MCDERMOTT INTERNATIONAL INC. vs BURN STANDARD CO. LTD. . — C.A. No. 4492/1998

Summary: McDermott International Inc. v. Burn Standard Co. Ltd. Case: C.A. No. 004492/1998 | Date: 12 May 2006 | Court: Supreme Court of India Facts McDermott International Inc. (MII), a US contractor, entered into a subcontract with Burn Standard Company Limited (BSCL) for fabrication, transportation, and installation of six offshore oil platforms for ONGC in the Bombay High. Disputes arose concerning claims for increased costs, delays, and additional work. MII invoked arbitration in April 1989. Arbitral Proceedings The arbitrator issued a partial award (June 2003) and final award, awarding MII approximately US$30+ million in various claims including fabrication charges, delay and disruption damages, material procurement costs, and interest. BSCL challenged the awards under Section 34 of the Arbitration and Conciliation Act, 1996. Key Holdings The Supreme Court partially allowed BSCL's challenge, modifying the award on specific issues: 1. Partial Awards Valid – The 1996 Act permits interim awards that are final on matters covered; no error in the arbitrator's procedure. 2. Delay & Disruption Damages Upheld – Time was not of the essence; under Section 55 of the Indian Contract Act, MII entitled to compensation for delays caused by BSCL. 3. Emden Formula Acceptable – The arbitrator's use of the Emden Formula (a widely recognized international method for calculating overhead and profit loss) was valid; Indian law does not prescribe a specific method. 4. Uninvoiced Claims Allowed – Claims without formal invoices were admissible if raised in correspondence and as part of the dispute referred to arbitration. 5. Exchange Rate Clause Applied Partially – Exchange loss provisions in Clause 4.0 applied to Claims 1, 2, and 3 (fabrication and transportation) but not to material procurement or damage claims. 6. Substituted Material Claim Disallowed – MII accepted (sub silentio) ONGC's refusal to pay for material substitution; claim for US$20,832 was beyond contract terms. 7. Interest Reduced – Interest rate reduced from 10% to 7.5% per annum given the long delay in resolution. Reasoning The Court emphasized the limited supervisory role of courts over arbitral awards under the 1996 Act. Awards can only be set aside for violation of public policy, fraud, bias, violation of natural justice, or patent illegality going to the root of the matter—not for mere errors of law or fact. This case analysis is maintained by casestatus.in based on publicly available court records.