MCDERMOTT INTERNTIONAL INC. versus BURN STANDARD CO. LTD. AND ORS.

Citation: [2006] SUPP. 2 S.C.R. 409 · Decided: 12-05-2006 · Supreme Court of India · Bench: B.P. SINGH · Disposal: Disposed off

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Judgment (excerpt)

MCDERMOTT INTERN A TI ON AL INC. 
v. 
BURN STANDARD CO. LTD. AND ORS. 
MAY 12, 2006 
[B.P. SINGH AND S.B. SINHA, JJ.] 
Arbitration and conciliation Act, 1996: 
Sections 31, 33 and 34-Partial award made by deferring some 
claims-Nature and character of-Held: It is same as of interim award 
envisaged in the Act, even though expression "partial award" is not used 
therein-If it answered definition of award under Section 2(c), for all intent 
and purport, it would be a final award-It is not akin to a preliminary 
decree-It is final in all respects with regard to disputes referred to 
arbitrator which are subject matter of such award-By such an award no 
prejudice is caused as both partial and final awards are subject matter of 
challenge under Section 34-Additional award is not vitiated in law, 
especially keeping in view powers of arbitral tribunal under Section 33. 
Section 16-Plea that a claim was arbitrary or beyond its authority--
Held: It has to be raised before arbitrator. 
Contract-Construction of-Held: It is within jurisdiction of arbitrators 
even if it gives rise to determination of a question of law-In this regard 
conduct of parties and correspondences exchanged by them are relevant 
factors. 
Denial of claim-Held-Jn every case claim is not required to be 
followed_ by denial-If a matter is referred to any arbitrator within a 
reasonable time, the party invoking the arbitration clause may proceed on 
the basis that the other party to the contract has denied or disputed his claim 
or is not otherwise interested in referring the dispute to the arbitrator. 
Parties to arbitration-:-Reduction of claim of party to contract by one 
who was not party to it-Held: Latter was involved in the matter and had 
a direct nexus with claim of former. 
Contract Act, 1872: 
409 
A 
B 
c 
D 
E 
F 
G 
H 
410 
SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R. 
A 
Section 55-Time being essence of construction contract-Specific date 
B 
c 
D 
E 
for performance set by contract at time when it was entered into-Notice 
invoking arbitration agreement therein served much after expiry of those 
dates-Held: Service of notice would not mean that party repudiated the 
contract as soon as schedule fixed by contract expired-Delay and disruptions 
might have occurred for various reasons-Parties did not intend time to be 
of essence of contract as (i) contract itself provided for extension of time and 
payment of damages in case of delay in execution of contract (ii) party 
claiming that time was of essence did not raise that plea before the Arbitrator 
(iii) contract being a construction contract wherein generally time was not 
essence unless special features existed therefor, which in facts of the case 
were not brought to notice of Court. 
Sections 55 and 73-Quantification of claim for damages-Held-
Amount for damages is not required to be quantified as that is merely a 
matter of proof-Different formulas for quantification can be applied in 
different circumstances--Formulae evolved over the years and accepted 
internationally can be adopted as that is neither prohibited nor inconsistent 
with Indian law-However, court or arbitrator may insist on some proof of 
actual damages, and may not allow the parties to take recourse formula-
One formula may be preferred as against ano!her--Jn facts of the case, 
choice of formula by arbitrator not interfered by Court-Section 16 of 
Arbitration and Conciliation Act, 1996. 
Section 7 3-Claim for damages for breach of contract--Held: Invoice 
is not the only base where under such claim be made as it is drawn only 
in respect ofa claim made in terms of contract-Claim for breach of contract 
F 
can be made through correspondence or in meetings-Jn facts of the case, 
held that the claim for overhead costs resulting in decrease in profit or 
additional management costs was a claim for damages, and it could be 
claimed in arbitration proceedings without invoice being drawn for it. 
G 
Section 73---Consequential damages-}vfain contract providing that 
neither of parties thereto were liable to other for such damages--Applicability 
to sub-contract with one of those parties with another party-Held: Main 
contract was a matter of an agreement between parties thereto and in law 
it could not be extended to obligations assumed by another party to sub-
contract ft was nut subsumed in sub-contract irrespective of latter providing 
H for !Is application---Party common to it and sub-contract was not absolved 
MCDERMOIT INT

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