 and accessory equipments which had to be installed / supplied by petitioners.
G) As originally agreed between the parties, the date of commencement of the contract was 6th June 1988 and the date of completion was 6th December and that, any rescheduling of the commencement and the completion ig dates had to be by mutual agreement in terms of Clause 8.5 of the contract.
H) After the work order was placed by appellants with the respondents, there were kick off meetings between the parties.
According to the respondents, various
changes were made by appellants in the
terms of the telex, which created
uncertainty and delay in the commencement date. These, which are referred to as the major factors are set out in paragraph 8 of the statement of claim.
::: Downloaded on - 09/06/2013 17:35:53 ::: 7 APP1358/98I) According to the respondents, the schedule of the project was affected by the delays caused by appellants in keeping several key free issue components for the project ready. It was imperative, according to the respondents, that once their marine spread was mobilised, it would remain fully ig busy upon arrival in India, in order that stand-by costs could be avoided. Appellants were not agreeable to paying USD 35,000 per day as stand-by charges demanded by the respondents.
J) According to the respondents, the first stage invoice was submitted by them to petitioners on 14th August 1988 but no payment was made by appellants as stipulated. As a matter of fact, the said payment was never made on the ground that appellants could not have made the payment in foreign exchange unless the written ::: Downloaded on - 09/06/2013 17:35:53 ::: 8 APP1358/98 contract was signed by appellants and the bid bound was not extended till 30.12.1988.
Because of difference of opinion between the two learned Arbitrators, the disputes were referred to learned Umpire who made his award.
Being aggrieved by the award of the Umpire, the present appellants filed arbitration petition No.107 of 1997. That petition was decided by the learned Single Judge of this Court by judgment dated 29th/30th June 1998. The learned Single Judge dismissed the petition. The present appeal is directed against that order.
4] The present appeal was heard by a Division Bench of this Court and by order dated 12th March 2003, the appeal was dismissed. Against that order, the present appellants approached the Supreme Court, the proceedings were registered as civil appeal No. 6018 of 2004. It was disposed off by order dated ::: Downloaded on - 09/06/2013 17:35:53 ::: 9 APP1358/98 21st April 2010 by the Supreme Court. The order of the Supreme Court is as under :-
Heard learned counsel for the parties at length.
This appeal has been preferred against the impugned judgment and order dated 12.3.2003 of the High Court of Bombay. The facts in detail have bee set out in the impugned judgment of the High Court and hence we are not repeating the same here. Without going very much in detail into the dispute between the parties, we are of the opinion that a proper decision should have been given whether there was a concluded contract between the parties and whether there was an arbitration agreement between them. It has to be decided whether the Telex Message dated 6.6.1988 was only a letter of intent or a concluded contract between the parties. As held by Madras High Court in (2005) 2 M.L.J. 653, a letter ::: Downloaded on - 09/06/2013 17:35:53 ::: 10 APP1358/98 of intent is only a document which shows that a party is likely to place a contract with another party, but a letter of intent itself is not a contract. The Special Leave Petition against the said judgment was dismissed.
We are not expressing any opinion as to whether the Telex Message dated 6.6.1988 is only a letter of intent or a concluded contract and we are also not expressing any opinion, whether there was any arbitration agreement between the parties. We are also not going into the other questions decided by the High Court.
Hence, we set aside the impugned order of the High Court and remand the matter back to the Division Bench of the High Court for giving a fresh decision in accordance with law and in the light of the observations made above, expeditiously.
The appeal is accordingly allowed.
No cost.::: Downloaded on - 09/06/2013 17:35:53 ::: 11 APP1358/98
On remand, the matter is placed before us for hearing. The first question that was urged before us was in relation to the existence of the concluded contract between the parties. We find from the record that the question whether there is a concluded contract between the parties or not was raised in arbitration petition No.3945 of 1991 filed by the respondents in this Court. That petition was decided by order dated 17th September 1993 by the learned Single Judge of this Court. Paragraph 7 of that order reads as under :-
7. On behalf of the respondents, the reference is objected inter alia on the main ground that there is no concluded eg. Contract between the parties and therefore the plaintiffs are not entitled to seek the reference as claimed in this petition.
It is thus clear that on behalf of the present appellants, an issue as to the existence of ::: Downloaded on - 09/06/2013 17:35:53 ::: 12 APP1358/98 the concluded contract between the parties was raised in arbitration petition No.3945 of 1991. The learned Single Judge considered that question and the conclusions of the learned Single Judge are recorded in paragraph 9. Paragraph 9 reads as under :-
9. In the circumstances, I do not find any merits in the opposition and or objections raised by and on behalf of the respondents.
The reliefs as claimed in the petition have to be granted.
Thus, the learned Single Judge held that there is a concluded contract between the parties.
The order dated 7th September 1993 passed in arbitration petition No.3945 of 1991 has become final between the parties. In our opinion, therefore, in the face of this order, it cannot now be said by the appellants that there is no concluded contract between the parties. In addition to this, we have been pointed out paragraph 2 of the ::: Downloaded on - 09/06/2013 17:35:53 ::: 13 APP1358/98 affidavit of evidence filed on behalf of the appellants of Shri V. Shivaram Krishna. Paragraph 2 of that affidavit reads as under :-
I say that opponents have placed a firm order with the Claimants by telex dated 6.6.1988 and as per clause 8 of the said TOI which provides that till the contract is signed this telex order shall remain as binding between the parties.
Thus, the witness examined on behalf of the appellants has himself stated that there was a binding contract between the parties. In our opinion, therefore, the appellants cannot now say that there is no binding or concluded contract between the parties.
5] The learned counsel appearing for appellants next submitted that the learned Umpire has not given any reason for holding that the claimants are entitled to a sum of USD 10,00,000.
::: Downloaded on - 09/06/2013 17:35:53 ::: 14 APP1358/98The learned counsel submitted that the learned Umpire considered in detail the oral evidence of Ms Benichou and held that on the basis of her evidence, the entire claim made by the claimants i.e. Of the amount of USD 20,00,000 on various heads (A) to (G) cannot be allowed fully. However, the learned Umpire without again dealing with the evidence to find out what portion of the claim can be awarded on the basis of oral evidence and the documents produced on record by the witnesses, decided to award 50 % of the claim without giving any reasons why 50 % of the claim is being awarded. The learned counsel, relying on the judgment of the Constitution Bench of the Supreme Court in the case of Raipur Development Authority and others, v/s M/s Chokhamal Contractors and others, reported in (1989) 2 SCC 721 submits that as these proceedings were under the 1940 Arbitration Act, the learned Umpire was free to make a non-speaking award, but as the learned Umpire has chosen to give reasons for his award, the award is liable to be set aside as for the finding referred to above he has not given reasons. The ::: Downloaded on - 09/06/2013 17:35:53 ::: 15 APP1358/98 learned counsel appearing for respondents, on the other hand, submits that the finding of the learned Umpire that the claimants are not entitled to the amount of USD 10,00,000 is based on appreciation of evidence on record and therefore, it cannot be disturbed. The learned counsel submits that the learned Umpire has considered the evidence on record for awarding the claim. He however submits that the learned Umpire has also power to make lump sum award and the award made by the learned Umpire is of the nature of lump sum award and therefore, it cannot be interfered with by this Court.
6] Perusal of paragraph 36 of the award shows that the matter was before two Umpires, Justice Chandrachud and Mr Gadkari. Mr Gadkari in his award has held that the claimants can be awarded USD 16,07,000 as against their claim of USD 20,00,000.
Justice Chandrachud, however, in his award held that no amount can be granted to the claimants because the witness has no personal knowledge about the expenses incurred or vouchers produced by the ::: Downloaded on - 09/06/2013 17:35:53 ::: 16 APP1358/98 claimants. Justice Chandrachud gave two additional reasons for holding that the claimants are not entitled to the amount claimed by the claimants.
The learned Umpire further obseves that the difficulty that was faced by Justice Chandrachud in awarding the claim was that the witness examined on behalf of the claimants had no personal knowledge of the transaction. According to the learned Umpire, that difficulty has been removed because the claimants have examined before the learned Umpire Ms Benichou as a witness. The learned Umpire in paragraph 38 refers to the deposition of the witness. The learned Umpire in paragraph 39 observes thus :-
39. I accept the evidence of Ms Benichou that she had seen the originals of which the xerox copies are produced, that the xerox copies were made by the Marseilles office on her instructions, that she could identify the signatures, initials and notings on the xerox copies, and that ::: Downloaded on - 09/06/2013 17:35:53 ::: 17 APP1358/98 the originals were lost, misplaced or destroyed when the claimants shifted their office from Marseilles to a place which was at a distance of about 20 kms.
Thereafter, the learned Umpire proceeded to considered the question whether the claims (A) to (G) made by the claimants can be awarded on the basis of oral evidence and the documents produced on record and in paragraph 41, the learned Umpire observes thus :-
41. Taking into account these aspects of the evidence of Ms Benichou, the claim made by the claimants under items A to G of Annexure A which aggregate to USD 20,00,000 cannot be allowed fully.
What is pertinent to be noted here is that in paragraph 40 where the learned Umpire discusses evidence on record, the learned Umpire nowhere indicates as to if full claim is not made out by the ::: Downloaded on - 09/06/2013 17:35:53 ::: 18 APP1358/98 oral and documentary evidence on record, to what extent each claim has been made out. The learned Umpire also does not discuss the evidence to find out as to what portion of the claim is established by the evidence on record after recording findings in paragraph 41 which we have quoted above that the evidence on record does not make out the claim fully. Instead, the learned Umpire observes thus :-
In these matters, a rough and ready formula has to be inevitably adopted, bearing in mind all the circumstances of the case. Having considered the matter on the basis of the evidence, oral and documentary, I am of the opinion that the claim made by the claimants in the sum of USD 20,00,000 should be reduced by one half.
The learned Umpire does not indicate as to how he finds that granting 50 % of the claim would be appropriate, why the claimants are not entitled ::: Downloaded on - 09/06/2013 17:35:53 ::: 19 APP1358/98 to an amount less than 50 %, why the claimants are not entitled to an amount higher than 50 %. Because of series of judgments of the Supreme Court including the judgment of the Constitution Bench in the case of Raipur Development Authority (supra) it is well settled under the Arbitration Act 1940 that if the Arbitrator or Umpire chooses not to award any claim, then the reasons have to be given in support of the findings igrecorded by the Arbitrator or Umpire. The crucial finding in this case is that the claimants are entitled to award 50 % of their claim but in the entire award of the learned Umpire, one does not find any reason given why they are entitled to 50 % of the claim and not to slightly higher or lower than 50 % of the claim. In our opinion, this would be a non-speaking award. When the Arbitrator chooses to award something, reasons have to be given for each of the claim awarded by the Arbitrator. The award made by the learned Arbitrator cannot be termed as a lump sum award because this is a reasoned award made by the learned Arbitrator. Perusal of the award reveals that the ::: Downloaded on - 09/06/2013 17:35:53 ::: 20 APP1358/98 learned Umpire has not made enquiry to find out what part of the claim is made out on the basis of evidence on record. He examines in detail the evidence and records the conclusion that the claim made by the claimants is not fully made out by the claimants and then proceeds to award 50 % of the claimed amount. In our opinion, this discloses error apparent on the face of record. What is further to be seen here is that the amounts claimed in relation to some heads in petition filed under section 20 of the Arbitration Act viz. Arbitration petition No.3945 of 1991 and the amounts claimed before the learned Arbitrators were different. For example, against Item (A), total amount claimed was different. Under Item (A), the claim made was of USD 5,16,000 whereas before the Arbitrators, the claim made was of USD 7,55,000. Similar is the case with other items, but the grand total of the amounts claimed in the petition and before the Arbitrators was the same. In view of these different claims made, in our opinion, it was necessary for the learned Umpire to consider as to what part of the ::: Downloaded on - 09/06/2013 17:35:53 ::: 21 APP1358/98 claim was made out by the evidence on record and what part was not so made out. In our opinion, as the award of the learned Umpire discloses an error which is apparent on the face of the record, the award made by the learned Umpire is liable to be set aside. In the result therefore, appeal succeeds and is allowed, the order passed by the learned Single Judge in arbitration petition No.107 of 1997 is set aside.
Arbitration petition No.107 of 1997 succeeds and is allowed, the award made by the learned Umpire, which was impugned in that petition, is set aside. No order as to costs.
At the request of the learned counsel appearing for respondents, it is directed that the bank guarantee which is given by the respondents pursuant to the interim order passed in this appeal, shall not be invoked for a period of eight weeks from today. If within that period, no contrary order from the superior Court is received, the Prothonotary and Senior Master of this Court shall invoke the bank guarantee and pay the amount to the ::: Downloaded on - 09/06/2013 17:35:53 ::: 22 APP1358/98 appellants. The learned counsel appearing for appellants states that he will keep the bank guarantee alive for a period of eight weeks from today.
Parties to act on the copy of this order duly authenticated by the Associate / Private Secretary of this Court.
Certified copy expedited.
( JUSTICE D.K. DESHMUKH ) ( JUSTICE R.G. KETKAR ) ::: Downloaded on - 09/06/2013 17:35:53 :::