International Inc. Vs. Burn Standard Co. Ltd. & Ors  Insc 316 (12 May 2006)
Singh & S.B. Sinha
NOS.2-3 IN CIVIL APPEAL NO. 4492 OF 1998 S.B. SINHA, J :
was discovered in the Bombay High Region in 1974 whereupon a plan of rapid
development of off-shore oil and gas production was embarked by the Government
of India through Oil and Natural Gas Commission (ONGC). With a view to achieve
exploration of production programme, ONGC appointed contractors to fulfill
substantial portions of its off-shore construction requirements. Burn Standard
Company Limited (for short "BSCL") was interested in the second stage
of platform construction of ONGC, i.e., structural and progress fabrication and
contracts were thereafter awarded in favour of BSCL for fabrication,
transportation and installation of six platforms bearing No. ED, EE, WI-8,
WI-9, WI-10 and N3 and associated pipelines. They were to be installed in ONGC's
Bombay High Sea.
said contracts covered:
procurement and fabrication of the ED and EE jackets, piles and decks.
and installation of the ED and EE jackets, piles and decks.
Procurement and fabrication of the WI-8, WI-9, WI-10 and N-3 Jackets, piles,
temporary decks and decks (the "Four Platform Fabrication Main
Contract") and (iv) Transportation and installation of the WI-8, WI-9,
WI-10 and N-3 jackets, piles, temporary decks and decks, and installation of
four pipelines and eight risers (the "Four Platform Installation Main
said contracts contained arbitration agreements.
and Mcdermott International Inc. (for short "MII") entered into
Technical Collaboration Agreement on 25th September, 1984 in terms whereof the latter agreed
to transfer technology to the former with regard to design, construction and
operation of a fabrication yard. The said agreement contains a separate
arbitration clause between the parties.
with regard to the fabrication and installation of off-shore platforms, BSCL
decided to give a sub-contract of the work to MII on a project by project
basis. BSCL while retained the job of fabrication of the ED and EE decks, six helidecks
and procurement of materials for the overall project other than pipeline
materials and some process equipment which was issued by ONGC sub-contracted
the remaining work.
terms of a letter of intent dated 14th September, 1984 a contract was entered
into by and between BSCL and ONGC for fabrication and installation of offshore
platforms ED, EE, WI-8, WI-9, WI-10 and N-3 and laying of WI-8 to WI-9, WI-9 to
WI-10, WI-9 to WIS and N-3 to NO pipelines and 8 associated risers as well as
WI-7 to WI-8, WI-9 to SD, WI- 10 to SV, EB to SC1, EC to SHP, ED to SHP, EE to
SHP pipelines and 11 associated risers. A part of the said contract work was
assigned to MII in respect of fabrication, transporation and installation of
structures, modules, platforms and pipeline components on or about 1st January, 1986. The work under the said agreement
was to be completed within 24 months but in all respects it was completed in
OF THE CONTRACT
relevant covenants between the parties contained in the said agreement are as
shall unless inconsistent with the provisions of this Sub-contract perform
fulfill and observe all the obligations, covenants and agreements required on
the part of BSCL to be performed, fulfilled and observed in terms of the Main
Contracts to the extent these obligations, covenants and agreements relate to
the Sub- contract Work including such obligations, agreements and covenants as
may in future be added, modified or provided in the Main Contracts between the
Buyer and BSCL with concurrence of MII to the extent thereof. These obligations,
covenants and agreements, as have been agreed to be performed, fulfilled and
observed by MII shall include the performance of the Sub-contract work in the
manner and to the specifications as provided in the respective Main Contracts.
MII shall be
bound to BSCL by the terms of this Sub-contract Agreement and to the extent that
the provisions of the respective Main Contract between Buyer and BSCL apply to
the relevant Sub-Contract work of MII as defined in this Sub- contract
Agreement, MII shall assume towards BSCL all the obligations and
responsibilities which BSCL, by such Main Contract, assumes to Buyer and shall
have the benefit of all rights, remedies and redresses against BSCL which BSCL,
by such Main Contract, has against Buyer, insofar as applicable to this
sub-contract Agreement, provided that when any provision of the respective Main
Contract between Buyer and BSCL is inconsistent with this Sub-contract
Agreement, this Sub-contract Agreement shall govern and prevail over the Main
BSCL shall be
bound to MII by the terms of this Sub-Contract Agreement and to the extent that
the provisions of the respective Main Contracts between Buyer and BSCL apply to
the relevant Sub-contract work of MII as defined in this Sub- contract
Agreement, BSCL shall assume towards MII all the obligations and
responsibilities that Buyer, by such Main Contracts, assumes towards BSCL, and
shall have the benefit of all rights, remedies and redress against MII which
Buyer, by such Main Contracts, has against BSCL insofar as applicable to this
sub-contract Agreement provided that when any provisions of the Main Contract
between Buyer and BSCL is inconsistent with any provisions of this Sub-contract
Agreement, this Sub-contract Agreement shall govern and prevail over the Main
otherwise provided herein, all claims made by Buyer against BSCL shall be the
responsibility of MII when such claims arise or are derived from MII's
Sub-contract Scope of Work; similarly, all claims made by Buyer that arise or
derive from BSCL's Scope of Work shall be the responsibility of BSCL. To the
extent that BSCL, as Main Contractor vis-`-vis Buyer, would be liable for any
claims that arise or are derived from MII's Sub-contract Scope of Work, MII
shall hold harmless and keep indemnified BSCL from any such claims to the extent
analogous with MII's Sub-contract.
6 - Arbitration
Should there by
any dispute or difference between BSCL and Buyer in regard to any matter
connected with BSCL relating to or arising out of the Main Contract (s), which
may involve MII's performance or affect MII's interest under the subcontract,
BSCL shall keep MII informed and shall act in consultation and coordination with
MII to ascertain the facts and agree on the appropriate action to be taken. MII
shall render all assistance and cooperation that BSCL may require in this
regard. If it is determined that the dispute or difference does not involve
MII's performance or affect MII's interests, MII shall render such reasonable
assistance and cooperation as BSCL may require; provided, however, that MII
shall be entitled to reimbursement of costs, if any, incurred therefor with the
prior approval of BSCL.
If any dispute or
difference arising between BSCL and Buyer under or in respect of or relating to
the Main Contract insofar as it relates to the work to be carried out by MII is
referred to arbitration and any award/ judgment/ decree/ order is passed, or a
settlement is otherwise reached with MII's consent, MII shall be bound to accept
the same and bear all MII's liability resulting therefrom. MII shall, however,
be assisted at all stages by BSCL with such arbitration proceedings and MII
shall bear all expenses of such arbitration/ litigation and/ or negotiated
settlement, if any.
expenses incurred by BSCL in deputing their officials to attend such
arbitration/ proceeding/ litigation would be to BSCL/s accounts.
All disputes and
differences in respect of any matter relating to or arising out of or in
connection with the execution or construction of this subcontract document, if
the same cannot be and/ or is not the subject matter of dispute between BSCL and
the Buyer under the Main Contracts and is not settled mutually by negotiation,
shall be referred to arbitration under the Indian Arbitration Act, 1940, as
amended from time to time, by appointing some agency acceptable to both the
parties as Arbitrators and if no agency is found acceptable to both the parties,
then by constituting a Board of Arbitration consisting of three Arbitrators, one
to be nominated/ appointed by each party and the third to be appointed by the
two Arbitrators as Umpire. The arbitration proceeding shall be held at New Delhi
and the decision of the Arbitrators or the Umpire as the case may be shall be
final and binding on both parties hereto. The arbitrators or the umpire, as the
case may be, shall record their reasons for passing awards, copies of which
shall be sent to the parties.
and/ or modification of this Sub-contract shall be valid only if it is in
writing and signed by both the parties.
other terms and conditions not specified in this sub-contract shall be as
stipulated in the Main Contracts.
Agreement shall be governed by the Laws of the Republic of India." DISPUTES
Disputes and differences having arisen between the parties, MII invoked the
arbitration clause by a legal notice dated 10th April, 1989.
proceedings as regards invocation of arbitration clause were initiated by the
parties before the Calcutta High Court. The said proceedings ultimately ended
in favour of MII leading to appointment of two arbitrators for determination of
the disputes and differences between the parties. The arbitrators who were
earlier appointed were removed and Mr. Justice A.N. Sen, a retired Judge of
this Court was appointed as a sole arbitrator. It is stated that Mr. Justice
A.N. Sen declined to act as an Arbitrator and by an order dated 28th August, 1998, Mr. Justice R.S. Pathak was
appointed by this Court as a sole arbitrator. The Arbitrator was to continue
with the proceedings from the stage it had reached. The said order is in the
Justice R.S. Pathak, retired Chief Justice of India is appointed as the sole
Arbitrator. In the case to resolve the disputes and differences which had been
raised by the parties and were the subject matter of the arbitration
proceedings before the arbitrators earlier appointed;
That the Learned
Arbitrator shall enter upon the reference within three weeks from the date of
service of this order upon him.
arbitration proceedings shall be held at New Delhi. However, in the event the learned Arbitrator considers it necessary to
hold any sitting at any other place, he may do so with the consent of the
Arbitrator shall continue with the proceedings from the stage where the
proceedings of the arbitration were on 8.5.1998, when the impugned order came
to be made by the Calcutta High Court;
proceedings held till 8.5.1998 shall be treated as the arbitration proceedings
held before the learned sole Arbitrator now appointed;
It shall be in
the discretion of the learned Arbitrator to take or not to take oral evidence
or to take oral evidence by way of affidavits. The learned arbitrator would be
at liberty to adopt summary proceedings for concluding arbitration proceedings.
That the learned
Arbitrator shall publish his Award, as far as possible, within a period of one
year from the date of entering upon the reference;
That the fees of
the Arbitrator (which may be fixed by him) and all expenses of arbitration
proceedings shall be shared equally by the parties;
Arbitrator shall file the Award in this Court.
Any application which may become
necessary to be filed during or after the conclusion of arbitration
proceedings, shall be filed only in this Court." CLAIM OF MII Before the
learned Arbitrator, MII raised the following claims:
of jackets, Temporary Decks and Main Decks US$ 1,182,817.94
Transportation and Installation of jackets and Decks US$ 4,351,062.68
of Pipelines and Risers US$ 840,064.23
Material Procurement US$ 5,301,534.13 For Bulk Material Procurement US$
84,919.14 UKL 262,296.43 S$ 680,764.29
Transportation of Pipe US$ 1,231,415.00
Orders and Extra Work US$ 7,423,741.95
For Delays &
Disruptions US$ 13,233,343.00
Entitlements US$ 2,881,195.03
For Interest upto 21 August, 1989 US$ 10,909,772.19 UKL 148,254.14 S$
521,102.56 Total US$47,817,174.59 UKL 410,550.57 S$ 1,201,866.85"
the Arbitrator, apart from the aforementioned amount, interest on the
outstanding amount was also claimed at the rate of 15% per annum on all claims
for which invoices were not paid until the award, as well as interest from 21st August, 1989 and future interest at the rate of
fifteen per cent.
filed counter statements as also counter-claims before the learned Arbitrator.
learned arbitrator took up for his consideration the following claims for his
Jackets, Temporary Decks and Main Decks
and Installation of Jackets, Decks (Permanent & Temporary) and Helidecks
Material and Rolling
and Extra Works
Whether MII is
entitled to an exchange loss as claimed in paragraphs 4.74 to 4.78 of the
Statement of Claims? If so, in what amount?
Did MII commit
breach of the contract?
Is the Claim of
MII barred by limitation?
General It was
agreed to by and between the learned counsel for the parties that the 1996 Act
in stead and in place of 1940 Act shall apply.
learned arbitrator having heard the parties inter alia on jurisdictional
question initially passed a partial award on 9th June, 2003 determining the same in favour of
MII. The decision on points Nos. 6, 8 and 9 were deferred for a period of four
months by the learned Arbitrator so as to enable BSCL to dispose of all claims
raised by MII in the meanwhile which had arisen before reference to the
arbitration. The said claims were rejected.
detailed reasoned statement by ONGC/BSCL referring to each individual document
relied upon were filed in the arbitral proceedings. However, by reason of the
said partial award, as regards points Nos. 1 to 5, 7 and 9A, MII became
entitled to payment from BSCL the following amounts:
Point No. 1 US$ 1,182,817.69
Point No. 2 US$ US$ 3,133,612.40 & 28,400.00
Point No. 3 US$ US$ 665,039.41 & 54,000.00
Point No. 4 US$ US$ 2,809,100.54 & 2,300,200.00
Point No. 5 US$ UK Pound Singapore$ 65,207.39 232,604.40 &
Point No. 7 US$ 322,351.87 US$ 52,422.51 US$ 1,573,466.00 US$ 512,187.16
Point No. 9A US$ 3,330,790.94" PROCEEDINGS RE:
point No. 10, MII was held to be entitled to interest on the amount awarded at
the rate of 10% per annum from the date on which the amount fell due for
payment till the date of the partial award and the awarded amount together with
interest was directed to bear interest at the same rate from the date of the
award to the date of payment.
parties thereafter filed applications under Section 33 of the Arbitration and
Conciliation Act, 1996 alleging that certain claims made by them had not been
dealt with and/ or were omitted from consideration by the learned arbitrator in
his partial award.
its application contended:
deciding Point No. 4 regarding Structural Material and Rolling, MII's claim for
US$ 128,000.00 as contended in paragraph 4.29 of the Statement of Claim has not
been dealt with and has been omitted from the Award.
Point No. 7 regarding Corporate Income Tax, MII's claim that BSCL should be
liable to the tax authorities for all further liabilities for Indian Corporate
Income Tax as may be assessed in respect of the income received by MII under
the Sub-contract as also for all tax liabilities that may be assessed in
respect of any Award in favour of MII in the present arbitration proceedings as
contained in paragraph 4.84 of the Statement of Claim has not been dealt with
and has been omitted from the Award.
In deciding Point
No. 7 regarding Corporate Income Tax, MII has claimed two amounts one of US$
804,789.36 being interest @15% per annum up to 29 February, 1992 paid by MII in
respect of Corporate Income Tax liability to the Tax authority, and the other
on account of principal amount of tax payment of US$ 1,623,048.00. In
paragraphs 18.17 and 18.18 of the Award, the learned Arbitrator has in respect
of the principal claim allowed an amount of US$ 1,573,466.00 on account of
Corporate Income Tax and an amount of US$ 512,187.16 by way of interest. MII
has also claimed interest on these two amounts from 29 February 1992 till payment. This claim for interest has not been dealt
with in the Award and has been omitted from the Award.
Point No. 10 relating to interest, MII's claim for interest on amounts paid but
paid late as contained in paragraphs 5.1 and 5.2 has not been dealt with and
has been omitted from the Award." BSCL raised a preliminary objection in
regard to the MII's claim under Section 33 of the Act contending that there
exists no provision for making a partial award.
reason of the additional award dated 29th September, 2003, the learned Arbitrator, however,
claim in respect of US$ 128,000.00 is not accepted.
MII's claim for
a declaration that BSCL is liable to the tax authorities for all further
liabilities for Indian Corporate Income-tax as may be assessed in future in
respect of income received by MII under the Sub-Contract is allowed only
insofar as it related to MII's liability, if any, to Corporate Income-tax, on
the amounts awarded to it by a Partial Award, an Additional Award and a Final
MII is entitled
to interest at 10% per annum for the period from 1 March 1992 to the date of payment in respect of the principal amount
of US$ 1,573,466.00 on account of Corporate Income-tax and the interest amount
of US$ 512,187.16 calculated up to 29 February, 1992.
MII is entitled
to interest at 10% per annum for the period of delay in BSCL making payment of MII's
invoices, that if, for the period from due date of payment to the date of
actual payment. Such amount will carry interest at 10% per annum from the date
of the Partial Award to the date of its payment." The learned Arbitrator
rejected the BSCL's objection in regard to the maintainability of the said
proceeding stating that the same can be a subject matter for determination of
jurisdictional question in a proceeding under Section 33 of the 1996 Act.
filed an application under Section 34 of the Act questioning the said partial
award dated 9th June,
2003 as also the
additional award dated 29th
learned Arbitrator thereafter took up the left over matters for his
consideration, viz., points Nos. 6, 8 and 9 observing that ONGC in the meantime
had expressed no interest in participating in the decision making process at
the inter-party level and, thus, arrived at an inference that the machinery set
up under the sub-contract has broken down and it would be for him to determine
final award was thereupon passed.
point No. 6 which related to transportation of pipes, the learned arbitrator
held MII to be entitled to US$ 919,194.32 against BSCL in respect of the nine
barge pipes for transporting them from Mangalore to Bombay.
No. 8 related to Change Orders and Extra Work. The learned Arbitrator awarded
MII US$ 305,840.00 as regards Change Order No. 1. As regards Change Order No.
6, MII was awarded US$72,000.00 against BSCL. Furthermore, in respect of Change
Order No. 9, MII was awarded US$ 300,000.00 against BSCL. As regards Extra
Work, MII was awarded US$ 4,870,290.96 against BSCL pursuant to the invoices
covered under the said point whereas MII's claim for US $637,473.00 was
No. 9 related to delays and disruptions. MII was awarded US$ 574,000.00 against
BSCL in respect of Change Order No. 2. MII was further awarded US$1,271,820.00
and US$355,000.00 against BSCL under Change Order Nos. 3 and 7 respectively. As
regards increased cost and expenditure incurred by MII, it was awarded
as the claim of interest is concerned, the learned arbitrator made the
is entitled to interest on the amounts awarded under various heads by Final
Award. In my opinion, having regard to the circumstances of the case, a rate of
interest at 10 percent per annum will be appropriate from the date on which the
amount fell due for payment to the date of this Final Award. The awarded amount
including interest shall bear the interest at the same rate from the date of
this Final Award to the date of the payment by BSCL." The learned
arbitrator also awarded US$750,000.00 as costs of the arbitration.
application was filed by BSCL under Section 34 of the Act praying for setting
aside the final award.
Mitra, learned senior counsel and Mr. Pallav Sisodia, learned counsel appearing
on behalf of BSCL made the following submissions:
had no jurisdiction to make a partial award which is not postulated under the
1996 Act as an award in piecemeal is impermissible in law.
While making the
partial award, the learned Arbitrator opined that involvement of ONGC was
imperative for determination of point Nos. 6,8 and 9, i.e., claims relating to
transportation of pipes, Change Orders and Extra Work and delays and
disruptions and, thus, the final award must be held to be bad in law.
subcontract provided for a back to back contract, determination of various
claims depended upon determination of interpretative application of the main
contract by ONGC wherefor directions of ONGC were binding on the parties.
Although US $
8.8 million has been awarded as regard alleged delay and disruption of work, no
reason, far less any cogent or sufficient reason, as was mandatorily required
in terms of Section 31 of the Act having been assigned, the impugned award is
vitiated in law.
In its award,
the learned Arbitrator was bound to determine the actual loss suffered by the
parties and as the same was not determined, the award cannot be enforced.
The award as
regards loss of profit under various heads is based on no evidence and, thus,
The claims made
by MII were not only contrary to the terms of contract but also substantive law
of India and were otherwise opposed to
As the contract
did not contain any agreed schedule or any stipulation as to whether the work
was required to be finished within a stipulated period, in view of the fact
that the contention of the MII was that the time was of the essence of
contract, the only remedy available to it in terms of Section 55 of the Indian
Contract Act was to revoke the contract upon giving a notice therefor. In
absence of such a notice, damages could not be claimed. Reliance Union of India and
Another [(1999) 9 SCC 449].
towards extra work was payable to MII having regard to the payment clauses
contained in the contract and in particular the minutes of the meeting held by
the parties on 9th
In view of the
clear terms of the contract, ONGC was a necessary party and the learned
Arbitrator committed an error in refusing to implead it in the proceeding.
Arbitrator having rejected the claim of the MII in his partial award dated 9th
June, 2003 on the ground that increased overhead decrease of profit and
additional management cost had not been raised before reference to arbitration
and, thus, was beyond the scope of arbitral reference, could not have
determined the self same question in his final award. The objection and the
award for US$ 8.8 million had not been taken into consideration and, thus, the
same is liable to be set aside.
Arbitrator could not have awarded the said sum solely on the basis of the
opinion of one Mr. D.J. Parson who did not have any personal knowledge of the
facts of the case, particularly in view of the fact that no evidence was
adduced as regards sufferance of actual loss by MII. Mechanical application of Emden
Formula was also wholly uncalled for and no award could be made relying on or
on the basis thereof.
So far as the
claim of extra work is concerned, the learned Arbitrator has wrongly allowed
the claim of MII in respect of invoice Nos. 2806470 to 2806475 although due
date for payment of the said amount fell after the commencement of reference to
arbitration and, thus, as no dues existed on that date, the Arbitrator had no
jurisdiction to make an award in relation thereto.
"exchange loss", MII's claim was allowed without any amendment to the
statement of claim. Claim of MII was wrongly allowed by the learned Arbitrator
for entire value of the invoices without any deduction as delay in making
payment by BSCL to MII on account of delay in receiving payment from ONGC has
no relevance and in any event was contrary to the terms of the contract.
learned Arbitrator had also not taken into consideration that in terms of the
contract, foreign exchange rate was frozen at the rate of Rs. 100 X 8.575
Dollars as was applicable on 9th August, 1984.
The claim for
US$ 2.3 million was outside the scope of reference to arbitration as no demand therefor
was made. Such a claim was made for the first time only in the statement of
In terms of
Clause 37 of the contract entered into by and between ONGC and BSCL, no award
by way of damage was payable.
provision was also contained in the subcontract entered into by and between the
As MII was to
compensate for the supply of materials by BSCL subsequently, no award for a sum
of US$ 2.3 million could be made.
As no invoice in
respect of the claim of US$ 28,400 on account of an additional barge trip to
transport the ED Temporary Deck had been raised, the learned Arbitrator had no
jurisdiction to decide the same.
The award under
the said head for a sum of US$ 54,000 on account of additional survey of WIS and WI9 pipeline was not an arbitrable dispute being
clearly outside the purview of the arbitration proceedings.
Relying on or on
the basis of American Institute of Steel Construction (AISC) Code as a base for
measurement being contrary to the contract, the award is liable to be set aside..
Tanks in respect of ED and EE Jackets As BSCL had paid MII for fabrication of
the same buoyancy tanks and the buoyancy tanks were the same which were used
for W18, W19 and W110 and N3 Platform, claim on the said account once over
again was not maintainable ignoring the the evidence of Mr. S.K. Mukherjee
and Sea Fastening As Tie Down materials are required for safe transportation of
structures allotted on transportation barge, the learned Arbitrator erred in
allowing the claim of MII as they are not permanent part of jacket decks of any
Materials The learned Arbitrator committed a serious error in not taking into
account the material evidence adduced by BSCL to the effect that MII was
instructed to substitute the specified materials with available material at no
additional cost of fabrication.
terms of the contract, it was for the MII to procure the materials which were
to be reimbursed by BSCL. The claim for US$ 20832.108 was based on fabrication
charges on account of increased tonnage for material substitution for W18, W19,
W110 and N3 jackets and piles as well as ED and EE jackets and, thus, as the
learned Arbitrator had allowed claim only to the extent of fabrication, the
amount claimed by MII could not have been allowed in toto.
Gupta, learned senior counsel appearing on behalf of MII, on the other hand,
submitted that no case has been made out for setting aside the award of the
reply to the submissions made on behalf of BSCL, it was urged:
Increased Overhead Decrease of Profit and Additional Management Cost The amount
has been awarded on the basis of statement of Mr. D.J. Parsons. The contract
clearly provided that W18, W19, W110 and N3 platforms were to be completed by
30th December, 1985 whereas ED and EE platforms were to be commissioned in
February, 1986. It is not the case of MII that the time was of the essence of
contract and, thus, in terms of Section 55 of the Indian Contract Act, damages
were payable. Even in terms of the main contract between BSCL and ONGC, time
was not of the essence of the contract. The contract contained clauses for
extension of time and liquidated damages which is also indicative of the fact
that time was not of the essence of the contract and, thus, damages for delay
is permissible in law in view of the decision of this Court in Hind
Construction v. State of Maharashtra [(1979) 2 SCC 70] Change Order Nos. 2, 3
and 7 covered compensation under various heads as specified therein. The award
of the learned Arbitrator clearly shows that additional costs had been incurred
by MII and, thus, the award cannot be faulted. The partial award did not deal with
the said claims. The dispute was specifically referred to arbitration in terms
of notice dated 10th
April, 1998. The
quantification of damages being a matter of evidence and proof, no case has
been made out for interference with the award particularly in view of the fact
that BSCL had never raised any objection as regards the jurisdiction of the
on the Emden Formula cannot be said to be against the law prevailing in India
as Sections 55 and 73 of the Indian Contract Act provided only for entitlement
to compensation and not the mode and manner in which such compensation is to be
37 of the Main Contract between ONGC and BSCL has no application as MII's claim
is not for any consequential damage but for the direct losses occasioned by BSCL's
breach of contractual duty to honour its time bound commitments. The said
clause cannot be extended to the obligations towards MII under the sub-contract
as ONGC has no role to play in respect of the breach of its obligations towards
it by BSCL under the sub- contract.
Partial Award A partial award is in effect and substance an interim award
within the meaning of Section 31(6) and 2(c) of the Act and, thus, the validity
of the partial award is not open to question.
Exchange Loss Clause 4.0 of contract only relates to payment for transportation
and installation and BSCL did not make any payment to MII despite receipt of
the whole amount from ONGC except an amount of Rs. 12,70,290/-. In any event,
Clause 4.0 has no relevance to the exchange loss dispute. BSCL acted contrary
to the agreed terms as it made payment upon applying the fixed exchange rate of
Rs. 100 = US$8.575. BSCL was to pay to MII the amount as per the current rate,
only on reconciliation MII was to refund the excess amount to BSCL which
ensured that exchange loss would be shared by both the parties.
Claims BSCL never raised any objection before the Arbitrator that the claim for
US$ 2,300,200 for procurement of structural material could not be raised in
view of the provisions contained in Section 16 of the 1996 Act. Invoice in any
event, is merely a basis for claim and such a claim may be raised in
correspondences as also in the meetings. The claim for US$ 2,300,200 was not
strictly claim for damages, as in terms of the contract BSCL was required to
procure the steel and as it being not in a position to do so, MII agreed to
procure the same on its behalf if BSCL would agree to pay US$ 2,300,200 to
cover MII's cost for accelerated procurement and other costs.
offer was the subject matter of correspondence between the parties. As no
dispute was raised to recover the same amount from BSCL, procurement job was
undertaken. The finding arrived at by the learned Arbitrator in this behalf is
entirely a finding of fact. Reference to Clause 5 of the Contract was wholly
irrelevant. This clause provides that BSCL shall procure suitable steel for
"jackets' on replacement basis for MII purchased steel. BSCL did not
procure the required amount of steel to replace the structural materials that
MII provided from its inventory as an accommodation to BSCL. MII did so on the
understanding that the structural material removed from MII's inventory would
be promptly replaced by BSCL. BSCL did not replace the material.
Method of Measurement Clause 23.1.1 (a) & (c) of the Main Contract between
BSCL and ONGC has no application as the same covers payment for 'structural
material' which is an altogether different claim being Claim No. 4. The claim
was towards labour charges for fabrication of structures, labour charges and
not claim for cost of material. AISC Code applied in relation to the
fabrication job is as under:
scheme of the Contract provides in relation to Fabrication and the application
of AISC Code is explained below:
provides total estimated tonnage of 18, 178 ST with following break-up:
Platforms 6078 ST (page 166 I.A. no.2 Vol.2) WI8, WI9, WI10 and N3 platforms
12,100 ST/ 18, 178 ST (page 371 I.A. no.2 vol.2)" Re: Buoyancy Tanks for
ED and EE Jackets MII's claim is for labour cost at the rate of US$ 1067 per ST
involved for fabrication work in the refurbishment of the Buoyancy Tanks. The
finding of the Arbitrator is a finding of fact inter alia based on the
admission of the witness, namely, Shri S.K. Mukherjee, who was examined on
behalf of BSCL Re: Tie Down and Sea Fastening In offshore construction, jackets
and decks are fabricated onshore and then they are transported on barges to the
offshore location for installation.
pertaining to Tie Down and Sea Fastening required substantial fabrication work
and no claim has been made towards costs of welding the Tie Downs and Sea
Fasteners to the deck.
2 of the Contract would have no application to the instant case as it provides
only for a stage payment on milestone basis. But, clause 2.1(a)(i) which
substantially covers sea fastening job as part of the fabrication contract
would be applicable. BSCL had not been able to show that the fabrication of Tie
Down and Sea Fastening materials were included within the scope of
transportation and not as a separate item under the head 'fabrication'.
Substitution It was for BSCL in terms of the sub-contract to procure and supply
all materials but as it was not in a position to do so, MII on instructions of
BSCL used available materials which was having larger thickness and weight vis-a-vis
those specified in the ONGC's specifications. The same having been approved
both by the Engineer and ONGC, MII was entitled to compensation towards the labour
charges at the rate of US$ 1067 per ST.
Extra Work Invoice Nos. 2806470 to 2806475 The invoices which were contained in
Annexure 9 to MII's statement of claims were substituted by new documents in
terms whereof the due date of invoice was corrected to 9th March, 1989 and, thus, fall due for payment
prior to the notice dated 10th April, 1989
invoking arbitration. The payment of extra work became due when the work was
performed and moreover, the invoices in question did not specify any date for
Interest The ground has been taken only in the supplementary affidavit filed on
behalf of BSCL on 21st
September, 2004 beyond
a period of three months as specified in Section 34 of the Act. The Arbitrator
has awarded the principal amount and interest thereon upto the date of award
and future interest thereupon which do not amount to award on interest on
interest as interest awarded on the principal amount upto the date of award
became the principal amount which is permissible in law.
SCOPE OF Section 2(1)(b) of the 1996 Act reads as under: "2(1)(b)
"arbitration agreement" means an agreement referred to in section
7" In terms of the 1996 Act, a departure was made so far as the
jurisdiction of the court to set aside an arbitral award is concerned vis-`-vis
the earlier Act. Whereas under Sections 30 and 33 of the 1940 Act, the power of
the court was wide, Section 34 of the 1996 Act brings about certain changes
30 of the 1940 Act reads, thus:
for setting aside award An award shall not be set aside except on one or more
of the following grounds, namely:
arbitrator or umpire has misconducted himself or the proceedings;
That an award
has been made after the issue of an order by the Court superseding the
arbitration or after arbitration proceedings have become invalid under Sec 35;
That an award
has been improperly procured or is otherwise invalid." The Section did not
contain expression "error of law.". The same was added by judicial
interpretation. While interpreting Section 30 of the 1940 Act, a question has
been raised before the courts as to whether the principle of law applied by the
was applied. If, however, no dispute existed as on the date of invocation, the
question could not have been gone into by the Arbitrator.
UNDER THE NEW ACT
1996 Act makes a radical departure from the 1940 Act. It has embodied the
relevant rules of the modern law but does not contain all the provisions
thereof. The 1996 Act, however, is not as extensive as the English Arbitration
statutes operated in the field in respect of a domestic award and a foreign
award prior to coming into force of the 1996 Act, namely, the 1940 Act, the Arbitration
(Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and
Enforcement) Act, 1961. All the aforementioned statutes have been repealed by
the 1996 Act and make provisions in two different parts, namely, matters
relating to domestic award and foreign award respectively. Vis-`-vis Grounds for setting aside the award:
the 1996 Act came into force, under Section 16 of the Act the party questioning
the jurisdiction of the arbitrator has an obligation to raise the said question
before the arbitrator. Such a question of jurisdiction could be raised if it is
beyond the scope of his authority. It was required to be raised during
arbitration proceedings or soon after initiation thereof. The jurisdictional question
is required to be determined as a preliminary ground.
decision taken thereupon by the Arbitrator would be subject matter of challenge
under Section 34 of the Act. In the event, the arbitrator opined that he had no
jurisdiction in relation thereto an appeal thereagainst was provided for under
Section 37 of the Act.
1996 Act makes provision for the supervisory role of courts, for the review of
the arbitral award only to ensure fairness. Intervention of the court is
envisaged in few circumstances only, like, in case of fraud or bias by the
arbitrators, violation of natural justice, etc. The court cannot correct errors
of the arbitrators. It can only quash the award leaving the parties free to
begin the arbitration again if it is desired. So, scheme of the provision aims
at keeping the supervisory role of the court at minimum level and this can be
justified as parties to the agreement make a conscious decision to exclude the
court's jurisdiction by opting for arbitration as they prefer the expediency
and finality offered by it.
this Court, as would be noticed hereinafter, has the occasion to consider the
matter in great detail in some of its decisions.
AG v. Ythan Ltd. [(2006) 1 All ER 367], jurisdictional issue based on interpretation
of documents executed by the parties fell for consideration having regard to
the provisions of the Carriage of Goods by Sea Act, 1992. It was held that as
the appellant therein did not become holder of the bills of lading and
alternatively as the conditions laid down in Section 2(2) were not fulfilled,
the arbitrator had no jurisdiction to arbitrate in the disputes and differences
between the parties.
the duty to assign reasons Another important change which has been made by
reason of the provisions of the 1996 Act is that unlike the 1940 Act, the
Arbitrator is required to assign reasons in support of the award. A question
may invariably arise as to what would be meant by a reasoned award.
Law of Arbitration and Conciliation, Fourth Edition, pages 855-856, it is
is a ground or motive for a belief or a course of action, a statement in
justification or explanation of belief or action. It is in this sense that the
award must state reasons for the amount awarded.
rationale of the requirement of reasons is that reasons assure that the
arbitrator has not acted capriciously. Reasons reveal the grounds on which the
arbitrator reached the conclusion which adversely affects the interests of a
party. The contractual stipulation of reasons means, as held in Poyser and
Mills' Arbitration In Re, "proper, adequate reasons". Such reasons
shall not only be intelligible but shall be a reason connected with the case
which the court can see is proper. Contradictory reasons are equal to lack of
meaning of the word " reason" was exaplained by the Kerala High Court
in the contest of a reasoned award "Reasons are the links between the
materials on which certain conclusions are based and the actual conclusions."
A mere statement of reasons does not satisfy the requirements of s.31(3) .
Reasons must be based upon the materials submitted before the arbitral
tribunal. The tribunal has to give its reasons on consideration of the relevant
materials while the irrelevant material may be ignored Statement of reasons is
mandatory requirement unless dispensed with by the parties or by a statutory
provision." In Konkan Railway Corporation Ltd. v. Mehul Construction
Company [(2000) 7 SCC 201], this Court emphasized the mandatoriness of giving
reasons unless the arbitration agreement provides otherwise.
Policy In Renusagar Power Co. Ltd. v. General Electric Co. [(1994) Supp 1 SCC
644], this Court laid down that the arbitral award can be set aside if it is
policy of Indian Law,
the interests of India; or
morality. A narrower meaning to the expression 'public policy' was given
therein by confining judicial review of the arbitral award only on the
aforementioned three grounds. An apparent shift can, however, be noticed from
the decision of this Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes
Ltd. (for short 'ONGC')[(2003) 5 SCC 705].
Court therein referred to an earlier decision of this Court in Central Inland
Water Transport Corporation Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156]
wherein the applicability of the expression 'public policy' on the touchstone
of Section 23 of the Indian Contract Act and Article 14 of the Constitution of
India came to be considered. This Court therein was dealing with unequal
bargaining power of the workmen and the employer and came to the conclusion
that any term of the agreement which is patently arbitrary and/ or otherwise
arrived at because of the unequal bargaining power would not only be ultra vires
Article 14 of the Constitution of India but also hit by Section 23 of the
Indian Contract Act. In ONGC (supra), this Court, apart from the three grounds
stated in Renusagar (supra), added another ground thereto for exercise of the
court's jurisdiction in setting aside the award if it is patently arbitrary.
patent illegality, however, must go to the root of the matter. The public
policy violation, indisputably, should be so unfair and unreasonable as to
shock the conscience of the court. Where the Arbitrator, however, has gone
contrary to or beyond the expressed law of the contract or granted relief in
the matter not in dispute would come within the purview of Section 34 of the
Act. However, we would consider the applicability of the aforementioned
principles while noticing the merit of the matter.
would constitute public policy is a matter dependant upon the nature of
transaction and nature of statute. For the said purpose, the pleadings of the
parties and the materials brought on record would be relevant to enable the
court to judge what is in public good or public interest, and what would
otherwise be injurious to the public good at the relevant point, as
contradistinguished from the policy of a particular government. [See State of Rajasthan v. Basant Nahata, (2005) 12 SCC
ONGC (supra), this Court observed:
our view, the phrase "public policy of India" used in Section 34 in context is
required to be given a wider meaning. It can be stated that the concept of
public policy connotes some matter which concerns public good and the public
interest. What is for public good or in public interest or what would be
injurious or harmful to the public good or public interest has varied from time
to time. However, the award which is, on the face of it, patently in violation
of statutory provisions cannot be said to be in public interest.
award/judgment/decision is likely to adversely affect the administration of
in our view in addition to narrower meaning given to the term "public
policy" in Renusagar case10 it is required to be held that the award could
be set aside if it is patently illegal.
result would be award could be set aside if it is contrary to:
policy of Indian law; or
the interest of India; or
in addition, if
it is patently illegal.
must go to the root of the matter and if the illegality is of trivial nature it
cannot be held that award is against the public policy. Award could also be set
aside if it is so unfair and unreasonable that it shocks the conscience of the
court. Such award is opposed to public policy and is required to be adjudged
void." We are not unmindful that the decision of this Court in ONGC
(supra) had invited considerable adverse comments but the correctness or
otherwise of the said decision is not in question before us. It is only for a
larger Bench to consider the correctness or otherwise of the said decision. The
said decision is binding on us. The said decision has been followed in a large
number of cases. [See The Law and Practice of Arbitration and Conciliation by
O.P. Malhotra, Second edition, page 1174.] Before us, the correctness or
otherwise of the aforesaid decision of this Court is not in question. The
learned counsel for both the parties referred to the said decision in ex tenso.
therefore, would proceed on the basis that ONGC (supra) lays down the correct
principles of law.
consider the submissions of the learned counsel for the parties on the basis of
the broad principles which may be attracted in the instant case, i.e.,
award is contrary to the terms of contract and, therefore, no arbitrable
dispute arose between the parties;
award is in any way violative of the public policy;
award is contrary to the substantive law in India, viz., Sections 55 and 73 of the Indian Contract Act;
reasons are vitiated by perversity in evidence in contract ;
adjudication of a claim has been made in respect whereof there was no dispute
or difference; or
award is vitiated by internal contradictions.
the aforementioned purpose, it would be necessary to see as to what law the
arbitrator was required to apply.
may, therefore, consider the legal submissions before adverting to the merit of
OF THE 'PARTIAL AWARD'
1996 Act does not use the expression "partial award". It uses interim
award or final award. An award has been defined under Section 2(c) to include
an interim award. Sub-section (6) of Section 31 contemplates an interim award.
An interim award in terms of the said provision is not one in respect of which
a final award can be made, but it may be a final award on the matters covered
thereby, but made at an interim stage.
learned arbitrator evolved the aforementioned procedure so as to enable the
parties to address themselves as regard certain disputes at the first instance.
As would appear from the partial award of the learned arbitrator, he deferred
some claims. He further expressed his hope and trust that in relation to some
claims, the parties would arrive at some sort of settlement having regard to
the fact that ONGC directly or indirectly was involved therein. While in
relation to some of the claims, a finality was attached to the award, certain
claims were deferred so as to enable the learned arbitrator to advert thereto
at a later stage. If the partial award answers the definition of the award, as
envisaged under Section 2(c) of the 1996 Act, for all intent and purport, it
would be a final award. In fact, the validity of the said award had also been
questioned by BSCL by filing an objection in relation thereto.
cannot also lose sight of the fact that BSCL did not raise any objection before
the arbitrator in relation to the jurisdiction of the Arbitrator.
ground to that effect has also not been taken in its application under Section
34 of the Act. We, however, even otherwise do not agree with the contention of Mr.
Mitra that a partial award is akin to a preliminary decree.
other hand, we are of the opinion that it is final in all respects with regard
to disputes referred to the arbitrator which are subject matter of such award.
We may add that some arbitrators in stead and in place of using the expression
"interim award" use the expression "partial award". By
reason thereof the nature and character of an award is not changed. As, for
example, we may notice that in arbitral proceedings conducted under the Rules
of Arbitration of the International Chamber of Commerce, the expression
"partial award" is generally used by the arbitrators in place of
interim award. In any view of the matter, BSCL is not in any way prejudiced. We
may state that both the partial award and the final award are subject matter of
challenge under Section 34 of the Act.
33 of the Act empowers the arbitral tribunal to make correction of errors in
arbitral award, to give interpretation of a specific point or a part of the
arbitral award, and to make an additional award as to claims, though presented
in the arbitral proceedings, but omitted from the arbitral award. Subsection
(4) empowers the arbitral tribunal to make additional arbitral award in respect
of claims already presented to the tribunal in the arbitral proceedings but
omitted by the arbitral tribunal provided
There is no
contrary agreement between the parties to the reference;
A party to the
reference ,with notice to the other party to the reference ,requests the
arbitral tribunal to make the additional award;
Such request is
made within thirty days from the receipt of the arbitral award;
tribunal considers the request so made justified; and
arbitral award is made within sixty days from the receipt of such request by
the arbitral tribunal The additional award, in our opinion, is not vitiated in
facts According to the applicants, the contract entered into by and between MII
and BSCL did not provide for any period of completion. MII, on the other hand,
states that at that time when the contract was entered into it was supposed to
be performed by 30th
December, 1985 as
would appear hereinafter:
Jackets and Temporary Decks (for platforms WI-8, WI-9, WI-10 and N-3), the
completion period is 30
April 1985 and for
Decks and Helidecks ( for platforms WI -8, WI-9, WI-10 and N-3) the completion
date is 30 December
1985. Clause (ii) in
the 'Schedule of Completion of Well Platforms' states: "the completion
dates.will be reckoned for purpose of L/d." In terms of the provisions of
the contract the jobs in respect of WI-8, WI-9, WI-10 and N-3 were to be
performed within the said period.
stipulation for commissioning of ED and EE platforms within a time frame has
also been mentioned, i.e., February, 1986 as would appear from the following:
for commissioning of platforms ED & EE is by end of February 1986, subject
to the provisions of this Contract." MII served a notice on 10th April, 1998 invoking the arbitration agreement.
The same would not mean that it should have repudiated the contract as soon as
20 months schedule fixed by the contract expired. Delay and disruptions might
have occurred for various reasons. In the instant case, therefore, the matter would
be covered by the second part of Section 55 of the Indian Contract Act
providing that where the parties did not intend time to be of the essence of
the contract, the contract was not voidable, but the promisee was entitled to
compensation for loss occasioned. For the aforementioned purpose, no notice was
required to be served. In any event, the contract provided for extension of
time, as would appear from clause 27(ii) and the relevant portions of clause 28
which read as under:
Should be amount
of extra work, if any, which Contractor is required to perform under clause 24
to 26 ants, fairly entitled Contractor to extension of time beyond the scheduled
date for completion of either the whole or part of the works or for such extra
work as the case may be, Company and Contractor shall mutually discuss and
decide extensions of time, to be granted to Contractor and the revised schedule
for completion of the Works.
requirements in the Contract Specifications as to the completion of any portion
of the work before completion of the whole and subject to the other provisions
contained in the Contract, the Works shall be completed in accordance with the
agreed schedule as indicated in Appendix-II. Company may, if the exigencies of
the works or other projects so required amend the completion schedule and/or
phase out completion.
No extension in
completion shall be permitted unless authorized in writing by Company as a
"Variation in completion schedule" or as otherwise specified in the Contract. In
any case, no portion of the works shall extend beyond the commencement of the
1986 monsoon." The parties, furthermore, agreed for payment of liquidated
damages, as would appear from clause 28(v)(a) which reads as under:
is its sole and only remedy for delayed completion of work by Contractor, as
ascertained and agreed liquidated damages, and not by way of penalty, as sue
equivalent to 2.5% of the Contract Price for the item which is delayed, for
each month of delay (or prorate thereof for part of a month), beyond the
scheduled completion date, subject to a maximum of 7.5 % of the said Contract
price. Such liquidated damages shall be loveable after allowing a grace period
of 15 days. The monsoon peril requiring which no work can be carried out orders,
shall be excluded for the purpose of determining the quantum of delay in
completion of work.." Moreover, the contract itself contains provisions
for extension of its terms and payment of damages in case of delay in execution
of the contract.
claim for increased overhead and decreased profit and additional project
management cost flows out of the same operative facts as the delay and
disruption change in respect of Change Order Nos. 2, 3, and 7.
at the outset point out that the question as regards the effect of the said
claims which were not considered in the first round of the arbitral proceedings
shall be dealt with a little later.
as the Change Order No. 2 is concerned, the learned arbitrator has accepted the
contention of the MII that it had to incur additional cost due to delay in
receipt of equipment and materials supplied. In his Final Award, the learned
appears that BSCL accepted and acknowledged that MII had incurred additional
cost on account of this delay occasioned by BSCL" So far as, Change Order
No. 3 is concerned, the learned arbitrator in paragraph 67.2 of the Final award
noticed as under:
was followed by a meeting on 7-8 October 1986 attended by the representatives
of ONGC, EIL, BSCL and MII, during which ONGC advised BSCL that BSCL should
absorb one half the mobilization and demobilization costs of MII's marine
equipment, since the delay was occasioned by BSCL in completing the helidecks"
So far as Change Order No. 7 is concerned, the learned Arbitrator has recorded
in paragraph 68.1 of the Final Award as under:
Change Order was accepted by BSCL and ONGC but MII has received no payment"
It was further recorded in paragraph 68.4 of the Final Award:
after the work was completed, there was a meeting on 16-17 June, 1987 at which
ONGC informed that the Change Order was agreed to in principle" So far as
the claim of compensation in addition to the said Change Order Nos. 2,3 and 7
is concerned, the statement of claim of MII is as under:
"The BSCL delays
and disruptions required McDermott to alter the fabrication and installation
sequence to match deliveries of equipment. This precluded McDermott performing
certain activities as planned in the Subcontract. Change order No.2 relates to
additional cost incurred by McDermott due to delay in receipt of equipment and
material supplied by BSCL.
delivery of the equipment was upto seventeen months late. During this period,
McDermott continued to fabricate the decks installing material as it became
available. The delay resulted in additional costs to McDermott due to change
order with cost effect of US$574,000.00. BSCL has failed and neglected to make
payment of the invoice for this change order.
Change order no.3
relates to mobilization and demobilization of Derrick Barge 26 to complete BSCL
work in the 1986/1987 construction season. The Subcontract price was based on
mobilization and demobilization of a single barge in the 1984/1985 and 1985/1986
construction seasons only and performance of the offshore scope of work in a
BSCL delays, the WI-8, WI-9, WI-10 and N3 decks and helidecks were not
completed for installation during the 1985/1986 work season. Further, the WI-7
to WI-8 pipeline and five risers could not be installed due to unavailability
of material and lack of access to the EB and EC jackets, which were still under
construction. In the 1986/1987 construction season, Mcdermott used Derrick
Barge 27, which was already in the field, to install the WI-8, WI-9, WI-10 and
also had to mobilize Derrick Barge 26 in the same construction season for
installation of the WI-7 to WI-8 pipeline and associated risers. On the
instructions of BSCL, Mcdermott mobilized Derrick Barge 26 in February 1987.
Derrick Barge 26 installed the pipelines and risers and was demobilized from
the field on 10 March
1987. For the
mobilization/demobilization of Derrick Barge 26 for the 1986/1987 construction
season work, McDermott submitted a change order to BSCL with cost effect of US
$ 1,271,820.00. BSCL has failed and neglected to make payment of the invoices
for this change order.
Change Order no.7
relates to offshore installation or late-supplied equipment on the WI-8 , WI-9,
WI-10 and N3 decks. As early as February,1986, the parties contemplated that
certain BSCL-supplied equipment planned for installation by McDermott onshore
would have to be installed offshore due to the projected late delivery. The cost
of installing equipment off shore is much US $ 1,140,705.00. On
6 November 1986, McDermott reviewed the list of outstanding equipment
and revised its change order to US $ 355,000.00. On the instructions of BSCL,
McDermott performed the change order work and installed outstanding equipment
failed and neglected to make payment of the invoice for this change
order." In the Final Award also the learned arbitrator noticed:
discussion covering earlier issues establishes that BSCL was guilty of delays
and disruptions. Proceeding from there, the question is whether MII is entitled
to an amount on account of increased overhead and loss of profit and additional
project management costs? MII states that construction law recognizes that
construction contractor incurs two general jobs of costs in the course of its
operation; the operating costs that are attributable to a particular project,
and costs such as overhead that are expended for the performance of the
business as a whole, including t`he particular project. Consequently,
construction law recognizes that owner caused delay entitles the contractor to
recover from the owner the increased overhead and loss of profit as part of
has been made to Hudson's building and Engineering
Contracts. Article 8.176-91 pp. 1074-81 (11th edn.), Molly J.B., "A
formula for Success". Three formulae have been evolved for computation of
a claim for increased overhead and loss of profit due to prolongation of the works
: the Hudson Formula; The Emden Formula and Eicheay Formula. Of these three, the
Emden Formula is the one widely applied and which has received judicial support
in a number of cases." Section 55 of the Indian Contract Act Section 55 of
the Indian Contract Act reads as under:
party to a contract promises to do a certain thing at or before a specified
time, or certain things at or before specified time, and fails to do any such
thing at or before the specified time, the contract, or so much of it as has
not been performed, becomes voidable at the option of the promisee, if the
intention of the parties was that time should be of the essence of the
was not the intention of the parties that time should be of the essence of the
contract, the contract does not become voidable by the failure to do such thing
at or before the specified time; but the promisee is entitled to compensation
from the promisor for any loss occasioned to him by such failure.
case of a contract voidable on account of the promisor's failure to perform his
promise at the time agreed, the promisee accepts performance of such promise at
any time other than that agreed, the promisee cannot claim compensation for any
loss occasioned by the non-performance of the promise at the time agreed,
unless, at the time of such acceptance, he gives notice to the promisor of his
intention to do so." In Arosan Enterprises Ltd. (supra), the law was
stated in the following terms:
presumptions of the High Court in our view are wholly unwarranted in the
contextual facts for the reasons detailed below but before so doing it is to be
noted that in the event the time is the essence of the contract, question of
there being any presumption or presumed extension or presumed acceptance of a
renewed date would not arise. The extension if there be any, should and ought
to be categorical in nature rather than being vague or on the anvil of
presumptions. In the event the parties knowingly give a go-by to the
stipulation as regards the time- the same may have two several effects:
parties name a
future specific date for delivery, any
parties may also
agree to the abandonment of the contract- as regards (a) above, there must be a
specific date within which delivery has o be effected and in the event there is
no such specific date available in the course of conduct of the parties, then
and in that event, the courts are not left with any other conclusion but a
finding that the parties themselves by their conduct have given a go-by to the
original term of the contract as regards the time being the essence of the
contract. Be it recorded that in the event the contract comes within the ambit
of Section 55, Contract Act, the remedy is also provided therein" It was
now on to the issue of duty to speak, can it be said that silence on the part
of the buyer in not replying to the letters dated 15-11-1989, 20- 11-1989,
24-11-1989, 4-12-1989 and 20-12-1989 only shows that the buyer was not willing
to extend the delivery period after 15-11-1989 the answer cannot but be in the
negative, more so by reason of the fact that fixation of a second delivery date
by the Appellate Bench of the High Court as noticed above, cannot be termed to
be in accordance with the law. There was, in fact, a duty to speak and failure
to speak would forfeit all the rights of the buyer in terms of the agreement.
to speak would not, as a matter of fact, jeopardise the seller's interest
neither would the same authorise the buyer to cancel the contract when there
have been repeated requests for acting in terms of the agreement between the
parties by the seller to that effect more so by reason of a definite anxiety
expressed by the buyer as evidenced in the intimation dated 8-11-1989 and as
found by the arbitrator as also by the learned Single Judge." We,
therefore, are of the opinion that in the instant case the second part of
Section 55 of the Indian Contract Act would be attracted and not the first
time was the essence of contract The question which, further, arises for
consideration is as to whether the Respondents having proceeded on the basis
that time was of the essence of the contract, it was bound to issue a notice of
repudiating the contract subject to reservation as regards its claim of
damages. MII, however, states that it had never raised a contention that the
time was of the essence of the contract, but the claim arises in view of the
delay caused in completion of the contract for a period of 34 months and
consequent escalation of costs.
price payable in terms of the sub-contract did not adequately cover increased
costs expended by MII. On a plain reading of the provisions of Section 55 of
the Indian Contract Act, it is evident that as the parties did not intend that
time was to be of the essence of the contract on the expiry whereof the contract
became voidable at the instance of one of the parties, but by reason thereof
the parties shall never be deprived of damages.
notice that the BSCL had never pleaded before the Arbitrator that the time was
of the essence of the contract. In Construction contracts generally time is not
of the essence of the contract unless special features exist therefor. No such
special features, in the instant case, has been brought to our notice.
learned arbitrator proceeded on the basis that the BSCL had accepted and
acknowledged that no additional cost on account of delay was occasioned in
completing the helidecks. MII is found to have incurred additional cost for
offshore installation. The learned arbitrator has also found that MII had not
received any payment on account of such increased cost. The compensation under
the said head of claim was only in addition to Change Order Nos. 2,3 and 7 to
which we shall advert to a little later.
Court in Hind Construction v. State of Maharashtra [(1979) 2 SCC 70] stated:
question whether or not time was of the essence of the contract would
essentially be a question of the intention of the parties to be gathered from
the terms of the contract. [See Halsbury's Laws of England, 4th ed., Vol.4, para
1179]." "8. Even where the parties have expressly proided that time
is of the essence of the contract such a stipulation will have to be read along
with other provisions of the contract and such other provisions may, on
construction of the contract, exclude the inference that the completion of the
work by a particular date was intended to be fundamental. [See Lamprell v. Billericay Union (19849) 3 Exch 283, 308; Webbv.
Hughes (1870) LR 10 Eq 281; Charles Rickards Ltd. v. Oppenheim (1950) 1 KB
principal question which arises for consideration is whether uninvoiced claims
could be a subject matter of dispute. While dealing with the claims falling
within the purview of the partial award, the arbitrator noticed:
of WI-9 to WI-S Pipeline laying (US$ 115,087.50) The Statement of claim by MII
mentions that an amount of US $ 10,671,340.00 on account of delay and
disruption expenses and costs are claimed. Admittedly, they had not yet been
invoiced when the reference to arbitration was made. It is not clear what are
the specific claims included within that sum. If they had not been invoiced, it
cannot be said that they remained unpaid, and that therefore, a difference or
dispute had arisen between the parties when the reference to arbitration was
made." It was further noticed:
has been made to the claim in respect of the standby of the MII transportation
spread, additional compensation on account of the construction of temporary
emergency helidecks, the extended stay of MII personnel and a claim in respect
of Lay Barge 26. All these claims will be considered after it has been
satisfactorily proved that invoices in respect of each of these claims were
issued and had become due for payment before the reference to arbitration was made
and also meanwhile the arbitration record will have received the statement of
ONGC/BSCL in respect of Change Order Proposals Nos. 2,3,7 and 8. Therefore, the
consideration of these claims is deferred." No invoice was raised by MII
for the following claims:
Claim of US$
2,300,200 for procurement of structural material on BSCL's behalf.
US $28,400 for
additional Barge trip.
US $54,000 for
additional pipeline survey.
said claims are the subject matter of the partial award. It was dealt with by
the learned arbitrator in the following terms:
was pointed out by BSCL that ONGC did not accept the reconciliation attempted
by MII in regard to the pipelines. I have examined the documents pertinent to
this question, and I find that the variation is so marginal that it can
reasonably be ignored. It seems to me that to take account of those variations
is to attempt to make too fine a point. I would accept the reconciliation
statement and proceed on that basis. BSCL contends that the claim made by MII
on account of the additional survey of the WI-8, WI-9 pipelines is not
acceptable because it is covered within the lump sum price mentioned in the
Subcontract. I am not impressed by that submission because had it been so
covered ONGC would not have undertaken to conduct the additional survey itself.
It was treated as some thing outside the subject matter covered by the lump sum
price and when ONGC requested BSCL to conduct the additional survey, and at the
behest of BSCL the additional survey was conducted by MII, there is good reason
for MII to claim the payment of US$54,000 for that survey." While dealing
with the claims for the standby of DB 26 and interruption to WI-9 to WI S
pipelines laying, the arbitrator in its partial award held:
Derrick Barge 26 (US$1,396,800.00) The claim for payment of standby charges in
respect of Derrick Barge 26 relates to a standby for 24 days of that vessel.
The MII Statement of Claim mentions that MII has not sent any invoice to BSCL.
Therefore it cannot be said that any claim has been made by MII yet in the
matter. Consequently, the position is that no difference or dispute concerning
this had arisen between the parties when the reference to arbitration was made.
Therefore, so far as this arbitration is concerned, the claim cannot be
entertained. It falls outside this arbitration and cannot be considered."
of WI-9 to WI-S Pipeline Laying (US$115,087.50) The Statement of Claim by MII
mentions that an amount of US$10,671,340.00 on account of delay and disruption
expenses and costs are claimed. Admittedly, they had not yet been invoiced when
the reference to arbitration was made. It is not clear what are the Specific
claims included within that sum. If they had not been invoiced, it cannot be
said that they remained unpaid, and that therefore a difference or dispute had
arisen between the parties when the reference to arbitration was made."
The said claims were, thus, rejected only on the ground that no invoice had
been raised and consequently no difference or dispute had arisen by and between
the parties at the time when the reference to arbitration was made.
contended that applying the same line of reasoning, the learned arbitrator
should have rejected the aforementioned claims.
we may notice that the said claim as regard procurement of structural material
related to damages. According to MII, the said claim strictly did not relate to
damages under the contract. The BSCL was required to procure the steel and as
it was not in a position to do so, the MII had agreed to procure steel on its
behalf provided it agreed to cover the MII's cost for accelerated procurement,
material priced premiums, order fixing costs and other incidental charges. It
is not in dispute that such a claim was the subject matter of correspondence
which passed between the parties. Receipt of such letters from MII is not
denied or disputed by BSCL.
also not been disputed that right reserved by MII to claim such additional
costs towards procurement of the materials on behalf of BSCL was not denied or
disputed. Only pursuant to or in furtherance of the said correspondence,
procurement on the said basis had been undertaken by MII and acceptance of BSCL
in this behalf was presumed. The learned Arbitrator proceeded on such
presumption. According to learned arbitrator, despite such knowledge, BSCL
failed to make payment. The learned arbitrator in his award has gone into the
said question in detail. Reference had been made to the evidence of Shri A.R.
Taylor, who was examined on behalf of MII. The said witness was cross-examined
by BSCL. Both the parties had filed detailed written submissions before the
on the basis of such evidence brought on record and submissions made before
him, the learned arbitrator held:
my opinion, BSCL must be taken to have accepted the proposal of MII and to have
gone along with MII's action flowing from that proposal and to have benefited
thereby." With a view to consider the submission of Mr. Mitra that in
terms of the contract entered into by and between the parties, MII was not
entitled to the said claim, it would be proper to notice the relevant clause of
the contract which is in the following terms:
shall procure suitable steel for jackets (based on MTO supplied by MII) on a
replacement basis for MII purchased steel. BSCL shall purchase steel as plate
suitable for rolling 24 in O.D. and above tubulars.
material shall be delivered by BSCL to MII's yard at Dubai Emirate, United Arab
Emirates or to
Singapore Port Authority for transshipment by MII (at BSCL's cost) to Batam Island, Indonesia. MII shall indicate the destination when furnishing the
replacement steel request." In terms of the aforementioned provision of
the contract, BSCL was required to procure suitable steel for jackets on
replacement basis in regard to quantum of steel purchased by MII. If BSCL had
failed to procure the said required amount of steel to replace the structural
materials which MII had provided from its inventory as an accommodation to
BSCL, indisputably the understanding between the parties was that either such materials
should be replaced or the cost therefor had to be paid. It has not been
disputed before the arbitrator that BSCL promptly replaced the material. It is
in that view of the matter, the learned arbitrator in his partial award held:
" The procurement
was effected by MII from its inventory on the basis that it would be replaced by
BSCL promptly. It was not so replaced. To effect the replacement MII would be
compelled to pass through the entire burdensome process of procuring the
structural material directly from outside sources. MII suffered loss and damage
which it has quantified at US$ 2.3 million in the light of the considerations
mentioned by it earlier." The arbitrator has noticed that the claim of MII arose
only after it has been satisfactorily proved that the invoices in respect of
each of these claims were issued and had become due for payment before reference
appears that paragraph 23 of the partial award and the claim for compensation
on the aforementioned head are not identical. Para 23 of the partial award dealt with the claim in respect of WI-9 to WI-S
pipeline laying. So far as paragraph 24 of the said award is concerned, the
learned arbitrator noticed the specific invoices issued against Change Order
Nos. 2, 3 and 7 relating to delay and disruptions. It is, therefore, in our
considered opinion, not correct to contend that the invoice is the only base
whereby and where under a claim can be made. There is no legal warrant for the
said proposition. A claim can also be made through correspondence or in
claim for overhead costs resulting in decrease in profit or additional
management costs is a claim for damages.
invoice is drawn only in respect of a claim made in terms of the contract. For
raising a claim based on breach of contract, no invoice is required to be
furthermore not in dispute that the claim for damages had been made prior to
invocation of arbitration. Once such a claim was made prior to invocation, it
became a dispute within the meaning of the provisions of the 1996 Act. It is
not disputed that the same claim was specifically referred to arbitration by
MII in terms of its notice dated 10th April, 1989.
claiming damages, the amount therefor was not required to be quantified.
Quantification of a claim is merely a matter of proof.
fact BSCL never raised any plea before the arbitrator that the said claim was
arbitrary or beyond its authority. Such an objection was required to be raised
by BSCL before the arbitrator in terms of Section 16 of the 1996 Act. It may
also be of some interest to note that this Court even prior to the enactment of
a provision like Section 16 of the 1996 Act in Waverly Jute Mills Co. Ltd. v. Raymon
& Co. [(1963) 3 SCR 209; Dharma Prathishthanam v. Madhok Construction
(2005) 9 SCC 686] clearly held that it is open to the parties to enlarge the
scope of reference by inclusion of fresh dispute and they must be held to have
done so when they filed their statements putting forward claims not covered by
the original reference.
FOR COMPUTATION OF DAMAGES
should, however, be the method of computation of damages is a question which
now arises for consideration. Before we advert to the rival contentions of the
parties in this behalf, we may notice that in M.N. Gangappa v. Atmakur Nagabhushanam
Setty & Co. and Another [(1973) 3 SCC 406], this Court held:
the assessment of damages, the court must consider only strict legal
obligations, and not 'the expectations, however reasonable, of one contractor
that the other will do something that he has assumed no legal obligation to do.
also Lavarack v. Woods of Colchester Ltd (1967) 1 QB 278] The arbitrator
quantified the claim by taking recourse to the Emden formula. The learned arbitrator also referred to other
formulae, but, as noticed hereinbefore, opined that the Emden Formula is a
widely accepted one.
not in dispute that MII had examined one Mr. D.J. Parson to prove the said
claim. The said witness calculated the increased overhead and loss of profit on
the basis of the formula laid down in a manual published by the Mechanical
Contractors Association of America entitled 'Change Orders, Overtime,
Productivity' commonly known as the Emden Formula. The said formula is said to
be widely accepted in construction contracts for computing increased overhead
and loss of profit. Mr. D.J. Parson is said to have brought out the additional
project management cost at US$1,109,500. We may at this juncture notice the
different formulas applicable in this behalf.
Hudson Formula: In Hudson's Building and Engineering
Contracts, Hudson formula is stated in the following
head office overhead & x contract sum x period of delay" Profit
percentage contract period In the Hudson formula, the head office overhead
percentage is taken from the contract. Although the Hudson formula has received judicial
support in many cases, it has been criticized principally because it adopts the
head office overhead percentage from the contract as the factor for calculating
the costs, and this may bear little or no relation to the actual head office
costs of the contractor.
Emden Formula: In Emden's Building Contracts and Practice,
the Emden formula is stated in the following
office overhead & profit x Contract sum x period of delay" 100
contract period Using the Emden formula, the head office overhead percentage is
arrived at by dividing the total overhead cost and profit of the contractor's
organization as a whole by the total turnover. This formula has the advantage
of using the contractors actual head office and profit percentage rather than
those contained in the contract. This formula has been widely applied and has
received judicial support in a number of cases including Norwest Holst
Construction Ltd. v. Cooperative Wholesale Society Ltd., decided on 17 February, 1998, Beechwood Development Company (Scotland) Ltd. v. Mitchell, decided on 21 February, 2001 and Harvey Shoplifters Ltd. v. Adi
Ltd., decided on 6
The Eichleay formula was evolved in America and derives its name from a case heard by Armed Services Board of
Contract Appeals, Eichleay Corp. It is applied in the following manner:
Contract Billings Total overhead for Overhead allocable Total Billings for
contract x contract period = to the contract period Step 2 Allocable overhead
Total days of contract = Daily Overhead rate Step 3 Daily Contract Overhead
Number of Days Amount of Unabsorbed Rate x of delay = overhead" This
formula is used where it is not possible to prove loss of opportunity and the
claim is based on actual cost. It can be seen from the formula that the total
head office overheads during the contract period is first determined by
comparing the value of work carried out in the contract period for the project
with the value of work carried out by the contractor as a whole for the
contract period. A share of head office overheads for the contractor is
allocated in the same ratio and expressed as a lump sum to the particular
contract. The amount of head office overhead allocated to the particular
contract is then expressed as a weekly amount by dividing it by the contract period.
The period of delay is then multiplied by the weekly amount to give the total
sum claimed. The Eichleay formula is regarded by the Federal Circuit Courts of
America as the exclusive means for compensating a contractor for overhead
us several American decisions have been referred to by Mr. Dipankar Gupta in
aid of his submission that the Emden formula
has since been widely accepted by the American courts being Nicon Inc.v. United States, decided on 10 June, 2003 (USCA Fed. Cir.), Gladwynne
Construction Company v. Balmimore, decided on 25 September, 2002 and Charles G.
William Construction Inc. v. White, 271 F.3d 1055.
not intend to delve deep into the matter as it is an accepted position that
different formulas can be applied in different circumstances and the question
as to whether damages should be computed by taking recourse to one or the other
formula, having regard to the facts and circumstances of a particular case,
would eminently fall within the domain of the Arbitrator.
learned Arbitrator, therefore, applied the Emden Formula in assessing the
amount of damages, he cannot be said to have committed an error warranting
interference by this Court.
contention has been raised both before the learned Arbitrator as also before us
that MII could not prove the actual loss suffered by it as is required under
the Indian law, viz., Sections 55 and 73 of the Indian Contract Act as Mr. D.J.
Parson had no personal knowledge in regard to the quantum of actual loss
suffered by the MII. D.J. Parson indisputably at one point of time or the other
was associated with MII. He applied the Emden Formula while calculating the
amount of damages having regard to the books of account and other documents
maintained by MII. The learned Arbitrator did insist that sufferance of actual
damages must be proved by bringing on record books of account and other
55 and 73 of the Indian Contract Act do not lay down the mode and manner as to
how and in what manner the computation of damages or compensation has to be
made. There is nothing in Indian law to show that any of the formulae adopted
in other countries is prohibited in law or the same would be inconsistent with
the law prevailing in India.
computation depends on circumstances and methods to compute damage, how the
quantum thereof should be determined is a matter which would fall for the
decision of the arbitrator. We, however, see no reason to interfere with that
part of the award in view of the fact that the aforementioned formula evolved
over the years, is accepted internationally and, therefore, cannot be said to
be wholly contrary to the provisions of the Indian law.
State of U.P. v. Allied Constructions [(2003) 7
SCC 396], this Court held:
made by an arbitrator can be set aside only if one or the other term specified
in Sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a
case where it can be said that the arbitrator has misconducted the proceedings.
It was within his jurisdiction to interpret clause 47 of the agreement having
regard to the fact-situation obtaining therein. It is submitted that an award
made by an arbitrator may be wrong either on law or on fact and error of law on
the face of it could not nullify an award. The award is a speaking one.
arbitrator has assigned sufficient and cogent reasons in support thereof.
Interpretation of a contract, it is trite, is a matter for the arbitrator to
determine (see Sudarsan Trading Co. v. Govt. of Kerala). Section 30 of the Arbitration
Act, 1940 providing for setting aside an award is restrictive in its operation.
Unless one or the other condition contained in Section 30 is satisfied, an
award cannot be set aside. The arbitrator is a Judge chosen by the parties and
his decision is final. The court is precluded from reappraising the evidence.
in a case where the award contains reasons, the interference therewith would
still be not available within the jurisdiction of the court unless, of course,
the reasons are totally perverse or the judgment is based on a wrong
proposition of law.
error apparent on the face of the records would not imply closer scrutiny of
the merits of documents and materials on record. Once it is found that the view
of the arbitrator is a plausible one, the court will refrain itself from
interfering (see U.P. SEB v. Searsole Chemicals Ltd. and Ispat Engg. &
Foundry Works v. Steel Authority of India Ltd.)." It is trite that the
terms of the contract can be express or implied. The conduct of the parties
would also be a relevant factor in the matter of construction of a contract.
The construction of the contract agreement, is within the jurisdiction of the
arbitrators having regard to the wide nature, scope and ambit of the
arbitration agreement and they cannot, be said to have misdirected themselves
in passing the award by taking into consideration the conduct of the parties.
It is also trite that correspondences exchanged by the parties are required to
be taken into consideration for the purpose of construction of a contract.
Interpretation of a contract is a matter for the arbitrator to determine, even
if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil & Natural Gas
Commission, (2003) 8 SCC 593 and D.D. Sharma v. Union of India (2004) 5 SCC 325].
thus, it is held that the arbitrator had the jurisdiction, no further question
shall be raised and the court will not exercise its jurisdiction unless it is
found that there exists any bar on the face of the award.
above principles have been reiterated in Chairman and MD, NTPC Ltd. v. Reshmi
Constructions, Buildres & Contractors (2004) 2 SCC 663; Union of India v. Banwari
Lal& Sons (P) Ltd. (2004) 5 SCC 304;
Construction Ltd. v. State of U.P. (2003) 8
SCC 4; State of U.P. v. Allied Constructions (2003) 7
court of law or an arbitrator may insist on some proof of actual damages, and
may not allow the parties to take recourse to one formula or the other. In a
given case, the court of law or an arbitrator may even prefer one formula as
against another. But, only because the learned arbitrator in the facts and
circumstances of the case has allowed MII to prove its claim relying on or on
the basis of Emden Formula, the same by itself, in our opinion, would not lead
to the conclusion that it was in breach of Sections 55 or Section 73 of the
Indian Contract Act.
37 EFFECT OF We may now look at clause 37 of the main contract entered into by
and between ONGC and BSCL which reads as under:
AND CONSEQUENTIAL DAMAGES:
company nor contractor shall be liable to the other for any consequential
damages, which shall include but not be limited to loss of revenue/ profits,
loss or escape of product, etc." In Major (Retd.) Inder Singh Rekhi v.
Delhi Development Authority [(1988) 2 SCC 338], whereupon Mr. Mitra placed
strong reliance, an award made under the old Act was in issue. A dispute had
arisen whether there was a claim and denial or repudiation thereof. In that
context, it was held:
should be dispute and there can only be a dispute when a claim is asserted by
one party and denied by the other on whatever grounds. Mere failure or inaction
to pay does not lead to the inference of the existence of dispute. Dispute
entails a positive element and assertion of denying, not merely inaction to
accede to a claim or a request. Whether in a particular case a dispute has
arisen or not has to be found out from the facts and circumstances of the case."
There is no dispute about the aforementioned principle but the same would not
mean that in every case the claim must be followed by a denial. If a matter is
referred to any arbitrator within a reasonable time, the party invoking the
arbitration clause may proceed on the basis that the other party to the
contract has denied or disputed his claim or is not otherwise interested in
referring the dispute to the arbitrator.
Coking Coal Ltd. v. L.K. Ahuja [(2004) 5 SCC 109], this Court opined:
"Here when claim for
escalation of wage bills and price for materials compensation has been paid
and compensation for delay in the payment of the amount payable under the
contract or for other extra works is to be paid with interest thereon, it is
rather difficult for us to accept the proposition that in addition 15% of the
total profit should be computed under the heading "Loss or Profit". It is not
unusual for the contractors to claim loss of profit arising out of diminution
in turnover on account of delay in the matter of completion of the work. What
he should establish in such a situation is that had he received the amount due
under the contract, he could have utilised the same for some other business in
which he could have earned profit. Unless such a plea is raised and
established, claim for loss of profits could not have been granted. In this
case, no such material is available on record. In the absence of any evidence,
the arbitrator could not have awarded the same. This aspect was very well
settled in Sunley (B) & Co. Ltd. v. Cunard White Star Ltd by the Court of
Appeal in England. Therefore, we have no hesitation in deleting a sum of Rs.
6,00,000 awarded to the claimant." We are herein not concerned with such a
terms of Clause 37 of the main contract, reference whereto has been made
hereinbefore, neither of the parties are liable to the other for any
consequential damages. The claim for damages raised by MII cannot be said to be
consequential damages. The claim relates to direct losses purported to have
been occasioned by the failure to perform the contractual duty on the part of
the BSCL and to honour the time bound commitments. Such a loss, according to
MII, occurred on account of increased overhead cost and decreased profit and
additional management costs by reason of BSCL's delays and disruptions. It is
only in that view of the matter, the Emden formula was taken recourse to. Furthermore, clause 37 of the main
contract was a matter of an agreement by and between ONGC and BSCL. In law, it
could not have been extended to the obligations assumed by BSCL towards MII in
terms of the contract entered into by and between the said parties. So far as
ONGC is concerned, it cannot be said to have any role to play in the event of
breach of obligation on the part of the BSCL towards its sub- contractor.
3.1 of the sub-contract reads as under:
shall be bound to BSCL by the terms of this Sub- contract Agreement and to the
extent that the provisions of the respective Main Contract between Buyer and
BSCL apply to the relevant sub-contract work of MII as defined in this
sub-contract agreement, MII shall assume towards BSCL all the obligations and
responsibilities which BSCL, by such Main Contract, assumes to Buyer and shall
have the benefit of all rights, remedies and redresses against BSCL which BSCL,
by such Main Contract, has against Buyer, insofar as applicable to this
sub-contract Agreement, provided that when any provisions of the respective
Main Contract between Buyer and BSCL is inconsistent with this sub-contract
agreement, this sub-contract agreement shall govern and prevail over the Main
Contract." By reason of the said provision, therefore, the Main Contract
between ONGC and BSCL would apply to the relevant sub-contract work and MII was
enjoined with a duty towards BSCL to fulfill its obligations and
responsibilities. But, thereby, BSCL cannot absolve itself from its liability
so far as breach of the terms and conditions of the sub-contract is concerned.
other words, by reason of Article 3.1, the contract by and between ONGC and
BSCL has not been subsumed in the sub-contract so as to absolve the BSCL from
its own contractual liability for breach of contract or otherwise.
main contention of BSCL in this behalf is that the learned arbitrator acted
illegally and without jurisdiction in adopting the AISC Code.
question arose in the context of the provisions in the contract that MII was
required to undertake to fabricate the materials which were required to be supplied
and, therefore, was entitled to fabrication charges from BSCL.
not been denied or disputed before us that the parties did not agree to a fixed
method of measurement. They did not refer to the AISC Code in the contract but
only because AISC code was not referred to in the contract, the same by itself
may not be a ground for us to hold that the arbitrator had gone beyond the
terms of the contract. Clause 23.1.1(a) and (c) of the main contract reads as
for structural material viz. steel and steel tubulars, anodes, flooding and
grouting stems, rubberized rings and rubberized items for barge hampare,
rub-strips and boat landing shall be made on the basis of actual landed cost at
cost would include c.i.f. price, testing charges, if any plus port charges
clearing and handling charges at Port, transportation to Contractor's
fabrication yard plus local taxes (like octroi ) if any, company shall pay to
Contractor an additional 7 = per cent of the landed cost referred to above to
cover the cost of procurement."
In computing the
quantity of steel materials used on each platform for the purpose of sub-clause
(a) above, an allowance of 4% shall be made for wastage. The payment to
Contractor shall be for weights including the wastage element credit for steel
scrap shall be given by Contractor to Company at the rate of Rs. 500.00 per
short ton for the said wastage of 4%." Clause 11 and Clause 5 read as
quantities of materials used in the Works shall be jointly ( i.e. by
ONGC/Engineer, BSCL and MII ) determined on the basis of as-fabricated tonnage
as per the Main Contract between Buyer and BSCL and shall be used for adjusting
the Subcontract Price."
preceding fabrication rates are worked out taking into consideration
installation of all equipment, fabrication and installation of process piping, electricals
and instrumentation work including pre-commissioning and all yard test in
addition to structural fabrication work in accordance with the specifications.
For computing the tonnage for reimbursement of fabrication, installation,
pre-commissioning and testing work at the yard by MII the tonnage of equipment
and items for top side facilities shall not be included and fabrication tonnage
shall be solely on the basis of as built tonnage as approval by buyer."
Submission of Mr. Mitra is that a combined reading of the aforementioned
provisions would go to show that the method of measurement was the subject
matter of the contract. We do not agree.
23.1.1 has no application in the present case as it covers payment for
structural material which has no nexus with the Claim No. 4. The claim of MII
was for labour charges due under the sub-contract for fabricating the
learned arbitrator, in his partial award, while dealing with the said claim
replacement steel, BSCL would procure suitable steel for jackets (based on MTO
supplied by MII) on a replacement basis for MII purchased steel. BSCL would
purchase steel as plate suitable for rolling 24 in OD and tubulars. Replacement
material would be delivered by BSCL to MII's yard at Dubai, UAE or to Singapore
Port Authority for transshipment by MII , at BSCL's cost, to Batam Island,
Indonesia. In the matter of computing the prices payable for structural
fabrication of piles, Jackets and decks Clause 23.1.1 of the main fabrication
contracts provided that the prices would be computed as follows: The payment for
structural material, namely, steel and steel tubulars and anodes, flooding and
grouting system, rubberized rings and rubberized items for barge bumpers, rub
strips and boat landing would be made on the basis of actual landed cost at the
yard of BSCL or MII. The landed cost would include CIF price, testing charges,
if any plus port charges, clearing and handling charges at port , transportation
to BSCL's or MII's fabrication yard plus local taxes, and ONGC would pay to BSCL
in additional 7 = per cent of the landed cost to cover the cost of procurement."
Wastage allowance was relevant only for the purpose of allowance due to BSCL
from MII in respect of scrap materials. The learned arbitrator in his award had
referred to evidence adduced in this behalf by Shri A.R. Taylor. The provisions
of the contract have no bearing on calculation of gross fabricated weight of the
structures for determining the fabrication charges due.
use of AISC Code relates to the claim for fabrication charges being Claim No.
1. The said claim was for labour charges which was not a claim for cost of
material and, thus, nothing to do therewith. The scheme of the contract
provides that total estimated tonnage of 18,178 ST will have the following
Platforms 6078 ST WI-8, WI-9, WI-10 and N3 platforms 12100 ST 18178 ST Since
the total tonnage of 18,178 ST was only an estimated tonnage, the sub-contract
made provision for variation of the contract price on the basis of 'as
fabricated' tonnage. Further the quantities of the materials used were to be
jointly determined by ONGC /EIL, BSCL and MII on the basis of fabricated
tonnage which was to be used for adjusting the sub-contract price.
"as fabricated tonnage" was found to be less than the estimated
tonnage, the excess payment received by MII through monthly bills was to be
refunded. If the "as fabricated tonnage" was found to be more than
the estimated tonnage, MII was to be paid for the additional tonnage by
applying the rate of US $ 1067 per ST. The contract was silent with respect to
the method or code to be applied for determining the "as fabricated
1.1.13 defined specifications to mean Industry Standard Codes (ISC). In the
absence of a contractually specified method of calculation, the MII applied the
AISC Manual of Steel Construction for calculating the as fabricated tonnage.
AISC is an industry standard. It has been applied by ONGC in other contracts.
Even the Arbitrator has noted that the BSCL has also accepted the validity of
the AISC Code. Now the BSCL cannot turn around and take a contrary position
before this court in the proceedings under Section 34 of the Act. Hence by
adopting the AISC Code, the Arbitrator has not acted contrary to the terms of
arbitrator in his award noticed that the parties impliedly accepted the validity
of the AISC method of calculation for calculating the final fabricated weight
in the following terms:
of those contracts have been provided by MII during the arbitration proceeding
showing that the AISC Code has been employed for determining the final "as
fabricated tonnage" of structuresIt seems to me that inasmuch as BSCL has
applied the AISC Code in the case of long to long point distance measurement it
cannot be denied that the AISC Code is regarded as a valid basis for
measurement it cannot be denied that the AISC Code is regarded as a valid basis
for measurement. There is no reason why it should be applied in the case of one
category of fabrication and not in the case of another." If before the
arbitrator, the said mode of calculation was accepted, we do not see any reason
why the BSCL should be permitted to raise the said question before us.
TANKS FOR ED AND EE JACKETS
involves a question of fact. It was a part of Claim No. 1 for fabrication. The
contention of the BSCL is that whereas Buoyancy tanks which were used in WI-8
and N3 jackets were removed by MII after installation thereof, the same had
been used after refurbishment on the ED/EE jackets and in that view of the
matter, no fabrication was required to be done. The claim of MII was that it
had nothing to do with the cost of material or the nature of the fabrication
work involved. Its claim was purely based on the labour cost at the rate of US
$1067 per ST which was incurred by it towards fabrication work in the refurbishment
of the Buoyancy Tanks.
to it, the tonnage of the Buoyancy Tanks had not been taken into account by
ONGC on the ground that no fabrication work was done after removal of the
Buoyancy Tanks from N3 and WI-8 Jackets. The learned arbitrator, however, in
his partial award found as of fact that substantial fabrication work had been
done by MII in the refurbishment of the said Buoyancy Tanks in the following
instructions, MII made substantial fabrication in refurbishing, handling,
rigging and welding the buoyancy tanks on the ED and EE jackets. The oral
evidences of RW S.K. Mukherjee shows that the attachment of buoyancy tanks
involves substantial fabrication activity. There can be no doubt that
fabrication work had to be done and that involved a measure of labour activity.
MII has demonstrated that there was difference in weight between the original
buoyancy tanks used on the N-3 and W-8 jackets and the weight of those tanks
when used on the ED and EE jackets. It says that this clearly points to
substantial fabrication activity for refurbishment of those two tanks." It has
further been held by the learned Arbitrator that MII had also been able to
establish that there had been a difference in weight between the original
Buoyancy Tanks used on N-3 and WI-8 Jackets and the weight of those tanks when
used in ED and EE Jackets. In fact, the learned arbitrator in arriving at the
said conclusion had taken into consideration the admission of Shri S.K.
Mukherjee who was examined on behalf of BSCL itself that attachment of Buoyancy
Tanks involved substantial fabrication activity.
dispute raised is a matter of appreciation of evidence. The findings arrived at
by the learned arbitrator cannot, thus, be said to be perverse.
claim relates to the question whether MII was entitled to payment for
fabrication as the tie-downs and sea-fastening require substantial fabrication
job in regard whereof there did not exist any provision in the contract. The
learned arbitrator has accepted the claim of MII holding that offshore
construction contracts, jackets and decks are fabricated onshore and then they
are transported on barges to the offshore location for installation wherefor
the lugs, braces and other sea-fastening and tie-down items are required to be
created which the installation contractor is to use to weld the jackets and
decks to the transportation barges, thereby securing the jackets for their
journey to the offshore location. MII had merely claimed payment for
fabrication of tie-downs and sea-fastening as part of the fabrication scope of
work. Reference has been made to clause 2 of the contract which is as under:
seafastening, . 60% of the transportation and installation lumpsum price of
jacket, piles & appurtenances
.40% of the transportation and installation lumpsum price of Decks, Hook-up and
resting The said provision has no application in the instant case as it merely
provides for stage payment on milestone basis. In fact, the clause which would
be attracted in the present case is contained in clause 2.1(a)(i) is as under:
scope of work to be executed by Contractor under this Contract shall comprises
Including bergs bumbers, best landing, grouting an flooding systems, launch
trustees, riser clamps. Catholic protection anodes, and mats and other
accessories and components indicated in the drawings and specifications
including lifting lugs, pulling lugs, retaining lugs etc. for lead out and refastening
and upending of the jacket." It specifically covers sea-fastening as part
of the scope of fabrication contract work. WI-8, WI-9, WI-10 and N-3
fabrication contract also contains a similar clause in Clause 2.1.
learned arbitrator in para 12.24 of his award noticed that BSCL itself has
acknowledged to ONGC that the tie-down materials had been fabricated as part of
the fabrication scope and the weight could not be disallowed in calculating the
'as fabricated tonnage'. It, therefore, evidently cannot take a stand which is
contrary thereto and inconsistent therewith.
by reason of the award, the learned arbitrator was of the opinion that the
sea-fastening and tie-down were part of the transportation and installation
scope and BSCL did not succeed in proving that the said item should be included
in the scope of transportation and is not a separate item under the head of
fabrication. Again, the findings of the learned arbitrator were within his
domain, being findings of fact.
in relation to the said claim would depend upon the interpretation of clause 3
of Section 2 of the Consolidated Sub-Contract Price Schedule which provides:
the sub-contract price for the work described in the letter of intent is
payable by BSCL to MII in U.S.
the Main Contract Price is payable by ONGC to BSCL in Indian Rupees. It has
been agreed that Rupee- U.S. Dollar Excahnge rate shall remain fixed at Rs.
100.00=U.S$8.575 and loss or gain due to any variation in the Rupee-U.S. Dollar
exchange rate at the time of actual remittance of bills would be to MII's
aforesaid rate was the prevailing rate as on 9 August 1984 as mentioned in the Letter of
Intent dated 11
September 1984. Within
30 days of completion of MII's scope of work under the Sub-contract, a
reconciliation will be made of all the payments made from time to time.
cumulative value of all Rupess expended to buy U.S. Dollar remittance for the
Sub-contract work described in the Letter of Intent is less than the Rupee
equivalent of the Sub-contract price as determined on the basis of the
aforesaid rate prevailing on 9 August 1984, BSCL shall remit the balance amount
of Indian Rupees, if any, to MII in U.S. Dollars at the prevailing rate of
exchange on the date of such U.S. Dollar remittance; and if after such
reconciliation it is found that BSCL have expended Rupees in excess of the
Rupees equivalent of the Sub-contract Price for the work described in the
Letter of Intent, MII shall arrange to refund any such excess in Rupees to
BSCL." Clause 4.0 of the contract provides that the payment will be made
by BSCL to MII on receipt of payment by BSCL from ONGC.
not in dispute that by reason of the contract entered into by and between the
parties the rate was frozen at Rs. 100 = US$ 8.575. One of the questions which
arise for consideration is as to whether the said provision applied to all the
claims or not. According to MII, having regard to the provisions for milestone
payments for transportation and installation, Clause 4.0 would apply only in
contended that BSCL had not correctly understood the merit and purport of the
said provision which has been sought to be explained. The said provision
according to MII would be as under:
contract is followed, MII gets US$100 and pays back US$7.43, therefore the net
receipt of MII is US$ 92.57. However, BSCL had adjusted the exchange rate at
the time of payment only. The rate as per contract 1 US$= 11.662. Thus, the rate on the date of payment is Rs.
13. Therefore, the net receipt of MII is only US$ 89.70. In reality, the loss
suffered by MII was much greater since in the fifty-four month life of the
project, the value of the Indian rupee deteriorated drastically against the
not in dispute that in terms of the contract, the payments made by BSCL, which
was to be in US dollars, was required to be reconciled at the end of the
contract. According to MII, if BSCL expended less than the rupee amount
stipulated in the sub-contract in dollar payments, BSCL would convert the
unused rupees to dollars to remit the dollars to MII. Whereas if BSCL expended
more than the agreed amount of rupees, MII would refund the excess amount to
BSCL so as to ensure sharing of exchange loss by both the parties. According to
MII, however, BSCL acted contrary to the said provision insofar as instead of
paying the full amount of invoice in US dollars it paid at the fixed exchange
rate relying on, or on the basis of, the aforementioned provisions, resulting
in loss suffered by MII.
learned arbitrator proceeded on the basis that loss of exchange provisions had
no application in respect of structural material (claim 4), bulk material
(claim 5), transportation of pipe (claim 6), reimbursables (claim 7), change
orders and extra work (claim 8) and delay and disruption (claim 9).
although has acted in breach of the contract in which variation provision as
regard the claims of the sub-contract, viz., scope of fabrication work (Claim
1), transportation and installation of platforms (Claim 2) and transportation
and installation of pipelines and risers (Claim 3) while making payments. It
is, however, one thing to say that having regard to the nature of breach on the
part of BSCL, MII would be entitled to claim damages, but it is another thing
to say that by reason thereof it would be entitled to full payment without
deduction relating to the BSCL conversion of Indian rupees to US dollars. It is
not in dispute that the initial claim of MII was US $ 2881195.03 which was
later on revised to US $ 3330790.94.
terms of the agreement, payments were to be made to MII if the payments were
certified by EIL and upon receipt of payments from ONGC and upon receipt of
foreign exchange clearance. For appreciating the aforementioned disputes, it
may be necessary to refer to the general terms of payment clause:
Claims for structural fabrication work is to be billed by MII duly certified by
EIL on monthly basis and the payment of the same bills shall be released after
60 days of receipt of the bill by BSCL.
stipulated above will be subject to the following conditions:
foreign exchange clearance by BSCL.
milestone basis will be made by BSCL to MII only after payments have been
received by BSCL from ONGC." The learned arbitrator held that MII would be
entitled to receive the entire amount as BSCL, despite receipt of payment from
ONGC, did not pay the amount to MII. For the purpose of applicability of the
exchange rates, the same, in our opinion, is irrelevant. The award was required
to be made in terms of the contract whereby and whereunder the foreign exchange
rate was frozen as was applicable on 9th August, 1994. The parties were bound by the said
terms of contract. It may be noticed that the sub-contract was entered into on 1st January, 1986. The execution of the contract had
started much earlier, i.e., much before the date of entering into the contract.
The purpose for which the Rupee US Dollar conversion rate has been frozen as
on 9th August, 1984 must be viewed from the angle that
thereby the parties thought that loss or gain towards the exchange rates would
be on account of MII. It is in the aforementioned situation that a letter of
intent in the following terms was served:
McDermott International Inc., P.O. Box 3098 Dubai United Arab Emerates.
Sirs, Sub: ED, EE, WI-8, 9, 10 & N3 Platforms Ref: Minutes of Meeting dt.
9.8.84 Your offer P/M 547 dt. 9.8.84 8/3132 dt. 4.9.84 With reference to the
above, we are pleased to issue this Letter of Intent conveying acceptance of
your offer for the following:
load-out & sea-fastening of 6 Jackets with Piles including all appurtenances
such as boat landing, conductor, riser clamps etc.
load-out & sea-fastening of 4 main decks, WI- 8, 9, 10 & N3 complete with
installation of all equipment, process piping, electricals and instrumentation
work including all yard test.
Refurbishing of 4
temporary decks to be supplied by ONGC.
installation, hook-up & commissioning of all above i.e. 1.1, 1.2 & 1.3 and ED,
EE Decks and 6 helidecks fabricated by BSCL at Jellingham. Temporary deck will
be collected from ONGC and taken to MII yard. Additionally the temporary decks
will be removed prior to installation of this deck and handed back to ONGC.
installation, hook-up & commissioning of Submarine Pipeines & Risers.
lump sum price is as follows:-
For 1.1, 1.2 &
1.3 of above US$ 19,400,000
For 2.0 of above
US$ 23,025,000 TOTAL US$ 42,425,000
PIPELINES For 3.0
above pipelines totaling 28 US$ 3,800,000 L.S. KM in length and installation of
8 risers @ US$ 91 per metre of pipeline and US$ 156,485 per Riser.
The above lump
sum prices are based on estimated tonnages and flowline length and number of
risers. Any variation in the above will alter the prices pro rata.
The above amounts
are based on the exchange rate between U.S. Dollars and Indian rupees (as ruling
on 9.8.84). Any variation in the above rate will be to MII's account.
TERMS & CONDITIONS
All terms and
conditions other than the payment terms as stipulated by ONGC in their contract
with BSCL for the above platforms will be applicable to MII.
The lumpsum price
is inclusive of all engineering required for total scope of BSCL's & MII's work
for six platforms as well as all technical service support by provision of
expert personnel to BSCL.
TERMS OF PAYMENT
of payment are to be mutually discussed and agreed to. It is however understood
that payment on milestone basis will be made by BSCL to MII only after payments
have been received by BSCL from ONGC.
will ensure delivery in such a manner that the delivery dates as stipulated by
ONGC for the above platforms will be met.
It may be noted that this Letter of Intent is subject to clearance of
Import List form DGTD and receipt of sanction from Government of India for
release of requisite amount of foreign exchange and import licenses etc. In case
Govt's clearance/ approval is not received, this Letter of Intent will be
withdrawn without any financial repercussions on either side.
shall however inform you as soon as Govt's approval/ clearance is received by
to this, we would request you to proceed with the work to ensure completion
within the agreed schedule." There might be some delay on the part of BSCL
to make payments.
not go into the aforementioned question, but to hold that the exchange rate
clause shall cease to have any application only because of the breaches on the
part of BSCL, cannot be accepted.
not in a position to accept that the exchange variation provision does not
relate to the payments in respect of Claim Nos. 1, 2 and 3. The objection
raised by the claimant to the said extent is accepted.
not in dispute that MII had substituted heavier material, as material
conforming to ONGC specification was not available readily in the market. The
matter was referred to EIL. Use of material was found to be technically
acceptable to EIL to which ONGC agreed by a letter dated 3rd May, 1985. ONGC, however, made it clear that
it would not make payment for the substituted material. BSCL immediately by a
telex dated 13th May, 1985 informed the same to MII. ONGC also in its letter
dated 6th December, 1984 categorically stated:
subject matter highlighted in your letter mentioned above has been reviewed by
us and we have found that payment against increased tonnage on account of
material substitutions proposed by M/s. BSCL/MII cannot be agreed to. Based on
above we reiterate our view that we will pay the material/ fabrication costs
based on the materials shown in the AFC drawings." The claim of MII is
based on the failure on the part of the BSCL to fulfil its part of the obligation
in procurement of the required material. It is true that BSCL agreed to
reimburse MII for the same. MII's claim is partially based on the facts that
EIL had recommended payments therefor as stated in a letter to ONGC dated 10
February 1987 and 6 April 1987.
it is also not in dispute that ONGC did not accept the said recommendations and
refused to take into consideration the substituted tonnage for payment of 'as
may be a dispute in this behalf between BSCL and ONGC.
admittedly, ONGC refused payment to BSCL.
partial award, the learned arbitrator noticed that ONGC's involvement was
imperative. ONGC had all along maintained its stand that it was not ready and
willing to bear the extra costs. The correspondence between the parties was
brought on record.
5 of the contract categorically states that MII was to procure the material
which was to be reimbursed by BSCL. The extra amount incurred by MII for
procuring materials having extra thickness, therefore, was not payable. To the
aforementioned extent, there has been a novation of contract. MII had never
asserted, despite forwarding of the contention of ONGC, that it would not
comply therewith. It, thus, accepted in sub silentio.
thus, must be held to have accepted that no extra amount shall be payable.
one thing to say that some more amount might have been spent towards
fabrication but the learned arbitrator has awarded the exact amount claimed by
MII in the following terms:
am satisfied that MII is entitled to a payment of US$ 20, 832.108 for the
disallowed tonnage of 19.584 ST at the contractual rate of US$ 1067 per
ST." It is in the aforementioned context that the involvement of ONGC was
necessary and if it is the accepted case of the parties that ONGC would not
entertain any claim of BSCL in this behalf, a fortiori having regard to the
tripartite agreement, the learned arbitrator could have no jurisdiction to
determine the claim in favour of MII only because at one point of time BSCL had
raised its own claim with ONGC. In other words, any reduction of the claim of
the BSCL by ONGC had a direct nexus with the claim of MII. It was, therefore,
not a case where ONGC was not involved in the matter. The exchange of letters
categorically proves that MII had accepted that it would not be entitled to any
extra amount in that behalf. MII by necessary implication accepted the said
contention. The principle of acceptance sub-silentio shall also be attracted in
the instant case. MII was, therefore, not entitled to raise a claim to the
extent of fabrication on account of the increased charges for substitution of
material used for WI-8, WI-9, WI-10 and N-3 Jackets and piles.
aforementioned extent, the claim of MII was beyond the terms of the contract.
power of the arbitrator to award interest for pre-award period, interest
pendent lite and interest post-award period is not in dispute. Section 31(7)(a)
provides that the arbitral tribunal may award interest, at such rate as it
deems reasonable, on the whole or any part of the money, for the whole or any
part of the period between the date on which the cause of action arose and the
date on which award is made, i.e., pre-award period. This, however, is subject
to the agreement as regard the rate of interest on unpaid sum between the
parties. The question as to whether interest would be paid on the whole or part
of the amount or whether it should be awarded in the pre- award period would
depend upon the facts and circumstances of each case.
arbitral tribunal in this behalf will have to exercise its discretion as
at what rate
interest should be awarded;
should be awarded on whole or part of the award money; and
should be awarded for whole or any part of the pre-award period.
1996 Act provides for award of 18% interest. The arbitrator in his wisdom has
granted 10% interest both for the principal amount as also for the interim. By
reason of the award, interest was awarded on the principal amount. An interest
thereon was upto the date of award as also the future interest at the rate of
18% per annum.
in some cases, this Court was resorted to exercise its jurisdiction under
Article 142 in order to do complete justice between the parties.
Pure Helium India (P) Ltd. (supra) this Court upheld the Arbitration award for
payment of money with interest at the rate of 18% p.a. by the respondent to
appellant. However, having regard to long lapse of time, if award is satisfied
in entirety, respondent would have to any a huge amount by way of interest.
With a view to do complete justice to the parties, in exercise of jurisdiction
under Article 142 of the Constitution of India, it was directed that award
shall carry interest at the rate of 6% p.a. instead and in place of 18% p.a.
in Mukand Ltd. v. Hindustan Petroleum Corpn., [2006 (4) SCALE 453], while this
court confirmed the decision of the division bench upholding the modified award
made by the learned single judge, the court reduced the interest awarded by the
learned single judge subsequent to the decree from 11% per annum to 7 = % per
annum observing that 7 = % per annum would be the reasonable rate of interest
that could be directed to e paid by the appellant to the respondent for the
period subsequent to the decree.
this case, given the long lapse of time, it will be in furtherance of justice
to reduce the rate of interest to 7 = %.
regards certain other contentions, in view of the fact that the same relate to
pure questions of fact and appreciation of evidence, we do not think it
necessary to advert to the said contentions in the present case.
Nos. 2 and 3 are allowed in part and to the extent mentioned hereinbefore. The
award of the learned Arbitrator is modified to the aforementioned extent. In
the facts and circumstances of this case, there shall be no order as to costs.