TaxTMI 
TaxTMI 
2006 (5) TMI 442
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....stalled in ONGC's Bombay High Sea. CONTRACT The said contracts covered: (i) Material procurement and fabrication of the ED and EE jackets, piles and decks. (ii) Transportation and installation of the ED and EE jackets, piles and decks. (iii) Material 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 Contract"). The said contracts contained arbitration agreements. BSCL 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. However, 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....
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....es 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 Contract. 3.2 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 Contract. Article 5 5.1 Except as otherwise provided h....
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....e 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. Article -10 10.1 Any amendment and/ or modification of this Sub-contract shall be valid only if it is in writing and signed by both the parties. All other terms and conditions not specified in this sub-contract shall be as stipulated in the Main Contracts. 10.2 This Sub-Contract Agreement shall be governed by the Laws of the Republic of India." DISPUTES Disputes and....
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....y him) and all expenses of arbitration proceedings shall be shared equally by the parties; 9) The learned Arbitrator shall file the Award in this Court. 10) 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: 1. For Fabrication of jackets, Temporary Decks and Main Decks US$ 1,182,817.94 2. For Transportation and Installation of jackets and Decks US$ 4,351,062.68 3. For Installation of Pipelines and Risers US$ 840,064.23 4. For Structural Material Procurement US$ 5,301,534.13 For Bulk Material Procurement US$ 84,919.14 UKL 262,296.43 S$ 680,764.29 5. For Transportation of Pipe US$ 1,231,415.00 6. For Reimbursables US$ 377,309.30 7. For Change Orders and Extra Work US$ 7,423,741.95 8. For Delays & Disruptions US$ 13,233,343.00 8A. For exchange Entitlements US$ 2,881,195.03 9. For Interest upto 21 August, 1989 US$ 10,909,7....
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.... On Point No. 4 US$ 2,809,100.54 & 2,300,200.00 On Point No. 5 65,207.39 232,604.40 & 548,271.81 On Point No. 7 322,351.87 52,422.51 1,573,466.00 512,187.16 On Point No. 9A US$ 3,330,790.94" PROCEEDINGS RE: ADDITIONAL AWARD On 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. The 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. MII in its application contended: "(i) While 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 omitt....
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....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. 4. 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. BSCL 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 September, 2003. FINAL AWARD The 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 ....
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....ng 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. (iii) As the 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. (iv) 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. (v) 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. (vi) The award as regards loss of profit under various heads is based on no evidence and, thus, wholly unreasonable. (vii) 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 public policy. (viii) As the contract did not contain any agreed schedule or any stipulation as to whether ....
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....n 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. The 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. (xv) 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 claim. (xvi) In terms of Clause 37 of the contract entered into by and between ONGC and BSCL, no award by way of damage was payable. Similar provision was also contained in the subcontract entered into by and between the parties. (xvii) 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. (xviii) 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. (xix) The award under the said head for a sum of US$ 54,000 ....
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....ntract 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 Arbitrator. Reliance on the Emden Formula cannot be said to be against the law prevailing in India as Sections 55 and 73 of the In....
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....ract 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. Re: 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: "The scheme of the Contract provides in relation to Fabrication and the application of AISC Code is explained below: (i) the sub-contract provides total estimated tonnage of 18, 178 ST with following break-up: ED/EE Platforms 6078 ST (page 166 I.A. no.2 Vol.2) WI8, W....
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....d 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. CHALLENGE TO AWARD: LEGAL 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 envisaged thereunder. Section 30 of the 1940 Act reads, thus: "Grounds for setting aside award -An award shall not be set aside except on one or more of the following grounds, namely: (a) That an arbitrator or umpire has misconducted himself or the proceedings; (b) That an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become in....
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....h 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. However, this Court, as would be noticed hereinafter, has the occasion to consider the matter in great detail in some of its decisions. In Primetrade 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. Vis-`-vis 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 Arbitrat....
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....orporation Ltd. v. Saw Pipes Ltd. (for short 'ONGC')[(2003) 5 SCC 705]. This 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. Such 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 t....
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....erse 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. We, therefore, would proceed on the basis that ONGC (supra) lays down the correct principles of law. SUPERVISORY JURISDICTION We may 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., (i) whether the award is contrary to the terms of contract and, therefore, no arbitrable dispute arose between the parties; (ii) whether the award is in any way violative of the public policy; (iii) whether the award is contrary to the substantive law in India, viz., Sections 55 and 73 of the Indian Contract Act; (iv) wheth....
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....me arbitrators instead 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. Section 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 1. There is no contrary agreement between the parties to the reference; 2.....
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....contract provided for extension of time, as would appear from clause 27(ii) and the relevant portions of clause 28 which read as under: "27 (ii) 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. 28 (i) Subject any 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. 28(iii) No extension in completion shall be permitted unless authorized in writing by Company as a "Variation in completio....
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.... far as Change Order No. 7 is concerned, the learned Arbitrator has recorded in paragraph 68.1 of the Final Award as under: "This 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: "Even 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: "4.65: 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. BSCL's delivery of the equipment was upto seventeen months late. During this period, McDermott continued to fabricate the de....
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....hange order." In the Final Award also the learned arbitrator noticed: "The 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 damages. Reference 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 Hud....
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.... 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 further observed: "19. Turning 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 ....
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....ddition to Change Order Nos. 2,3 and 7 to which we shall advert to a little later. This Court in Hind Construction v. State of Maharashtra [(1979) 2 SCC 70] stated: "7. The 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 616]." UNINVOICED CLAIMS: The 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 ....
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....ble 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: "22. Standby 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 a....
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....ehalf of MII. The said witness was cross-examined by BSCL. Both the parties had filed detailed written submissions before the learned arbitrator. It is on the basis of such evidence brought on record and submissions made before him, the learned arbitrator held: "In 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: "5. Replacement Steel : BSCL 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. Replacement 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 sh....
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....invoice is required to be drawn. It is 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. While claiming damages, the amount therefor was not required to be quantified. Quantification of a claim is merely a matter of proof. In 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 ....
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....nbsp; "Head 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 March, 2003. (c) Eichley Formula: 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: Step 1 Contract Billings Total overhead for Overhead allocable Total Billings for contract x contract period = to the contract period Step 2 Allocable ....
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....l 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 relevant documents. Sections 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. As 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 Ind....
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.... 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]. Once, 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. The 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; Continental Construction Ltd. v. State of U.P. (2003) 8 SCC 4; State of U.P. v. Allied Constructions (2003) 7 SCC 396. A 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 arbitra....
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....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 case. In 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 cons....
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....ain contention of BSCL in this behalf is that the learned arbitrator acted illegally and without jurisdiction in adopting the AISC Code. The 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. It has 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 under: "a) Payment 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 Contractor's yard. Landed cost would include c.i.f. price, testing charges, if any plus port charges clearing and....
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....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 h....
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....e 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. BUOYANCY TANKS FOR ED AND EE JACKETS It 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 ....
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....ks 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: "2.1 (i) (a) Load-out, sea fastening- 60% of the transportation and installation lumpsum price of jacket, piles & appurtenances (b) Load-out, seafastening, .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: "The scope of work to be executed by Contractor under this Contract shall comprises (i) Jac....
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....er 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. It is 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 relation thereto. It is contended that BSCL had not correctly understood the merit and purport of the said ....
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....II was US $ 2881195.03 which was later on revised to US $ 3330790.94. In 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: "1. Fabrication 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. 4. Payments as stipulated above will be subject to the following conditions: (a) Receipt of foreign exchange clearance by BSCL. (b) Payments on 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 foreig....
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....a. 4.5 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. 5.0 TERMS & CONDITIONS 5.1 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. 5.2 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. 6.0 TERMS OF PAYMENT Terms 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. 7.0 DELIVERY MII will ensure delivery in such a manner that the delivery dates as stipulated by ONGC for the above platforms will be met. 8.0 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/ a....
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....wever, admittedly, ONGC refused payment to BSCL. In his 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. Clause 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. It, thus, must be held to have accepted that no extra amount shall be payable. It is 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: "I 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$....