Court affirms contractor's entitlement to standby charges due to ONGC's suspension of work; rejects challenge to arbitral findings and discretionary denial of pre-award interest
In a significant judgment dated November 2, 2026, the Bombay High Court dismissed challenges by Oil and Natural Gas Corporation Ltd. (ONGC) to an arbitral award favoring M/s Great Eastern Shipping Co. Ltd. (now M/s Great Offshore Ltd.) in a dispute arising from delays in an offshore fabrication and installation project at Bombay High Field. The Court upheld the Arbitral Tribunal's findings that ONGC was responsible for suspending offshore work and delaying the platform shutdown, entitling the contractor to standby charges as per contractual clauses.
Background:
The dispute arose out of a contract awarded by ONGC in July 1999 to Great Eastern Shipping for the fabrication, transportation, and installation of the NG Flare Tripod Structure at an offshore location. The work required a complete shutdown of the platform, with strict timelines and detailed work programs agreed upon by the parties. However, ONGC postponed the shutdown to coordinate with another contractor's delayed schedule, effectively suspending the contractor's work for over six weeks. This led to claims by the contractor for standby charges and compensation for denial of access to the platform.
The Arbitral Award and ONGC's Challenge:
The Arbitral Tribunal, after examining documentary and oral evidence, concluded that ONGC's suspension of work and postponement of the shutdown caused the delay and disruption. It awarded the contractor approximately US$1.13 million in standby charges and costs, with interest from the award date, rejecting ONGC's contentions that the delay was attributable to the contractor's failure to comply with notice and work plan requirements.
ONGC challenged the award before the Bombay High Court, contending that the Tribunal ignored critical contractual clauses mandating formal notices and approvals, that standby charges were wrongly awarded for periods when vessels were engaged in load-out or transportation, and that the award suffered from internal inconsistencies and irrationality. ONGC also sought pre-award interest, which the Tribunal had declined.
Court's Analysis:
The Court meticulously analyzed the contractual provisions, including Clauses 8.2 (suspension of work), 2.2.2.1 and 2.2.2.2 (access to site and compensation for denial of access), and 2.3.4 (work program approval). It observed that the contractor had issued readiness notices and submitted detailed work schedules incorporated into the contract. ONGC's postponement of the shutdown to accommodate another contractor's delay was found to constitute a suspension of work under Clause 8.2.
Rejecting ONGC's argument about notice formalities, the Court noted that the Tribunal's findings were based on substantial evidence, including correspondence and meeting records, which showed that the delay was attributable to ONGC's unilateral rescheduling. The Court emphasized that contractual clauses must be construed harmoniously but must also give effect to the realities of the situation, which in this case was the suspension order issued by ONGC.
Regarding the standby charges, the Court upheld the Tribunal's reasoning that physical presence of vessels at the work site during standby was not a contractual prerequisite. The vessels were committed and available for deployment, and their location at times away from the site did not negate the contractor's entitlement to compensation. The Court also rejected ONGC's challenge to the Tribunal's deduction of charges for periods when load-out or transportation was underway, holding that these were factual findings not subject to reappraisal under Section 34 of the Arbitration and Conciliation Act, 1996.
On the issue of pre-award interest, the Court reiterated that under the law as it stood prior to the 2015 amendment, granting interest for the period before the award was discretionary. Since the Tribunal declined to grant such interest, no interference was warranted.
Conclusion:
The Bombay High Court dismissed Arbitration Petition No. 212 of 2013 filed by ONGC and Arbitration Petition No. 211 of 2013 filed by the contractor concerning pre-award interest. The judgment confirms the principle that courts will not reappraise evidence or interfere with arbitral findings unless there is patent illegality or perversity, particularly in complex commercial disputes involving contractual interpretations and factual determinations.
This decision provides clarity on the application of suspension clauses and standby charges in offshore contracts, reinforcing the sanctity of arbitral awards and the limited scope of judicial intervention under Section 34 of the Arbitration and Conciliation Act.
Bottom Line:
Arbitration - Section 34 of Arbitration and Conciliation Act, 1996 - Court cannot re-appreciate evidence or interfere with arbitral findings where Tribunal, on documentary and oral evidence, held that ONGC had suspended offshore work and delayed shutdown, thereby entitling contractor to standby charges under contractual clauses - Non-grant of pre-award interest under unamended Section 31(7) being discretionary, no interference warranted.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 31(7), Section 34
