O.N.G.C.Ltd vs Off-Shore Enterprises Inc

R. V. Raveendran J., Under a contract dated 14.7.1981 between appellant and the respondent, the respondent agreed to supply the equipment and engineering drawings and provide the project management and construction supervision to M/s Paul Lindenau GmbH to assist with the design, building, equipping and launching of a drillship known as `Sagar Prabhat' purchased by the appellant. The appellant had simultaneously entered into an agreement with M/s Paul Nindenau GmbH for purchase of the said drillship. The said drillship equipped and mobilised by the respondent reached Bombay on 5.6.1982. American Bureau of Shipping ("ABS" for short) vide certificate dated 25.6.1982 certified that the machinery of the drillship and the stability of the drillship were in accordance with its rules and standards. On the basis of the said certificate 2 dated 25.6.1982, the appellant took delivery of the Drill-ship on 29.6.1982. The appellant thereafter found some defects in the drill-ship and therefore withheld the payment to the respondent. ABS revised its certificate on 18.6.1985, stating that its earlier certificate dated 25.6.1982 was based on incorrect data supplied by Paul Lindenau GmbH (builder of the drillship) and the respondent (designer, equipment supplier and construction supervisor of the drillship).

3. As the respondent disputed the claim of ONGC that the Drill-ship was defective and the defects affected its stability, it issued a notice dated 1.8.1986 stating that a dispute had arisen in regard to the claim of the 3 appellant about the defects/deficiencies in the stability of the Drill-ship. The said dispute was referred to arbitration by an Arbitral Tribunal with Shri K.H. Bhabha, Senior Advocate and Vice-Admiral Shri N.P. Datta as members. The said Arbitral Tribunal entered upon the reference on 4.9.1986.

4. ONGC filed its Statement of Claim on 2.12.1987 in regard to its claim relating to defects/deficiencies in regard to the stability of the Drill- ship. Para 27 thereof containing the claim and prayer of the appellant is extracted below:

5. The respondent participated in the initial stages of the second arbitration and filed a reply dated 29.11.1988 denying the claim and arbitrability on four grounds: (i) the claim was beyond the scope of arbitration agreement contained in Article 13.2 of the agreement dated 14.7.1981; (ii) the claim related to a technical matter falling under clause 13.1 of the contract, and therefore to be concluded only by the decision of ABS. (iii) the claim having been made beyond the warranty period of twelve months prescribed in clause 9.2.1 of the contract, was deemed to have been waived and not maintainable; and (iv) the claim was barred by limitation as it was made beyond three years from the date of taking over the drillship.

7. On 18.9.1995 the Arbitrators made an Award for Rs.36,38,50,000/- (Rupees Thirty six crores thirty eight lakhs fifty thousand) in favour of ONGC, with interest at the rate of 12% per annum on the said sum from the date of award. The award set out the contentions of ONGC and the 6 respondent in brief and then proceeded to direct respondent to pay the following amounts (being the break up of Rs.36.385 crores) by a non- speaking award:

18. What is, however, surprising is that the award is neither based on the claim of Rs.3.5 crore plus US $ 180,000/- made in the claim statement or the claim of Rs.2049.54 lakhs that was made in the affidavit. The arbitrators referred to the claim of the ONGC as 4329.46 lakhs in para 5 of the award, and awarded Rs.3638.50 lakhs without any reasons as detailed below :

21. In view of the above, there is no need to examine the other grounds of attack against the award. We, therefore, dismiss the appeal as having no merit.