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M/s. Essar Oil Ltd. Versus Hindustan Shipyard Ltd. & Others

Arbitration Agreement - Whether ONGC is part of arbitration agreement or not - Arbitral Tribunal made an Award, but all the three Members of the Tribunal could not come to the same conclusion. The majority i.e. two Members of the Tribunal came to the conclusion that there was no privity of contract between the appellant and the ONGC; and the ONGC was not a party to the contract between the appellant and the respondent. In the aforestated circumstances, the ONGC, according to the majority view, c .....

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establishing contractual relationship between the ONGC and the appellant. In the circumstances, the ONGC cannot be made legally liable to make any payment to the appellant. As stated hereinabove, only for the sake of convenience and to get the work of the ONGC done without any hassle, the ONGC had made payment to the appellant on behalf of the respondent without incurring any liability to make complete payment on behalf of the respondent.

The ONGC shall not be liable to make payment, .....

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ved by a common judgment dated 29th September, 2004, delivered in Appeals Against Order Nos.255 and 624 of 2003 by the High Court of Andhra Pradesh at Hyderabad, these appeals have been filed by M/s Essar Oil Ltd., who had been given a sub-contract by the first respondent, Hindustan Shipyard Ltd., in respect of a contract which was given to it by the Oil and Natural Gas Commission. 2. The facts giving rise to the present litigation, in a nutshell, are as under:- The Oil and Natural Gas Commissio .....

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ge a sub-contractor for getting the work done. Other respondents in these appeals are the arbitrators, who are formal parties. 3. In pursuance of the aforestated understanding arrived at and the contract entered into between the ONGC and Hindustan Shipyard Ltd. (who has been referred to as the respondent hereinafter), the respondent had entered into a contract with M/s Essar Oil Ltd., who is the appellant in both these appeals. Thus, the appellant was a sub-contractor in respect of the contract .....

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es. 5. In the process of carrying out the contract, the appellant was not paid by the respondent for the work done and therefore, a dispute had arisen between the appellant and the respondent. Let us not look at the nature of the dispute or the amount claimed or the liability with regard to making payment to the appellant at this stage, suffice it to state that there was an Arbitration Agreement between the appellant and the respondent and therefore, the dispute had been referred to the Arbitral .....

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ellant and the respondent. The question which was involved in the said dispute was not only with regard to determination of the amount to be paid to the appellant, but was also with regard to determination of a person who was liable to make payment to the appellant. 7. After hearing the concerned parties, the Arbitral Tribunal made an Award, but all the three Members of the Tribunal could not come to the same conclusion. The majority i.e. two Members of the Tribunal came to the conclusion that t .....

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made. At this stage, we are not concerned with the other facts and the amount awarded by the majority of the Tribunal. 8. On the other hand, the dissenting Member, who was in minority, was of the opinion that there was a contract between the appellant and the ONGC and therefore, the ONGC was liable to make payment to the appellant, but he expressed an opinion to the effect that the respondent should be directed to make payment to the appellant only if the respondent is paid the unpaid amount by .....

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. In the circumstances, the respondent filed OP NoS.989 of 2001 and 96 of 2002 before the Principal District Judge, Visakhapatnam, under Section 34 of the Arbitration and Conciliation Act, 1996. 10. The Principal District Judge, Visakhapatnam, decided both the Original Petitions by orders dated 10th October, 2002 and 1st November, 2002, respectively. The learned Principal District Judge confirmed the award on the issues with which we are concerned, but he remanded the matter to the Arbitral Trib .....

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as a tripartite agreement among the ONGC, the appellant and the respondent. The High Court had relied upon some letters written by the appellant to the ONGC and therefore, the ONGC was also treated as a party to the contract. It also held that as the ONGC was a party to the contract, it ought to have been made a party before the Arbitral Tribunal but as the ONGC was not represented before the Arbitral Tribunal, the Award made by the Tribunal was bad in law. The Award deserved to be set aside by .....

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nt at this stage. It is not in dispute that the appellant has not been paid the amount payable to it. It is also not in dispute that the appellant had been engaged by the respondent in pursuance of a contract entered into between the respondent and the ONGC and it was open to the respondent to avail services of any other person for doing the work entrusted to it by the ONGC. In the light of the aforestated undisputed facts, the question is only with regard to determination of liability of the pe .....

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o it by the respondent, which was a sub-contract in nature. In absence of any contract between the ONGC and the appellant, the appellant could not have made any claim before the ONGC and as there was no contract between them, it was also not possible for the appellant to make the ONGC a party before any Court or Authority for recovery of the amount payable to it in pursuance of the sub-contract given by the respondent. 15. It had been fairly admitted by the learned counsel appearing for the appe .....

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iate a long procedure and to expedite payment to the appellant, who was actually doing the job for the ONGC, instead of the ONGC paying to the appellant through the respondent, the ONGC was paying directly to the appellant. 16. The learned counsel for the appellant had with great stress submitted that there was not a single contract between the appellant and the ONGC and there was no tripartite contract among the appellant, the respondent and the ONGC, whereby the ONGC was made liable to pay the .....

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e to make payment to the appellant. 18. On the other hand, the learned counsel for the respondent had submitted that the ONGC was liable to make payment to the appellant and therefore, there is no liability on the part of the respondent to make payment to the appellant. 19. It had further been submitted by the learned counsel for the respondent that it is not necessary that in each and every case the contract should be in writing. The contract can be very well inferred by the act or conduct of t .....

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d 25th October, 1991 addressed by the respondent to the ONGC, wherein it was stated that the ONGC had desired to make payment directly to the appellant in pursuance of meetings convened among the representatives of the respondents and the ONGC. He had also submitted that some of the letters written by the ONGC to the respondent clearly denoted that the ONGC had accepted the liability to make payment to the appellant and therefore, there was no liability on the part of the respondent to make any .....

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tted by the learned counsel for the respondent that the view of the High Court that the ONGC was liable to make payment to the appellant is correct and therefore, the appellant should take appropriate action against the ONGC for recovery of the unpaid amount. The learned counsel had, therefore, submitted that the view taken by the High Court is absolutely correct and the respondent is no more liable to make any payment to the appellant. 22. We have heard the learned counsel for the parties at le .....

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hat some understanding, but not amounting to any agreement or contract, was arrived at between the ONGC and the respondent for making direct payment to the appellant, possibly because the respondent was not in a position to make prompt payments to the appellant. It also appears that on account of the delay in making payment to the appellant, the work of the ONGC was likely to be adversely affected. The ONGC was interested in getting its work done promptly and without any hassles. In the circumst .....

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payable to the appellant by the respondent. 26. It is also pertinent to note that the Arbitration Agreement was only between the appellant and the respondent. The ONGC was not a party to the Arbitration Agreement. When a dispute had arisen between the appellant and the respondent in relation to payment of money, the appellant had initiated the arbitration proceedings. As the ONGC was not a party to the Arbitration Agreement, it could not have been represented before the Arbitral Tribunal. If th .....

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appellant. 27. We are in agreement with the view expressed by the majority of the Arbitral Tribunal. In our opinion, the High Court had committed an error by not considering the above facts and by observing that the appellant will have to take legal action against the ONGC for recovery of the amount payable to it. If one looks at the relationship between the appellant and the respondent, it is very clear that the respondent had given a sub-contract to the appellant and in the said agreement of s .....

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