M/S. M.B. Patel & Co. v. Oil & Natural Gas Commission

Case Details & Bench

Court: High Court
Hon'ble Judges: H. K. Sema
Markandey Katju
Judgment Date: 2008-05-08
Court Decision / Holding: Appeal dismissed. The arbitrator may proceed with arbitration and re-examine the matter afresh in light of the High Court's reasoning.
Final Disposition: Appeal dismissed.

Parties to the Case

Appellants / Petitioners

M/S. M.B. Patel & Co.

Respondents

Oil & Natural Gas Commission

Legal Representation & Advocates

Counsels for Petitioners

• Ramesh Singh
• Ankur Saigal
• Gaurav Singh
• Bina Gupta

Counsels for Respondents

• B. Dutta
• ASG
• K.R. Sasiprabhu
• R. Chandrachud

Case Synopsis & Summary

MB Patel & Co. v ONGC concerns a dispute arising from several claims by the contractor under a contract with Oil and Natural Gas Corporation, including abandonment compensation, illegal deductions, delay in supply of material, costs for keeping the establishment afloat, loss of profit, and interest. An arbitrator awarded a lump sum of Rs. 5,98,438, which the Gujarat High Court at Ahmedabad set aside on several grounds: (a) the arbitrator misconducted himself; (b) there appeared to be errors on the face of the record as the umpire overlooked clauses 14 and 18 of the arbitration agreement; (c) the umpire exceeded the contract’s scope on certain items; and (d) the award was a lump sum and thus unintelligible. Clause 14 provides that compensation for delays is not admissible unless a corresponding extension of time is granted; Clause 18 provides that no interest is payable on security deposits or other amounts under the contract. The Supreme Court agreed with the High Court’s reasoning and held that the arbitrator did not consider these contractual clauses and that the interest awarded violated Clause 14. The Court directed the arbitrator to proceed afresh in light of the High Court’s reasoning and dismissed the appeal. The judgment emphasizes strict compliance with contract terms in arbitral awards and maintains the option for fresh arbitration consistent with those terms.

Provisions of Law Cited

Clause 14 of Arbitration AgreementClause 18 of Arbitration Agreement

Submissions & Arguments

Contentions of Appellants / Petitioners

Appellants contended that the arbitrator’s award reflected the contract terms and that the High Court erred in setting aside the award on grounds of misconduct or misreading of clauses 14 and 18; they urged upholding the lump-sum award and the contractor’s claimed amounts, seeking restoration of the award.

Contentions of Respondents

Respondents argued that the arbitrator misconducted himself, overlooked clauses 14 and 18 of the arbitration agreement, awarded interest contrary to clause 18, and issued a lump-sum award that was unintelligible; the High Court’s grounds for setting aside the award were correct.

Extracted Judgment Text

Exact text extracted from official judgment records.

[2008] 8 S.C.R. 35 A _i_ -lo: _MIS._ M.B. PATEL & CO. _v_ OIL & NATURAL GAS COMMISSION (Civil appeal No.7340 of 2002) MAY 8, 2008 B **[H.K. SEMA AND MARKANDEY KAT JU, JJ]** _Arbitrtion:_ _Award by arbitrator_ - _Set aside by High Court_ - _HELD: Arbitrator_ has _not considered, inter alia, clause 14 of arbitration agreement_ - _Interest_ has a/so _been awarded in violation of clause 18 of the agreement_ - _High Court_ was _right in_ its _reasonings for setting aside the award_ - _Arbitrat9r may now proceed with arbitration and would consider the matter in the light of the reasonings given in the judgment of the High_ Court CIVIL APPELLATE JURISDICTION : Civil Appeal NO. 7340 of 2002 From the Judgment and Order dated 11.7.2000 of the High Court of Gujrat at Ahemadabad in First Appeal from NO. 418/ E 1986 Ramesh Singh, Ankur Saigal, Gaurav Singh and Bina Gupta for the Appellant. **'t'** B. Dutta, ASG, K.R. Sasiprabhu and R. Chandrachud for the Respondent. F The following Order of the Court was delivered -( This appeal is filed against the judgment and order dated 11.07 .2000 of the High Court of Gujarat at Ahmedabad in First Appeal No.418 of 1986 whereby the High Court set aside the award dated 03.05.1985 passed by the Arbitrator. The High Court set aside the aforesaid award on the following reasonings: G 35 H SUPREME COURT REPORTS 36 [2008] 8 S.C.R. "' A (a) that an arbitrator or umpire has misconducted himself in the proceedings; B (b) that there appears to be an error on the face of the record inasmuch as the Umpire has overlooked clauses 14 & 18 of the Arbitration Agreement; (c) that the Umpire has traveled beyond the scope of the contract between the parties on certain items and claims and (d) that he has rendered lump sum award making it totally unintelligible. c On the aforesaid premises the award was s3t aside. In the present case the contractor claimed Rs.30,425/- for abandonment of contract. This was the first claim. The second claim was for Rs.30,213/-for illegal deductions made by ONGC. D The third claim was for Rs.2,00,000/- for not supplying the material in time by the ONGC. The fourtl-i claim was loss occasioned by the contractor for keeping his establishment alive and on this head the claim was for Rs.3,50,000/-. The fifth claim was loss of profit at the rate of 20 percent amounting E Rs.1,80,000/-. Last claim was interest at the rate of 18% p.a. As already pointed out that the Arbitrator awarded Rs.5,98,438/- as lump sum, we agree with the reasoning of the High Court that the award is unintelligible. F Clause 14 of the Arbitration Agreement reads as under : "DELAY IN CONSTRUCTION (COMMISSION'S DEFAULTS); G H The Commission will make every reasonable affect to furnish the materials under the contract and the right of user including the permits required to be furnished by the Commission under the contract in due time so as not to delay the construction related work of reconditioning. In case of any hold up to site work of the CONTRACTOR on account of non-availability of any one of these terms, no M/S. M.B. PATEL & CO. v. 37 OIL & NATURAL GAS COMMISSION compensation by way of claims is admissible but only A corresponding extension of time limit would be granted." Under the aforesaid clause no claim for compensation is admissible even that foul of the Commission. Clause 18 of the Arbitration Agreement reads : B ## "INTEREST ON AMOUNTS No interest will be payable on the security deposit or any other amount payable to the CONTRACTOR under the contract." c The Arbitrator has awarded the interest at the rate of 12% on the amount with effect from 09.02.1984 to 03.05.1985 (pendente lite). He has also awarded interest from the date at the rate of 12% on the amount as shown in 1 & 3 above till the date of decree or actual date of payment, whichever is earlier. In view of the aforesaid premi!'es, the Arbitrator has not at all considered clause 14 of the Arbitration Agreement. The interest has been awarded in violation of clause 14 of the Agreement. Apart from others these two legal aspects have not been considered by the Arbitrator. We are, therefore, in full agreement with the reasoning given by the High Court. The Arbitrator may now proceed with the arbitration but in the light of the judgment of the High Court. We direct the Arbitrator to consider the matter afresh in the light of the reasoning of the High Court. Subject to the aforesaid, the appeal is dismissed. D E F R.P. Appeal dismissed.