M/S ESSAR OIL LTD. versus HINDUSTAN SHIPYARD LTD. & ORS.

Citation: [2015] 6 S.C.R. 924 · Decided: 02-07-2015 · Supreme Court of India · Bench: ANIL R. DAVE · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2015] 6 S.C.R. 924 
MIS ESSAR OIL LTD. 
v. 
HINDUSTAN SHIPYARD LTD. & ORS. 
(Civil Appeal No. 3353 of 2005) 
JULY 2, 2015 
[ANIL R. DAVE, VIKRAMAJIT SEN AND 
PINAKI CHANDRA GHOSE, JJ.] 
c 
Arbitration and Conciliation Act, 1996 - s. 34 - Contract 
- Sub contract - Determination of person, who is liable to 
make payment to the person performing work under the sub-
contract given to him - Appellant given sub-contract by 
respondent, in respect of a contract which was given to it by 
D the ONGC-Appellant upon doing certain work done under 
the sub-contract, receiving payments directly from ONGC -
Non-payment by respondent to the appellant for the work 
done - Dispute arising between them - In terms of the 
arbitration agreement between the appellant and the 
E respondent, wherein ONGC was not a party, dispute referred 
to arbitral tribunal - Majority view that respondent was liable 
to make payment to the appellant - Said order upheld by 
trial court - However, High Court set aside the same - On 
appeal, held: ONGC not liable to make payment to appellant 
F but the payment would be made by respondent, who had 
given a sub-contract to appellant -
There is no 
correspondence establishing contractual relationship 
between ONGC and appellant - So as to prevent a long 
procedure and to expedite payment to appellant, who was 
G actually doing the job for ONGC, instead of ONGC paying to 
appellant through respondent, ONGC was often paying 
directly to appellant - Thus, majority view of the tribunal 
upheld and that of the High Court set aside. 
H 
Allowing the appeals, the Court 
924 
M/S ESSAR OIL LTD. v. HINDUSTAN SHIPYARD LTD. 
925 
HELD: 1.1 ONGC Would not be liable to make A 
payment to the appellant but the payment would be made 
by the respondent, who had given a sub-contract to the 
appellant. Majority view of the Arbitral Tribunal is 
confirmed and the view of the High Court is set aside. 
[Para 29] [937-B-C] 
B 
1.2 So as to obviate a long procedure and to 
expedite payment to the appellant, who was actually 
doing the job for the ONGC, instead of the ONGC paying 
to the appellant through the respondent, the ONGC was c 
often paying directly to the appellant.Every time when 
payment was made by the ONGC to the appellant, the 
ONGC used to debit the account of the respondent i.e. 
the amount so paid by the ONGC to the appellant was 
treated by the ONGC as if the said payment was made D 
by the ONGC to the respondent. Simply becauge some 
payments had been made by the ONGC to the appellant, 
it would not be established that there was a privity of 
contract between the ONGC and the appeHant and only 
E 
for that reason the ONGC cannot be saddled with a 
liability to pay the amount payable to the appellant by 
the respondent. [Paras 14, 15, 24, 25] [931-H; 932-A,C-D; 
932-A-C] 
1.3 As the ONGC was not a party to the Arbitration F 
' 
,. 
Agreement, it could not have been represented before 
the Arbitral Tribunal. If the ONGC was not a party before 
the Arbitral Tribunal, the Tribunal could not have made 
any Award making the ONGC liable to make payment to 
G 
the appellant. The majority view of the Arbitral Tribunal 
was right to the effect that the ONGC, not being a party 
to any contract or Arbitration Agreement with the 
appellant, could not have been made liable to make any 
payment to the appellant. [Para 26] [935-D-G] 
H 
926 
SUPREME COURT REPORTS 
(2015] 6 S.C.R. 
A 
1.4 The High Court erred in observing that the 
appellant would have to take legal action against the 
ONGC for recovery of the amount payable to it. It is very 
clear that the respondent had given a sub-contract to 
the appellant and in the said agreement of sub-contract, 
B the ONGC was not a party and there was no liability on 
the part of the ONGC to make any payment to the 
appellant. Moreover, there is no correspondence 
establishing contractual relationship between the ONGC 
C and the appellant. [Para 27] [936-A-C] 
1.5 The appellant failed to show any document in 
the nature of a contract entered into between the 
appellant and the ONGC whereby the ONGC had made 
itself liable to make payment to the appellant. Even when 
D the payment had been made by the ONGC, it was very 
clear that the payments were made on behalf of the 
respondent as the ONGC was debiting the account of 
the respondent by the amount paid to the appellant. It is 
important that the payment was made to the appellant 
E only upon certification of work done by the res

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