Reliance Naval sues ONGC for terminating pact for 12 vessels
Reliance Naval tells Bombay high court that ONGC has refused to take delivery of eighth vessel, invokes a bank guarantee
Mumbai: Reliance Naval and Engineering Ltd has approached the Bombay high court against Oil and Natural Gas Corp. Ltd (ONGC) after the explorer ended a deal for the supply of a dozen vessels to support offshore oil exploration. In its petition, the firm controlled by Reliance Infrastructure Ltd said ONGC has refused to take delivery of the eighth vessel and also invoked a bank guarantee.
The company, a part of billionaire Anil Ambani’s diversified Reliance Group, is seeking a refund of more than $6.6 million (about ₹ 45 crore), which ONGC has invoked as performance bank guarantee, along with $15.46 million (about ₹ 105 crore) as payment for the eighth offshore support vessel (OSV) that it built for India’s largest explorer.
Reliance Naval also sought the court’s intervention to direct ONGC to take delivery of the eighth vessel.
Reliance Naval said in its plea that ONGC had in 2008 floated a tender to build and supply the dozen vessels. At that point in time, erstwhile private shipbuilder Pipavav Defence and Offshore Engineering Co. Ltd had entered into an agreement with Singapore-based Jurong Shipyard Pte Ltd to meet the eligibility criteria for technical support to build the vessels.
The contract was bagged by Pipavav in 2009. On 4 March 2015, Reliance Defence Systems, a unit of Reliance Infrastructure, acquired Pipavav Defence—then India’s largest shipyard with a licence to build warships—and rechristened it Reliance Naval and Engineering Ltd.
However, in June 2016, ONGC informed Reliance Naval that it needs to execute a fresh memorandum of understanding with Jurong Shipyard for continuing technical support. However, Reliance responded that all trials concerning the eighth ship have been completed and it also provided the progress report for the remaining four vessels.
Reliance Naval, in its subsequent responses, told ONGC the technical pact with Jurong Shipyard is still binding and, therefore, a new agreement isn’t needed. In June 2017, Jurong Shipyard and Reliance Naval entered into an amendment agreement with regards to technical support. The firm had also sought an extension of a year to June 2019 to deliver remaining vessels. However, ONGC categorically informed the shipbuilder that the only reason the eighth ship was not accepted because of change of name issue and the company’s “alleged inability to substantiate Jurong Shipyard’s contribution to the project”. Also, in June 2018, ONGC informed Reliance Naval that the name change has not been accepted by them and also the company is not in a position to give any further extension.
“We would like to inform that ONGC has issued a letter dated July 30, 2018, for termination of an old contract dated 16th October 2009 for the supply of 5 out of 12 offshore support vessels,” Reliance Naval informed the stock exchanges on 2 August. “As advised, the termination of the aforesaid contract is arbitrary. The company has taken and will take all necessary steps and actions to protect its rights,” it further added.
According to the Bombay high court’s website, a division bench of Justice R.M. Borde and Justice V.M. Deshpande will hear the matter on 9 August.
An emailed query to ONGC did not elicit any response. Nishit Dhruva, managing partner of law firm MDP and Partners who is advising ONGC along with senior counsel Kevic Setalvad, confirmed the filing of the case by Reliance Naval, but declined to divulge any details since the matter is sub judice.
A spokesperson for Reliance Naval declined to comment on the issue as the matter is in the court. Senior counsel, Venkatesh Dhond who is representing Reliance Naval along with law firm Mulla & Mulla & Craigie Blunt & Caroe said the company wants to fulfil the contract to deliver all 12 vessels but declined to elaborate.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.
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