SC notice to French firm on ONGC plea

The Supreme Court on Monday sought reply from a French company on a petition by state-run ONGC alleging that there was no concluded contract for commissioning of pipelines for its D-18 oil field with the former.

A bench headed by Justice Altamas Kabir sought reply from So France SA (erstwhile Comex services SA) on an important question of law whether a telex message by which ONGC placed an order was only a letter of intent or a concluded contract between the parties.

Challenging the Bombay HC judgment that upheld an arbitral tribunal’s award asking ONGC to pay damages to the foreign company, the PSU said that the high court failed to decide the matter afresh, as directed by the Supreme Court, on the issue.

The HC was not justified in overlooking the fact that the entire arbitral reference in issue arose out of a draft contract which was never entered upon between the parties, the petition filed through counsel Sunil Kumar Jain stated.

It further said that LoI was only a document which showed that a party was likely to place a contract with another party and cannot be taken as a concluded contract between the parties.

ONGC in June 1998 had by telex placed an order worth 2.65 crore French Francs upon the French firm for supply, installation and commissioning of pipeline for D-18 field. The telex also sent out the terms and conditions of the contract and the delivery schedule provided for completion of work by December 1988-end.

While it was decided that 10% of the contract value would be paid to So France on opening of the letter of credit, the company in return was supposed to submit a bank guarantee of equivalent amount. After the work could not be completed within the stipulated time, the French company had sought arbitration in 1991 on the ground that the schedule of the project was affected by the delays caused by ONGC as the latter had refused to agree to pay $35,000 per day as standby charges.

It further said that no payment was made by the state-run company even after the first stage invoice was submitted. However, ONGC had refuted such claims by saying that payments in foreign exchange could not have made unless the written contract was signed between the parties.

The arbitral tribunal appointed pursuant to the high court directions had asked ONGC to pay $10 lakh as damages. Even the high court upheld the award. However, on appeal by ONGC, the apex court had remanded the matter back to the high court, which held that there was a concluded contract between the parties.