HYUNDAI (~ORPORATION & ANR. v. OIL AND NATURAL GAS CORPORAUON LTD.

The Judgment of the Court was delivered by R. F. NARIMAN, J. I. The present appeal has a somewhat chequered history. It arises out of the respondent's floating a tender for two platform facilities for off-shore oil exploration and drilling in October, G

1982. The appellant before us submitted two tenders for two such platforms on 13th January and 22nd March of 1983 respectively. Immediately after the submission and acceptance of these tenders, on 3 lst March, 1983, a Notification was issued by the Government oflndia extending the Income Ta'<Act, 1961 to the Continental Shelf and Exclusive Economic Zone oflndia with effect from Ist April, 1983, in respect of H

p. 492 Copy page pinpoint

A income derived by every person inter alia from prospecting for, or extraction or production of mineral oil in tile Continental Shelf or Exclusive Economic Zone of India. Fomal contracts were entered into between the Oil and Natural Gas Corporation Ltd.["ONGC"] and the appellant on 16th December, 1983. For the purpose of this appeal, two clauses are material and are set out below: 8 "13.2.8 The company shall not be responsible/obligated for making any payments or any other related obligations under the Contract to the Contractor's sub-contractor/vendors. The Contractor shall be c fully liable and responsible for meeting all such obligations and all payments to be made to its sub-contractors/Vendors and any other third party engaged by the Contractor in any way connected with the discharge of the Contractor's obligation under the Contract and in any manner whatsoever. D 17.3 Change of law: In the event of any change or amendment of any law, rule or -regulation of any Government in India or public body of the Republic oflndia which becomes effective after the date of the Tender (the 25th day of March, 1983) and which results in any E increased cost to the Contractor shall be indemnified for any such cost by the Company and the Completion Schedule shall be extended as required." 2: Some time in 1984, the appellant entered into a sub-contract with Mis McDermott International Jncorporated. Panama, wherein a F part of the work to be carried out by the appellant was sub-contracted. This back to back contract also had a provision which was similar to Clause 17.3. On 12th May, 1987, Section 4488 was introduced in the Income Tax Act, with retrospective effect from Ist April, 1983. Under this provision, a non-resident assessee engaged in the business of providing services or facilities, or supplying plant and machinery on hire for the prospecting, extraction or production of mineral oil, was notwithstanding anything to the contrary contained in various sections of the Income Tax Act, liable to pay income tax on a sum equal to I0% of the aggregate of the amounts specified in sub-section (2), which were then deemed to be profits and gains of such business chargeable to tax under the head 'profits and gains of business' or profession. To complete

HYUNDAI CORPORATION & ANR. v. OIL AND NATURAL 493 GAS CORPORATION LTD.

494 SUPREME COURT REPORTS . [2017) 9 S.C.R.

A request of the Claimants while Cl.13.2.8 was already there, it appears that Cl.17.3 was intended to cover those extra costs incurred by the Claimants due to the change of law which were outside of and not covered by Cl.13.2.8 oft he Contract. Even the reading of Cl.l 3.2.8 itself would show that it does not and would not cover the Claimants' claim for compensation for extra costs B under the said CJ .17 .3 of the Contract."

3Copy pinpoint3. On this limited dispute, the Umpire, Retired Chief Justice Y.V.Chandrachud. delivered his award dated 20th March, 2002. In paragraph 20 of the said award, the learned Umpire stated: 'The main question and. indeed, the only question which was c pressed before me by learned Counsel for the parties. arises out of the provisions contained in Clause 17 .3 of the SH Contract and the extension of the LT. Act to the Continental Shelf ofindia and other Exclusive Economic Zones by the Notification dated March 31, 1983, issued by the Government ofindia, which is referred to D .in paragraph 9 above." :•r ,~~'However, instead of deciding this question, the learnedUmpire wenti.nto 1..;..,,, i a question already decided in favour of the appellant and arrived at a.contrary conclusion, namely, that tax was not payable under Section \&~~

44BB .at aU but had in fact been paid pursuant to the Circular of the E C~ntrnl Government of July, 1987, and that this being the case, Clause 17 .3 itself would not be attracted, as there was no change in law unner which such tax had to be paid. The tax had to be paid in any case under the provisions of Sections 5 and 9 of the Income Tax Act and accordingly, the claim of the appellant w<ls rejected. However, before concluding the award the learned Umpire held: F "35. Before concluding the discussion on the aforesaid point, it would be useful to refer to clause 13.2.7 of the main Contract between the Claimants and the Respondents, it reads thus: · "13.2.7. the Company shall not be responsible/obligated for making any payments or any other related obligations under this G Contract to the Contractor's sub-contractors/vendors.The contractor shall be fully liabk and responsible for meeting all such obligations and all payments to be made to its sub-contractors/ vendors and any other third party engaged by the Contractor in any way connected with the discharge of the contractor's H obligations under the contract and in.any manner whatsoever".

HYUNDAI CORPORATION & ANR. v: OIL AND NATURAL 495 GAS CORPORATION LTD.

35.1 Since clause 17.3 of the Contract is not attracted and since, consequently, the. Claimants are not liable to indemnify Mil in respect of the Income Tax for which a demand has.been made on Mll, Clause 13.2.7 extracted above, wo.uld squarely come into play. The "Company" that is to say, the Claimants, are not responsible or _obligated to reimburse Mll in respect of the aforesaid tax demand."

5Copy pinpoint5. It will be noticed on a perusal of the award of the Umpire. that a decision has been rendered on an issue which was never referred to the learned Umpire. The award was ultimately only on the said issue. In passing. the Umpire did refer to Clause 13.2.7, which was the only bone of contention left between the pa1ties, but .stated that since Clause 17.3 c of the contract was not attracted, and since consequently the Claimants were not liable to indemnify the sub-contractor, Clause 13.2.7, would squarely come into play. From this it can be seen, that there was no independent reasoning or conclusion with regard to the applicability of Clause 13.2.7. This being the case, and the matter being a fairly old one, D we are of the view that the award of the Umpire has to be set aside on the ground that his ultimate decision was on a matter not referred to him, but indeed on a matter which had been concluded in favour of the appellant. This being the case, it would be necessary to remit the matter to the Umpire. lnasmuch as the Former Chief Justice Y. V. Chandrachud is no longer alive, with the consent of the parties, we appoint Justice E Aftab Alam to be the Umpire in this case to decide the narrow issue as to whether Clause 13.2.8 would apply so as to interdict the application of Clause I7.3 which has been held by both learned Arbitrators to apply to the parties. We request the learned Arbitrator to take up the matter as early as possible and deliver his award within a period of three months F from the date on which he receives the papers from the parties. By consent, it is recorded that the matter being an old one, this award would not be subjected to the dril I of appeals before the High Court, but would come back directly to us for fmther adjudication.

6Copy pinpoint6. The appeal is accordingly allowed and the judgment of the G; High Cou1t is set aside.

. I· Diyya Pandey Appeal allowed. '.·