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REPORTABLE  

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

ARBITRATION PETITION NO.6 OF 2013

Schlumberger Asia Services Ltd.                   ...Petitioner

VERSUS

Oil & Natural Gas Corporation Ltd.            …

Respondent

J U D G M E N T

SURINDER SINGH NIJJAR,J.

1. This  petition  is  filed  under  Section  11(6)  of  the  

Arbitration  and Conciliation  Act,  1996 seeks  a  direction  

from this Court for appointment of the nominee Arbitrator  

on behalf of the respondent and also appointment of third  

Arbitrator (Presiding Arbitrator) in the Arbitral Tribunal to  

adjudicate the disputes arises between the parties.   

2. The  petitioner  is  a  Company  incorporated  and  

registered under the law of Hong Kong having its project  

office in India and one of the base offices at Mumbai.  The  

respondent  is  a  Corporation  registered  under  the  

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Companies Act, 1956 having its registered office at Jivan  

Bharti Tower-2, 124, Circus New Delhi.

3. In its counter-affidavit, the respondent has raised a  

preliminary objection to the maintainability of the petition.  

It is submitted by the respondent that the petitioner has  

filed the present case only to bring unnecessary litigation.  

The arbitration petition is an abuse of process of law and  

the claims made are barred by a long period of time and  

are, therefore, dead claims.  

4. In order to decide the preliminary objection, it would  

be necessary to take note of certain relevant events.

5. The petitioner and the respondent had entered into  

and  executed  a  contract  dated  7th December,  2004  

(effective from the date of issue of the firm order dated 6th  

August, 2004). The contract under Clause 27 provides for  

arbitration as the mechanism for resolution of any dispute  

that may arise between the petitioner and the respondent.  

The arbitration clause reads as under:

“27 ARBITRATION

27.1 Except  as  otherwise  provided  elsewhere  in  the  CONTRACT  if  any  dispute,  difference,  question  or  disagreement  arises,  at  any  time  before  or  after  completion  or  abandonment  of  work,  between  the  parties  hereto  or  their  respective  representatives  or  

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assignees,  at  any  time  in  connection  with  construction,  meaning,  operation,  effect,  interpretation or out of the CONTRACT or breach  thereof the same shall be decided by an Arbitral  Tribunal  consisting  of  three  Arbitrators.  Each  party  shall  appoint  one  Arbitrator  and  the  Arbitrators so appointed shall  appoint  the third  Arbitrator who will act as Presiding Arbitrator.  

The party desiring the settlement of dispute shall  give notice of its intention to go for arbitration  clearly  stating  all  disputes  to  be  decided  by  arbitral  tribunal  and  appoint  its  own  arbitrator  and call upon the other party to appoint its own  arbitrator within 30 days. In case a party fails to  appoint  an  arbitrator  within  30  days  from  the  receipt of the request to do so by the other party  or the two Arbitrators so appointed fail to agree  on the appointment of third Arbitrator within 30  days from the date of their  appointment,  upon  request of a party, the Chief Justice of India or  any person or institution designated by him (in  case  of  International  Commercial  Arbitration)  shall appoint the Arbitrators/Presiding Arbitrator.  In case of domestic Contracts, the Chief Justice of  the  High  Court  or  any  person  or  institution  designated by him within whose jurisdiction the  subject  purchase  order/CONTRACT  has  been  placed/made,  shall  appoint  the  arbitrator/Presiding  Arbitrator  upon  request  of  one of the parties.  

If  any  of  the  Arbitrators  so  appointed  dies,  resigns,  incapacitated  or  withdraws  for  any  reason from the proceedings, if shall be lawful for  the  concerned  party/arbitrators  to  appoint  another person in his place in the same manner  as aforesaid. Such person shall proceed with the  reference from the stage where his predecessor  had  left  if  both  parties  consent  for  the  same;  otherwise, he shall proceed de novo.  

It  is  a  term  of  the  CONTRACT  that  the  party  invoking arbitration shall  specify all  disputes to  

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be  referred  to  arbitration  at  the  time  of  invocation of arbitration and not thereafter.  

It  is also a term of the CONTRACT that neither  party to the CONTRACT shall be entitled for any  ante-lite (pre-reference) or  pendent-lite interest  on the amount of the award.  

The Arbitral Tribunal shall  give reasoned award  and  the  same  shall  be  final,  conclusive  and  binding on the parties.  

The venue of the arbitration shall be at Mumbai,  India.  

It is a term of the CONTRACT that the cost of the  arbitration will be borne by the parties in equal  shares.  

Subject  to  as  aforesaid  the  provisions  of  the  Arbitration  and  Conciliation  Act,  1996  and  any  statutory  modifications  or  re-enactment  in  lieu  thereof shall apply to the arbitration proceedings  under this clause.”

Clause 26 of the Contract further provides as under:

“26 JURISDICTION AND APPLICABLE LAW:

This agreement including all  matter connected  with this Agreement, shall be governed by the  laws of India (both substantive and procedural)  for the time being in force and shall be subject  to exclusive jurisdiction of  the Indian Court  at  Mumbai.   Foreign  Companies,  operating  in  Indian or  entering into Joint  ventures in  India,  shall have to obey the law of the Land and there  shall  be  no  compromise  or  excuse  for  the  ignorance  of  the  Indian  legal  system  in  any  way.”

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6. The petitioner together with its affiliates is a leading  

oilfield service provider.  It is trusted to deliver superior  

results  and  improved  E&P  performance  for  oil  and  gas  

companies around the world, including India.  Through its  

well site operations, research and engineering facilities, it  

is working to develop products, services and solutions that  

optimize  customer  performance  in  a  safe  and  

environmentally sound manner.   It employs over 113,000  

people  of  more  than  140  nationalities  working  

in 85 countries, including India.    

7. The respondent was desirous of  hiring four  sets of  

Measurement While Drilling (MWD) and one set of Gyro  

Equipment  & Services  (Gyro)  collectively  referred  to  as  

“Equipments” for carrying out its operation.   Accordingly,  

the respondent issued a tender No.MR/DS/MAT/CT/MWD/  

142(390) 2003-04/P46KC04002.   The petitioner had the  

necessary experience of carrying out operation as stated  

in the tender and submitted a bid on 8th June, 2004 under  

offer No.SASL/D&M/ONGC 4002/2002-02 for providing the  

required  services  against  the  respondent’s  tender  in  

accordance  with  the  terms  and  conditions  set-forth  

therein.  The respondent accepted the bid of the petitioner  

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and  placed  a  firm  order  dated  6th August,  2004  under  

No.MR/DS/MAT/CT/MWD/142(390)2003-04/DY8DF0301/  

9010002261.  Accordingly,  on  7th December,  2004,  the  

parties  entered  into  and  duly  executed  a  contract  

effective from the date of issue of the firm order i.e. 6 th  

August, 2004.  The petitioner agreed to perform a work  

defined in Appendix-III of the Contract. The respondent in  

consideration  thereto  promised to  pay the  amounts  set  

out in Appendix-IV of the Contract at the time and in the  

manner prescribed in the contract.   The duration of the  

contract was initially for a period of 2 years from the date  

of  receipt  of  “Equipments”  at  Nhava  base.   The  

respondent had the option of extending the contract by  

one more year  in  two equal  installments of  six  months  

each at the same rate, terms and conditions.  The contract  

was  automatically  extendable  for  completion  of  jobs  in  

ongoing wells, at the same rates, terms and conditions.  

The petitioner  claims that  as  it  was providing excellent  

services  to  the  respondent,  the  contract  was  extended  

from 16th October, 2006              to 15th April, 2007 for the  

first  installment  of  six  months.   Thereafter,  it  was  

extended from 16th April, 2007 to                   15th October,  

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2007  for  the  second  installment  of  six  months  on  the  

same rates, terms and conditions as contained in Clause  

2.0 of the Special Terms and Conditions of the Contract.  

8. The petitioner  further  claims that  it  performed the  

work in terms of the contract and raised invoices for the  

work  performed  from time  to  time.   However,  invoices  

amounting  to  USD 481,252.65  and INR 9,565,616 were  

either short paid or not paid despite the work under the  

contract  was  satisfactorily  performed  by  the  petitioner.  

The details of the invoices raised by the petitioner are as  

under:

Invoice No. Period Amount  (USD)

800001820 March 2006 128,630.00 800001821 March 2006 89,149.00 800001828B March 2006 31,053.00 800001829B March 2006 41,406.00 800002119 September 2006 192,169.00 800002120B September 2006 63,729.00 800002860 September 2007 71,304.00 800002861B September 2007 96.00 800002862B September 2007 49,487.00

Total 667,023.00

9. The petitioner further claims that the respondent has  

refused to make payment against the aforesaid invoices.  

The respondent totally rejected the various Lost in Hole  

(LIH) claims of the petitioner.  According to the petitioner,  

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in  the  event  of  “Equipments”  are  lost,  destroyed  or  

damaged in the site well, the respondent is liable to pay  

the depreciated replacement value of the “Equipments”  

stuck/lost in the hole subject to a limit of 50% calculated  

from the date of first use of such “Equipments” in India.  

Furthermore, in terms of the Clause 17 of the Contract,  

the  respondent  was  under  an  obligation  to  make  an  

attempt  to  recover  or  retrieve  the  said  tools  but  the  

respondent failed to discharge this obligation also.    

10. Since no payment had been received, the petitioner  

sent  a  letter  to  the  respondent  on  11th July,  2008  

demanding  the  payment  of  the  outstanding  amount.  

However,  there  was  no  response  to  the  aforesaid  

communication.  The petitioner, therefore, issued a legal  

notice  dated  14th November,  2008  invoking  arbitration  

under Clause 27 of the Contract.  In the aforesaid notice,  

the  petitioner  detailed  the  disputes  that  have  arisen  

between the parties.  In the same notice, the petitioner  

informed  the  respondent  that  it  has  nominated  the  

Arbitrator  and  called  upon  the  respondent  to  nominate  

their Arbitrator within 30 days from the date of receipt of  

the notice, failing which the petitioner shall be constrained  

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to  initiate  legal  steps  for  appointment  of  Arbitrator  on  

behalf of the respondent.   According to the petitioner, the  

aforesaid notice was duly served upon the respondent but  

no  steps  were  taken  by  them  for  appointment  of  

Arbitrator.   Thereafter,  the  petitioner  sent  a  reminder  

letter on 21st May, 2009 calling upon the respondent to  

nominate an Arbitrator within 30 days from the date of  

receipt  of  the  notice.   The  petitioner  reiterated  that  in  

case the respondent still failed to nominate the Arbitrator,  

the petitioner shall initiate proceedings for appointment of  

Arbitrator on behalf of the respondent.  Another reminder  

was issued by the petitioner on 11th August, 2010 in the  

same terms as the earlier notices and the reminders.  Still  

there was no response from the respondent, which led the  

petitioner  to  send  another  notice  on  9th January,  2012.  

Finally,  on  29th February,  2012,  the  respondent  sent  a  

reply  to  the  petitioner  denying  that  any  amount  as  

claimed by the petitioner was due.

11. At  this  stage,  the  petitioner  finally  accepted  that  

disputes  have arisen  between the  parties  and filed  the  

present petition under Section 11(6) of the Arbitration and  

Conciliation  Act,  1996  seeking  appointment  of  the  

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nominee Arbitrator on behalf of the respondent as well as  

the third Arbitrator (Presiding Arbitrator).  

12. I  have  heard  the  learned  counsel  for  the  parties.  

Mr.  Siddharth  Luthra,  learned  senior  counsel  has  

submitted  that:   (1)  the  petitioner  had  accepted  the  

payment  without  demur  in  2007.   The  claims  are,  

therefore, already settled.;  (2) The contract had come to  

an  end  long  time  ago  upon  the  petitioner  accepting  

payment in 2007.; (3) The cause of action, if any, arose in  

2007,  while  the  arbitration  petition  is  filed  in  January,  

2013.; (4)  According to Mr. Luthra, even on pleadings of  

the petitioner, the cause of action arose to the petitioner  

for  filing petition  under  Section 11(6)  of  the  Arbitration  

and  Conciliation  Act  from  14th December,  2008  i.e.  on  

expiry  of  30  days  from  the  first  notice  

dated 14th November, 2008 invoking arbitration. Learned  

senior counsel submitted that the present petition ought  

to have been filed within a maximum period of 3 years  

from the said date, i.e., on or before 14th December, 2011  

while the present petition has been filed on 11th January,  

2013.  Learned senior counsel emphasized that this Court  

would not entertain the present petition as it raises dead  

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claims.   The contract expired after the de-hiring of last  

unit on 21st October, 2007.  The respondent had received  

the entire amount in the years 2006-07.  Pointing out to  

the averments made in the counter-affidavit,  Mr.  Luthra  

submits that the letter dated 14th November, 2008, 21st  

May, 2009 and 11th August, 2010, which were written to  

ONGC,  were  not  received  in  the  concerned  section  of  

ONGC.  The address in the contract for  correspondence  

was  given  as  ONGC  Limited,  Drilling  Services,  Mumbai  

Region, 3B, Vasundhara Bhavan, Bandra-East, Mumbai-51.  

This  was  changed  to  ONGC  Limited,  Drilling  Services,  

Directional Drilling Section, Mumbai Region, 2nd Floor, 11-

High, ONGC, Sion (W), Mumbai-400017 in October, 2005.  

This was known to the petitioner as it had submitted the  

invoices to ONGC at new address. However, notices dated  

21st May, 2009 and 11th August, 2010 were still sent to the  

earlier  address.   In  any  event,  notice  dated  14th  

November, 2008 was never received by the respondent.  

Mr. Luthra submits that mere sending of subsequent show  

cause notice/letters would not extend the limitation as the  

date of cause of action was fixed on the expiry of 30 days  

from  the  first  notice  dated  14th November,  2008.   Mr.  

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Luthra points out that Section 43 of the Arbitration and  

Conciliation  Act,  1996  provides  that  the  Limitation  Act,  

1963  shall  apply  to  arbitrations  as  it  applies  to  

proceedings in Court.  Relying on Section 43(2) read with  

Section  21  of  the  aforesaid  Act,  the  learned  counsel  

submitted that  the arbitration shall  be deemed to have  

commenced  on  the  date  on  which  a  request  for  that  

dispute  referred  to  arbitration  is  received  by  the  

respondent.   The petitioner  having sent  the first  notice  

on 14th November, 2008, the arbitration petition ought to  

have been filed  after  the  expiry  of  30  days  therefrom.  

Learned counsel relies on the Constitution Bench of this  

Court in SBP & Co. Vs. Patel Engineering Ltd. & Anr.  

(2005) 8 SCC 618, in support of the submission that the  

present petition is barred by limitation.  He relies on para  

39 of the judgment, which reads as under:

“39. It is necessary to define what exactly the  Chief  Justice,  approached  with  an  application  under Section 11 of the Act, is to decide at that  stage.  Obviously,  he  has  to  decide  his  own  jurisdiction  in  the  sense  whether  the  party  making  the  motion  has  approached  the  right  High Court. He has to decide whether there is an  arbitration agreement, as defined in the Act and  whether the person who has made the request  before him, is a party to such an agreement.  It  is necessary to indicate that he can also decide   the question whether the claim was a dead one;   

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or  a  long-barred claim that  was sought  to  be   resurrected and  whether  the  parties  have  concluded  the  transaction  by  recording  satisfaction  of  their  mutual  rights  and  obligations  or  by  receiving  the  final  payment  without objection. It may not be possible at that  stage, to decide whether a live claim made, is  one  which  comes  within  the  purview  of  the  arbitration clause. It will be appropriate to leave  that  question  to  be  decided  by  the  Arbitral  Tribunal  on  taking  evidence,  along  with  the  merits of the claims involved in the arbitration.  The  Chief  Justice  has  to  decide  whether  the  applicant  has  satisfied  the  conditions  for  appointing an arbitrator under Section 11(6) of  the Act. For the purpose of taking a decision on  these  aspects,  the  Chief  Justice  can  either  proceed  on  the  basis  of  affidavits  and  the  documents produced or take such evidence or  get  such  evidence  recorded,  as  may  be  necessary.  We  think  that  adoption  of  this  procedure in the context of the Act would best  serve the purpose sought to be achieved by the  Act  of  expediting  the  process  of  arbitration,  without  too  many  approaches  to  the  court  at  various  stages  of  the  proceedings  before  the  Arbitral Tribunal.”

13. Relying  on  the  aforesaid  observations,  the  learned  

senior counsel has submitted that this Court would have  

to  decide  as  to  whether  the  petition  is  liable  to  be  

dismissed on  the  ground of  limitation  as  it  raises  dead  

claims.  It would not be necessary for this Court to leave  

the matter to be decided by the Arbitral Tribunal.  

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14. On the  other  hand,  Mr.  Sanjiv  Puri,  learned senior  

counsel  appearing  for  the  petitioner  submits  that  the  

limitation stops running from the date mentioned in the  

notice invoking arbitration and in  the present case,  the  

notice  invoking  arbitration  was  sent  on  14th November,  

2008.  Learned  counsel  also  relied  on  Section  3  of  the  

Arbitration and Conciliation  Act,  1996 in  support  of  the  

submission  that  the  notice  is  deemed  to  have  been  

received  by  respondent  as  it  was  delivered  to  the  

addresses mentioned in  the contract.  In  any event,  the  

learned counsel submitted that the petitioner had sent the  

final notice on 9th January, 2012 and the respondent had  

denied the claim through its letter  dated 29th February,  

2012. The disputes clearly arose only w.e.f. 29th February,  

2012.  Therefore, the preliminary objection raised by the  

respondent deserves to be rejected.

15. In any event, learned senior counsel submitted that  

this Court in the case of Indian Oil Corporation Ltd. Vs.  

SPS  Engineering  Ltd.  (2011)  3  SCC  507 has  

considered and explained the observations made by the  

Constitution Bench in  SBP & Company’s case (supra).  

It is submitted that on the question of limitation, this Court  

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had categorically held that the matter will be left to the  

decision of the Tribunal to decide whether the claim made  

is barred by limitation or not.   

16. I  have  considered  the  submissions  made  by  the  

learned counsel  for  the  parties.   A  bare  perusal  of  the  

observations made by this Court in paragraph 39 of the  

judgment in  SBP & Co. (supra) makes it clear that the  

Chief  Justice  or  the  designated  Judge  can  also decide  

whether the claim was dead one or a long-barred claim.  

But  it  is  not  imperative  for  the  Chief  Justice  or  his  

designate to decide the questions at the threshold.  It can  

be  left  to  be  decided  by  the  Arbitral  Tribunal.     The  

observations made in SBP & Co. (supra) were explained  

by this Court in Indian Oil Co. Ltd. (supra), which are as  

under:

“14. To find out whether a claim is barred by res  judicata, or whether a claim is “mala fide”, it will  be necessary to examine the facts and relevant  documents.  What  is  to  be  decided  in  an  application  under  Section  11  of  the  Act  is  whether  there  is  an  arbitration  agreement  between  the  parties.  The  Chief  Justice  or  his  designate is not expected to go into the merits  of  the  claim or  examine  the  tenability  of  the  claim, in an application under Section 11 of the  Act.  The  Chief  Justice  or  his  designate  may  however choose to decide whether the claim is   

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a  dead  (long-barred)  claim  or  whether  the  parties  have,  by  recording  satisfaction,  exhausted all  rights,  obligations  and remedies  under the contract, so that neither the contract  nor the arbitration agreement survived. When it  is  said  that  the  Chief  Justice  or  his  designate   may choose to decide whether  the claim is  a   dead claim, it is implied that he will do so only   when the claim is evidently and patently a long   time-barred claim and there is no need for any   detailed  consideration  of  evidence.  We  may  elucidate  by  an  illustration:  if  the  contractor  makes a claim a decade or so after completion  of  the  work  without  referring  to  any  acknowledgment  of  a  liability  or  other  factors  that kept the claim alive in law, and the claim is  patently  long time-barred,  the Chief  Justice or  his designate will examine whether the claim is  a dead claim (that is, a long time-barred claim).  On the  other  hand,  if  the contractor  makes  a  claim  for  payment,  beyond  three  years  of  completing of the work but say within five years  of completion of work, and alleges that the final  bill  was  drawn  up  and  payments  were  made  within three years before the claim, the Court  will not enter into a disputed question whether  the claim was barred by limitation or not. The  Court will leave the matter to the decision of the  Tribunal.  If  the  distinction  between  apparent  and obvious dead claims, and claims involving  disputed issues of limitation is not kept in view,  the  Chief  Justice  or  his  designate  will  end  up  deciding  the  question  of  limitation  in  all  applications under Section 11 of the Act.  

These observations make it clear that it is optional  

for the Chief Justice or his designate to decide whether the  

claim is dead (long-barred).  It is also made clear by this  

Court that the Chief Justice or his designate would do so  

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only when the claim is evidently and patently a long time-

barred claim. The claim could be said to be patently long  

time-barred,  if  the  contractor  makes  it  a  decade  or  so  

after  completion  of  the  work  without  referring  to  any  

acknowledgment of a liability  or  other factors  that  kept  

the claim alive in law.  On the other hand, if the contractor  

makes a claim, which is slightly beyond the period of three  

years  of  completing  the  work  say  within  five  years  of  

completion,  the  Court  will  not  enter  into  disputed  

questions of fact as to whether the claim was barred by  

limitation or not.  The judgment further makes it clear that  

there  is  no  need  for  any  detailed  consideration  of  

evidence.   

17. In the present case, there is a dispute as to whether  

the  repeated  notices  sent  by  the  petitioner  to  the  

respondents  were  ever  received.   There  are  further  

disputes (even if the notices were received by ONGC) as  

to  whether  they  were  actually  received  in  the  correct  

section of ONGC.  These are matters of evidence which  

are  normally  best  left  to  be  decided  by  the  Arbitral  

Tribunal.

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18. In my opinion, it would be appropriate for this Court  

to constitute the entire Arbitral Tribunal in exercise of my  

powers  under  Section  11(6)  of  the  Arbitration  and  

Conciliation  Act,  1996.   In  exercise  of  the  aforesaid  

powers,    I  nominate  Justice  V.N.  Khare,  Former  Chief  

Justice of India as the Chairman and Justice D.P. Wadhwa  

and Justice S.N.  Variava,  former Judges of this Court as  

Arbitrators  to  adjudicate  the  disputes  that  have  arisen  

between the parties.   The arbitrators shall  fix their own  

remuneration in consultation with the parties.  

19. The Registry is directed to communicate this order to  

the Chairman of the Arbitral  Tribunal,  as well  as to the  

other Arbitrators, so that they can enter upon reference,  

as soon as possible.

20. With  these  observations,  the  Arbitration  Petition  is  

allowed with no order as to costs.  

.……..…………………..J.                      [Surinder Singh  

Nijjar]  New Delhi; May 09, 2013.

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