IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

ARBITRATION PETITION NO. 21 OF 2009

Dolphin Drilling Ltd.               …..Petitioner

Versus

Oil and Natural Gas Corporation Ltd.         ..Respondent

O R D E R

AFTAB ALAM, J

1. This  is  an  application  under  Section  11(6)  of  the  

Arbitration  and  Conciliation  Act,  1996  for  appointment  of  an  

arbitrator for and on behalf of the respondent and to refer the  

dispute(s) between the parties for arbitration. The applicant and  

the respondent entered into an agreement dated October 17, 2003 for  

“Charter  Hire  of  Deepwater  Drilling  Rig  DP-Drill  Ship  ‘Belford  

Dolphin’ along with Services on Integrated Basis”. In terms of the  

agreement, the applicant was to carry out drilling operations for  

the respondent in the offshore waters of India as allocated by the  

respondent. Clause 28 of the agreement contained the arbitration  

clause.  According  to  the  applicant,  though  the  period  of  the  

agreement came to an end on February 13, 2007, on being called upon  

by the respondent, it continued to provide further services till  

April 10, 2007 for which it was entitled to be paid additionally on

comparable rates under the agreement.  

2. The  applicant  makes  the  grievance  that  a  number  of  its  

invoices were not paid or only paid in part by the respondent and on  

demands made by it the respondent did not even give any satisfactory  

reply for non-payment/part-payment of those invoices. Failing to get  

any  positive  response  from  the  respondent  despite  demands  and  

reminders, the applicant was left with no option but to invoke the  

arbitration clause under the agreement. It accordingly, addressed a  

notice to the respondent on January 29, 2008 invoking arbitration on  

the  disputes  broadly  set-out  in  the  notice  and  nominating  Mr.  

Justice S. P. Bharucha, a former Chief Justice of India, as its  

arbitrator.  The applicant further states that the respondent did  

not respond to the arbitration notice in the manner as provided in  

the arbitration clause in the agreement and hence, it was forced to  

move this application before the court.

3. Mr.  Gaurav  Agrawal,  learned  counsel  appearing  for  the  

respondent, accepted the provision for arbitration vide clause 28 of  

the agreement dated October 17, 2003.  He also acknowledged that the  

dispute(s) raised by the applicant in the arbitration notice dated  

January 29, 2008 arose under the agreement dated October 17, 2003  

and  was/were  fully  arbitrable.   Nevertheless,  he  resisted  the  

applicant’s prayer to refer the dispute(s) raised in the arbitration  

notice dated January 29, 2008 to arbitration on the plea that the  

applicant  had  already  invoked  the  arbitration  clause  albeit in  

connection  with  a  different  dispute  earlier  arising  under  the

agreement.

4. Mr. Agrawal submitted that the remedy of arbitration under  

clause 28 of the agreement was a one-time measure and it could not  

be taken recourse to repeatedly even though the disputes may be  

different and unconnected to each other. Learned counsel further  

submitted that the arbitration was an expensive proposition and even  

though the respondent was liable to bear only half of the expenses,  

the financial burden cast by the arbitration proceedings in terms of  

fees for the learned arbitrators and counsel/solicitors and other  

incidental expenses was quite onerous. Hence, the arbitration clause  

in the agreement envisaged one, single arbitration for all disputes  

between  the  parties  and  not  repeated  arbitrations  for  different  

disputes arising between the parties at different times under the  

same agreement. The gist of the respondent’s objection is contained  

in  sub-paragraphs  (d)  and  (e)  of  paragraph  4  of  its  counter  

affidavit which are reproduced below:

“(d) The respondent would further beg leave of this  Hon’ble Court to submit that in the List of Dates and  in  the  Arbitration  Application,  the  Petitioner  did  not refer to the fact that the petitioner had already  invoked clause 28 of the agreement in 2004.  Pursuant  to the said request for arbitration, an Arbitration  Tribunal  consisting  of  Hon’ble  Mr.  Justice  B.P.  Sharaf (Retd.)  Hon’ble Mr. Justice S.C. Pratap and  Hon’ble  Mr.  Justice  A.K.  Dutta  (Retd.)  was  constituted in the year 2005.  The said arbitration  has  continued  for  the  last  more  than  four  years.  Needless  to  mention,  the  Respondent  has  incurred  heavy expenses in the arbitration which is at the  concluding stage, i.e. arguments have been completed  and written submissions to be filed.

(e) In view of the aforesaid invocation of Clause 28  by  the  Petitioner,  the  notice  issued  by  the  Petitioner  on  29.01.2008  purportedly  invoking  the  arbitration  clause  once  again  and  raising  further  disputes was not permissible under the contract.  It  is most respectfully submitted that there cannot be

repeated  arbitrators  in  relation  to  the  very  same  contract.  The  arbitration  agreement  cannot  be  interpreted to imply that for every dispute under the  contract, the parties can invoke a fresh arbitration.  As per the contract, all disputes should have been  referred to arbitration at one go.”

5. The plea raised by the respondent voices a real problem. It  

is unfortunate that arbitration in this country has proved to be a  

highly  expensive  and  time  consuming  means  for  resolution  of  

disputes. But on that basis it is difficult to read the arbitration  

clause in the agreement as suggested by the respondent. Clause 28 of  

the agreement dated October 17, 2003 reads as follows:

“28. SETTLEMENT OF DISPUTES  

28.1 Except as otherwise provided elsewhere in the  Agreement, if any dispute, difference, question  or  disagreement  or  matter  whatsoever  shall,  before  or  after  completion  or  abandonment  of  work or during extended period, hereafter arises  between  the  parties  hereto  or  respective  representative or assignees concerning with the  construction,  meaning,  operation  or  effect  of  the  Agreement  or  out  of  or  relating  to  the  Agreement or breach thereof shall be referred to  arbitration.

28.2 The  reference  to  arbitration  shall  be  to  an  arbitral  tribunal  consisting  of  three  arbitrators.   Each  party  shall  appoint  one  arbitrator  and  the  two  appointed  arbitrators  shall appoint the third arbitrator, who shall  act as the presiding arbitrator.

28.3 The  party  desiring  the  settlement  of  dispute  shall give notice of its intention to go in 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.  If  the other party fails to appoint its arbitrator  within stipulated period or the two arbitrators  fail  to  appoint  the  third  arbitrator,  Chief  Justice of High Court of competent jurisdiction  or Chief Justice of India as the case may be or  any  person  or  institution  designated  by  them  shall appoint the Second Arbitrator and/or the  Presiding arbitrator as the case may be.

xxx xxx xxx xxx

xxx xxx xxx xxx”

6. The  plea  of  the  respondent  is  based  on  the  words  “all  

disputes” occurring in paragraph 28.3 of the agreement. Mr. Agrawal  

submitted  that  those  two  words  must  be  understood  to  mean  “all  

disputes under the agreement” that might arise between the parties  

throughout the period of its subsistence. However, he had no answer  

as to what would happen to such disputes that might arise in the  

earlier period of the contract and get barred by limitation till the  

time  comes  to  refer  “all  disputes”  at  the  conclusion  of  the  

contract. The words “all disputes” in clause 28.3 of the agreement  

can only mean “all disputes” that might be in existence when the  

arbitration  clause  is  invoked  and  one  of  the  parties  to  the  

agreement gives the arbitration notice to the other. In its present  

form clause 28 of the agreement cannot be said to be a one time  

measure and it cannot be held that once the arbitration clause is  

invoked the remedy of arbitration is no longer available in regard  

to other disputes that might arise in future.

7. The  issue  of  financial  burden  caused  by  the  arbitration  

proceedings is indeed a legitimate concern but the problem can only  

be remedied by suitably amending the arbitration clause. In future  

agreements, the arbitration clause can be recast making it clear  

that the remedy of arbitration can be taken recourse to only once at  

the  conclusion  of  the  work  under  the  agreement  or  at  the  

termination/cancellation  of  the  agreement  and  at  the  same  time  

expressly saving any disputes/claims from becoming stale or time  

-barred  etc.  and  for  that  reason  alone  being  rendered  non-

arbitrable.

8. For  the  reasons  aforesaid  I  am  unable  to  sustain  the  

objection raised on behalf of the respondent.

9. In the result, the application is allowed.  The applicant  

has  nominated  Justice  S.P.  Bharucha,  a  former  Chief  Justice  of  

India, as its arbitrator. Justice Mrs. Sujata V. Manohar, a former  

judge  of  this  court,  is  appointed  arbitrator  on  behalf  of  the  

respondent, subject to her consent and on such terms as she may deem  

fit and proper.  

10. The Registry is directed to communicate this order to the  

learned Arbitrator to enable her to enter upon the reference and  

decide the matter as expeditiously as practicable.  

11. The petition stands disposed of with no order as to costs.

     …………………………………….. J

                  (AFTAB ALAM)

New Delhi,  February 17, 2010.