Oil & Natural Gas Corporation Ltd. V. Saw Pipes Ltd. 2003 (4) SCALE 92

CITATION	2003 (4) SCALE 92
DATE OF JUDGMENT	17th April 2003
COURT	Hon’ble SUPREME COURT OF INDIA
APPELLANT	Oil & Natural Gas Corporation Ltd
RESPONDENT	SAW Pipes Ltd
BENCH	M.B. SHAH & Justice ARUN KUMAR, JJ

INTRODUCTION

 “Oil & Natural Gas Corporation Ltd. V. Saw Pipes Ltd. 2003( 4) SCALE 92” is a notable legal case that took place in the Indian judicial system and developed the new  period of  transnational Commercial Arbitration and court also interpreted the word arbitral procedure and Public Policy of India. The case involves oil  and Natural Gas Corporation Ltd. As petitioners, and  SAW Pipes Ltd. As the respondent. In light of this, the court in the case of ONGC vs. Saw Pipes observed that the award which is in violation of statutory vittles cannot be said to be in the public interest and if the court doesn’t exercise its authority to set aside  similar awards it would negatively affect the administration of justice. 

FACTS OF THE CASE

The Oil and Natural Gas Corporation had given Saw Pipes an order for the provision of  ministry for  coastal  disquisition, to be acquired from recognised European suppliers. The replier Company which is engaged in the business of supplying  outfit for  coastal  oil painting  disquisition and  conservation by its letter dated 27-12-1995 on agreed terms and conditions, offered to supply to the petitioners 26 ” periphery and 30 ” periphery containing pipes. The complainant by letter of intent dated 3-6-1996 followed by a detailed order accepted the offer of the replier Company. As per terms and conditions, the goods were  needed to be supplied on or before 14-11-1996. Due to a labour strike in Europe, delivery was delayed. The contract’s abecedarian provision was the timely delivery of the  particulars, and although ONGC extended the deadline, it  nevertheless invoked the provision for the recovery of liquidated damages by abating the applicable sum from the supplier’s payment. Arbitration was requested because Saw Pipes challenged the action.  The award was challenged by ONGC, which said that it was against public policy and that the arbitral  bench had failed to resolve the issue by failing to apply the applicable  substantive law, ignoring the terms of the contract, and disregarding usual business procedures in  analogous deals. ONGC challenged the award as being patently illegal. The single judge and a division bench of Bombay High Court dismissed the challenge.  

ISSUE RAISED

1. Whether the court would have  governance under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an award passed by the Arbitral Tribunal? . 
2. 2. Is the liquidation of damages by ONGC  fairly right?

CONTENTIONS OF APPELLANT

1. That is in case where there’s clear violation of Sections 28 to 31 of the Arbitration and Conciliation Act, 1996.  
2.  That the terms of the contract between the parties, the said award can be and is  needed to be set aside by the court while exercising  governance under Section 34 of the Arbitration and Conciliation Act, 1996  

CONTENTIONS OF RESPONDENT

1. That the court’s  governance under Section 34 is limited and the award could be set away  substantially on the ground that the same is in conflict with the “ public policy of India ”. 

JUDGEMENT

Court held that 

(A)( 1) The court can set aside the arbitral award under Section 34( 2) of the Act if the party making the  operation furnishes  evidence that  

i) A party was under some  incapability, or 

ii) The arbitration agreement isn’t valid under the law to which the parties have  subordinated it or, failing any  suggestion thereon, under the law for the time being in force; or 

iii) The party making the operation wasn’t given proper notice of the appointment of an adjudicator or of the arbitral proceedings or was  otherwise  unfit to present his case;  

B)( 1) The impugned award requires to be set away  substantially on the grounds  

i) There’s specific reservation in the agreement that the time and date of delivery of the goods was of the  substance of the contract;  

ii) In case of failure to deliver the goods within the period fixed for  similar delivery in the schedule, ONGC was entitled to recover from the contractor Liquidated damages as agreed; 

iii)On the request of the replier to extend the time- limit for  force of goods, ONGC informed specifically that time was extended but quested liquidated damages as agreed would be recovered; 

iv) Liquidated damages for  detention in  force of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;  

v) There’s nothing on record to suggest that  reservation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable

CONCLUSION

To conclude, the case make significant development in the Indian judicial system as in this case court interpreted the concept of Arbitral Proceedings and Public Policy Of India in broad sense. 

REFERENCE

1. http//www.scconline.com/DocumentLink/iYHg1TVT
2. https//lawplanet.in/  oil painting- and-natural- gas-  pot- ltd- vs-  aphorism- pipes- ltd- case- summary-2003-sc/
3.  https//www.legalserviceindia.com/legal/article-1557-case-comment-oil-and-natural-gas-corporation-ltd-v-s-saw-pipes-ltd.html

This Composition is written by ROHIT ATTRI pupil of INSTITUTE OF LAW, KURUKSHETRA UNIVERSITY KURUKSHETRA; Intern at Legal Vidhiya.