Supreme Court Rules No Privity of Contract Between ONGC and Appellant

The Supreme Court set aside the High Court's judgment, confirming the majority view of the Arbitral Tribunal that there was no privity of contract between ONGC and the appellant. ONGC was not liable to make payments to the appellant; the responsibility rested with the respondent. The appeals were allowed, directing the respondent to make the necessary payments to the appellant. The absence of a direct contract between ONGC and the appellant precluded any liability on ONGC's part, emphasizing the arbitration agreement was strictly between the appellant and the respondent.

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Issues Involved:
1. Determination of the liability to make payment to the appellant.
2. Validity of the Arbitral Tribunal's Award.
3. Existence of a tripartite agreement among ONGC, the appellant, and the respondent.
4. The High Court's interpretation of the contractual relationships and its decision.

Detailed Analysis:

1. Determination of the Liability to Make Payment to the Appellant:
The primary issue in these appeals is the ascertainment of the person liable to make payment to the appellant. The appellant, M/s Essar Oil Ltd., had been subcontracted by Hindustan Shipyard Ltd. (the respondent) for work originally contracted by the Oil and Natural Gas Commission (ONGC) to the respondent. The appellant performed the work and received some payments directly from ONGC based on certifications from the respondent. However, disputes arose when the appellant was not paid for the completed work, leading to arbitration.

2. Validity of the Arbitral Tribunal's Award:
The Arbitral Tribunal, consisting of three members, issued an Award with a majority view that there was no privity of contract between the appellant and ONGC. Consequently, ONGC was not liable to make payments to the appellant; the liability rested with the respondent. The dissenting member, however, opined that ONGC was liable but suggested that the appellant should seek legal action against ONGC for recovery.

3. Existence of a Tripartite Agreement Among ONGC, the Appellant, and the Respondent:
The High Court concluded that there was a tripartite agreement among ONGC, the appellant, and the respondent, based on certain letters exchanged between the parties. It held that ONGC should have been a party before the Arbitral Tribunal, and its absence rendered the Award invalid. This interpretation was challenged by the appellant, who argued that no such tripartite agreement existed and that the payments made by ONGC were merely to facilitate the work without creating any contractual obligation.

4. The High Court's Interpretation of the Contractual Relationships and Its Decision:
The High Court's judgment was based on the assumption that ONGC was a party to the contract and thus should have been included in the arbitration. The Supreme Court, however, found that the High Court erred in its interpretation. The Supreme Court agreed with the majority view of the Arbitral Tribunal, stating that there was no privity of contract between ONGC and the appellant. The payments made by ONGC were on behalf of the respondent and did not establish any direct contractual relationship or liability.

Conclusion:
The Supreme Court set aside the High Court's judgment, confirming the majority view of the Arbitral Tribunal. It held that ONGC was not liable to make payments to the appellant, and the responsibility lay with the respondent, who had subcontracted the work. The appeals were allowed, and the respondent was directed to make the necessary payments to the appellant. The Supreme Court emphasized that the absence of a direct contract between ONGC and the appellant precluded any liability on ONGC's part, and the arbitration agreement was strictly between the appellant and the respondent.

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