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TMI Blog2017 (9) TMI 1984X X X X Extracts X X X X X X X X Extracts X X X X ..... elies upon clause 7.6.5 to hold that a defaulting party remains liable and obligated for its participating interest especially for costs and obligations. The petitioner is essentially trying to challenge the interpretation of the JOA made by the learned Arbitrator. The interpretation of the learned Arbitrator of the said clauses of the JOA are a plausible interpretation and cannot said to be in any manner illegal or suffering from any illegality. It is settled legal position that interpretation of a contract is within the domain of an Arbitrator. The court shall not ordinarily substitute its interpretation of the terms of the contract with the interpretation of the arbitrator. A perusal of the Award would show that the learned Arbitrator has noted that under Article 4.9.1 of the JOA any loss of damages suffered in connection with the conduct of the operations except in the case of gross negligence or wilful conduct will not render any liability on the operator. The Award notes that the only negligence alleged on behalf of the operator was seeking extension of time from the government for completion of Minimum Work Programme in respect of Phase-I of the Programme. It notes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o complete the Mandatory Work Programme or Minimum Work Programme or both, at the end of the relevant exploration phase or early termination the constituent companies were required to pay to the Government equivalent to the participating interest, to complete the Mandatory Work Programme or Minimum Work Programme or both. 3. Pursuant to the aforesaid PSC Agreement the aforesaid entities had also entered into a Joint Operating Agreement (hereinafter referred to as JOA) on 31.10.2007 with a view to pool their respective financial and technical capabilities for the purpose of exploring the site for oil and natural gas and in case of successful exploration, developing the area and producing, transporting etc. all the produce in terms of the allotted share in terms of the PSC Agreement. It was also pointed out that under Article 5 of the JOA an Operating Committee was set up which consisted of representatives of each of the parties to the JOA. The Operating Committee was responsible for overall supervision of the joint operations. The petitioner was a member of this Operating Committee. As per Article 7.1 of the JOA, all costs and expenses incurred by the Operator on behalf of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was entitled to interest amount of Rs.14,09,054/- as per the rate contained in the agreement between parties for a period of default up to date of claim? 4. Whether the claimant was entitled to interest from date of claim till the date of Award and for Post Award Period. If so, at what rate? 5. Whether the Claimant failed to follow the mechanism as provided in clause 7.6 of JOA? 6. Whether the non-defaulting parties were obliged to pay to the operators (claimant and GSPC) the amount of cash calls not paid by respondent? 7. Whether the payment made by claimant in compliance of obligation of Respondent under JOA in respect of call numbers 27, 28 and 29 discharged the Respondent of its liability to make the payment against above cash calls? 8. Whether the delay in filing claim by the Claimant before Delhi International Arbitration Centre should result in rejection of the claim? 9. Whether there was failure on the part of claimant in obtaining timely approvals from Ministry of Petroleum and Natural Gas and a failure in furnishing requisite information to the Respondent. If so, the consequences thereof? 10. Whether the Claimant (GAIL) committed breach of Joint Op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PSC Agreement if no commercial discovery was made in the contract area by the end of the exploration period, the contract was to be terminated. On issue No.14 regarding the claim of the petitioner for loss of profit the same was rejected. On issues No.2, 3 and 4 noting that the share of the petitioner is not in dispute being 11.11%, there was no dispute raised regarding the quantum of expenditure and the resultant share of the petitioner. Accordingly, an Award was passed in favour of the respondent for a sum of Rs.2,66,66,574/- plus interest of Rs.14,09,054/-. LIBOR rate plus 2% interest on the amount of Rs.2,80,75,628/- from January 2016 till passing of the Award was also passed. If the amount was not paid within 30 days the petitioner was also liable to pay interest from the date of the Award till realisation of the Award. Costs were also awarded to the respondent. 8. I have heard learned counsel for the parties. Learned counsel for the petitioner has vehemently argued as follows to support his plea that the award is liable to be set aside:- (i) It is submitted that under the PSC, the respondent had no authority to file the present proceedings on behalf of the other partici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the articles of the said Agreement clearly vest the operator with the power to take all necessary steps for appropriate functioning of the JV. Recovery of dues from a defaulting participant would certainly be included in the powers of the operator. Clause 4.6.05 of JOA specifically authorises the operator to represent parties before the court. In any case, it may be noted that none of the other constituents of the JOA have raised any objection regarding the rights of the operator/respondent to initiate the present proceedings on their behalf. The plea raised by the petitioner is hence even otherwise absolutely without merits. 14. I will now deal with the next submission of the learned counsel for the petitioner, namely, that the petitioner was not liable to pay the defaulted call dues. Reference may be had to some of the clauses of the JOA. 15. Article 7.6 and 7.7 of the JOA Agreement reads as follows:- 7.6 Default 7.6.1 If any Party (hereinafter called the Defaulting Party) fails to pay in part or full its share of any Cash Call by the date of payment thereof as provided in the Accounting Procedure (the Due Date): a) The Operator shall notify all Parties o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall not be entitled to vote on any matter coming before the Operating Committee during the period such default continues. Unless agreed otherwise by the Non Defaulting Parties, the Voting interest of the Defaulting party shall be divided amongst the Non-Defaulting Parties in the proportion, of the Participation Interest for the duration of the period of default. Any matter requiring unanimous vote of the Parties shall be deemed to exclude the Defaulting Party. Notwithstanding the foregoing, the Defaulting Party shall be deemed to have approved, and shall join with the Non Defaulting Parties in taking any action to maintain and preserve the Contract. 7.7.2 In the event that the default continues for more than ninety (90) days (the Default Period ) and the Defaulting Party does not pay the amount in default plus accrued interest by the end of such time, a proportion of the Participating Interest of such Defaulting Party shall at the sole election of the Non-Defaulting Parties be forfeited to the Non- Defaulting Parties, to reflect the ratio that the Participating Interest of the Defaulting Party bears to the cumulative contribution made by the Defaulting Party to the cumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement Committee/Government. 7.7.4(i) The Defaulting Party shall be deemed to have surrendered its Participating Interest in the Contract and each of the Non-Defaulting Parties shall have the right to request the transfer to it and to acquire, with effect from the date of default, subject to any necessary consent of the Government, as beneficial owner and free of any liens, charges and encumbrances, the Participating Interest of the Defaulting Party. (ii) The Defaulting Party shall promptly join in such actions as may be required to obtain any necessary consent of the Government and shall do such acts and execute such documents as may be necessary to transfer its Participating Interest in the Contract to the other Parties in the proportions agreed and all rights, title and interest derived there from in and under this Agreement, and in any Petroleum produced and Joint Property. All costs and expenses relating to such transfer shall be for the sole account of the Defaulting Party. (iii) Each Party hereby irrevocably appoints the Operator (and any successor Operator) to act, in the event of default by such Party in the circumstances described in that clause, as its lawful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract did not envisage this. Article 7.6.5 makes it abundantly clear that liability of defaulting party does not get discharged on payment of its cash call share by other parties...... 20. It is quite clear that the interpretation which is sought to be made by the petitioner of the stated terms of the JOA is entirely baseless. If such an interpretation was accepted, it would tantamount to rewarding a party guilty of default. The interpretation urged by the petitioner would lead to absurd results. The moment it becomes apparent that no oil or gas is going to be discovered, the participants can default on the call money leaving only the operator to fund for the entire operation. The Award rightly relies upon clause 7.6.5 to hold that a defaulting party remains liable and obligated for its participating interest especially for costs and obligations. The said clause 7.6.5 reads as follows:- 7.6.5 The Defaulting Party shall remain liable and obligated for its Participating Interest share of all costs and obligations that any way relate to any abandonment of Petroleum Operations. Any sums paid in respect of such abandonment, by the Non Defaulting Parties on behalf of the Defaulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.58,48,919/- has not been made by the respondent in the Statement of Account, it is admitted that no such plea was raised before the learned Arbitrator. It is, at this stage, not possible to raise the said plea. In fact a perusal of the record would show that the learned Arbitrator has recorded that there was no dispute raised that the participating share of the petitioner was 11.11%. The documents that have been filed by the parties also showed that there was no dispute regarding the amount spent on exploration of the oil field and that the amount payable by the petitioner was not in dispute and that there has been no challenge to the quantum of expenditure. Accordingly, there is no merit in the said plea of the petitioner. 26. The last plea raised by the petitioner pertained to the claim that there has been needless delay on the part of the operator in seeking extension of time from the Government for completion of Minimum Work Programme. Hence, it is pleaded that the respondent is liable for the same on account of which certain damages have been imposed by the government. 27. A perusal of the Award would show that the learned Arbitrator has noted that under Article 4. ..... 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