WELSPUN SPECIALTY SOLUTIONS LIMITED (FORMERLY KNOWN AS REMI METALS GUJARAT LTD. versus OIL AND NATURAL GAS CORPORATION LTD.

Citation: [2021] 11 S.C.R. 120 · Decided: 13-11-2021 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 11 S.C.R.
WELSPUN SPECIALTY SOLUTIONS LIMITED
(FORMERLY KNOWN AS REMI METALS GUJARAT LTD.)
v.
OIL AND NATURAL GAS CORPORATION LTD.
(Civil Appeal Nos. 2826-2827 of 2016)
NOVEMBER 13, 2021
[N. V. RAMANA, CJI AND SURYA KANT, JJ.]
Arbitration and Conciliation Act, 1996: ss. 37 and 34 –
Appealable orders – Arbitral award – Sustainability of, under section
37 – On facts, execution of contract wherein appellant was to supply
pipes to the respondent-ONGC – During execution of contract,
certain delays in meeting the obligations as required under the
contract – Deduction of certain amount by respondent as liquidated
damages from various bills submitted by the supplier – Dispute
before the arbitral tribunal – Arbitral tribunal proceeded to determine
the actual damages, holding that the liquidated damages could not
be granted as there was no breach of contract since  time was not
essence of contract – Interference with – Held: It has to be culled
out from the reading of the entire contract as well as the surrounding
circumstances whether time is essence of the contract – Merely
having an explicit clause may not be sufficient to make time the
essence of the contract – As the contract was spread over a long
tenure, the intention of the parties to provide for extensions surely
reinforces the fact that timely performance was necessary – Fact
that such extensions were granted indicates respondent’s effort to
uphold the integrity of the contract instead of repudiating the same
– Thus, award cannot be interfered since the arbitral tribunal’s
interpretation of contractual clauses having extension procedure
and imposition of liquidated damages, are good indicators that ‘time
was not the essence of the contract – Arbitral tribunal’s view to
impose damages accrued on actual loss basis could be sustained in
view of the waiver of liquidated damages and absence of precise
language which allows for reimposition of liquidated damages –
High Court and District Court strayed beyond the limitation u/s. 34
and 37 – Order of the High Court as well as the District Court is set
aside – Award of the arbitral tribunal is upheld – Contract Act,
1872 - ss. 55 and 74.
[2021] 11 S.C.R. 120
120
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Allowing CA Nos. 2826-2827 of 2016 and disposing of CA
Nos. 6834 of 2021, the Court
HELD: 1.1 The main challenge to the award is against the
imposition of unliquidated damages, when the matter of fact stood
that the contract between parties stipulated for pre-estimated
damages (liquidated damages). The concerned contract contained
provisions for liquidated damages for breach of contract,
particularly breach of deadlines set in the contract. Under
Contract law, such liquidated damages are recognized, subject to
the same being reasonable. [Para 26][136-B-D]
1.2 Time not being the essence of the contract’, as
determined by the Arbitral Tribunal, was beyond reproach.
Reliance on the contractual conditions and conduct of parties to
conclude that existence of extension clause dilutes time being
the essence of the contract, was in accordance with rules of
contractual interpretation. The award concludes that as time was
not the essence, liquidated damages could not be granted.
[Para 27, 28][136-F-G]
1.3 In order to consider the relevancy of time conditioned
obligations, some basic principles are that subject to the nature
of contract, general rule is that promisor is bound to complete
the obligation by the date for completion stated in the contract.
That is subject to the exception that the promisee is not entitled
to liquidated damages, if by his act or omissions he has prevented
the promisor from completing the work by the completion date.
These general principles may be amended by the express terms
of the contract as stipulated in this case. [Para 29][137-A-D]
1.4 It is now settled that ‘whether time is of the essence in
a contract’, has to be culled out from the reading of the entire
contract as well as the surrounding circumstances. Merely having
an explicit clause may not be sufficient to make time the essence
of the contract. As the contract was spread over a long tenure,
the intention of the parties to provide for extensions surely
reinforces the fact that timely performance was necessary. The
fact that such extensions were granted indicates ONGC’s effort
WELSPUN SPECIALTY SOLUTIONS LTD. (FORMERLY KNOWN AS
REMI METALS GUJARAT LTD.) v. ONGC
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SUPREME COURT REPORTS
[2021] 11 S.C.R.
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