Geophysical Institute Of Israel v. Geoenpro Petroleum Limited .

Order

1. This petition filed under Section 11(5) of the Arbitration and Conciliation Act, 1996 prays for the appointment of an independent arbitrator to arbitrate upon the claims raised by the petitioner.

2. I have heard the learned counsel for the petitioner and the learned counsel for the respondent.

3. According to the averments in the petition, the petitioner is an organisation run and owned by the Government of Israel and is a well-known service provider specialised in the seismic exploration of oil and gas, including survey design, seismic field surveys, data processing and interpretation.

4. The respondent is a company registered under the Companies Act, 1956, having its office at A-121, 12th Floor, Himalaya House, 23, Kasturba Gandhi Marg, New Delhi. The respondent Company is engaged in the exploration, extraction and production of crude oil. The respondent Company was awarded a sharing contract by the Government of India for exploring, extraction and production of crude oil in Kharsang oilfield in the State of Arunachal Pradesh.

5. Being aware of the expertise and reputation of the petitioner, as a well-known service provider specialising in seismic exploration of oil and gas including survey design, seismic field surveys, data processing and interpretation, the respondent approached the petitioner in the year 2007 and requested the petitioner to perform 3-D seismic data acquisition, processing and interpretation of data of Kharsang oilfield. The petitioner agreed to the request and entered into a contract with the respondent on 13-12-2007, setting out the terms and conditions between the parties. The petitioner duly executed the works under the contract dated 13-12-2007 and raised its invoices on the respondent.

6. After the works had been executed by the petitioner, it became clear that the results of the survey did not meet the expectations of the respondent and the respondent started dragging its feet in paying the invoices of the petitioner on one excuse or the other. The respondent failed to make the payment against the 16 invoices mentioned in the petition. Over and above the aforesaid invoices, the petitioner had also paid an amount of US dollars 385,000 as performance bond to the respondent and the same was to be refunded to the petitioner after the execution of the works, but the same has not been refunded to the petitioner by the respondent.

7. It is also stated in the petition that though the petitioner requested the respondent several times to pay the amounts due to the petitioner, the respondent did not pay any heed. Thereupon the petitioner served on the respondent a notice dated 2-3-2009, demanding the payment due to it. However, the respondent was in no mood to make any payment and vide its reply dated 19-3-2009, refused to pay the amounts due to the petitioner. It is further stated that on refusal of the respondent to pay the invoices and the other sums mentioned in the petition, a dispute has arisen between the petitioner and the respondent.

8. The petitioner has enumerated the following claims against the respondent:

“1. That the petitioner claims USD 1,631,288 (USD) (or 1 million 631 hundred thousand 2 hundred and 88 USD only) per month from the date since the aforesaid invoices became due and the interest @ 24% on the abovesaid amount from the date of accrual to the date of payment.

2. The petitioner claims an amount of INR 480,000.00 towards Invoice No. AOSL/GN/18 dated 30-6-2008 for INR 480,000.00 for reimbursement of GB Commission.

3. The petitioner claims the refund of an amount of USD 385,000.00 paid by the petitioner to the respondent as performance bond along with an interest of 24% from the date of completion of works till the date of refund.

4. It is submitted that by the time the petitioner had paid the various parties demanding protection money, to save its personnel and equipment, it had already suffered substantial damage to its equipment caused on account of not being provided adequate security by cutting, fire and sabotage which are estimated at an amount of USD 500,000.00.

5. Expense of USD 5,000.00 incurred towards 2 trips made to India by Mr Shabtay Yakkov, Deputy General Manager, Finance & Administration of the petitioner to persuade the respondent to make payment of outstanding amounts due to the petitioner along with interest @ 18% per annum from the date of incurring of the same to the date of payment.

6. Theft of equipment worth an amount of USD 255,787. It is submitted that the petitioner had complained to the Chief of Police at Kharsang (Arunachal Pradesh). Police, however, refused to register a complaint of theft and was willing to accept only a complaint of lost/missing equipment.

7. The petitioner had received various payments from the respondent Company on which the respondent Company deducted tax at source. However, the respondent Company has failed to issue TDS certificate towards the said payments, which is its legal responsibility. Therefore, the petitioner claims the amount of USD 60,130.49 that had been deducted at source from the payments of the respondent to the petitioner on account of the failure of the respondent to furnish the TDS certificate for the aforesaid amount. The respondent has to pay the amount along with an interest of 24% per month, from the date of accrual to the date of payment.

8. The petitioner claims USD 800,000.00 towards the cost of new equipment purchased on account of damage, sabotage and theft.

9. The petitioner claims the cost of the litigation and the proceedings to be attended before the arbitrator.”

9. According to the petitioner, the agreement dated 13-12-2007 provides for settlement of any dispute, controversy or claim arising out of or relating to the contract or breach, termination, existence or invalidity thereof between the parties by arbitration in accordance with the Arbitration and Conciliation Act, 1996. In support of the said averment, Article 15.6.3 of the agreement is quoted in the petition, which reads as follows:

“15.6.3 Any dispute, controversy or claim arising out of/or relating to this contract or breach, termination, existence or invalidity thereof between the parties which is not settled in accordance with Articles 15.6.1 and 15.6.2 shall be referred to and finally and exclusively settled by arbitration in accordance with the Arbitration and Reconciliation (sic Conciliation) Act, 1996. The venue of arbitration shall be New Delhi. Language to be used in arbitration proceedings shall be English.”

10. It is stated that the petitioner served a letter dated 11-5-2009, referring the dispute to arbitration but the respondent vide its letter dated 10-6-2009, did not agree on the person nominated by the petitioner as arbitrator. On the other hand, the respondent nominated its own arbitrator. Through a letter dated 13-7-2009 the petitioner conveyed to the respondent that the name suggested by the respondent was not acceptable to the petitioner. Since the parties could not agree on a sole arbitrator, the petitioner has chosen to file this petition.

11. The respondent has no objection in referring the dispute to arbitration. The learned counsel for the parties submitted that since the parties could not agree on the name of a sole arbitrator and since the subject-matter of the dispute involves complicated technical issues also, an Arbitration Tribunal may be appointed and both the petitioner and the respondent may be permitted to nominate one person each as member and the Chairman of the Arbitration Tribunal may be a retired Judge, nominated by this Court.

12. Learned counsel for the petitioner suggested the name of Mr R. Nath, Consultant Geophysicist, ex-General Manager (Geophysics) ONGC as the petitioner's nominee. Learned counsel for the respondent has no objection to the said name. Learned counsel for the respondent suggested the name of Mr S.P Painuly, ex-General Manager (Geophysics), Directorate General of Hydrocarbons (DGH), Ministry of Petroleum and Natural Gas, as the nominee of the respondent. Learned counsel for the petitioner has no objection to the said name.

13. I do not find any legal impediment for accepting the above suggestions made by learned counsel for the parties. I am also satisfied that the agreement dated 13-12-2007, executed between the petitioner and the respondent contains a valid arbitration clause and that the dispute/claims mentioned in this petition are covered by the said arbitration clause and hence, the submission made by the learned counsel for the parties for appointment of an Arbitration Tribunal can be accepted.

14. Under the above circumstances, an Arbitration Tribunal is constituted to arbitrate upon the disputes/claims/counterclaims raised by the parties, with the following members:

(1) Hon'ble Mr Justice D.P Wadhwa, former Judge, Supreme Court of India, as Chairman.

Residential address: C-25, Panchsheel Enclave, New Delhi-110 017.

(2) Mr R. Nath, Consultant Geophysicist, ex-General Manager (Geophysics), ONGC.

Address: C-202, Rosewood Apartments, Mayur Vihar, Phase I, Extn. II, Delhi-110 091, Tel: 9818725258(M).

(3) Mr S.P Painuly, ex-General Manager (Geophysics) in Directorate General of Hydrocarbons (DGH) (Ministry of Petroleum and Natural Gas).

Address: H. No. 1297, Sector 37, Noida-201 301 (U.P) Phone: 9818922290(M).

15. The Arbitration Tribunal is requested to enter upon the arbitration at the earliest and to complete the arbitration proceedings as early as possible, and preferably within a period of 18 months from the date of entering upon the arbitration. It is made clear that the expiry of the abovementioned period will not be a ground for challenging the validity of the arbitration proceedings. The Arbitration Tribunal will be entitled to decide on the terms and conditions of arbitration, including the procedure, venue, time, fees, etc.

16. The arbitration petition is disposed of in the above terms. The Registry is directed to communicate a copy of this order to the three members of the Arbitration Tribunal.