Bombay HC Dismisses ONGC’s Appeals, Upholds Rs. 160 Crore Arbitral Award to Jindal Drilling

The Bombay High Court has dismissed a set of four appeals filed by Oil and Natural Gas Corporation Ltd. (ONGC), thereby upholding a Rs. 160 crore arbitral award in favour of Jindal Drilling and Industries Ltd.

The Division Bench comprising Chief Justice Alok Aradhe and Justice Sandeep V. Marne held that ONGC could no longer defer payment on the basis of its ongoing dispute with a third party, Discovery Enterprises Pvt. Ltd.

The appeals challenged a common judgment dated April 28, 2015, wherein a Single Judge had dismissed ONGC’s petitions under Section 34 of the Arbitration and Conciliation Act, 1996, against the arbitral award dated October 9, 2013.

Background

The dispute stems from a 2005 tender floated by ONGC for the charter hire of an FPSO (Floating Production Storage and Off-loading) vessel, which was awarded to Discovery Enterprises. ONGC paid over Rs. 55 crore in customs duty on behalf of Discovery, allegedly on the understanding that Discovery would export the vessel and claim duty drawback. Upon Discovery's failure to comply, ONGC terminated the contract and initiated arbitration.

In a parallel development, ONGC had entered into four independent contracts with Jindal Drilling between 2003 and 2006, which were not connected to the Discovery contract. Jindal performed the contractual work and raised undisputed bills. However, ONGC withheld payment, amounting to approximately Rs. 63.87 crore, claiming a right to adjust this against the expected recovery from Discovery.

Arbitral Award in Jindal’s Favour

The arbitral tribunal, in October 2013, awarded Jindal USD 14.7 million plus interest, accepting that the dues were legitimate and not denied by ONGC. ONGC’s sole defence was the right of set-off, which was rooted in its contention that Jindal and Discovery were “sister concerns.”

This defence failed to convince both the arbitral tribunal and the Single Judge. The dispute was subsequently entangled in prolonged litigation, including an appeal to the Supreme Court.

Supreme Court’s 2022 Remand

In 2022, the Supreme Court remanded the matter back to a reconstituted arbitral tribunal, directing a fresh decision on Jindal’s application under Section 16 of the Arbitration Act (challenging ONGC’s attempt to rope it into the Discovery arbitration) after allowing ONGC to inspect documents and lead further evidence. ONGC argued the applicability of the “group of companies” doctrine to link Jindal with Discovery.

However, the reconstituted tribunal, comprising Justices (Retd.) Swatanter Kumar, Naresh Patil, and Jayant Nath, rejected ONGC’s claim and ruled on April 3, 2025, that Jindal had no contractual or legal nexus with Discovery. The tribunal accordingly deleted Jindal from the Discovery arbitration. The arbitral proceedings were formally terminated on April 18, 2025.

High Court: No Grounds to Defer Payment

The Bombay High Court, in its latest ruling, noted that the direction from the Supreme Court to adjourn ONGC’s appeals was limited to the pendency of the arbitral tribunal’s decision on Jindal’s jurisdictional objection. With that issue now concluded, the Court held that there was no justification to defer hearing or payment further.

Rejecting ONGC’s plea for continued deferment pending its appeal under Section 37 of the Act against the April 3, 2025 tribunal order, the Court held:

“The Apex Court has not directed that hearing of the present Appeals shall be kept in abeyance even after ONGC fails to establish connection between Jindal and Discovery.”

The Court further observed that ONGC had at no point denied the substantive claims raised by Jindal and that the only defence was the offsetting of dues based on an unproven connection with Discovery.

“Now that ONGC’s liability against Jindal cannot be adjusted against Discovery’s liability to ONGC, the present Appeals must be dismissed as ONGC has not denied the claims made by Jindal.”

Accordingly, the Court upheld both the arbitral award and the Single Judge’s 2015 ruling, dismissing ONGC’s appeals.

Case Title: Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Ltd.