In the case between Oil and Natural Gas Corporation (ONGC) and Afcons Infrastructure Ltd., the dispute centered on delays and cost overruns in the construction of a jetty. ONGC sought damages, alleging that Afcons had breached contractual obligations, while Afcons countered by claiming ONGC was responsible for the delays due to its failure to provide timely approvals.
The Supreme Court reaffirmed the validity of the arbitration clause, ruling that all disputes arising from the contract were covered under arbitration. It stressed that public sector companies like ONGC should not shy away from arbitration, as it provides an efficient and less confrontational method to resolve disputes.
This judgment is significant as it reinforces the importance of arbitration in contracts involving public sector entities. The Court clarified that while public policy considerations are important, they do not override the obligation to arbitrate disputes unless there is a violation of natural justice. The decision serves as a reminder that clear and comprehensive arbitration agreements are essential in public contracts to avoid prolonged legal battles.
