Summary
A contractor challenged the reversal of an arbitral award which had disallowed ONGC’s compensation for delayed construction. Reading the contractual compensation and arbitration clauses together, the Court held the Superintending Engineer’s determination to be an excepted matter outside arbitration and upheld adjustment of the compensation against the final bills.
Issues
- Whether compensation determined under Clause 2 was an excepted matter beyond the arbitrator’s jurisdiction.
- Whether the contractual finality covered liability as well as quantification and how the deposited amount should be disbursed.
Held
- Clause 2 provided a complete mechanism for determining liability and quantifying compensation for delay, with finality attached to the Superintending Engineer’s decision. Read with Clause 25, it excluded that determination from arbitration; a declaration describing it as illegal could not circumvent the agreed exclusion. (¶¶ 15, 16, 18, 24)
- The clause differed from the provision in BSNL v Motorola, which concerned quantification after a separate determination of liability. The present agreement assigned the determination itself to the Superintending Engineer. Any remedy against that decision lay in the ordinary course of law. (¶¶ 21, 23, 24)
- The arbitrator and Single Judge erred in treating the contractual compensation as a penalty and reviewing an excepted matter. The Division Bench correctly set aside the award concerning claim 6 and permitted adjustment against the contractor’s final bills. (¶ 25)
- From the Rs 75 lakh deposited in the Supreme Court, Rs 74,88,768 with accrued interest was payable to ONGC, and the balance Rs 11,232 with accrued interest was refundable to the contractor. (¶ 26)
Result
Appeals dismissed without costs. The deposited sum was directed to be disbursed: Rs 74,88,768 plus accrued interest to ONGC and Rs 11,232 plus accrued interest to the contractor.