ARBITRATION PETITION NO.549 OF 2013

Challenge to arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, relating to operation and maintenance contracts for vessels Samudrika-3, Samudrika-8, Samudrika-9, Sindhu-9 and Sindhu-11.

The petitioner (ONGC Ltd.) sought setting aside of the majority arbitral award dated 11th November 2010, which allowed the respondent's claims for reimbursement of repair costs and other amounts.

The petitioner contended that the arbitral tribunal erroneously interpreted the lump-sum contract and allowed reimbursement despite absence of prior approval as required under clause 2.6 of the contract.

The arbitral tribunal (majority) allowed various claims of the respondent; the petitioner-nominated arbitrator issued a dissenting minority award. Earlier, an award in respect of vessel Samudrika-2 (SAM-2) was set aside by a Single Judge of the Bombay High Court in Arbitration Petition No.4 of 2009, which is under appeal (Appeal No.369 of 2016).

Whether the respondent was entitled to reimbursement for the cost of repairs/spares under the terms of the contract, which prescribed a lump-sum daily compensation and comprehensive obligations. Whether the condition precedent of prior approval by the petitioner, as per clause 2.6 of the contract, was satisfied for any repair reimbursement. Whether the arbitral tribunal erroneously applied the principles of contra proferentem or dominant purpose of the contract in interpreting unambiguous contract provisions.

The contract was a comprehensive lump-sum arrangement (clauses 2.0, 2.1) covering all duties including repairs and maintenance at the respondent's cost; no provision allowed separate reimbursement for repairs. Clause 2.6 of the contract imposed an express condition precedent that any extra work must have prior written approval of the owner; no such approval was obtained, barring the claim. The respondent's own prior conduct (letters, earlier contracts) and the evidence of petitioner’s witness confirmed that repair costs were to be borne by the respondent itself. The contract terms were clear and unambiguous, leaving no scope for application of contra proferentem or dominant purpose theories. The respondent's claim for “Manning Fees” was a mischaracterization; the lump-sum payment compensated for all obligations, and the vessel downtime did not give rise to separate repair reimbursement.

the duties and obligations of the respondent included inter alia “.... manning, operation, victualling, repair and maintenance and provisioning of the vessel with a view to provide round-the-clock logistics support services....” The contract does not contain any term such as “Manning Fees.” The contract provides for payment of a “lump-sum amount per day” under clause 2.1 for all the obligations and duties of the respondent under the contract. Question of invoking of principle of “contra proferentem” or “dominant purpose of the contract” did not arise. the respondent could not have been awarded the said claim for repairs by the arbitral tribunal contrary to clause 2.6 of the contract which stipulated a condition precedent, i.e.“... provided Owner has approved such action in advance.”

In 1995, ONGC awarded five identical contracts to Interocean Shipping for operation and maintenance of vessels Samudrika-3, Samudrika-8, Samudrika-9, Sindhu-9 and Sindhu-11. Disputes arose over deductions from bills. The respondent first invoked arbitration for vessel Samudrika-2 (SAM-2) in March 1999, leading to an award in March 2009 partly allowing claims. ONGC challenged that award in Arbitration Petition No.4 of 2009, which was allowed by a Single Judge on 13 March 2015; an appeal (No.369 of 2016) is pending. For the five vessels in the present case, arbitration was initiated by the respondent; the tribunal was reconstituted after resignations and a demise. The tribunal gave directions for disclosure and additional evidence. On 11 November 2010, the majority of the tribunal rendered an award allowing various claims of the respondent, while the ONGC-nominated arbitrator gave a dissenting minority award. ONGC filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the majority award. The court heard submissions and reserved judgment on 14 March 2017, pronouncing it on 9 June 2017.

• Arbitration and Conciliation Act, 1996: Section 34