Ongc Case, 2019

Mercator Oil And Gas Ltd. V. Oil And Natural Gas Corporation[1]. On, 3rd June, 2019 the Bombay High Court filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 whereby the petitioner has prayed for interim reliefs pending invocation of the arbitration. The reliefs principally pertain to the different bank guarantees furnished by the petitioner in favour of respondent no.1-Oil and Natural Gas Commission  of respondent no.2-Axis Bank Ltd to  maintain the status quo on the validity of the Contract. The case of the petitioner is that there was substantial increase in scope of the work under the contract including strengthening of hull, replacement of all the legs, replacement of jacking cylinders and due to “in place analysis” as per modified ABS guidelines for the project, necessitating replacement of all the four legs. Petitioner contends that ONGC had accepted that the delay was not attributable to consortium and refunded the bank guarantee extension charges to the consortium. On 9 March 2015 vide amendment no.7 to the contract, ONGC extended the schedule completion dated till 20 December 2015 without pvr 6 ONGC-03-06-19 levy of liquidated damages. Petitioner contends that the consortium was diligently performing the contract and admittedly completed over 95% of the project work on the date of filing of the petition despite several odds and certain force majeure event. The petitioner contends that to ease out the financial pressure on the project and to maintain cash flow, the consortium entered into a supplementary agreement with ONGC and obtained interest-bearing advance of Rs.32 crores as per Clause 3.7 of the supplementary agreement. Also in pursuance of the supplementary agreement the petitioner submitted two advance bank guarantees equivalent to 110% of the advance amount which were valid for a period covering entire repayment period upto 24 May 2017 plus six months thereafter upto 24 November 2017. The advance bank guarantees were extended till 31 May 2019 by the petitioner, being so called upon by ONGC and hence, repayment period of interest -bearing advance as per Clause (3) of supplementary agreement was mutually agreed to be 30 November 2018. The petitioner has also asserted the case of ONGC’s collusive conduct with GPC. It is contended that in or about August,2018, the petitioner became aware that ONGC has been secretly negotiating with GPC behind its back about terminating the consortium’s contract and awarding the same to GPC on standalone basis, after having enjoyed the performance of the petitioner’s scope of the SSCP. It is the petitioner’s case that ONGC began clearing only those invoices which has GPC’s scope of work and withholding the invoices of the scope of work of the remaining member of consortium. in dealing the allegations ,  the petitioner’s contention that the award of the contract for the balance work to GPC is a fraud, it is submitted that these are baseless allegations of the petitioner and the allegations of the petitioner on a fraud in pvr 42 ONGC-03-06-19 invoking the bank guarantees it is submitted by Mr. Nankani that there is no fraud involved either in issuance of the bank guarantees or in invocation thereof and the bank guarantees have been furnished in performance of the said contract, and on account of breach of the said contract, ONGC is entitled to invoke the bank guarantees. It is submitted that there are no pleadings to make out a case of fraud, and the petitioner’s allegations of fraud that the ONGC has connived with GPC, behind the petitioner’s back, is false and baseless, as due to non- payment by petitioner to GPC, on account of financial difficulties of the petitioner, disputes arose between the consortium members, with which ONGC has nothing to do. It is submitted that as the rig was lying in GPC’s yard in a dismantled condition, which made the movement out of yard impossible, and thus ONGC had no option but to consider awarding GPC the balance contractual work. It is submitted that the bank guarantees are unconditional, and payable on demand, the Court in considering the settled principles of law ought not to grant an injunction restraining the bank from payment thereunder and this is more so when the petitioner is in breach of the said contract. After considering the facts of the case, to grant reliefs to the petitioners is as good as undertaking a mini trial on all these issues of disputes, for which a section 9 remedy cannot be considered to be an appropriate remedy, as in adjudicating a section 9 petition, the Court would be guided by the three basic principles of a prima facie case, balance of convenience, and irretrievable injustice which was not made out by the petitioners and hence, dismissed the petition.


[1]https://indiankanoon.org/doc/160912821/

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