Madras High Court
M/S.Oil And Natural Gas Corporation ... vs M/S.Shiv-Vani Oil And Gas Exploration on 10 September, 2025
Author: N.Anand Venkatesh
Bench: N.Anand Venkatesh
O.P.No.1007 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 10.09.2025
CORAM
THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH
O.P.No.1007 of 2015
M/s.Oil and Natural Gas Corporation Limited,
Having its registered Office at
Jeevan Bharti, Tower II, 124 Cannaught
Circus,
New Delhi and site office at Godavari Bhavan,
1st Floor, B Wing, Base Complex,
Rajahmundry-533 106.
Petitioner
Vs.
1.M/s.Shiv-Vani Oil and Gas Exploration
Service Limited,
(Amalgamated with SVUL Projects Limited)
Having its Registered Office,
at Tower-1, 5th Floor, NBCC Plaza,
Sector-5, Pushp Vihar, Saket,
New Delhi-110 017.
2.Hon'ble Mr.Justice N.V.Balasubramanian(Retd).,
Sole Arbitrator,
No.40, Sankarapuram,
Alemelumangapuram,
Mylapore, Chennai-600 004.
3.The Official Liquidator,
High Court, Delhi.
Respondents
[*R3 is impleaded vide order dated 25.09.2019 in A.No.7199 of 2019
and condone the delay in carrying out the amendement as per order
dated 23.01.2020 in A.No.113 of 2020].
1/18
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O.P.No.1007 of 2015
Prayer: Original Petition filed under Section 34(2)(A)(IV) & (V) and
(B)(2) r/w. Section 16(6) of the Arbitration and Conciliation Act, 1996,
to set aside the arbitration award dated 27.08.2015 passed by the second
respondent which had arisen out of the dispute between the petitioner
and the first respondent in Contract dated 11.08.2000 and direct the first
respondent to pay the costs of the petition.
For Petitioner : Mr.A.Abdul Hameed
Senior Counsel
For Respondents : No appearance
for R1 and R2
Mr.S.Gopalakrishnan for R3
ORDER
This Original Petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996, against the award dated
27.08.2015 passed by the Sole Arbitrator arising out of a dispute between
the petitioner and the first respondent in a contract dated 11.08.2000.
2. Heard Mr.A.Abdul Hameed, learned Senior Counsel appearing
for the petitioner and Mr.S.Gopalakrishnan, learned counsel appearing
for the third respondent.
3. On 11.08.2000, a contract was entered into between the
petitioner and the first respondent for Charter Hire of 1 No.200 Ton
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Work Over Rig, together with all equipments/accessories for Work Over
Operation in the KG Basin of the petitioner in the State of
Andhra Pradesh. This contract was awarded in favour of the first
respondent pursuant to the tender floated by the petitioner. It is stated
that the first respondent failed to perform the obligations under the
contract and as a result, the liquidated damages were levied and
ultimately, the contract was terminated vide notice dated 04.09.2001 with
effect from 30.09.2001.
4. The first respondent was permitted to continue the work over
operation, subject to certain conditions contained therein and ultimately,
the contract came to an end on 11.10.2002.
5. The first respondent issued the trigger notice dated 28.01.2006
under Section 21 of the Arbitration and Conciliation Act, 1996 [for
brevity 'the Act'] for referring the disputes to the Arbitrator. Thereafter,
the Sole Arbitrator was appointed and the arbitration proceedings
commenced on 09.11.2010.
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6. The first respondent filed the claim statement on 10.12.2010 and
the petitioner filed reply and counter claim on 10.03.2011, and a
rejoinder was also filed by the first respondent on 29.04.2011. The chief
and cross-examination was over on both sides on 10.04.2013 and the first
respondent commenced their arguments on 15.06.2013 and completed on
25.08.2013.
7. The first respondent filed a memo dated 06.09.2013 for receipt
of three additional documents. Objections were filed by the petitioner on
26.09.2013. However, the Arbitrator passed an order on 29.09.2013
taking those documents on file and marked them as Ex.C37 to Ex.C39.
Thereafter, arguments were addressed on both sides and the impugned
award dated 27.08.2015 came to be passed by the Sole Arbitrator. The
same has been put to challenge in the present petition.
8. The main ground that was urged by the learned Senior Counsel
appearing on behalf of the petitioner is that the claim made by the first
respondent was hopelessly barred by limitation. The learned Senior
Counsel further submitted that the Arbitrator, without there being any
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evidence, and after giving a finding to that effect, proceeded to award a
sum of Rs.15,00,000/- in favour of the first respondent towards
Claim No.5, which pertained to reimbursement towards costs for
drill strings and other accessories which remained in the well.
9. Per contra, the learned counsel appearing on behalf of the third
respondent submitted that the first respondent is presently under the
administration of the Official Liquidator, who is the third respondent.
The learned counsel submitted that there is no patent illegality in the
reasoning given by the learned Arbitrator warranting interference of this
Court. Hence, he sought for dismissal of this petition.
10. It is not in dispute that the notice of termination of contract was
given on 04.09.2001, with effect from 30.09.2001. It is also not in
dispute that the contract came to an end on 11.10.2002. The trigger
notice before initiation of arbitration proceedings was issued by the first
respondent only on 28.01.2006. After the appointment of the Arbitrator,
the claim statement was filed by the first respondent. One of the main
objections that was raised in the reply filed by the petitioner is that the
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claim made by the first respondent is barred by limitation and hence, the
entire claim is liable to be rejected. For this reply, the first respondent has
filed a rejoinder and has merely stated that the claim made by the first
respondent is within the period of limitation.
11. At this juncture, it will be relevant to take note of the written
arguments filed on the side of the first respondent and the portion which
dealt with the issue of limitation. For appreciation, the same is extracted
hereunder:-
“XV. Whether the claim made by the claimant is within the
period of limitation?
A.As per Ex.P22 issued by the respondent, the
contract came to an end on 11.10.2002. The claimant raised
the claims by various letters between 11.10.2002 and
10.10.2005 i.e. within a period of 3 years. The letters are
dated 05.09.2000, 05.10.2000, 27.06.2001, 22.01.2002,
28.01.2002, 06.03.2001, 27.02.2002, 27.05.2002,
30.03.2002, 01.04.2003, 26.08.2004, 12.01.2005,
21.02.2005, 28.04.2005 and 01.07.2005 which are marked
as Ex.P.10, Ex.P.11, Ex.P.12, Ex.P.13, Ex.P.19, Ex.P.21,
Ex.P.23, Ex.P.24, Ex.P.26, Ex.P.28, Ex.P.29, Ex.P.30,
Ex.P.31, Ex.P.32 and Ex.P.33 respectively.”
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12. The above stand taken by the first respondent makes it clear
that the contract came to an end on 11.10.2002 and thereafter, the first
respondent was continuously sending communications to the petitioner
upto the year 2005, and there was nothing to show that the petitioner
responded to any of those communications. Thereby, the first respondent
has virtually attempted to extend the period of limitation by means of
sending repeated representations/communications to the petitioner.
13. Even in the written arguments filed on the side of the
petitioner, a specific stand was taken to the effect that the contract came
to an end in the year 2002 and the claim has not been made within the
period of limitation of 3 years thereafter, and therefore, the claim made
by the first respondent is barred by limitation.
14. After the written submissions were filed, arguments on the side
of the first respondent was also completed, which is evident from the
proceedings recorded by the learned Arbitrator which is found at Page
Nos.241 to 243 in the paper book. At this point of time, a memo dated
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06.09.2013 came to be filed on the side of the first respondent. For
proper appreciation, the memo is scanned and extracted hereunder:-
15. The three documents that were relied upon by the first
respondent is available at Page Nos.251 to 256 in the paper book. For
this memo, the petitioner filed objections. The petitioner took a stand that
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the documents relied upon are attempted to be brought in belatedly,
without assigning any reasons, and that there is no proof regarding the
issuance of receipt of documents mentioned at Serial Nos.2 and 3 of the
memo and that the document in Serial No.1 is inadmissible in evidence.
16. The learned Arbitrator, through proceedings dated 29.09.2013,
considered the memo and objections and decided to take those
documents on file and marked those documents as Ex.C37 to Ex.C39,
subject to the objections raised by the petitioner. Thus, even though the
Arbitrator did not deal with the objections in the proceedings dated
29.09.2013, the Arbitrator was expected to deal with the objections
atleast while passing the award.
17. It is relevant to take note of one vital fact which missed the
attention of the learned Arbitrator. The learned Arbitrator failed to see
that these three documents were not supported by any pleadings. The
appropriate manner in which these three documents ought to have been
brought on file is by permitting the claimant to file additional statement
and explain the purport of those documents and the stand that is sought
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to be taken by relying upon those documents. Instead, the Arbitrator
thought it fit to straight away admit those documents without pleadings.
Apart from that, these documents ought to have been marked through the
witness who should have explained the above three documents and the
scope of the bank entries that were relied upon by the first respondent. If
this procedure had been followed, the petitioner would have had an
opportunity to file a reply for the additional statement, and also would
have cross-examined the witness pertaining to the three additional
documents that were sought to be brought in by the first respondent
towards the fag end of the proceedings. The denial of this opportunity to
the petitioner would clearly tantamount to violation of the principles of
natural justice. The reason for rendering such a finding will get more
clearer in the later portion of this order.
18. The learned Arbitrator while dealing with the issue of
limitation has rendered the following finding:-
“81. I am of the view that though the contract came
to an end on 11.10.2002, the last payment against the said
work was made by the respondent to the claimant Company
on 28.03.2003 and the claimant has issued a notice dated
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28.01.2006 in Ex.C38 for appointment of Arbitrator and the
Chennai office has forwarded the same to the Rajahmundry
office the letter of the claimant requesting for appointment
of Arbitrator on 31.01.2006 (Ex.C39). But the Learned
Counsel for the respondent has denied the same and stated
that the payment made on 28.03.2003 (Ex.C37) cannot be
relied upon. However, there is no evidence from the
respondent to establish that no payment was made on
28.03.2003 nor there is any evidence from the respondent to
show when the respondent has made the last payment and in
absence of final bill, the last date of payment made by the
respondent can be considered as the starting point of
limitation. The respondent also had not produced any
evidence to show that they have denied the claims made by
the claimant prior to 28.3.03 to the several letters sent by
the claimant for commencement of period of limitation. I am
therefore of the view that mere denial by the Learned
Counsel for the respondent that no payment was made by
respondent on 28.3.03 is not acceptable in the absence of
any proof of the non-payment on 28.3.2003. The respondent
could have produced the copies of account books showing
when the last payment was made to the claimant under the
agreement or when the respondent had denied the claims of
the claimant made in several letters referred to prior to
11.10.2002, when the contract came to an end.”
19. The learned Arbitrator has given a finding as if the petitioner
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has made the last payment against the work done by the first respondent
on 28.03.2003, by relying upon the entry that was made in the statement
of account which was marked as Ex.C37. If such a finding has to be
rendered, the learned Arbitrator ought to have explained as to whether
such a payment actually was received from the petitioner, and even if it is
assumed that it is received from the petitioner, whether it pertained to the
contract that is under dispute. The bank entry is completely silent about
these facts. However, the Arbitrator thereafter proceeds to put the burden
of proof on the petitioner and has held that the petitioner has failed to
show that no such payment was made by them on 28.03.2003 and the
petitioner has failed to show that such last payment was made in the
absence of the final bill. On this premise, the Arbitrator has calculated
the limitation from 28.03.2003 and has concluded that the trigger notice
was issued on 28.01.2006 and hence, the claim made by the first
respondent is within the time.
20. This is further elaborated by the Arbitrator at paragraph No.82
of the award.
21. In the considered view of this Court, the above finding of the
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learned Arbitrator suffers from patent illegality. It is not necessary for
this Court to burden this order with all the citations and it will suffice to
take note of the latest judgment of the Hon'ble Apex Court in the case of
OPG Power Generation Private Limited vs. Enexio Power Cooling
Solutions India Private Limited and another reported in
2025 (2) SCC 417. The Hon'ble Apex Court has held that the ground of
patent illegality is available for setting aside a domestic award, if the
decision of the Arbitrator is found to be perverse or so irrational that no
reasonable person would have arrived at it. Such patent illegality can also
arise in a case where a finding is based on no evidence at all or where an
award ignores a vital evidence while arriving at a decision. Even an
award without reasons would suffer from patent illegality. Such patent
illegality will also arise in a case where the Arbitrator decides a matter
not within his jurisdiction or there is a violation of the principles of
natural justice.
22. In the case in hand, the impugned award suffers from patent
illegality since it is vitiated due to violation of principles of natural
justice and also due to the fact that the findings were rendered on the
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issue of limitation based on no evidence.
23. As was observed supra, the basis for admitting three
documents as Ex.C37 to Ex.C39 was not supported by pleadings and it
was not marked through a witness. As a result, the petitioner lost an
opportunity to file a reply for additional statement, which should have
been filed by the first respondent, and the petitioner also lost an
opportunity to cross-examine the witness, if those documents had been
marked through a witness.
24. The learned Arbitrator expected the petitioner to prove that the
petitioner did not make any payment to the first respondent on
28.03.2003 and no final bill was raised for such payment. Even though
the Indian Evidence Act does not apply to the arbitration proceedings,
certainly the principles of evidence will apply during such proceedings.
If the first respondent was relying upon certain documents in order to
save the claim from being knocked out on the ground of limitation, it is
the first respondent who should have discharged the burden and the
burden never shifts to the petitioner till the first respondent discharges
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the burden. Therefore, the learned Arbitrator went wrong in strongly
relying upon the bank entry dated 28.03.2003 and thereby, gave a finding
that the claim is within the limitation. In other words, a claim which
otherwise was hopelessly barred by limitation, all of a sudden, sees the
light at the end of the tunnel because of a one bank entry dated
28.03.2003. In such an event, the entire burden was on the first
respondent to explain those bank entries to sustain the claim. By no
stretch, the burden could have been shifted on the petitioner.
25. The last issue pertains to the counter claim made by the
petitioner. If the very claim made by the first respondent is barred by
limitation, it goes without saying that the counter claim also cannot be
considered on the very same ground. In any case, the learned Arbitrator
has given sufficient reasons for rejecting the counter claim made by the
petitioner.
26. The upshot of the above discussion leads to the only
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conclusion that the award dated 27.08.2015 passed by the learned
Arbitrator suffers from patent illegality and it can be brought within the
scope of Section 34(2)(a)(iv) of the Act.
27. Accordingly, the award dated 27.08.2015 passed by the Sole
Arbitrator is hereby set aside and this Original Petition stands allowed.
There shall be no order as to costs.
10-09-2025
ssb
Index:Yes
Speaking order
NCC:Yes
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To
1.M/s.Shiv-Vani Oil and Gas Exploration
Service Limited,
(Amalgamated with SVUL Projects Limited)
Having its Registered Office,
at Tower-1, 5th Floor, NBCC Plaza,
Sector-5, Pushp Vihar, Saket,
New Delhi-110 017.
2. The Sole Arbitrator,
No.40, Sankarapuram,
Alemelumangapuram,
Mylapore, Chennai-600 004.
3.The Official Liquidator,
High Court, Delhi.
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N.ANAND VENKATESH, J
ssb
10.09.2025
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