Drilling Ltd. Vs. Oil & Natural Gas Corp.Ltd.  INSC 132 (17 February
ORIGINAL JURISDICTION ARBITRATION PETITION NO. 21 OF 2009 Dolphin Drilling Ltd.
.....Petitioner Versus Oil and Natural Gas Corporation Ltd. ..Respondent
O R D E R
This is an application under Section 11(6) of the Arbitration and
Conciliation Act, 1996 for appointment of an
arbitrator for and on behalf of the respondent and to refer the dispute(s)
between the parties for arbitration. The applicant and the respondent entered
into an agreement dated October 17, 2003 for "Charter Hire of Deepwater
Drilling Rig DP-Drill Ship `Belford Dolphin' along with Services on Integrated
Basis". In terms of the agreement, the applicant was to carry out drilling
operations for the respondent in the offshore waters of India as allocated by
the respondent. Clause 28 of the agreement contained the arbitration clause.
According to the applicant, though the period of the agreement came to an end
on February 13, 2007, on being called upon by the respondent, it continued to
provide further services till April 10, 2007 for which it was entitled to be
paid additionally on comparable rates under the agreement.
The applicant makes the grievance that a number of its invoices
were not paid or only paid in part by the respondent and on demands made by it
the respondent did not even give any satisfactory reply for
non-payment/part-payment of those invoices. Failing to get any positive
response from the respondent despite demands and reminders, the applicant was
left with no option but to invoke the arbitration clause under the agreement.
It accordingly, addressed a notice to the respondent on January 29, 2008
invoking arbitration on the disputes broadly set-out in the notice and
nominating Mr.Justice S. P. Bharucha, a former Chief Justice of India, as its
arbitrator. The applicant further states that the respondent did not respond to
the arbitration notice in the manner as provided in the arbitration clause in
the agreement and hence, it was forced to move this application before the
Mr. Gaurav Agrawal, learned counsel appearing for the respondent,
accepted the provision for arbitration vide clause 28 of the agreement dated
October 17, 2003. He also acknowledged that the dispute(s) raised by the
applicant in the arbitration notice dated January 29, 2008 arose under the
agreement dated October 17, 2003 and was/were fully arbitrable. Nevertheless,
he resisted the applicant's prayer to refer the dispute(s) raised in the
arbitration notice dated January 29, 2008 to arbitration on the plea that the
applicant had already invoked the arbitration clause albeit in connection with
a different dispute earlier arising under the agreement.
Mr. Agrawal submitted that the remedy of arbitration under clause
28 of the agreement was a one-time measure and it could not be taken recourse
to repeatedly even though the disputes may be different and unconnected to each
other. Learned counsel further submitted that the arbitration was an expensive
proposition and even though the respondent was liable to bear only half of the
expenses, the financial burden cast by the arbitration proceedings in terms of
fees for the learned arbitrators and counsel/solicitors and other incidental
expenses was quite onerous. Hence, the arbitration clause in the agreement
envisaged one, single arbitration for all disputes between the parties and not
repeated arbitrations for different disputes arising between the parties at
different times under the same agreement. The gist of the respondent's
objection is contained in sub-paragraphs (d) and (e) of paragraph 4 of its
counter affidavit which are reproduced below:
The respondent would further beg leave of this Hon'ble Court to submit that in
the List of Dates and in the Arbitration Application, the Petitioner did not
refer to the fact that the petitioner had already invoked clause 28 of the
agreement in 2004. Pursuant to the said request for arbitration, an Arbitration
Tribunal consisting of Hon'ble Mr. Justice B.P.Sharaf (Retd.) Hon'ble Mr.
Justice S.C. Pratap and Hon'ble Mr. Justice A.K. Dutta (Retd.) was constituted
in the year 2005. The said arbitration has continued for the last more than
to mention, the Respondent has incurred heavy expenses in the arbitration which
is at the concluding stage, i.e. arguments have been completed and written
submissions to be filed.
view of the aforesaid invocation of Clause 28 by the Petitioner, the notice
issued by the Petitioner on 29.01.2008 purportedly invoking the arbitration
clause once again and raising further disputes was not permissible under the
contract. It is most respectfully submitted that there cannot be repeated
arbitrators in relation to the very same contract. The arbitration agreement
cannot be interpreted to imply that for every dispute under the contract, the
parties can invoke a fresh arbitration.
the contract, all disputes should have been referred to arbitration at one
The plea raised by the respondent voices a real problem. It is
unfortunate that arbitration in this country has proved to be a highly
expensive and time consuming means for resolution of disputes. But on that basis
it is difficult to read the arbitration clause in the agreement as suggested by
the respondent. Clause 28 of the agreement dated October 17, 2003 reads as
SETTLEMENT OF DISPUTES
Except as otherwise provided elsewhere in the Agreement, if any dispute,
difference, question or disagreement or matter whatsoever shall, before or
after completion or abandonment of work or during extended period, hereafter
arises between the parties hereto or respective representative or assignees
concerning with the construction, meaning, operation or effect of the Agreement
or out of or relating to the Agreement or breach thereof shall be referred to
reference to arbitration shall be to an arbitral tribunal consisting of three
arbitrators. Each party shall appoint one arbitrator and the two appointed
arbitrators shall appoint the third arbitrator, who shall act as the presiding
party desiring the settlement of dispute shall give notice of its intention to
go in for arbitration clearly stating all disputes to be decided by arbitral
tribunal and appoint its own arbitrator and call upon the other party to
appoint its own arbitrator within 30 days. If the other party fails to appoint
its arbitrator within stipulated period or the two arbitrators fail to appoint
the third arbitrator, Chief Justice of High Court of competent jurisdiction or
Chief Justice of India as the case may be or any person or institution
designated by them shall appoint the Second Arbitrator and/or the Presiding
arbitrator as the case may be.
xxx xxx xxx xxx xxx xxx"
The plea of the respondent is based on the words "all
disputes" occurring in paragraph 28.3 of the agreement. Mr. Agrawal
submitted that those two words must be understood to mean "all disputes
under the agreement" that might arise between the parties throughout the
period of its subsistence. However, he had no answer as to what would happen to
such disputes that might arise in the earlier period of the contract and get
barred by limitation till the time comes to refer "all disputes" at
the conclusion of the contract. The words "all disputes" in clause
28.3 of the agreement can only mean "all disputes" that might be in
existence when the arbitration clause is invoked and one of the parties to the
agreement gives the arbitration notice to the other. In its present form clause
28 of the agreement cannot be said to be a one time measure and it cannot be
held that once the arbitration clause is invoked the remedy of arbitration is no
longer available in regard to other disputes that might arise in future.
The issue of financial burden caused by the arbitration
proceedings is indeed a legitimate concern but the problem can only be remedied
by suitably amending the arbitration clause. In future agreements, the
arbitration clause can be recast making it clear that the remedy of arbitration
can be taken recourse to only once at the conclusion of the work under the
agreement or at the termination/cancellation of the agreement and at the same
time expressly saving any disputes/claims from becoming stale or time -barred
etc. and for that reason alone being rendered non- arbitrable.
For the reasons aforesaid I am unable to sustain the objection
raised on behalf of the respondent.
In the result, the application is allowed. The applicant has
nominated Justice S.P. Bharucha, a former Chief Justice of India, as its
arbitrator. Justice Mrs. Sujata V. Manohar, a former judge of this court, is
appointed arbitrator on behalf of the respondent, subject to her consent and on
such terms as she may deem fit and proper.
The Registry is directed to communicate this order to the learned
Arbitrator to enable her to enter upon the reference and decide the matter as
expeditiously as practicable.
The petition stands disposed of with no order as to costs.
............................................J (AFTAB ALAM)
February 17, 2010.