R.V.RAVEENDRAN, J. - (1.) UNDER a contract dated 14.7.1981 between appellant and the respondent, the respondent agreed to supply the equipment and engineering drawings and provide the project management and construction supervision to M/s. Paul Lindenau GmbH to assist with the design, building, equipping and launching of a drillship known as 'Sagar Prabhat' purchased by the appellant. The appellant had simultaneously entered into an agreement with M/s. Paul Nindenau GmbH for purchase of the said drillship. The said drillship equipped and mobilised by the respondent reached Bombay on 5.6.1982. American Bureau of Shipping ("ABS" for short) vide certificate dated 25.6.1982 certified that the machinery of the drillship and the stability of the drillship were in accordance with its rules and standards. On the basis of the said certificate dated 25.6.1982, the appellant took delivery of the Drillship on 29.6.1982. The appellant thereafter found some defects in the drillship and therefore withheld the payment to the respondent. ABS revised its certificate on 18.6.1985, stating that its earlier certificate dated 25.6.1982 was based on incorrect data supplied by Paul Lindenau GmbH (builder of the drillship) and the respondent (designer, equipment supplier and construction supervisor of the drillship).
(2.) THE respondent initiated arbitration proceedings in respect of the dispute relating to non-payment of the balance price. An award was made against ONGC in regard to the balance price due to the respondent. Certain counter claims by ONGC were also allowed. It is stated that challenge by ONGC to the said award is pending adjudication in court. During the pendency of the said arbitration, ONGC sought to raise the issue of defective stability of the Drillship. As that issue was beyond the reference of the ongoing arbitration, it was decided that a separate reference would be made in regard to dispute relating to the stability/defects of the drillship. As the respondent disputed the claim of ONGC that the Drillship was defective and the defects affected its stability, it issued a notice dated 1.8.1986 stating that a dispute had arisen in regard to the claim of the appellant about the defects/deficiencies in the stability of the Drillship. THE said dispute was referred to arbitration by an Arbitral Tribunal with Shri K.H. Bhabha, Senior Advocate and Vice-Admiral Shri N.P. Datta as members. THE said Arbitral Tribunal entered upon the reference on 4.9.1986. Ongc filed its Statement of Claim on 2.12.1987 in regard to its claim relating to defects/deficiencies in regard to the stability of the Drillship. Para 27 thereof containing the claim and prayer of the appellant is extracted below: "27. The Respondents submit that the consequences arising from the entire situation aforesaid would be either that the drillship be directed to be returned to the claimants on the conditions that the claimants return all the amounts received by them from the Respondents including US $ 55 million/and interest @ 12% per annum under the contract dated 14th July, 1981 in addition they pay adequate damages to the Respondent or that the claimants bring the drillship to the required state and condition as indicated hereinabove. The Respondents State and submit that tentatively and on prima facie considerations the amounts required to bring the drillship to the desired state and condition would be Rs.3.50 crores which does not include non use of the Drillship for the period during which the said adjustment, alterations or necessary things required to be done to the Drillship to bring it to the proper state and conditions would involve. This costs would be calculated at the the rates current when the modifications are carried out. However, the same is tentatively estimated as per the current prevailing rate of US $ 20,000/- per day, So calculated for 90 days the same would work out to US $ 1,80,000/-. The Respondent, therefore, pray: (a) That the claimants be directed to pay to the Respondent a sum of US $ 55 Million with further interest thereon at 12% per annum being the amount paid by the Respondents to the claimants for the acquisition of the said drillship by the Respondents from the claimants and that on the said amount being paid or in any manner secured to the Respondents the claimants may be directed to take back the said drillship "SAGAR PRABHAT". (b) That as an alternative to prayer (a) hereinabove, the claimants be directed to pay to the Respondents (i) a sum of Rs.3.5 crores converted to U.S. Dollars at the convertible rate prevailing on or about the date of the award to enable the Respondent to bring about necessary changes and/or alterations and additions in drillship in order that it may be put to enable the Respondent to operate the same as held out in the agreement between the parties hereto dated 14th July, 1981: and (ii) a further sum of U.S. Dollars 1,80,000/- being the amount of damages for non-use of the drillship at the rate of U.S. Dollars 20,000/- per day for 90 days required to set the drillship right. xxx xxx xxx
(3.) THE respondent participated in the initial stages of the second arbitration and filed a reply dated 29.11.1988 denying the claim and arbitrability on four grounds: (i) the claim was beyond the scope of arbitration agreement contained in Article 13.2 of the agreement dated 14.7.1981; (ii) the claim related to a technical matter falling under clause 13.1 of the contract, and therefore to be concluded only by the decision of ABS. (iii) the claim having been made beyond the warranty period of twelve months prescribed in clause 9.2.1 of the contract, was deemed to have been waived and not maintainable; and (iv) the claim was barred by limitation as it was made beyond three years from the date of taking over the drillship. At the meeting of Arbitrators on 17th & 18th January, 1989 the respondent raised a preliminary objection that the dispute related to a technical matter and therefore was an excepted matter beyond the scope of the Arbitration Agreement. ONGC submitted that the technical question of stability of the drillship be referred to ABS, New York for its opinion and it was willing to accept its opinion as evidence. Respondent submitted that it will settle the dispute in accordance with such opinion of ABS. THE Arbitral Tribunal referred the dispute relating to stability of the drillship to the opinion of the ABS, Bombay which gave its report dated 18.5.1990. According to respondent, the parties to the arbitration had agreed that the claim should be referred to ABS, New York, for its opinion as provided by Article 13.1 of the contract, but instead, the matter was referred to ABS, Bombay. However thereafter the respondent did not participate in the arbitration proceeding. In the arbitration proceedings, Mr. Pramod Seth, Dy. General Manager of ONGC filed an affidavit dated 6.4.1995 as the evidence on behalf of ONGC. As the respondent was not contesting the proceedings, the Arbitrators themselves examined Mr. Pramod Seth in detail. THEreafter on 15.9.1995, the concluding date of the arguments, ONGC submitted a comparative statement explaining its claim, giving various alternative calculations.;