NUMALIGARH REFINERY LID. versus DAELIM INDUSTRIAL COMPANY LID.

Citation: [2007] 9 S.C.R. 724 · Decided: 06-09-2007 · Supreme Court of India · Bench: A.K. MATHUR · Disposal: Disposed off
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Judgment (excerpt)

A 
B 
1· 
NUMALIGARH REFINERY LID. 
. .. 
v. 
DAELIM INDUSTRIAL COMPANY LID. 
SEPTEMBER 6, 2007 
' 
~ 
I 
1.L. : ~ •.. 
[A.K MATHUR AND MARKANDEY KA TJU,JJ.) 
Arbitration and Conciliation Act, 1996-Works contract between 
Government Undertaking and foreign company-:-Dispute during execution of 
C project-Contractor-foreign company referring to Arbitration-Appointment 
of three arbitrators-Claim of Rs 55.8 crores under different headings-
Majority award of arbitrators and minority award of arbitrator-Majority 
award partly upheld by High Court-On appeal held·' Order of High Court 
modified to the extent that claimant entitled to Rs.2 crores for substituted 
material, Rs. 8.9 crores for liquidity damages, Rs.0.2 crore as interest paid 
D on the delayed funds and 12 % interest pendente lite from the date of the 
claim petition till realization and 15% intere5t per annum in case of failure 
to make payment within six months. 
Appellant, Governm~nt oflndia Undertaking (NRL) awarded contract to 
respondent-DIC for building of Power.Ylant for its Petroleum Refinery. The 
E parties signed contract agreements. The total contract price was on a Turnkey 
basis and the time schedule for completion of the works was as per the' 
consolidated contract. Disputes arose between the parties during execution 
of contract DIC raised a claim and referred the matter before the International 
Chamber of Commerce; International Court of Arbitration. DIC and NRL 
F nominated their Arbitrator and the International Court of Arbitration 
nominated a third Arbitrator to constitute the Arbitral Tribunal DIC raised 
a total claim ofRs.55.8 crore under different heads. 
With regard to claim of sum of Rs.9.6 crore under heading transfer of 
US $6 million, DIC arranged procurement of the substituted indigenous 
G materials for which it incurred cost and ex~nses to the tune of Rs. 25.3 crore, 
based on clause 14.3 of the ITB, that items quoted in the bid to be imported . 
could be subsequently transferred to indigencius supply for which NRL was 
to pay at actuals maximum whereof to be limited to the computed value on site 
delivery basis on the pricings quoted originally for that of the imported origin; • 
H 
724 
I. 
NUMALIGARH REFI. LTD. v. DAELIM INDUS. CO. LTD. 
725 
However, DIC claimed Rs.21.7 crores by applying the conversion rate. NRL A 
paid Rs.12 crores and thus, DIC claimed Rs.9.6 crores. The majority of the 
arbitrators accepted the value expressed by the prime consultant of NRL for 
the execution of the project-Rs.17.68 crores and added 15% profit margin 
and awarded Rs.20.33 crores (Rs.17.65 crores + Rs.2.65 crores ). DIC had 
already received Rs.12.19 crores under this head and thus, awarded Rs.8.14 
crores with US$ exchange rate at $1 = Rs.36.28 as equivalent on 26.2.1996. B 
However, minority arbitrator held that as per the cost given by NRL their 
liability was Rs.14.19 crores and awarded Rs.4,81,50,272.00 after total 
calculations. 
Under head-Turbo technical price, consortium partner of DIC in the C 
contract agreement with NRL; had to supply various imported items for a 
consideration of US $4150000 and DM 22990009 as specified in the Price 
Schedule of the Overseas Contract DIC requested NRL to bifurcate the total 
consideration of the import items into CIF cost and service cost and to amend 
the contract agreement otherwise it had to pay customs duty on service portion 
of the price consideration also. NRL did not carry out amendment and DIC D 
could not avail necessary concession. DIC claimed Rs.1.65 crores under this 
head. The majority of Arbitrators allowed the claim. The minority held that 
NRL was not responsible for framing of such agreement and it was the fault 
of DIC and rejected the claim. 
Under heading-excess customs duty on account of fluctuation of E 
exchange rate DIC claimed Rs 2.9 crores. The majority of the Arbitrators 
held that the DIC was entitled to Rs.2.09 crores. However, the minority rejected 
the claim. 
·,. 
Under heading-claim of liquidity damages to the extent of Rs.8.9 crores, F 
DIC claimed compensation on account of delay on the part of the owner. The 
majority held that there was a delay of 929 days and on the basis of factual 
assessment granted damages to the extent of 5 % of the total contract value-
Rs.8.9 crores. However, the minority rejected the claim. 
With regard to the heading, interest on borrowing of the funds, DIC 0 
claimed Rs.0.5 crores. The majority of the Arbitrators granted Rs.0
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