ONGC had placed two supply orders for helium gas with Pure Helium at Rs 149 per cubic metre, inclusive of the foreign exchange component of $4.60. Owing to the increase in the price of dollar, Pure Helium claimed difference of price on the date of the contract and the date of supply.
Though this claim was recommended by the secretary in the petroleum and natural gas department, ONGC rejected it. Therefore, the arbitration clause was invoked.
According to the award, ONGC was liable to compensate Pure Helium for exchange rate fluctuation to the tune of Rs 1 crore with interest at the rate of 18 per cent.
ONGC moved the high court, which found in its favour. Pure Helium moved the Supreme Court.
ONGC opposed the claim arguing that the bid price for the supply of helium gas made by Pure Helium was in terms of a firm contract and, therefore, it was not entitled to any escalation in the price.
It further contended that the foreign exchange component had nothing to do with payment of the price for the supply of the gas.
The Supreme Court Bench comprising Chief Justice VN Khare and Justice SB Sinha rejected these arguments and said the high court had committed mistakes in framing the main issues. There was no specific bar in the contract regarding the raising of the claim.
Moreover, the arbitrator had the jurisdiction to decide whether the Reserve Bank of India notification had an impact on the cost factor.
