ONGC Must Pay Shipping Contractor $1.13 Million in Standby Charges After Delaying Offshore Work, Bombay HC Upholds Award

In brief

The question

1. Whether the tribunal erred in holding ONGC responsible for suspending the work despite the asserted failure to comply with contractual notice and work-plan requirements.

The court held

The court dismissed ONGC’s Arbitration Petition No. 212 of 2013, finding no ground for interference with the award under Section 34.

It also directed

It also dismissed the contractor’s Arbitration Petition No. 211 of 2013, declining to interfere with the non-award of pre-award interest.

01Facts

ONGC engaged Great Eastern Shipping to fabricate, transport and install a replacement NG Flare Tripod Structure at Bombay High.

¶ 3–7

The contract schedule provided for completion by 15 February 2000, with load-out scheduled to begin on 25 January 2000.

¶ 3–7

ONGC postponed the work to coordinate it with other platform works, and the shutdown required for installation was provided on 10 February 2000; work commenced the following day.

¶ 37–42, 56, 61

The contractor claimed US$1,185,500 in spread charges for the suspension and delayed site access.

¶ 9, 32

The tribunal awarded US$1,134,500, interest at 9% per annum from the award date, and Rs. 10,00,000 in arbitration costs.

¶ 9, 32

ONGC challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996; the contractor separately challenged the non-award of pre-award interest.

¶ 10, 22, 73

02Issues

i.1. Whether the tribunal erred in holding ONGC responsible for suspending the work despite the asserted failure to comply with contractual notice and work-plan requirements.

¶ 29(i)–(ii), 44–46

ii.2. Whether the tribunal’s award of standby charges was contrary to the contract or unsupported because the vessels were working, unavailable at the site, or engaged in transportation during the claimed periods.

¶ 29(iii)–(v), 58–68

iii.3. Whether the tribunal’s factual findings and award disclosed a ground for setting aside under Section 34.

¶ 22–23, 69–71

iv.4. Whether the court should interfere with the tribunal’s decision not to award interest for the period before the award.

¶ 73

03Law Applied

Section 34 of the Arbitration and Conciliation Act, 1996 permits a court to set aside an arbitral award only on the statutory grounds; it does not authorise a reassessment of evidence merely because a party disputes the tribunal’s factual conclusions.

¶ 69–71

Under Clause 8.2.3 of the contract, day-rate or rental-rate schedules applied to costs incurred during a suspension; Clause 2.2.2.2 provided for compensation where failure to provide site access caused delay or expense.

¶ 44, 64–65

Section 31(7)(a), as it stood before the 2015 amendment, gave the tribunal discretion to award pre-award interest at a rate it considered reasonable; the absence of such an award did not, by itself, warrant court interference.

¶ 73

No judicial precedents were cited in the judgment.

Provisions in the judgment · 3 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 34 Section 31

Interest Act, 1978 Section 2

04Reasoning

The court accepted the tribunal’s finding, based on the contractual schedule and contemporaneous correspondence, that ONGC postponed the work to accommodate another contractor and thereby suspended the claimant’s work.

¶ 46–53

The agreed programme and ONGC’s postponement undermined its objections concerning notice and work-plan compliance.

¶ 56

The tribunal had considered the vessels’ availability and use, made deductions for work and transportation components, and found that site access was unavailable until the shutdown on 10 February 2000.

¶ 59–68

The court held that ONGC’s remaining objections sought a reappraisal of evidence, which was impermissible under Section 34.

¶ 69–71

As to pre-award interest, the court treated its award as discretionary under the applicable version of Section 31(7)(a) and found no basis to interfere with the tribunal’s decision.

¶ 73