Mcdermott International Inc. Vs Oil and Natural Gas Commiss Ion — Arbitration | Bombay HC (2007)

Mcdermott International Inc. Vs Oil and Natural Gas Commiss Ion — Arbitration | Bombay HC (2007)

 IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

APPEAL NO.560 OF 1999

IN

ARBITRATION PETITION NO.233 OF 1995

IN

AWARD NO.45 OF 1995

AND

APPEAL NO.226 OF 2000

IN

ARBITRATION PETITION NO.53 OF 1994

IN

AWARD NO.211 OF 1993

AND

CROSS OBJECTIONS (LODG) NO.9 OF 1999

IN

APPEAL NO.560 OF 1999

Mcdermott International Inc.

... Appellant

vs.

Oil & Natural Gas Commission now
called as Oil & Natural Gas
Corporation Ltd.

... Respondent

Mr.F.E.Devitre with B.B.Saraf, Dinesh Chamboowala.
i/b. Mustafa Motiwala, for Appellant.

Mr.D.R.Zaiwala with Ms.Snehal Paranjpe, Mohandas i/b.
Little & Co., for Respondent.

CORAM: D. K. DESHMUKH &

 J. H. BHATIA, JJ.

DATED: 9th October,2007

P.C.:-

1.Both these appeals are between the same

parties and at least one question raised in both

these appeals is common, the parties are also common,
therefore, both the appeals can be conveniently
disposed of by a common order. The appellant in both
these appeals is an overseas contractor with whom

the respondent-ONGC had entered into a contract for

carrying out work at Bombay High. The disputes arose

between the parties. There was an arbitration clause
and therefore, the disputes were referred to
arbitrations. In the first arbitration Award was made
by the learned Umpire on 25.1.1995. Certain claims
made by the appellant-claimant were accepted. One
claim with which this appeal is concerned, is the
claim regarding surtax, that claim made by the
Contractor appellant was awarded by the umpire. An
arbitration petition was filed challenging the Award
made by the Umpire which was arbitration petition
no.233 of 1995 and the Award made by the learned
Umpire is Award no.45 of 1995. That petition was
decided by the order dated 4.9.1998. The learned
Single Judge records in his order that challenge was
raised to the several claims but only challenge to
the Award made under claim no.9 was seriously pressed
on behalf of O.N.G.C. which was the petitioner
challenging the Award. The learned Single Judge by
his judgment dated 4.9.1998 set aside the Award made
by the learned Umpire on clause 9. Appeal no.560 of
1999 is directed against that order. In the second
arbitration, the award was made by the arbitrators.

The Award number is Award no.211 of 1993. By the

Award, several claims made by the claimant were
awarded by the learned Arbitrator by their Award
dated 30.9.1993. The learned Arbitrators by the
Award also awarded the claim of the appellant in
relation to surtax. The second claim awarded by the
learned Arbitrator with which this appeal is
concerned, is claim in relation to mobilisation and
demobilisation of the equipments and the third claim
awarded by the learned Arbitrator with which this
appeal is concerned, is in relation to payment of
interest on disputed amount. The arbitration

petition challenging the Award made by the
arbitrators was filed in this Court by O.N.G.C. which
was registered as Arbitration petition no.53 of 1994.
It was decided by the learned Single Judge of this
Court by order dated 10.8.1999. So far as the claim
of surtax is concerned, the learned Single Judge
followed the judgment of the learned Single Judge in
Arbitration petition no.233 of 1995. The learned
Single Judge has agreed with the view taken in the
judgment in arbitration petition no.233 of 1995 and
has set aside the Award. The learned Single Judge
has also set aside the Award of the Arbitrators in

relation to the mobilisation and demobilisation of
the equipments. He also set aside the Award made by
the learned Arbitrators in relation to the payment of
interest. The judgment of the learned Single Judge in
Arbitration petition no.53 of 2004 is challenged in
the appeal no.226 of 2000.

2.Now taking up the question which is common
in both the appeals viz. surtax for consideration.

The surtax was admittedly payable by the appellant to
the Government and admittedly, the amounts were
deducted from the amount payable to the appellant by
the respondent for payment of surtax to the
Government. The amounts were deducted in the year
1987 but actual payment was made in the year 1990.
The claim of the appellant was that under the terms
of the contract, the contractor was entitled to
receive payment in U.S. dollars by crediting the
amount in the account of the contractor -appellant in
a bank at New York. The respondent deducted the

amounts payable to the contractor in dollars by
adopting the exchange rate which was in force on the
date of deduction. However, when the amount of tax

was actually paid in the year 1990, there was
variation in the exchange rate. In other words, when
the amount was actually paid lesser dollars were
required for making payment of the tax liability, and
therefore, according to the Contractor, the
contractor was entitled to refund of the dollars.
This claim has been rejected by the learned Single
Judge relying on the judgment of the Supreme Court in
the case of “P.V.Raghava Reddi and another vs.
Commissioner of Income Tax, AIR 1962 Supreme Court
977”. The learned Single Judge has thus held that
when the amount was deducted from the amounts payable
to the contractor in the year 1987 credit was given

in the account books of the respondent to the
contractor it amounts to payment to the contractor,
and therefore, the contractor is not entitled to the
benefit of variation in the exchange rate. This
finding is challenged by the appellant. It is
submitted by the learned Counsel appearing for the
appellant that as per the terms of the contract, the
amounts for the work done by the contractor was
payable by the respondent in foreign currency viz.
Dollars and therefore, when the amount was deducted

by the respondent the deduction was also in that

currency. According to the appellant, when the
deduction was made in the year 1987, the respondent
was under a duty to retain the amount in the same
currency till the payment is made to the tax
authorities. It is submitted that the judgment of
the Supreme Court in the case of “P.V.Raghava Reddi
and another vs. Commissioner of Income Tax” is not
applicable in this case because that judgment turns
on the terms of the contract between the parties in
that case. On the other hand, on behalf of the
respondent, relying on the provisions of the Foreign
Exchange Regulation Act, it was contended that the
amount which was deducted could not have been
retained in foreign currency by the respondent. Then
it was submitted that the account is maintained by
the respondent in Indian Currency and therefore, the
deduction was also made in Indian currency and the
payment of tax was also made in Indian currency,
therefore, there is no question of the appellant

being entitled to any benefit of variation in the
exchange rate.

3.Now if in the light of these rival
submission the record of the case is perused, it
becomes clear that it is clause 22 of the Contract
which is relevant. It reads as under:-

“22.Duties and Taxes

Indian Custom duties, if any,
levied upon fabricated structures, sub-
assemblies and equipment and all
components which are to be incorporated
in the Works under the Contract and
Constructional Plant and Equipment
(provided that the same shall be
exported back from India as early as
possible after completion of the Works
of Site) shall be borne by the Company.
 The Contractor shall bear all taxes
including but not limited to Indian
Corporate taxes levied or imposed on
the Contractor under the Contract,
under the provisions of Income Tax Act
1961 or any amendment thereof and under
the Companies (profit) Surtax Act 1964
or any amendment thereof on account of
payments received by it from the
Company for work done under the
Contract.Itshallbethe
responsibility of the Contractor to
submit to the concerned Indian

Authorities the returns and all other
connected documents required for this
purpose. The Contractor shall also
provide the company such information as
it may require in regard to the
Contractor's income and expenditure
under the Contract for proper
assessment of taxes and duties. Any
taxes levied on the personnel of
Contractor shall also be borne by
Contractor.

The Company will if so required by
applicable laws in force, at the time
of payment deduct income taxes payable
by the Contractor at the rates in
force, from the amount due to the
Contractor and pay to the concerned tax
authority directly.”(emphasis supplied)

Reading of the above clause in the contract shows
that liability to pay taxes under the Indian Laws was

that of the contractor and when the respondent
O.N.G.C. was making payment of the tax to the Income

Tax Department, it was making payment on behalf of
the contractor. The tax liability with which these
appeals are concerned, was under the Companies
(Profits) Surtax Act,1964. Perusal of Section 18 of

that Act shows that the provisions of Section 160,
161, 162 of the Income Tax Act have been made

applicable. Perusal of Section 160, 161 and 162 of
the Income Tax Act shows that so far as the tax
liability of the foreign contractor is concerned, the
respondent was a representative assessee and it was
acting on behalf of the foreign assessee to clear the
liability of the foreign assessee under the Companies
(Profits) Surtax Act. It is an admitted position that
under the terms of the contract payment was to be
made by the respondent to the contractor in foreign
currency by crediting the amount in the account of
the contractor in a Bank at New York. From the above
quoted clause in the contract it is clear that for
making payment of the surtax on behalf of the
contractor, the O.N.G.C. was authorised to deduct
such amount as may be necessary from the amount
payable to the contractor. For deciding how much
amount is to be deducted from the amount payable to
the contractor, for clearing the surtax liability of
the contractor, the rate of exchange that may be
prevalent on that date is to be applied. It is an
admitted position that when amounts for the aforesaid

purpose were deducted in 1987, the rate of exchange
prevalent at that time was applied. If the respondent
had immediately on making the deduction, paid the
amount to the Tax authority in the year 1987 itself,
no dispute would have arisen. But the respondent
retained the amount for a period of three years and
paid the tax in the year 1990, during that period
there was variation in the rate of exchange as a
result of which lesser number of dollars were
required to be paid for clearing the tax liability of
the contractor, therefore, the dispute arose, the
contractor claims that it is entitled to refund of
the amount from O.N.G.C. The learned Umpire and the
learned Arbitrators have construed the terms of the
contract as also the law in force and have held that
the contractor is entitled to refund. The amount was
deducted as observed above from the amount payable to
the contractor in dollars. The amount was held by
O.N.G.C. as agent of the contractor for clearing the
surtax liability of the contractor. We have not been
pointed out anything which will even suggest that
there was any law in force which prevented the
O.N.G.C. from holding the amount deducted from the

amount payable to the contractor in U.S. Dollars and
that it was compulsory for the O.N.G.C. to convert
the dollars into Rupees and hold the amount in Indian
currency. In our opinion, as the O.N.G.C. was holding
the amount as agent, considering that that
fluctuation in the exchange rate was in favour of
Dollar, the O.N.G.C. should have continued to hold
the amount in Dollar as that course of action was
favourable to its principal i.e. the contractor.
The learned Umpire in his award has discussed this
issue in detail, he has recorded his finding on the
issue thus:-

“It is, however, difficult to accept
the contention raised on behalf of ONGC
that MI was not entitled to ask for
refund of the balance in terms of
U.S.Dollars. It is obvious that MI had
nothing to do with the fact that NGC
was maintaining their accounts in terms
of Indian Rupees. The Contract between
ONGC and MII is to pay the contract
price to MII in terms of U.S.Dollars.
It is an expressly stipulated in Clause
13.1 of the contract. The invoices
were submitted by MII in U.S.Dollars.

The payment of the invoices is also to
be made by ONGC in U.S.Dollars.
Admittedly, the original deduction made
was also to the extent of US$
432,500.00. It is true that the tax
demanded from ONGC on account of MII
would be payable in Indian Rupees. At
the same time it must be appreciated
that the liability which ONGC owed to
MI was not in terms of Indian Rupees
and MII is entitled to proceed on the
assumption that an amount of US$
432,500.00 is lying with ONGC as having
been deducted out of the total amount
which was admittedly payable in foreign
currency, namely, U.S.Dollars. If the
deduction would not have been made by
ONGC, there can be no doubt that the
said amount of U.S.Dollars would have
been required to be made by ONGC to
MII. Just because the amount which was
immediately payable in U.S.Dollars is
paid late, whatever be the reason, the
nature of the liability to pay back the
deducted amount in U.S.Dollars does not
change into a liability to pay in
Rupees. The legal position is that
whatever be the nature of the account
which is maintained by ONGC and,
indeed, it could not have maintained

its own accounts in foreign currency,
the liability to pay MII any amount due
on the basis of its invoices continued
to be to pay in terms of U.S.Dollars.
The amount deducted in terms of
U.S.Dollars being the deposit with
ONGC, that amount of U.S.Dollars which
would be enough to meet the tax
liability in terms of Rupees as on the
date on which money was paid to meet
the demand of the Tax Department could
alone be debited to the account of MII.
The rate of exchange at which the
conversion of the tax liability in
Rupees into U.S.Dollars would be the
rate which was prevalent on 21st of
May,1990. As a consequence, the
balance due out of the deduction made
from the Invoices would have to be
refunded to MII in terms of Dollars.
Even the officers of ONGC had
understood that the liability of ONGC
would be to refund the deducted amount
in U.S.Dollars as well be clear from
theletterswrittenby
G.Balasubramaniam referred to earlier.
Consequently, MI will be entitled to
the refund of US $ 100733.89 with
interest thereon with effect from 21st
May 1990. Accordingly, the alternate

claim made by MI is granted.”

It is clear that according to the learned Umpire the
amounts to the contractor were payable under the
terms of the contract in Dollars, the amount was also
deducted in dollars, the rate of exchange prevalent
on the date of deduction was relevant only for the
purpose of deciding how many dollars, considering
that the tax liability would be in Indian Currency,
are to be deducted. Perusal of the judgment of the
learned Single Judge in Arbitration Petition no.233
of 1995 shows that he has set aside the above finding
recorded by the learned Umpire because, according to
the learned Judge, on the date on which deduction is
made by the O.N.G.C., credit was given of that amount
to the contractor in the account book of the O.N.G.C.
Observations in para.10 of the judgment of the
learned Judge read as under:-

“10.After considering the respective
contentions of the parties and
submissions made by the learned Counsel
for the parties and the award impugned,
it appears to me that the award suffers

16

from a manifest error apparent ex-facie
as far as claim no.9 is concerned. It
is the finding of the Umpire that the
Income Tax department treated the
petitioner as representative assessee
under Section 162 of the Income Tax Act
for the assessment year 1986-87 and the
deduction was legal and not uncalled
for. Thus, the assessment against the
petitioner was in its capacity as a
representative assessee. As held by
the Umpire the petitioner did not want
to retain the monies beyond the period
necessary. However, the petitioner was
directed by the Income Tax department
not to refund but to retain the amount
of surtax on the basis of computation
under Section 44-B of the Income Tax
Act. The petitioner was directed to
deposit the amount retained by it of
surtax and informed that the amount was
required to be paid pursuant to the
notice under Section 226(3) of the
Income Tax Act. It is thus clear that
the money retained in rupees in 1987
towards tax liability of the respondent
was credited in the account of the
respondent in the books of accounts of
the petitioner in rupees. In law the
effect is that the petitioner had paid

the amount to the respondent till 1987
as the money was held by it as a
depositee.”

Perusal of the above quoted paragraph shows that
according to the learned Single Judge, deduction of
the amount from the amounts payable to the
contractor, amounts to payment of the money to the
contractor and thereafter, the money is held by
O.N.G.C. as a depositee. We find, ourselves unable
to agree with the view. The amount which is payable
as tax by the contractor is deducted by O.N.G.C, to
make payment of that amount to the tax authority as
agent of the contractor. The money is thus held by
O.N.G.C. as agent of the contractor till payment is
made to the tax authority.. Perusal of both the
judgments impugned in the appeals shows that both the
learned Single Judges have heavily relied on the
judgment of the Supreme Court in the case of
“P.V.Raghava Reddi and another vs. Commissioner of
Income Tax, AIR 1962 Supreme Court 977” referred to
above. Perusal of that judgment shows that the
appellant before the Supreme Court, had sold MICA to

a Japanese company. During that time there were
difficulties in remitting the amount to the Japanese
company, and therefore, following clause was included
in agreement:-

“In view of the difficulties in this
country, it is requested that the first
party credits all these amounts to the
account of the second party with them
without remitting the same until
definite instructions are received by
the first party.”

The question that fell for consideration before the

Supreme Court was whether the amounts that were
payable to the Japanese company were received by the
Japanese Company in India. In paragraph 9 the Supreme
Court relying on the above quoted clause in the
agreement held that till the Indian firm credited the
amount that was payable to the Japanese company in
their books of account to the credit of the Japanese
company, the Indian Company was debtor of the
Japanese company, but after the amounts were credited
the money was held by assessee firm as depositee and
the money then belongs to the Japanese company and

was held for and on behalf of the Japanese company
and the money was at the disposal of the Japanese
company. The following observations in paragraph (9)
of the judgment are relevant, they read as under:-

“9.This leaves over the question
which was earnestly argued, namely,
whether the amounts in the two account
years can be said to be received by the
Japanese Company in the taxable
territories. The argument is that the
money was not actually received, but
the assessee firm was a debtor in
respect of that amount and unless the
entry can be deemed to be a payment or
receipt, cl (a) cannot apply. We need
not consider the fiction for it is not
necessary to go to the fiction at all.
The agreement, from which we have
quoted the relevant term, provided that
the Japanese Company desired that the
assessee firm should open an account in
the name of the Japanese Company in
their books of account, credit the
amounts in that account, and deal with
those amounts according to the
instructions of the Japanese company.
Till the money was so credited, there
might be a relation of debtor and

creditor; but after the amounts were
credited, the money was held by the
assessee firm as a depositee. The
money then belonged to the Japanese
Company and was held for and on behalf
of the Company and was at its disposal.
The character of the money changed from
a debt to a deposit in much the same
way as if it was credited in a Bank to
account of the company. Thus, the
amount must be held on the terms of the
agreement, to have been received by the
Japanese Company, and this attracts the
application of S.4(1)(a). Indeed, the
Japanese Company did dispose of a part
of those amounts by instructing the
assessee firm that they be applied in a
particular way. In our opinion, the
High Court was right in answering the
question against the assessee.”

It is thus clear that the Supreme Court has decided
the question that fell for consideration before it on
the basis of the above quoted clause in the contract
between the parties. In so far as the present case is
concerned, there is no such clause in the contract.
Therefore, really speaking, the ratio of the judgment
of the Supreme Court in the case “P.V.Raghava Reddi

and another vs. Commissioner of Income Tax” is not
applicable in the present case.. In our opinion, in
any case, the view that was taken by the Umpire as
also by the Arbitrators was based on the
interpretation on the terms of the contract and was a
possible view of the terms of the contract as also of
the Law and therefore, the learned Single Judge has
not justified in disturbing that. Therefore, in our
opinion, appeal no.560 of 1999 deserves to be
allowed, because this is the only point which was
raised in that appeal.

4.So far as two other points that are required
to be considered in appeal no.226 of 2000 are
concerned, the first question to be considered is
whether the Arbitrators were justified in awarding
interest on the undisputed claims. The relevant facts
are that invoices were submitted by the contractor
for payment. The respondent did not raise any
objection to some of the payment which were claimed
under the invoices but did not actually make the
payment. The payment of some of the amounts was made
even before the arbitration commenced. The payment

of some of the amounts was made after the arbitration
commenced. The learned Arbitrators have held that
because the objection or dispute was not raised after
receiving the invoices by the respondent by following
the procedure which is laid down in the contract, the
claim amounts were undisputed and therefore, the
appellant was entitled to interest in terms of the
contract. The learned Single Judge, however, set
aside the Award made by the learned Arbitrator on
this count holding that the conduct of the O.N.G.C.
of not making payment amounts to raising dispute and
as there was dispute raised by non-payment, no
interest could have been awarded on these amounts

because the contract is only for payment of interest
on undisputed claims and therefore, payment of
interest on disputed claim is barred by implication.
In our opinion, clause nos.13.2.1 to 13.2.4 are

relevant. They read as under:-

13.2.1Pending completion of the
whole works, provisional progress
payments for the part of Works executed
by the Contractor shall be made by the
Company on the basis of the said Work
completed by the Contractor as

certified by the Company Representative
and approved by the Company for
payment.

13.2.2The Contractor shall prepare
six copies of invoice with all the
required supporting documents and
details and submit the said invoice to
the Company Representative at Company's
Bombay address for certification of the
said work in the above invoice and for
approval of the amount payable
thereunder.

13.2.3The Company shall arrange
certification and approval of the
invoice for payments to be completed
within 30 days of receipt thereof by
the Company Representative. In the
event of the Company Representative
objecting to any portion of the Work
covered by the said invoice, such
objection shall be communicated to the
Contractor within 20 days of the date
of receipt of the invoice by the
Company Representative. The Contractor
shall have the right to claim the
payment of such amounts objected by the
Company Representative in subsequent
invoice after removal of cause of such

objection.

13.2.4The Company shall arrange the
remittance to the Contractor of the
undisputed amount of all the work
within 30 days of the receipt of the
invoice by the Company Representative
for the Scope of work as at the time of
award of the contract. In the event
that payment of the undisputed amounts
of the invoices is not received, within
forty-five (45) days of receipt of the
invoice by the Company, interest shall
accrue beginning on the forty sixth day
after receipt of invoice on the
undisputed amount due at the rate of
one (1) percent per month.”

Perusal of the above quoted clauses shows that on
receiving the invoices if the respondent desires to
raise any dispute about any of the items included in
the invoice, objection has to be raised within 20

days from the date of receipt of the invoice and
payment of balance of the amount has to be arranged
within a period of 30 days from the date of receipt
of the invoice. If the payment is not made within
that period, then the contractor becomes entitled to

payment of interest. In the present case, it is an
admitted position that no objection as contemplated
by the above quoted terms of the contract was raised
in relation to any of the invoices by the respondent
within the period specified in the contract, and
therefore, in our opinion, the learned Arbitrators
were justified in holding that the claims on which
the interest was to be paid were undisputed claims,
and therefore, the contractor was entitled to claim
interest on those amounts in terms of the contract.
In our opinion, the learned Single Judge was not
justified in holding that because the payment was
withheld, the invoices were disputed, and therefore,
interest is not payable. The finding recorded by the
learned Arbitrator was in any case is the finding
recorded on interpretation of the terms of the
contract. The finding was within the jurisdiction of
the learned Arbitrators and therefore, in our
opinion, the learned Single Judge was not justified
in disturbing that finding.

5.The last point that arises for consideration
in the appeal no.226 of 2000 is whether the

Arbitrators were justified in awarding full payment

of US $ 2,43,000 for both mobilization and

demobilization.The contractor made a claim of US
$483742 under the head “lumpsum amount”. Under the
contract if the barge of the contractor is mobilised
outside India for carrying out the work of O.N.G.C.
then lumpsum amount of US $243000 is payable for
mobilization. It was the case of the contractor that
for carrying out work of O.N.G.C. in question, the
barge was mobilised at U.A.E. and therefore, the
contractor is entitled to full lumpsum payment. The
defence of the ONGC was that some other work of
similar nature was taken by the contractor as a sub-
contract which was nearby to the site where the work
to which the contract in question relates was to be
carried out, and therefore, in terms of clause 24.5
the contractor was not entitled to claim full lumpsum
amount for mobilization. This case of the contractor

was accepted by the Arbitrators. The Arbitrators held
that the barge of the contractor was mobilized at
U.A.E. though it is true that before reaching the
site to which the contract in question relates, the
barge did work at other site which was nearby, as the

mobilization of the barge was took place at U.A.E.
the contractor is entitled to full lumpsum payment.
The learned Single Judge has set aside this finding
and has also set aside the Award made by the
Arbitrators on this count. We have heard the learned
Counsel appearing for both the sides in detail in
this regard. In our opinion, in view of the clear
language of clause 24.5, the Arbitrators were not
justified in awarding full lumpsum payment for
mobilization. Clause 24.5 reads as under:-

“24.5 In the event that Contractor
obtains other work in the nearby area
or Contractor elects to mobilize his
equipment from some point less distant
from Company's site in offshore than
the point of origin, the lumpsum amount
for mobilization shall be reduced in
the rates that the reduced distance
from the new point of mobilization
bears to the distance from the point of
origin.”

Perusal of the above quoted clause 24.5 shows that if
the contractor obtains other work in the nearby area

then the lumpsum amount for mobilization is to be
reduced. It is an admitted position that the
contractor had obtained on sub-contract other work

in the nearby area. It appears that the Arbitrators
fell in error because they failed to notice that
reduction in lumpsum amount for mobilization is
contemplated by clause 24.5 in two contingencies viz.
(1) when contractor obtains other work in the nearby
area, (2) the contractor elects to mobilise the
equipments from some point less in distance from the
company's site in off shore than the point of origin.
The Arbitrators read clause 24.5 to mean that both
the conditions should simultaneously be complied

with for reduction in lumpsum payment. In our
opinion, reduction in lumpsum amount of mobilization
will take place even when the barge is mobilised at
the point of origin, but if the contractor has taken
other work in the nearby area. Therefore, we do not

find any fault with the finding recorded by the
learned Single Judge that for mobilization the
Arbitrators were not justified in awarding full
lumpsum payment.

6.So far as the claim made by the contractor
for lumpsum amount under the contract i.e. US $243000

for demobilization is concerned, perusal of the
judgment of the learned Single Judge shows that he
has held that because the contractor is not entitled
to full lumpsum payment for mobilization, the
contractor is not entitled to claim full lumpsum
payment for demobilization also. In our opinion, the
conclusion reached by the learned Single Judge is
contrary to the record and clause 24(4) of the
contract. Clause 24(4) reads as under:-

“24.4In the event that the
Contractor obtains other work in the
nearby area, or Contractor elects to
demobilize his equipment to some point
less distant from Company's site in
offshore than the point of origin the
lump sum amount for demobilization
shall be reduced in the ratio that the
reduced distance to the new point of
mobilization bears to the distance to
the point of origin.”

Perusal of the above quoted clause 24.4 shows that if

after completing the work for which the barge was
mobilised, the barge was demobilised at some place
other than the point of origin, then the lumpsum
amount payable for demobilization can be reduced. It
is nobody's case that after completing the work at
the site of ONGC, the barge went for doing any other
work. It appears to be an accepted position on record
that the barge was taken to U.A.E. for demobilization
from O.N.G.C. site to which the contract in question

relates. U.A.E. was the point of origin, and
therefore, as the barge for the purpose of

demobilization was taken to U.A.E. And not to any
other work site, in terms of clause 24.4 the
contractor would be entitled to full lumpsum payment
provided in the contract for demobilization. In our
opinion, the learned Arbitrators were justified in
holding that the contractor is entitled to full
lumpsum payment of US $ 243000 for demobilization
under the contract. The order of the learned Single
Judge to that extent is therefore, liable to be set
aside.

7.In the result, therefore, appeal no.560 of

1999 succeeds entirely. The judgment and the order
impugned in that appeal are set aside. The Award

made by the learned Umpire in relation to surtax is
also made rule of the Court.

So far as the appeal no.226 of 2000 is

concerned, the order of the learned Single Judge
setting aside the Award in relation to the surtax,
demobilization and the interest is set aside. The

award made by the learned Arbitrators in relation to
surtax, demobilization and the interest is confirmed.

In other words, the order of the learned Single Judge

setting aside the Award in relation to the
mobilization of the barge is maintained and
therefore, the Award of the learned Arbitrators is
made rule of the Court except the amount awarded on
account of mobilization. If any interest is awarded
on the amount awarded for mobilization, obviously

that interest will also stand reduced.

There is cross objection in the appeal

no.560 of 1999. The cross objection is that before
the learned Single Judge, points other than the point
of surtax were also urged. The learned Single Judge
has clearly observed in the order that the only
point urged was in relation to surtax. If according
to the respondent, points other than the point of
surtax were also urged and the observation of the
learned Single Judge was not correct, in that event
the respondent's remedy was to approach the learned
Single Judge. The cross objections in appeal,
therefore, cannot be entertained and therefore, it is
disposed of.

It is common ground that some amounts were
deposited by the ONGC in the Court which was
permitted to be withdrawn by the contractor pursuant
to the Court's order. If, as a result of this order,
according to the respondent, the contractor is liable
to bring back any amount that he has withdrawn from
the Court, the O.N.G.C. shall be at liberty to take
out notice of motion in this appeal seeking orders of
the Court for brining back the amount.

Appeals are disposed of.

(D.K.DESHMUKH, J.)

(J.H.BHATIA, J.)

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