Oil & Natural Gas Corporation Ltd. v. Essar Shipping Ltd.
2008-06-23
P.B.MAJMUDAR, R.M.S.KHANDEPARKAR
body2008
DigiLaw.ai
ORAL JUDGMENT (Per Sri R.M.S. Khandeparkar, J.): 1. Admit. The learned Advocate for the respondent waives service. By consent, heard forthwith. 2. This appeal arises from the order dated 30-11-2006 passed in Arbitration Petition No.421 of 2006. The said petition under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter called as "the said Act", was filed by the appellant challenging the award dated 26-6-2006 passed by the arbitral tribunal. 3. The impugned order along with the award of the arbitral tribunal is sought to be challenged on two grounds; namely, that the learned arbitrator as well as the learned single Judge erred in holding that the claim was put forth within the period of limitation ignoring the fact that the cause of action in the matter had arisen as long back as in February, 1995 and the arbitration proceedings were sought to be commenced beyond the period of three years from the said date. The second ground of challenge is that the findings arrived at by the arbitral tribunal in relation to the consumable goods brought on the vessel during the dry docking period were contrary to the terms of the contract comprised under Article 7.1.6 thereof and the Clause 12.1.2 of Schedule 12 to the contract. 4. Taking us through the award of the arbitral tribunal and the impugned order of the learned single Judge, the learned senior counsel appearing for the appellant submitted that in terms of Section 21 of the said Act, the arbitral proceedings commence on the day on which a request for the dispute to be referred to arbitration is received by the respondent. However, such a request can be made only within three years from the date on which the cause of action arises for referring the dispute for arbitration. According to the learned senior counsel, the correspondence between the parties as well as the minutes regarding the meetings held between the parties clearly reveal that non-acceptance of the claim in relation to the supply of consumable goods made during the dry docking of the vessel being not acceptable to the appellant was made known to the respondent in February, 1995.
The respondent, therefore, was fully aware since February, 1995 that the claim in that regard was not acceptable to the appellant and, therefore, the cause of action, if any, to put forth the claim in that regard arose in February, 1995 and hence the arbitral proceedings for the same could have been commenced, in terms of Section 21 of the said Act, within three years from the said date. Referring to the letter dated 10-8-1998 by the respondent to the appellant, it was sought to be contended on behalf of the appellant that merely by writing such letter, the respondent could not claim to have extended the period of limitation to enable the respondent to commence the arbitral proceedings after the expiry of the period of three years from 6-2-1995. 5. The perusal of the award passed by the arbitral tribunal as well as the impugned order passed by the learned single Judge clearly disclose that the arbitral tribunal after taking into consideration the entire correspondence and the other documents particularly relating to the records regarding the meetings between the parties has held that the claim was put forth within the period of limitation and there was no bar of limitation as such. The learned single Judge in this regard has referred to the letter dated 2-9-1998 and has held that the said letter clearly shows that till that date the claims made by the respondent were under the consideration of the petitioner (appellant) and they were rejected only on 2-9-1998 and, therefore, there was no bar of limitation. Attention was sought to be drawn to the letter dated 10-8-1998 to contend that the said finding is contrary to the materials on record and particularly to the contents of the said letter, wherein it was written by the respondent to the appellant that:- "We are thankful for the courtesy extended to the undersigned during his visit on 6th August 1998 wherein we intimated to you that our payments towards F.E. Variation invoices is still pending with you since 1994.
Kindly note that in April 1994 we have submitted our total F.E. Variation Claim Invoices (as advised by your goodself and agreed by Essar that these invoices will be processed only after Essar submits its total claim towards F.E. Variation for the above referred contract)." Referring to the above quoted contents, it was sought to be argued that even before September, 1998 it was known to the respondent about the rejection of the said claim. It is pertinent to note that the said letter appears to be in response to the letter dated 14-3-1997 by the appellant. However, the letter of 14-3-1997 is not available for perusal. In any case, the letter dated 2-9-1998 itself discloses that the parties were in negotiations on the aspect of the claim put forth by the respondent and the final decision regarding rejection of the claim was not known to the respondent till September, 1998 and this is apparent from the following contents of the letter dated 2-9-1998 itself:- "This is with reference to your letter dated 10th August, 1998. With respect to invoices of diving personnel and saturation Bonus, the same is being viewed by our legal and finance department for any further necessary actions. Invoices related to spare parts supplied during offhire/drydock period, services of technician, equipment hire, management fees, capital goods and others had been discussed at various levels between ONGC and Essar on 19.1.95, 18.4.95, 2.3.95 and 6.2.95. During the discussion it was agreed by ONGC and Essar that most of the referred claims of Essar is not tenable, but however certain specific cases were to be examined by ONGC and Essar jointly after submission of additional information by Essar. Till date these additional information had not been furnished by Essar after our several reminders. In view of above, it can be inferred that there is no further claim of Essar eligible for FE variation compensation. Status report on above is enclosed for your ready reference at Annexure-A." 6. Even the letter dated 6-6-1997 also clarifies the same position. 7.
Till date these additional information had not been furnished by Essar after our several reminders. In view of above, it can be inferred that there is no further claim of Essar eligible for FE variation compensation. Status report on above is enclosed for your ready reference at Annexure-A." 6. Even the letter dated 6-6-1997 also clarifies the same position. 7. In the circumstances, since the materials on record sufficiently reveal that the parties were in negotiations and only in September, 1998 it was revealed to the respondent that the claim put forth by them against the appellant was not acceptable and there was no option left to them than to raise dispute in that regard by way of arbitration proceedings, that thereafter, steps were taken to initiate such proceedings and this view being possible view on the basis of the materials placed before the arbitral tribunal and having so held by the arbitral tribunal, we find no error on the part of the learned single Judge in rejecting the challenge on the ground of bar of limitation. 8. As regard the second ground of challenge, Article 7.1.6 of the contract between the parties provide that:- "Each and every document emerging from site/vessel in support of any claim by the Contractor has to have the counter-signature/comments of Commission’s representative/engineer without which no claim will be entertained by the Commission." The Clause 12.1.2 of Schedule 12 of the said agreement between the parties provides that:- "The condition of the vessel and its equipment should be such that it does not require any dry docking/overhauling during the primary contract period. In case during contract period vessel require any dry docking due to statutory reason or due to emergency repair, it will be to contractor’s account from the time of OFF-HIRE survey till subsequent ON-HIRE survey." Considering these two clauses, it was sought to be contended that undisputedly, the documents regarding the consumable goods brought on the vessel did not bear the signature of the Commission’s representative or engineer and secondly the same was during the dry docking period and therefore there was no liability upon the appellant to satisfy the claim put forth by the respondent in that regard. The learned arbitral tribunal, however, has rejected the same and the learned single Judge erred in rejecting the challenge in that regard. 9.
The learned arbitral tribunal, however, has rejected the same and the learned single Judge erred in rejecting the challenge in that regard. 9. Perusal of the award and the impugned order discloses that the learned arbitral tribunal has clearly held that the fact that the consumable goods were brought on the ship was clearly established by the other evidence on record, including the documentary proof comprised of endorsement by the customs authorities and being so, mere failure to comply with the procedural requirements pertaining to counter-signature of the Commission’s representative, that would not be a justification to deny the claim put forth by the respondent. There is a clear finding by the arbitral tribunal that there is sufficient evidence to establish that the items of spares and consumables were delivered on board the vessel and, therefore, absence of any counter-signature by the appellant’s representative would not make any difference and the arbitral tribunal was justified in proceeding on the basis that such spares and consumables were actually delivered on board the vessel. It is also held that Article 7.1.6 is not applicable to the facts of the present case since the documents supporting the claim for FEV were not generated on, and did not emerge from the vessel or the site which is the requirement of Article 7.1.6 of the contract for its applicability. Indeed, once it is established that the claim was in relation to the spares and the consumables delivered on board the vessel, it cannot be said that the documents relating to such supply to the vessel had emerged from the vessel or were generated on the site. It was in relation to the goods which were supplied to the vessel, having been delivered on board the vessel and, therefore, as rightly observed by the learned arbitral tribunal, it will have no application in the facts and circumstances of the case and even otherwise the requirement being mere procedural requirement and the factum of such goods having been delivered on board the vessel having been clearly established by other documentary evidence to which no challenge could be thrown on behalf of the appellant, mere absence of counter-signature of the appellant’s representative on such documents would not disentitle the respondent from claiming the said amount and no fault can be found, therefore, with the arbitral tribunal awarding the award in respect of such claim. 10.
10. It was sought to be contended that at one place the arbitral tribunal has held that the provision of Article 7.1.6 are applicable whereas in the next para it has jumped to the conclusion that the said provision is inapplicable. The contention is devoid of substance. It is true that in para B.14 in relation to the claim for spares and consumable, in the arbitral tribunal’s award it was observed that "It is obvious that Article 7.1.6 requires the counter signature of the Respondents representative/engineer in order to ensure that the items are delivered on board the vessel." It is also equally true that in para B.16 the arbitral tribunal has held that:- "We also find that Article 7.1.6 is inapplicable to the facts of the present claim since the documents supporting the claims of FEV are not generated on, and do not emerge from the vessel or the site." The observation that Article 7.1.6 requires counter-signature of the respondent’s representative in para B.14 is with reference to the arguments which were advanced on behalf of the respondent before the arbitral tribunal. The respondent who was the claimant had submitted that it would not be possible for the respondent to obtain counter-signature of the representative of the appellant on the documents showing receipt of the spares and consumable on board the vessel and as admitted by the appellant their representative could not be present on the vessel during the dry period, however, it was sought to be contended that the customs authorities had endorsed the documents regarding receipt of such goods on board the vessel and that proved the receipt of spares and consumables on board the vessel. While appreciating the said argument, the arbitral tribunal had observed that the contract between the parties comprised under Article 7.1.6 obviously requires counter-signature of the appellant’s representative in order to ensure that the items were delivered on board the vessel.
While appreciating the said argument, the arbitral tribunal had observed that the contract between the parties comprised under Article 7.1.6 obviously requires counter-signature of the appellant’s representative in order to ensure that the items were delivered on board the vessel. However, the said observation is immediately followed by the observation that:- "But if there is otherwise sufficient evidence to establish that the items of spares and consumables were delivered on board the vessel, the absence of any counter signature by the Respondent’s representative/engineer would not make any difference and the Arbitrators would be justified in proceeding on the basis that the Spares and consumables were delivered on board the Vessel." This apparently shows that the arbitral tribunal taking note of Article 7.1.6 of the contract has observed that undoubtedly as per the said Article it requires counter-signature of the appellant’s representative on the items delivered on board the vessel, however, mere absence of such counter-signature would not disprove the factum of receipt of spares and consumables on board the vessel if there is sufficient evidence otherwise available on record to establish such receipt of the goods on board the vessel. Having so observed, the arbitral tribunal thereafter, referring to the contents of Article 7.1.6 has also held that in the facts of the case the said Article was not attracted. We find no discrepancy in the observations and the finding arrived at by the arbitral tribunal. 11. It was then sought to be contended that the learned single Judge has, however, proceeded on the basis that Article 7.1.6 is applicable to the facts of the case. The contention does not appear to be borne out from the impugned order. Attention was drawn to para 5 of the impugned order which reads thus: "5. So far as the third ground is concerned, the arbitral tribunal has held that the requirement of the counter signature for receipt of the items on the vessel is not the mandatory requirement. The purpose of counter signature of a representative of the petitioner was introduced to ensure that the items in relation to which the claim is made is actually received on the vessel. The arbitral tribunal has held that considering the documents from the Customs authorities it can be said that the requirement is substantially complied with.
The purpose of counter signature of a representative of the petitioner was introduced to ensure that the items in relation to which the claim is made is actually received on the vessel. The arbitral tribunal has held that considering the documents from the Customs authorities it can be said that the requirement is substantially complied with. The Arbitral Tribunal has also considered the position that the times may be received on the vessel during the off-hire period when the representative of the petitioner may not present on the vessel, but that item may be actually consumed or used during the contract period. After having heard the learned Counsel appearing for the petitioner on this aspect of the matter, I find that the conclusion that is reached by the arbitral tribunal is a possible conclusion." The learned single Judge has clearly held that the arbitral tribunal in no uncertain terms has held that the requirement of counter-signature is not a mandatory requirement and considering the documents from the customs authorities, it can be very well said that the said requirement is substantially complied with. We have already observed above that the arbitral tribunal, on detail consideration of the rival contentions and on perusal of the entire materials placed on record, has arrived at the conclusion that in the facts and circumstances of the case it was not required to comply with Article 7.1.6 and in any case, in the facts and circumstances, the materials placed on record clearly establish the goods having been received on board the vessel. 12. As regards the contention relating to Clause 12.1.2, it provides that the vessel and its equipment, work equipment, call out and personnel (regular as well as call out personnel) should have the requisite capacity and capability to perform as per scope of work during the contract period. The sub-clause 2 thereof provides that the condition of the vessel and its equipment should be such that it does not require any dry docking or overhauling during the primary contract period and in case during the contract period the vessel require any dry docking due to statutory reason or due to emergency repair, it will be to contractor’s account from the time of OFF-HIRE survey till subsequent ON-HIRE survey.
These Clauses obviously disclose, as rightly held by the learned arbitral tribunal, that the same relate to the maintenance part of the vessel and it does not bar the receipt of spares and consumable goods during the dry docking/hire period and on the contrary the receipt of spares and consumables during the off-hire period for contractual operation is definitely contemplated and for such spares and consumable, admittedly, the FEV is payable. The learned arbitral tribunal after going through the sub-clauses and taking into consideration the entire contract between the parties has arrived at the above finding on proper construction of the said term. We do not find any arbitrariness in exercise of its powers by the arbitral tribunal, nor there is manifest disregard to the terms of the contract, nor even any error in construction of the contract or the terms thereof while arriving at the above findings. If a possible view has been taken in relation to the obligation of the parties based on the construction of the terms of the agreement between the parties, unless arbitrariness on the part of the arbitral tribunal in that regard in the matter of such construction of the contract is established, there cannot be any justification for interference in the award under Section 34 of the said Act. The decision of the Apex Court in Associated Engineering Co. v. another Government of Andhra Pradesh and another, reported in AIR 1992 SC 232 , rather than lending any assistance to the arguments advanced on behalf of the appellant, justifies the view that we are taking in the matter. The decision of the Apex Court in Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., reported in (2003) 5 SCC 705 , also is of no assistance in the matter in hand to the appellant. We do not find any sort of misconduct on the part of the arbitrator in construction of the terms of the contract or in relation to any of the findings arrived at by the learned arbitral tribunal. In the circumstances, the learned single Judge was justified in rejecting the said challenge and, therefore, we do not find any case for interference therein. The appeal, therefore, is rejected. 13.
In the circumstances, the learned single Judge was justified in rejecting the said challenge and, therefore, we do not find any case for interference therein. The appeal, therefore, is rejected. 13. It was also sought to be contended that the consumable goods which were supplied during the dry docking period, it would not be the liability of the appellant in that regard to satisfy the claim of the respondent. The contention is solely based on the basis of Clause 12.1.2 of Schedule 12 of the contract. As already held above, in the facts and circumstances of the case, the arbitral tribunal having found such liability for the reasons recorded therein, we do not find any substance in this contention and, therefore, the same is to be rejected. 14. It was sought to be contended that if the consumable goods are delivered during the dry docking period and they are consumed by the vessel during such period, the liability would not rest upon the appellant in that regard. However, the finding of the arbitral tribunal is to the effect that the spares and consumables referred to in the claims were utilised for contractual operation and that, therefore, they were not utilised during the dry dock period/off-hire period and there is no dispute in this regard as is apparent from the minutes of the joint meeting. Once the arbitral tribunal on analysis of the materials on record has arrived at the finding that it reveals no dispute on the point that such goods were utilised for contractual operation and that therefore they were not utilised during the dry dock period/off-hire period, the contention contrary to the said finding cannot be entertained in petition under Section 34 of the said Act. Whether there is a dispute regarding the fact that the goods were utilised for contractual operation or not is not a pure question of law. It is based on materials placed before the arbitral tribunal and essentially is a question of fact. Being so, once the arbitral tribunal has arrived at the said finding, unless the finding is shown to be totally perverse or contrary to the materials on record, we do not find any justification to entertain the appeal against the impugned order which nowhere discloses the said finding to have been contended to be either perverse or contrary to the materials on record.
This contention also, therefore, is to be rejected. 15. As no other point is sought to be canvassed, we find no case for interference. The appeal, therefore, fails and is dismissed. There shall be no order as to costs.