GAIL INDIA LTD Vs. SURYA ROSHINI LTD

JUDGEMENT

(1.) THIS is an appellate challenge to the award dated April 19, 2007 passed by the learned Sole Arbitrator insofar claim in sum of Rs.61,72,728/ - on account of the stated price difference between the costs of the pipe line actually laid and what was required to be laid has been declined.

(2.) THE appellant, Gas Authority of India Ltd.(GAIL) had an agreement with National Thermal Power Corporation (NTPC) to supply natural gas at its power plant in village Mujheri, district Faridabad, Haryana, and for which, from the main pipeline already laid by GAIL from Bijapur to Dadri, a tap had to be provided at the said main line by GAIL at village Chainsa wherefrom the respondent/contractor, Surya Roshni Ltd. had to lay down a 14 KM spur pipe -line of 14 inch diameter connecting the point of tap with the plant of NTPC in village Mujheri. This was as per a contract entered into between GAIL and Surya Roshni Ltd. The tender documents, gave in detail the chemical composition of the steel pipes, the tensile strength etc., and suffice would it be to highlight that the steel pipes were required to withstand a design pressure of 92 kg. per square centimeter and a hydrostatic pressure of 129 kg. per square centimeter. The thickness of the steel sheets of which pipes were to be fabricated was to be 6.4 mm. Surya Roshni Ltd. laid down the pipe -line and when subjected to field hydrostatic test, by removing three pipe segments and subjecting them to field hydrostatic test, all three pipes failed the test inasmuch as much before the stipulated pressure was reached the pipes burst at the seam. As informed to us during arguments of the appeal, the pipes burst due to poor quality of welding when steel sheets were rolled to form a cylinder and the edges welded. It was a case of loose welding, as informed to us, and this explaining the pipes notwithstanding the requisite pressure and bursting at the seam.

(3.) GAIL took resort to the latter and claimed six amounts under six different heads from Surya Roshni Ltd. which disputed liability. Proceeding to encash the performance guarantee in sum of Rs.15,84,357/ -, GAIL filed a civil suit against Surya Roshni Ltd. and since the contract between the parties had an arbitration clause, being Article 30.4.1 of the General Conditions of Contract, the dispute was referred to the sole arbitration of Justice Anil Dev Singh (Retd.), before whom GAIL submitted a statement of claim having an element of principal sums claimed and pre -claim interest. The principal sums claimed were as under: -