M/S Deep Industries Ltd. vs Oil And Natural Gas Corporation Ltd.

3) In the present case, the respondent-Oil and Natural Gas Corporation Limited (for short “ONGC”) awarded a contract to the appellant for supply of one Mobile Air Compressor for a period of five years. Shortly after entering into the contract, the contract was terminated on 11.10.2017 by the ONGC on the ground that some part of the equipment was not Digitally signed by R new but only second hand. This position was disputed by the NATARAJAN Date: 2019.12.04 17:04:42 IST Reason: appellant. On the very next day, i.e. on 12.10.2017, the Vendor Code of the appellant was blocked, meaning thereby, 2 that the appellant would be unable to bid for any other further bids floated by the ONGC. On 18.10.2017, a Show Cause Notice was issued by the ONGC to the appellant asking the appellant why it should not be put “on Holiday” i.e. black listed for a period of two years.

4) Since disputes had arisen between the parties, the appellant invoked the arbitration clause contained in the contract on 02.11.2017. This notice is the subject-matter of dispute before the Arbitrator as well as before this Court and will be adverted to subsequently. Pursuant to the notice, one Justice J.C. Upadhyaya (Retd. High Court Judge) was appointed as a Sole Arbitrator to decide the disputes between the parties on 21.12.2017. On 02.02.2018, a claim petition was filed by the appellant before the learned Arbitrator in which the termination of the contract/show cause notice was challenged and damages claimed. After this claim petition was filed, on 15.02.2018, the appellant was blacklisted by an order passed by the ONGC with effect from 11.10.2017 for a period of two years. Meanwhile, a Section 17 application was also been moved before the learned Arbitrator. Applications were then moved by the appellant to amend both the petition as well as the Section 17 application to challenge this order dated 15.02.2018, which amendments were granted by the learned Arbitrator on 10.03.2018.

7) An appeal against the Section 17 Order was filed and disposed of by the City Civil Court, Ahmedabad on 31.05.2018 by which the learned Arbitrator’s order was upheld. Consequently, the first appeal filed under Section 37 was dismissed. At this stage, and which is the major bone of contention between the parties before us, a Special Civil Application being Application No. 9305/2018 was filed under Article 227 of the Constitution of India before the High Court Gujarat at Ahmedabad in which the City Civil Court’s 4 order was challenged. By the impugned judgment dated 25.07.2018, the High Court of Gujarat referred to a preliminary contention raised on behalf of the petitioner that the petition filed under Article 227 should be dismissed at the threshold as it did not raise any jurisdictional issue. The High Court, without answering this question, then went on to state that the ban order had, in fact, been passed under a General Contract Manual and not under Clause 18 of the Agreement as a result of which serious disputes arose as to the jurisdiction of the Arbitrator to deal with the same. It was also held on a reading of the notice for arbitration that the notice did not raise the issue of the ban for two years and was confined only to illegal termination. The High Court finally held that no stay could possibly have been granted under Section 17 of the ban order as an injunction cannot be granted in cases where the party can be compensated later in damages. This being the case, the Writ Petition was allowed and the Ahmedabad City Civil Court’s order was set aside.

(V. RAMASUBRAMANIAN) New Delhi;

November 28, 2019.