TMI Blog2007 (11) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;OSVs') inter-alia, for supplying material from its onshore bases to its offshore installations. After initially meeting its requirements by chartering foreign OSVs, the appellant decided to develop a fleet of Indian Flag vessels. Various Indian companies including the respondent and the Shipping Corporation of India (in short 'SCI') acquired OSVs, with a view to chartering them to the appellant. The respondent acquired five vessels-(named Garware I to Garware V) which were handed over to the appellant in the months of November and December, 1983 and January and March, 1984. The dispute pertains to the cost of repairs and maintenance of the respondent's OSVs for the eleventh to the sixteenth year of their operation. Even though there is no dispute regarding the first two terms of five years each, reference to the manner in which the rates for the same were arrived at is necessary. A working group under the Director General of Shipping was constituted by the Ministry of Petroleum to determine the floor day rate in respect of the vessels keeping two objects in mind, i.e. (a) long term availability of the OSVs for the appellant and (b) economic viability to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Dr. Saxena Committee of 1995-77. c) 11 and 12 years to actualized on the basis of S.C.Is'OSVs as recommended by Dr. Saxena Committee of 1995-77. 8. Disputes and differences arose between the appellant and inter-alia the respondent and others regarding the method to the adopted for calculating rates payable with reference to the eleventh to the sixteenth years. The respondent, therefore, filed Writ Petition No. 2788 of 2001 for various reliefs. 9. By an order dated 7.12.2001 a Division Bench of the High Court recorded that the Writ Petition involved certain contractual disputes and that both the parties had agreed to refer the disputes raised in the Writ Petition to the sole arbitration of Mr. Justice M.L. Pendse (a former Judge of the Bombay High Court and the former Chief Justice of the Karnataka High Court). The order which is a short one, reads as follows: This writ petition involves certain contractual disputes relating to repairs and maintenance expenses etc. contract between the parties contain an arbitration clause. Both the parties agree to refer the disputes raised in the writ petition to sole arbitration of Justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal under Section 34 of the Act. Learned Single Judge dismissed the appeal holding that the conclusion was rational. An appeal filed was also dismissed. 12. According to the Division Bench, the learned arbitrator has considered and construed the reports while arriving at his conclusions. The entire dispute in the Writ Petition and before the learned arbitrator centered around this issue. The basis of the calculation adopted by the learned arbitrator was, not only logical but just and fair. The provisions of the said reports are not such that they required no interpretation and were merely to be applied without anything more. They called for a proper interpretation and construction before being applied to the facts of the case. The learned arbitrator did so. 13. The learned Single Judge held that undoubtedly there was no reference so far as the period of 13 to 16 years are concerned to the learned Arbitrator. But the prayers and the writ petitions clearly indicated that even for that period an issue was raised. 14. The Division Bench was of the view that even if the mode of calculation as applied by the arbitrator is not very appropriate in its effect that could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual work. 20. It is to be noted that the anomalies referred to in the subsequent paragraphs relate to the anomaly of lower rates being paid to owners to exercise greater management effectiveness by ensuring lower capital because of lower interest rate and lower rate equality ratio. 21. The recommendations of the HLWG are as follows: 1. Determination of year from which R M expenses are to be actualized a. 1st to 5th year as per payments already made. Settled cases not to be reopened. b. 6th to: 10th year as per norms fixed by the Dr. Saxena Committee of 1995-97. c. 11th and 12th years to be actualized on the basis of SCI's OSVs as recommended by the Dr. Saxena Committee of 1995-97. 5. Ceiling rates for A type Vessels only pertaining to the period beyond 12 years of operation a. From 1st to 5th year ceiling rates as already paid by ONGC. b. From 6th to 10th year floor rates to be paid by ONGC. c. For the 11th and 12th years ceiling rates to be paid by ONGC 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's OSVs of 5400 BHP (Audited statements) were to be reimbursed on year to year basis after receipt of the audited statement from SCI additional reimbursement of corresponding overhead expenses in the ratio of 15:85 of the differential amount will also be made. The differential amounts for other OSVs were recommended to be calculated pro rata basis of the BHP of the respective OSVs w.r.t. above differential amount for OSVs of 5400 BHP. 26. Though there was some controversy as to whether the year referred to is the financial year as reimbursement was on year to year basis after receipt of the auditor's statement from SCI the norms obviously relate to financial year. 27. A few factual aspects need to be noted. So far as Essar is concerned, the year is same as SCI. In case of Bann, there was one time settlement and it is only JESCO which challenged the report. SCI's first year of operation was 1984-85. The figures for that year provide some material for rationalization. It is to be noted that stress is on re-imbursement. Thus the measure is fixed and, therefore, year of operation is immaterial. It needs no reiteration that claim was for 11th and 12th years and the awa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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