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Welspun Specialty Solutions Limited v. Oil and Natural Gas Corporation Ltd.

Civil Appeal · 2021 INSC 724Decided 13 Nov 2021
Civil Appeal Nos. 2826-2827 of 2016
Chief Justice N.V. Ramana · Justice Surya Kant

Background

ONGC had floated a global tender for supply of seamless steel casing pipes, and Remi Metals (later Welspun Specialty Solutions) was the successful bidder. A dispute arose over delayed deliveries and the liquidated damages ONGC sought to impose, and the matter went to arbitration. The Arbitral Tribunal ruled partly in Remi Metals' favour on the damages question, but the Uttarakhand High Court set aside that part of the award, prompting cross-appeals to the Supreme Court by both sides.

Decision Breakdown

The Supreme Court held that the Arbitral Tribunal's interpretation, that time was not strictly of the essence given the contract's extension procedure, and that damages should be based on actual loss rather than automatically imposed liquidated damages, was a reasonable and plausible reading of the contract. Since courts have very limited power under Sections 34 and 37 of the Arbitration Act to interfere with a plausible view taken by an arbitral tribunal, the Court held the High Court and the District Court had overstepped that limited jurisdiction. It set aside their interference and restored/upheld the arbitral award.

Lesson Learnt

Courts cannot substitute their own interpretation of a commercial contract for a reasonable, plausible view taken by an arbitral tribunal: judicial interference with arbitration awards is meant to be the exception, not a fresh appeal on the merits.

Official source (sci.gov.in)View Judgment (PDF)

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