The appellant refuted this claim by its reply dated 15th March, 1985 and took up the stand that the appellant was number liable to reimburse the personnel tax dues due to change of law by way of extension of the tax jurisdiction to offshore areas.
On 22nd March, 1986 the respondent sought arbitration of the dispute between itself and the appellant on the aforesaid issues.
The appellant aggrieved by the said judgment of the learned Single Judge preferred an appeal before the Division Bench of the Bombay High Court.
On 2nd March, 1989, Mr. Justice D.V. Patel made a speaking award by which he rejected the claim of the respondent.
The respondent on 5th March, 1985 forwarded an invoice to the appellant claiming that pursuant to the numberification dated 31st March, 1983 issued by the Government of India there was a change in the law with regard to income tax which had resulted in the employees of the respondent becoming liable for income tax and companysequently under the employment companytract, the respondent had incurred additional liability for payment of personnel income tax which the respondent claimed under the terms of the companytract had to be reimbursed.
On 27th July, 1987, the dispute on the aforesaid issues was referred to arbitration of Mr. Justice D.V. Patel Retd.
Brief facts which are necessary to dispose of these appeals are recapitulated as under On 2nd March, 1983, the appellant, Oil and Natural Gas Corporation Limited entered into an Agreement with the respondent, Atwood Oceanic International, S.A. for carrying out drilling operations in offshore waters of India and for rendering other related services with regard to the drilling unit Sagar Pragati belonging to the appellant on the terms and companyditions set forth in the said Agreement.
The learned Umpire agreed with the decision of one of the Arbitrators Shri M. Rege.
The learned Umpire came to the companyclusion that the Notification companystituted change in law of the Central Government during the companyrse of the companytract.
whether the companytractor was entitled to be reimbursed for the increased companyt borne by him on account of salaries of the expatriates being made eligible to income tax pursuant to the Notification dated 31st March, 1983.
After hearing learned companynsel for the parties, the learned Single Judge further observed as under In the present case, the dispute referred to the Umpire was a very narrow dispute viz.
The judgment of this Court took the view that the said Notification was prospective and number retrospective.
The Government of India issued Notification on 31st March, 1983 which made the salaries earned by the expatriates taxable for the accounting year ending 31st March 1983 and 31st March, 1984.
The said Arbitration Clause 11 reads as under Arbitration If any dispute, difference or question shall at any time hereafter arise between the parties hereto or their respective representative companycerning anything herein companytained or arising out of these presents or as to the rights, liabilities, or duties of the said parties hereunder and cannot be mutually resolved the same shall be referred to arbitration, proceedings of which shall be held at Bombay India.
At the material time, when the agreement was entered into, the provisions of the Indian Income Tax Act, 1961 hereinafter referred to as the 1961 Act were number applicable beyond the territorial waters of India, i.e., beyond the limit of 12 nautical miles.
If any of the parties fail to appoint arbitrators within the specified period or should the two arbitrations fail to agree upon the selection of an Umpire within the stipulated period, the Honble Chief Justice of the Supreme Court of India shall numberinate the required arbitrator or the Umpire as the case may be, who shall be a resident of India, but number a national of the companyntry of neither of the parties.
and Mr. Justice D.M. Rege Retd.
Clauses 5 A and 7 read as under Clause 5 A Taxes.
On 31st March, 1983 the Government of India issued a numberification in exercise of powers companyferred by section 6 6 a and 7 7 a of the Territorial Waters, Continental Shelf, Exclusive Economic Zone, and other Maritime Zones Act, 1976 extending the provisions of the 1961 Act to the Continental Shelf and Exclusive Economic Zone of India with effect from 1st April, 1983 with some modifications.
Personnel Any taxes assessed on employees of Contractor and based on income earned in the performance of work for owner or otherwise shall be the responsibility of the Contractor.
The said change admittedly came into force after 25th August, 1982.
Within thirty 30 days of the receipt of the numberice of any dispute, each party shall appoint an arbitrator and such arbitrators shall appoint an Umpire before they enter upon the reference and number later than one month from the latest date of their respective appointments.
The learned Umpire also came to the companyclusion on the basis of the evidence on record that the claimant companytractor had agreed to pay the taxes assessable on the expatriates and in the circumstances, the claimant had incurred the increased companyts, and, therefore, the taxes have been paid by the claimants and they are entitled to that extent to the increased companyt.
The said Agreement companytained an Arbitration Clause 11.
The companytractor has incurred increased companyts for the accounting year ending 31st March, 1983 and 31st March, 1984.
In the above circumstances, the Arbitrator came to the companyclusion that since the Notification is dated 31st March, 1983, Clause 7 of the said Agreement would apply.
It was urged by the appellant that there was error apparent on the face of the record.
The learned Umpire made his award on 13th October, 1989 by which the claims of the respondent were allowed.
The appellant aggrieved by the award of the Umpire challenged the same before the learned Single Judge of the Bombay High Court.
In view of the disagreement between the two arbitrators, the dispute was referred to the arbitration of Mr. Justice Tulzapurkar Retd.
Dalveer Bhandari, J. These appeals are directed against the judgment of the High Court of judicature at Bombay delivered in Appeal Nos.141 and 142 of 1995 dated 8th February, 2000.
The other learned arbitrator Mr.Justice D.M. Rege Retd.
made a numbere of disagreement on 15th June, 1989.
Reliance was placed on Clauses 5 A and 7 of the Agreement dated 2nd March, 1983.
