Arbitration and Conciliation Act, 1996 - Works contract between Government Undertaking and foreign company - Dispute during execution of 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 on the delayed funds and 12% interest pendente lite from the date of the claim petition till realization and 15% interest per annum in case of failure to make payment within six months.

Appellant, Government of India Undertaking (NRL) awarded contract to respondent-DIC for building of Power Plant for its Petroleum Refinery. The 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 nominated their Arbitrator and the International Court of Arbitration nominated a third Arbitrator to constitute the Arbitral Tribunal DIC raised a total claim of Rs.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 materials for which it incurred cost and expenses 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 indigenous 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. However, DIC claimed Rs.21.7 crores by applying the conversion rate. NRL 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. 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 22990000 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 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 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, 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 claimed Rs.0.5 crores. The majority of the Arbitrators granted Rs.0.2 crores. However, the minority award rejected the claim.

With regard to the rate of interest, the majority of the arbitrators granted interest on the amount at the rate of 12 per cent pendente lite and post pendente lite at rate of 18% but the minority arbitrator granted 10 percent interest uniformally. 

Under heading countervailing duty, DIC claimed Rs 8.78 crores which had been paid on account of excise duty on the premise that at the time when the parties executed the agreement, countervailing duty was not there and it came into force subsequent to the contract. Both the majority and minority arbitrators allowed the claim.

Aggrieved appellant filed application challenging the majority award. District Judge set aside the award. DIC filed appeal before High Court claiming total Rs.55.8 crores under different heads. High Court allowed all the claims but set aside the order with regard to countervailing duty. Hence the present appeals by the appellant-NRL and respondent-DIC