O.N.G.C. AND ANR. versus ASSN. OF NATURAL GAS CONSUMING INDS. AND ORS.

Citation: [2001] SUPP. 1 S.C.R. 50 · Decided: 26-07-2001 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Case Allowed

Judgment (excerpt)

A 
O.N.G.C. AND ANR. 
V. 
ASSN. OF NATURAL GAS CONSUMING INDS. AND ORS. 
JULY 26, 2001 
B 
[B.N. KIRPAL AND N. SANTOSH HEGDE, JJ.] 
Contract Act, 1872 
Interest-Contracts for supply of natural gas-Agreement clause 
C stipulating rate of interest on delayed payment-Expiry of contract-Demand 
for enhanced price for renewal of contract-High Court by in/erim order 
directing continuation of supply of gas at the existing rate-Subsequently, 
Supreme Court upholding the demand for enhanced price-Suppliers claim 
for interest on delayed payment of the principal amount-Entitlement of-
D Held, in view of the interim order of Court, the contract between the parties . 
and terms thereunder were Impliedly renewed-Thus, supplier entitled to claim 
interest on delayed payment of principal amount as specified in the agreement 
clause-On the principle of restitution also supplier entitled to be 
compensated-Doctrine of restitution-Applicability. 
E 
Words and Phrases: 
"as at present"-Meaning of 
Agreements were entered into between the applicant Oil and Natural 
Gas Commission and respondents for supply of natural gas. Agreement clause 
F 5.01 read with clause 5.02 stipulated the price payable and also rate of interest 
in the event of delayed payment The contracts between the parties came to 
an end on 31.3.1979 and applicant proposed to renew the contract but at the 
enhanced rates, which was challenged by respondents in writ petitions. High 
Court passed an interim order directing the applicant to continue the supply 
of gas at the old rate. Subsequently, High Court allowed the writ petitions of 
G respondents and set aside the price increase. However, on appeal, this Court 
upheld the revised prices proposed by applicants. Consequently, applicants 
filed the present I.As claiming interest on delayed payment of the principal 
amount. 
H 
On behalfofthe applicant it was contended that in view of the agreement 
50 
O.N.G.C. v. ASSN. OF NATURAL GAS CONSUMING INDS, 
51 
between the parties, the respondents were liable to pay interest on the basis A 
of terms of clause 5.02 of the agreement; that on the principle of restitution, 
respondents should pay interest on the principal amount since they had got 
an advantage of not paying the amount by virtue of the order of this Court. 
On behalf of the respondents it was contended that since the contracts 
between the parties came to an end on 31.3.1979 there was no liability to pay B 
interest; that since the judgment of this Court had not specifically required 
the payment of any interest, the question of complying with the terms of clause 
5.02 of the agreement did not arise. 
Allowing the I.As., the Court 
HELD : 1.1. Applicant-Oil and Natural Gas Commission is entitled to 
claim interest from the respondents for the delayed payment of the principal 
amount at the rate specified in clause 5.02 of the agreement between the 
parties. 155-EI 
c 
1.2. It is true that the contracts between the parties came to an end on D 
31.3.1979. Thereafter the gas would have been supplied only ifa fresh written 
contract had been entered into which was not done. The respondents, however, 
chose to approach the High Court which required the applicant to continue 
the supply of gas at the old rate. The effect of this clearly was that except 
with regard to the amount of price which was payable and which was in 
dispute, the rest of the terms of the agreements which had been entered into E 
between the parties were impliedly continued. It is for this reason that in its 
order the Court used the expression on the same terms "as at present." 
155-E-Gl 
1.3. This Court upheld the price which was charged by the applicant 
and did not give any specific direction requiring payment of the principal F 
amount of the interest to be paid. Merely because this was not done, does not 
mean that the right of applicants to get the money due to it had come to an 
end. The clear implication of the disposal of the appeals would be that the 
interim orders which had prohibited the applicant from realising any sum in 
addition to the one fixed by the interim order came to an end and the applicant G 
would thereafter claim the money due to it. Applicant was under an obligation 
by virtue of the interim orders io comply with the terms of the earlier contracts 
and to supply gas in the manner provided thereunder. This part of the contract 
was performed by the applicant who became entitled to recover from the 
industries the pric

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