FRONTIER DRILLING AS Vs. JAGSON INTERNATIONAL LTD

JUDGEMENT

(1.) THE petitioners, owners of the drillship and respondents entered into Charter Hire Agreement in respect of the drillship "frontier Duchess" on 15/09/2000. An addendum was added to the Charter Agreement on 6/11/2000. Pursuant to the terms of the agreement and addendum on 7/11/2000, the respondents issued a letter to the state Bank of Hyderabad, New Delhi giving irrevocable payment instructions in terms of the agreement. On 7/11/2000, a similar letter was addressed by the respondents to ONGC with whom the respondents have engaged the vessel confirming that the payment instructions should not be altered without the consent of the owners of the drillship. On 13th June, 2002 there is a further addendum by which the charter hire was increased from US $ 14000 per day to US $ 16,372. 77 per day from 1st January, 2002, until 30th April, 2002, and a sum of US $ 15,171. 74 per day from 1st May, 2002 till 29th December, 2002. By letter of 23rd December, 2002 the petitioners called upon the respondents to issue fresh letter to State Bank of Hyderabad pursuant to increase in the day rate. Pursuant to that the respondents by letter of 15th January, 2003, issued irrevocable payment instructions to State bank of Hyderabad, New Delhi who have confirmed record of the same and further that they would comply with such instructions. The petitioners sent a fax to respondents on 22nd January, 2003 calling upon them to issue similar letter to ONGC. On 28th January, 2003 the respondents wrote to the petitioners that they had given instructions to ONGC by their letter dated 7/11/2000 and as such fresh letter was unnecessary. In December, 2002, against the invoice raised by the petitioners the respondents, it is contended, paid only part amount as set out in the petition. Thereafter discussion took place between the parties and it is the case of the petitioners that the respondents agreed to remit the outstanding sum. As the amount was not paid, correspondence was exchanged between the parties. The respondents by letter of 19th November, 2002, claimed from the petitioners a sum of US $ 706, 784 and called upon the petitioners to pay the same. The petitioners replied to the respondents that their claim had no basis and the outstanding amounts should be paid. On 19th December, 2002, the respondents wrote to the petitioners alleging that the agreement dated 10th april, 2001 was not valid as it was signed by the representative who joined the petitioner company after signing of the said letter. Thereafter the petitioners had been making demand on the respondents. Though discussions have taken place there has been no settlement. On 11th March, 2003, the petitioners intimated to the respondents that drillship has been withdrawn from the services of the respondents, in view of the respondents' failure to pay the outstanding. The agreement, however, contains a clause that the terms of the agreement would bind the parties till such time as the last well is completed. It is in those circumstances that the vessel is still being operated by the respondents herein.

(2.) RELIANCE is placed on the Charter Party Agreement and the various clauses. The Charter Agreement is subject to the ONGC contract on back-to-back basis for the continuation of the agreement as per Annexure "e". Clause 24 is the provision for arbitration. It reads as under:

(3.) ON behalf of the respondents V. K. Sharma, Base Manager of the respondent has filed an affidavit. Various contentions have been raised therein. It is pointed out that the ship was built in the year 1975 and is about 28 years old. It is further pointed out that the respondent commenced operation of the drillship from December, 2000. It is the case of the respondents that inspection was carried out by the petitioners and the inspection report will indicate that the vessel has been maintained as required. It is further pointed out that the vessel on account of its old age had certain latent and inherent defects which could not be detected by the respondents at the time when the drillship was taken over by them without actually testing it on the drilling site under the said charter party agreement. The purported defence is set out in sub-para (d) of paragraph 2 of the reply. It is pointed out that on account of late delivery the respondents suffered various prejudices. It is further pointed out that ONGC has made deductions from the amounts payable to the respondents on account of the break down of the vessel. It is then pointed out that the liability or the repairs on account of latent and inherent defects will be on account of owner and till such period no charter hire was to be paid. Various other contentions have been made. It would not be necessary to advert to all those avermnents considering the Charter Hire Agreement and the reliefs which can be granted under section 9 of the Act of 1996. It is also pointed out that the respondents have moved the Delhi High Court by filing a suit for declaration that the arbitration clause in the Charter Party Agreement is illegal, null and void and for an injunction restraining the petitioners from taking any steps pursuant to the said arbitration clause and also for a decree directing the petitioners to return the benefits of the bank guarantee wrongfully invoked by the petitioners. By interim order dated 2nd April, 2003, it is pointed out that the Delhi High Court was pleased to restrain, the petitioners herein from taking any steps pursuant to the arbitration clause in the Charter Party agreement. At this stage it may be pointed out that in so far as this Court is concerned this Court, considering the Act of 1996 and more specifically section 16, has taken a view that considering the arbitration clause it is not open to the Civil Court to decide the same, but it is for the arbitral tribunal under section 16 of the Act of 1996 to decide it. There are similar provisions under the English Arbitration Act, 1996, namely sections 7 and 30 which also provide for determination of that question by the Arbitral Tribunal. At any rate it will be open for the petitioners to raise the same before the Delhi High Court as and when the issue as the order of this Court is dated 13th March, 2003. The order was passed by the Delhi High Court on 2nd April, 2003, after the petitioners herein had already invoked section 9 of the Act of 1996. The respondents were parties and were heard before the order was passed on 13th march, 2003. The matter is subjudice before this Court and considering that prima facia at least the order of the Delhi High Court directing that the respondents cannot proceed with the arbitral proceedings at the highest could be restricted to further proceedings for invocation of the arbitration agreement. This Court atleast could not have been restrained from proceeding with the proceedings under section 9 being a Court of co-ordinate jurisdiction and a Court which has exercised and assumed jurisdiction earlier to the invocation of the jurisdiction of the Delhi High Court. It is then pointed out that the respondent company is a reputed company having assets as set out in paragraph 20. It is also pointed out that prior to the passing of the ad interim order dated 13th April, 2003, the respondents had already received amount which is subject-matter of the order dated 13th April, 2003 and the said amount was already withdrawn and/or utilised by the respondents. There is a rejoinder filed by one Blair Heines, Constituted Attorney of the petitioners which has met with the contentions as raised by the respondents. It is pointed out that the respondents have their office within the jurisdiction of this Court and apart from the respondents there are other companies having their offices in the very hotel. This was for the purpose of issue of jurisdiction of this Court. It would not be necessary to deal with the other averments and whatever is set out in the pleadings of the parties will be considered while hearing and deciding the issues involved.