Schlumberger Asia Services Ltd vs Oil & Natural Gas Corp.Ltd

The party desiring the settlement of dispute shall give notice of its intention to go for arbitration clearly stating all disputes to be decided by arbitral tribunal and appoint its own arbitrator and call upon the other party to appoint its own arbitrator within 30 days. In case a party fails to appoint an arbitrator within 30 days from the receipt of the request to do so by the other party or the two Arbitrators so appointed fail to agree on the appointment of third Arbitrator within 30 days from the date of their appointment, upon request of a party, the Chief Justice of India or any person or institution designated by him (in case of International Commercial Arbitration) shall appoint the Arbitrators/Presiding Arbitrator. In case of domestic Contracts, the Chief Justice of the High Court or any person or institution designated by him within whose jurisdiction the subject purchase order/CONTRACT has been placed/made, shall appoint the arbitrator/Presiding Arbitrator upon request of one of the parties.

7. The respondent was desirous of hiring four sets of Measurement While Drilling (MWD) and one set of Gyro Equipment & Services (Gyro) collectively referred to as “Equipments” for carrying out its operation. Accordingly, the respondent issued a tender No.MR/DS/MAT/CT/MWD/ 142(390) 2003- 04/P46KC04002. The petitioner had the necessary experience of carrying out operation as stated in the tender and submitted a bid on 8th June, 2004 under offer No.SASL/D&M/ONGC 4002/2002-02 for providing the required services against the respondent’s tender in accordance with the terms and conditions set-forth therein. The respondent accepted the bid of the petitioner and placed a firm order dated 6th August, 2004 under No.MR/DS/MAT/CT/MWD/142(390)2003-04/DY8DF0301/ 9010002261. Accordingly, on 7th December, 2004, the parties entered into and duly executed a contract effective from the date of issue of the firm order i.e. 6th August, 2004. The petitioner agreed to perform a work defined in Appendix-III of the Contract. The respondent in consideration thereto promised to pay the amounts set out in Appendix-IV of the Contract at the time and in the manner prescribed in the contract. The duration of the contract was initially for a period of 2 years from the date of receipt of “Equipments” at Nhava base. The respondent had the option of extending the contract by one more year in two equal installments of six months each at the same rate, terms and conditions. The contract was automatically extendable for completion of jobs in ongoing wells, at the same rates, terms and conditions. The petitioner claims that as it was providing excellent services to the respondent, the contract was extended from 16th October, 2006 to 15th April, 2007 for the first installment of six months. Thereafter, it was extended from 16th April, 2007 to 15th October, 2007 for the second installment of six months on the same rates, terms and conditions as contained in Clause 2.0 of the Special Terms and Conditions of the Contract.

9. The petitioner further claims that the respondent has refused to make payment against the aforesaid invoices. The respondent totally rejected the various Lost in Hole (LIH) claims of the petitioner. According to the petitioner, in the event of “Equipments” are lost, destroyed or damaged in the site well, the respondent is liable to pay the depreciated replacement value of the “Equipments” stuck/lost in the hole subject to a limit of 50% calculated from the date of first use of such “Equipments” in India. Furthermore, in terms of the Clause 17 of the Contract, the respondent was under an obligation to make an attempt to recover or retrieve the said tools but the respondent failed to discharge this obligation also.

10. Since no payment had been received, the petitioner sent a letter to the respondent on 11th July, 2008 demanding the payment of the outstanding amount. However, there was no response to the aforesaid communication. The petitioner, therefore, issued a legal notice dated 14th November, 2008 invoking arbitration under Clause 27 of the Contract. In the aforesaid notice, the petitioner detailed the disputes that have arisen between the parties. In the same notice, the petitioner informed the respondent that it has nominated the Arbitrator and called upon the respondent to nominate their Arbitrator within 30 days from the date of receipt of the notice, failing which the petitioner shall be constrained to initiate legal steps for appointment of Arbitrator on behalf of the respondent. According to the petitioner, the aforesaid notice was duly served upon the respondent but no steps were taken by them for appointment of Arbitrator. Thereafter, the petitioner sent a reminder letter on 21st May, 2009 calling upon the respondent to nominate an Arbitrator within 30 days from the date of receipt of the notice. The petitioner reiterated that in case the respondent still failed to nominate the Arbitrator, the petitioner shall initiate proceedings for appointment of Arbitrator on behalf of the respondent. Another reminder was issued by the petitioner on 11th August, 2010 in the same terms as the earlier notices and the reminders. Still there was no response from the respondent, which led the petitioner to send another notice on 9th January, 2012. Finally, on 29th February, 2012, the respondent sent a reply to the petitioner denying that any amount as claimed by the petitioner was due.

18. In my opinion, it would be appropriate for this Court to constitute the entire Arbitral Tribunal in exercise of my powers under Section 11(6) of the Arbitration and Conciliation Act, 1996. In exercise of the aforesaid powers, I nominate Justice V.N. Khare, Former Chief Justice of India as the Chairman and Justice D.P. Wadhwa and Justice S.N. Variava, former Judges of this Court as Arbitrators to adjudicate the disputes that have arisen between the parties. The arbitrators shall fix their own remuneration in consultation with the parties.

19. The Registry is directed to communicate this order to the Chairman of the Arbitral Tribunal, as well as to the other Arbitrators, so that they can enter upon reference, as soon as possible.

20. With these observations, the Arbitration Petition is allowed with no order as to costs.

.……..…………………..J. [Surinder Singh Nijjar] New Delhi;

May 09, 2013.