Bombay HC rules in ONGC’s favour in dispute over contract cancellation
The Bombay High Court has ruled in favour of Oil and Natural Gas Corp. (ONGC) after a vendor sued the energy firm for cancelling a Rs1,000 crore contract.
Core Offshore Services Pvt. Ltd had dragged ONGC to court saying that its tender was accepted by the state-owned energy firm and later cancelled without giving the vendor an opportunity to present its case.
The genesis of the dispute lies in the tender floated by ONGC for charter hire of barges and tugs for its operation near its Mumbai offshore in January 2015. According to Core Offshore, in October 2015, it had received a letter from ONGC which confirmed that their offer was shortlisted.
However, another bidder Halani Shipping Pvt Ltd had complained about the entire tender process to the Independent External Monitor (IEM) appointed by the government under the integrity pact program to maintain transparency in high stake bids. After hearing Halani, the external monitor had observed that the sanctity of the tender process had compromised.
Later, Core Offshore also sought IEM’s permission to present its case. The independent monitor heard the company but did not change its views. Subsequently, ONGC decided to issue fresh tenders inviting offers only for hiring barges.
On October 2016, Core Offshore had approached the Bombay High Court seeking its intervention in the entire process. Its counsel argued that the hearing by the external monitor was a mere formality and the decision had already been reached.
“ONGC has not blacklisted the petitioner and Core Offshore is free to participate in the fresh tender process,” argued the energy firm’s counsel adding that there is a significant change in the scope of work and it is a settled principle that re-tendering is permissible when there is a change in the scope of work.
When contacted, Nishit Dhruva, managing partner of law firm MDP & Partners, who was representing ONGC in the matter along with senior counsel Dr Birendra Saraf confirmed the development. Email queries to ONGC and Core Offshore did not elicit any response.
State-owned ONGC is not new to disputes with its contractors and vendors.
In another dispute in October 2016, the Bombay high court had asked ONGC to release nearly $20 million to Singapore-based Swiber Holdings Ltd, an oilfield services provider. Swiber, which was working on three projects for the company, had filed for liquidation in July. Worried that Swiber would not be able to complete its work, ONGC in August invoked bank guarantees totaling $105 million.
Similarly, in 2012, Essar Group had also filed a suit against ONGC after it decided to keep the business house out of its offshore oil services tenders worth $2 billion. However, state-run firm later reversed the decision.
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