MS ENGICON SYSTEM PVT. LTD. vs OIL AND NATURAL GAS CORPORATION LTD.

Sudhanshu Dhulia, J

Present appellant and the respondent before this Court entered into an agreement on 21.12.2000 for certain work which was to be done at the

hands of the appellant before this Court. The work was of water proofing of certain constructed area of Oil and Natural Gas Corporation premises at

Dehradun. Subsequently, parties entered into supplementary agreement on 16.8.2001 and paragraph no. 4 of the supplementary agreement reads as

under:

“Now the guarantor hereby guarantees that water proofing treatment and the minimum life of such water proofing shall be ten years to be

reckoned from the date of completion of water proofing treatment.â€​Â

The only question was whether the security amount which was given by the contractor to the Oil and Natural Gas Corporation amounting to Rs.

1,37,153/- (rupees one lakh thirty seven thousand one hundred fifty three only) was to be returned to the contractor after a period of one year or after

the period of ten years since the minimum life of water proofing was ten years which was to be reckoned from the date of completion of water

proofing treatment. Since the amount was not being returned and considering that there was an arbitration clause in the agreement, an arbitrator was

appointed. The arbitrator gave the award in favour of the contractor, i.e. present appellant, holding that security amount could not be withheld by the

Oil and Natural Gas Corporation after a period of one year and directed the ONGC to return the security amount to the contractor.  Â

The award of the arbitrator was challenged by the ONGC under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge,

Dehradun. Learned District Judge came to the conclusion that the mandatory condition of the supplementary agreement, referred to above, has not

been considered and, therefore, learned District Judge came to the conclusion that the error committed by the learned Arbitrator goes to the root of

the provisions of the Act. It was against the spirit of the Act and thus it has come in conflict with the public policy. The view expressed by the learned

Arbitrator was therefore held to be incorrect. The finding given by the learned Arbitrator was held to be against the terms of the agreement. In these

circumstances, the award pronounced by the learned Arbitrator was set aside by the Court below. Being  aggrieved, the contractor has preferred

the present appeal.Â

There was obvious an error committed by the Arbitrator by not looking at the mandatory condition of the supplementary agreement of the contract,

something which was liable to be considered by him. Since the Arbitrator has not done it, he committed a patent error apparent on record and which

was held to be in conflict with the public policy in India. The award of the Arbitrator has rightly been set aside by the learned District Judge. Hence,

there is no merit in this appeal, which is liable to be dismissed. It is hereby dismissed.Â

It is made clear though that although the present appeal has been dismissed, but this Court has further been informed that 10 years period

meanwhile has already come to an end on 10.6.2011. As such, the respondent has to return the security money to the appellant. Sri Siddhartha Sah,

the learned Counsel for the respondent admits this position and undertakes that the amount shall be returned forthwith.Â

Let the LCR be sent back. Â