Case: Schlumberger Asia Services Ltd Vs. Oil &amp; Natural Gas Corp.Ltd

The petitioner is a Company incorporated and registered under the law of Hong Kong having its project office in India and one of the base offices at Mumbai. The respondent is a Corporation registered under the Companies Act, 1956 having its registered office at Jivan Bharti Tower-2, 124, Circus New Delhi3. In its counter-affidavit, the respondent has raised a preliminary objection to the maintainability of the petition. It is submitted by the respondent that the petitioner has filed the present case only to bring unnecessary litigation. The arbitration petition is an abuse of process of law and the claims made are barred by a long period of time and are, therefore, dead claims4. In order to decide the preliminary objection, it would be necessary to take note of certain relevant events5. The petitioner and the respondent had entered into and executed a contract dated 7th December, 2004 (effective from the date of issue of the firm order dated 6th August, 2004). The contract under Clause 27 provides for arbitration as the mechanism for resolution of any dispute that may arise between the petitioner and the respondentThe petitioner together with its affiliates is a leading oilfield service provider. It is trusted to deliver superior results and improved E&P performance for oil and gas companies around the world, including India. Through its well site operations, research and engineering facilities, it is working to develop products, services and solutions that optimize customer performance in a safe and environmentally sound manner. It employs over 113,000 people of more than 140 nationalities working in 85 countries, including India7. 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 Contract8. The petitioner further claims that it performed the work in terms of the contract and raised invoices for the work performed from time to time. However, invoices amounting to USD 481,252.65 and INR 9,565,616 were either short paid or not paid despite the work under the contract was satisfactorily performed by the petitioner. The details of the invoices raised by the petitioner are as under:Invoice No.PeriodAmount (USD)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 also10. 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 due11. At this stage, the petitioner finally accepted that disputes have arisen between the parties and filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of the nominee Arbitrator on behalf of the respondent as well as the third Arbitrator (Presiding Arbitrator)

Court's reasoning:
I have considered the submissions made by the learned counsel for the parties. A bare perusal of the observations made by this Court in paragraph 39 of the judgment in SBP & Co. (supra) makes it clear that the Chief Justice or the designated Judge can also decide whether the claim was dead one or a long-barred claim. But it is not imperative for the Chief Justice or his designate to decide the questions at the threshold. It can be left to be decided by the Arbitral Tribunal.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 parties19. 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.