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Oil and Natural Gas Corporation Limited Vs. Dowell Schlumberger (Western) S.A. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberAPO/T No. 554 of 1996
Reported in(1997)1CALLT486(HC)
ActsArbitration Act, 1940 - Section 30
AppellantOil and Natural Gas Corporation Limited
RespondentDowell Schlumberger (Western) S.A.
Appellant AdvocateB.K. Batchwat, Adv.
Respondent AdvocateS.K. Kapoor and ;Anajan Mitra, Advs.
DispositionAppeal dismissed
Cases ReferredState of Rajasthan v. Puri Construction Limited
- .....secondly, that if dowell, the respondent, had acted diligently and according to the instruction of ongc, the equipments could have crossed manas-bridge before april 11, 1990 when the bridge was damaged. this plea of the appellant as raised was, however, not accepted by the arbitrators for the reasons specifically assigned in the award. 16. before i look into the reasons assigned in the award, it would be necessary to extract the relevant provision of force majure, which would be seen in clause 21.1 of the contract:-- '21.1. in the event of either party being rendered unable by force majeure to perform any obligation required to be performed by them under the agreement, the relevant obligation of the party effected by such force majeure shall upon notification to the other party be.....

Sidheswar Narayan, J.

1. This is an appeal against the judgment and order dated October 4, 1996 of a Single Judge of this court, by which an application under Section 30 of the Arbitration Act, 1940, to set aside an award dated June 10, 1995 was dismissed.

2. A dispute relating to the claim for rentals of equipments and for supply of chemicals arising out of a contract between the parties was referred to the joint Arbitrators, Mr. Alok Chandra Gupta (nominated by ONGC) and Mr. R.P. Bhatt (nominated by Dowell) both retired judges of High Court. At the close of the reference proceeding, there was an Award in favour of the claimant (Dowell) directing the appellant (ONGC) to pay the following amounts with interest @ 7.5 per cent per annum from 1st April, 1994 till the date of payment as also a sum of Rs. 25,000 as costs of arbitration :

(1) Claim for rentals of equipment (payable is US$)

(2) Claim for difference in exchange rate on the invoice for supply of chemicals (payable in Rupees at the DD buying exchange rate on the date of payment.

US$ 345,449.39US$ 16,345.27

3. The Award was challenged on the grounds with regard to the authority of the joint Arbitrators in construing the terms of the contract and also there being errors of facts and in law said to be apparent on the body of the Award. A question was, therefore, raised as to the extent of interference by a court of law with regard to the contentions raised as such. A long catena of authoritative decisions with regard to propositions of law was cited on the either side before the Single Bench where the appellant did not, however, find favour to accept its contention and, accordingly, the matter has been brought before this Bench. It may be added here that in the event of there being no default in conducting the proceeding of an arbitration as being an admitted case here there usually arises only the question as to how the terms of the contract have been interpreted by the arbitrators and if such interpretation has resulted into some apparent errors in the Award with regard to the facts. Any interference by a court of a law was however restrictive as provided under Section 30 of the Arbitration Act, 1940. It was only the extent of restriction which has thus been always in anxiety for a court of law so as to determine the same in the given facts of a particular case and to sub-serve the cause of justice.

4. At this juncture I may advert to the factual matrix of the case which can be fairly summarised as follows. By a contract in writing dated December 26, 1988 the respondent Dowell, agreed to let on certain equipments including Coil Tubing Unit (CTU) and Nitrozen Unit (N2) for production testing on-shore and off-shore rigs for one year with option to renew and extend the period. By an Addendum-I to the original contract, the term was extended for a further period of 10 months from 2.8.89 to 1.6.90 or till completion of testing of SMB-4 well of Calcutta off-shore project. The rental for the equipment was to be applicable from the date complete set of equipments is off-loaded at Calcutta/Haldia and made in a condition to full readiness to commence work and was to cease the day the equipments reached the port of entry. The contract provided that Dowell, the respondent, shall arrange for inland transportation of equipments/chemicals from one place to another as required by the company in connection with the requirement of jobs but the contractor will engage any transport agency with prior approval of the company in this regard. There was a term of contract as 'Force Majeure' as per which in the event of either party being rendered by a 'Force Majeure' to perform any obligations required to be performed by them under the contract, the relative obligation of the party effected by such 'Force Majeure' was upon notification to the other party to be suspended for the period during which such cause lasted.

5. Pursuant to the above contract, on 24.3.90 instructions were given by ONGC, the appellant, for mobilising four equipments from Agartala to be sent to Haldia for conducting testing in Haldia. However, since a bridge on the way to Agartala was damaged, the equipments loaded on containers could not reach Agartala. After negotiation ONGC decided that two of the equipments should be removed from the containers and transported by trucks to Haldia. The concerned equipments, therefore, reached Haldia in May, 1990. The remaining two pieces of machinery were agreed to be transported by some alternative mode and it was also agreed that any additional expense relating to transport would be paid by ONGC In June, 1990, while ONGC was procrastinating, Dowell, the respondent, suggested that the remaining two pieces of equipment should be sent by Rail but such permission was refused. Thus the restoration of the bridge for normal traffic was awaited for some time. The respondent, Dowell, thereupon, raised the invoices for the rental of the equipments. The claims were, however, rejected by the appellant-ONGC. The dispute was, therefore, referred to the joint Arbitrators: and there was an Award as referred to above.

6. The Award was, however, sought to be set aside on the grounds as hereinafter stated in brief:--

(i) The award is based on erroneous finding of facts.

(ii) The learned arbitrators in making the award disregarded the express terms of the contract.

(iii) The terms of the contract do not bear the decision of the arbitrators.

7. The above grounds, if put in different words, purported to suggest that the terms of the contract have not been properly construed with the consequence that there were apparent errors of finding of facts, which would ultimately vitiate the Award.

8. Before I go into the factual score, it would be apt to advert to the legal proposition as to what extent a court of law can interfere with an Award. While Section 30 of the Arbitration Act, 1940 has certainly provided for a negative role in this regard to the exception of only three statutory grounds as mentioned therein, a series of authoritative decisions of the Supreme Court, given from time-to-time, are available by now. Both the parties have placed reliance on one or the other such decisions and the learned single Judge has made specific reference to all those in his judgment. Those very decisions were referred to before this Bench as well. Whereas I do not find any particular reason to discard the view expressed by the learned single Judge with regard thereto, 1 would prefer to quote only a few of those decisions, which in my opinion, would serve the purpose in the instant case. It may, however, be noted here that there was, in fact, no divergent view expressed by the Supreme Court in the matter. The legal propositions as laid down by the Supreme Court from time-to-time were more or less the same, depending upon the individual facts of a particular case.

9. Since the main thrust of the dispute raised here was with regard to the interpretation of the terms of the contract by the Arbitrators, I would prefer first to refer to the case of Trustee of the Port of Madras v. Engineering Constructions Corporation Ltd., reported in : AIR1995SC2423 . In this case, the Supreme Court has been pleased to review all earlier Judgments of the English Court, Privy Council and of its own, which laid down that the interpretation by the Arbitrator cannot be challenged unless, of course, the reason for interpretation has been given in the Award and found erroneous. The Supreme Court, ultimately found that the conclusion arrived at by the Umpire as to the nature of the obligation undertaken by the appellant (of the said case) was a question of fact and cannot be interferred with because such question of fact was raised before the Division Bench and was not before the Umpire.

10. In this authoritative decision of the Supreme Court which has been relied upon by the respondent and which appears to be the latest one out of those cited on either side, I find that the Supreme Court has expressed its firm option that it was not open to the Division Bench to reappraise the evidence/ material before the learned Umpire and come to a different finding of fact (para 21). (Emphasis invited)*. This conclusion was arrived at even after recording approval of its earlier decision in Hindustan Construction Company Ltd. v. State of Jammu & Kashmir, reported in AIR 1992 SCW 2647, which was sought to be relied upon by the appellant in the instant case. In the case of Hindustan Construction Company Ltd., it was observed that even if, in fact, the Arbitrators had Interpreted the relevant clauses of the contract in making their Award on the impugned items and even if the interpretation is erroneous, the court cannot touch the Award as it is within the jurisdiction of the Arbitrators to interpret the contract (para 17).

11. I may also refer to the decision of the Supreme Court in the case of Associated Engineering Company v. Government of Andhra Pradesh reported in : [1991]2SCR924 , which has been relied upon by the Counsel for the appellant. The relevant proposition of law as formulated in the said case can be placed as hereinafter:--

'The Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But if he has remained inside the parameters of the contract and has construed the provisions of the contract his award cannot be interferred with unless he has given reasons for the award disclosing an error apparent on the fact of it (para 26).'(Emphasis invited)*

12. Almost on the same line of legal proposition as laid down above, there was also an earlier decision of the Supreme Court which I would like to refer here to make the position all the more explicit. This was in the case of Food Corporation v. Joginderpal Mohinderpal and Anr., reported in : [1989]1SCR880 , wherein by Sabyasachi Mukherji J., as then he was, observed as follows:--

'The Arbitrator had construed the effect of the clause of the contract and it cannot be said that such a construction is a construction which was not conceivable or possible. If that is the position, assuming even for the sake of argument that there was some mistake in the construction, such mistake is not amenable to be corrected in respect of the award by the court.............The conclusion arrived by the Arbitrator is a plausible conclusions. The court has, in our opinion, no jurisdiction to interfere or modify the Award.........' (Emphasis invited)*

13. One of the decisions which have been cited on behalf of ONGC, the appellant, is that of the State of Rajasthan v. Puri Construction Limited, : (1994)6SCC485 . In citing this decision reliance was placed on para 21 of the judgment of G.N. Ray, J. This decision does not show anything different from the principles laid down in the cases cited on behalf of Dowell. G.N. Ray, J. at page 502(e) of the judgment said this:

'By and large the courts had disfavoured interference with Arbitration Awards on account of error of law and facts on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the Award as far as possible.'

xxx xxx xxx xxx 'Error apparent on the face of the record does not mean that on closer scrutiny of the import of documents and materials on record, the findings made by the Arbitrator may be held to be erroneous. Judicial decisions over the decades have indicated that an error of law or fact omitted by the Arbitrator by itself does not constitute misconduct warranting interference with the Award.'

14. The proposition that emerges from the above decisions is that; an Arbitrator had full authority to construe the effect of a particular clause of the contract to settle a dispute between the parties to the contract and even if a construction as such is found to be howsoever erroneous but, of course, conceivable and possible one, it was not open for court of law to substitute its own view by way of correction unless that has resulted into a manifest error of law and in facts, apparent on the body of the Award. The legal pronouncements have also cautioned a court of law against reappraisal of the facts/material appearing in a reasoned Award.

15. Now, turning attention to the contextual facts of the instant case, what appears to be most significant is that during the period when the contract was very much in force, that is, on or about April 11, 1990 one road bridge called Manas Bridge at Kakrajhar, Assam was damaged in riot and revolt by Bodo insurgents and rebels, and, as a result, the said bridge was closed to the traffic and, therefore, there was obstruction for some time in transportation through the road passing through the said bridge. The bridge was thereafter restored to the normal traffic on September 11, 1990. This was the admitted position on the record. In this context, ONGC, the appellant, has urged two points, one being that due to the situation existing during the period from April II, 1990 to September 11, 1990 they were not liable to pay the rental to the equipments in terms of the Force Majeure provided in Clause 21 of the contract and, secondly, that if Dowell, the respondent, had acted diligently and according to the instruction of ONGC, the equipments could have crossed Manas-bridge before April 11, 1990 when the bridge was damaged. This plea of the appellant as raised was, however, not accepted by the Arbitrators for the reasons specifically assigned in the Award.

16. Before I look into the reasons assigned in the Award, it would be necessary to extract the relevant provision of Force Majure, which would be seen in Clause 21.1 of the contract:--

'21.1. In the event of either party being rendered unable by Force Majeure to perform any obligation required to be performed by them under the agreement, the relevant obligation of the party effected by such Force Majeure shall upon notification to the other party be suspended for the period during which such cause lasted.'

17. Whether any such notification was made by ONGC was yet to be discovered from the record, there was, however, no assertion made about making such notification soon after the damage of the Manas bridge. Instead of that, it was significant to note that on May 18, 1990, a meeting was convened between the parties in presence of the carrier (Container-way Agencies Pvt. Ltd.) and, in view of the said bridge being damaged and closed to traffic there was discussion for transport of equipments from Agartala to Haldia by Railways as an alternative mode of transport. After a lapse of more than a month from the said meeting, that is, on June 22, 1990, Dowell requested ONGC to approve and permit transport of the equipments by rail from Agartala to Calcutta. But ONGC, on its turn, intimated Dowell that transport of the equipments by railways required re-assessment and, accordingly, no such permission was given, vide ONGC's letter dated June 28, 1990.

18. In the given facts as noticed above, the learned Arbitrators have expressed their opinion in the Award : The closer of the bridge because of damage did not constitute a Force Majeure situation as the claimant (Dowell) had requested the respondent (ONGC) that the equipment should be transported by Rail and which could have been done. There was thus an alternate mode whereby the equipments could be transported but the respondent had not granted permission to utilise the said alternative mode'.

19. The above reasoning given by the Arbitrators while construing the clause of Force Majeure cannot but be termed as a most reasonable one and, in the light of the legal proposition as already discussed above it would be rather difficult to substitute any other possible view. The Force Majeure as suggested in the contract necessarily admits of only such a situation in which there was no alternative left with the either party to discharge one's obligation because of an event making it outright impossible.

20. In view of what has been noticed above, I am confident that the Arbitrators were perfectly right in their Judgment to have accepted the claim of rental also for the period between April 11, 1990 to September 11, 1990.

21. As to the alleged delay and lack of diligence, the Arbitrators appear to have rightly observed that no one could visualise the damage to Manas-bridge as it eventually happened. In the Award, it has been also taken note of the relevant correspondences between the parties and the nature of transportation of heavy and sensitive equipments and it has been held that there could not be any haste in transportation on the part of the Dowell. In a joint meeting held on May 18, 1990, it has also been agreed in the exigencies of the circumstances that two of the equipments, for example, DST and PTS & WL would be transported by truck after destuffing those from the container and that was actually done so. And, in fact, there was no cut-of date for transportation and, in that view of the matter as well, in the given facts and circumstance of the case no question arises of lack in diligence or of deliberate delay on the part of Dowell so as to debar them from the rental. It was thus difficult to record concurrence with the submission as made on behalf of the appellant with regard to the Force Majeure and the so called delay in transportation.

22. A submission was made on behalf of the appellant that they could not use two of the equipments viz. CTU and N2 because those were lying at Agartala and could not be utilised at Haldia base. In this context, the learned Arbitrators have accepted the plea of the respondent-claimant that if permission had been granted by ONGC to transport the equipments by rail, those would have reached Haldia well in time. There appears nothing wrong about it in as much this cannot be termed to be an improbable view in the back drop of the alternate mode of transport discussed in a meeting. Moreover, significant note in this regard was that in fact, one of the equipments, namely, CTU unit which could not be transported was actually in use of ONGC in Trishna base, Agartala till April 25, 1990 and the other unit, namely N2 unit, was mobilised by Dowell from Madras and transported to Haldia in time for use at SME-4 well in that view of the matter, the claim for all the four equipments up to October 12, 1990 appears to have been accepted by the Arbitrators. How the appellant, ONGC, can escape payment of rental for the equipments already used by them.

23. Now, coming to the period for which the rental was payable, it was urged on behalf of the appellant that the contract came to an end on July 29, 1990 and, therefore, no rental was payable after July, 1990. The plea as such also was refused by the Arbitrators, but certainly, for the reason given in the Award. In order to appreciate the same, it is worth pointing out the rental clause at No. 8.4 of the contract which speaks that the equipment rental shall be applicable from the date complete set of equipment is off-loaded at Calcutta/Haldia and made in a condition of full readiness to commence work and shall seize the day equipments reached the port of entry (Calcutta/Madras). In view of this specific term, the rental was most certainly payable till the equipments reached the port of entry notwithstanding the expiry of the contract. The Arbitrators have, therefore, correctly taken a decision that the rental payments are from the port of entry and return to the port of entry and not merely at the point of time when the contract comes to an end or is terminated. The rental was, therefore, granted till the equipments reached the port of entry. I hardly find any point on this score which may call upon re-appraisal of the contextual facts or to differ with the conclusion arrived at in the Award.

For the reasons, aforesaid, there appears no valid ground to disagree with the decision of the learned single Judge and to interfere with the Award-in-question under Section 30 of the Arbitration Act, 1940. The appeal has no merit and, accordingly, it is dismissed. There shall, however, be no order as to costs.

Prayer for stay made out refused.

Umesh Chandra Banerjee, J.

24. I agree.

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