In M/s. Sumitomo Heavy Industries Limited v Oil & Natural Gas Commission of India, Civil Appeal No. 3185 of 2002, SHIL had won a bid, worth around 108 billion yen, for the installation and commissioning of a platform complex to extract oil from ONGC's offshore Bombay site. SHIL was given the responsibility of laying submarine pipelines to connect the rig with the ONGC system. SHIL sub-contracted to McDermott International Inc and the project was successfully completed in 1984.

At that time, the project was totally exempt from income tax, due to its position more than 12 nautical miles offshore. However, due to an amendment of the tax laws in March 1983 it became mandatory for tax to be deducted on the project. ONGC claimed the tax from McDermott, who paid and claimed reimbursement from SHIL. When SHIL came to claim reimbursement back from ONGC, arguing that the contract explicitly stated they would pay for any unexpected escalation of cost, ONGC refused and the dispute was referred to arbitration.

The two arbitrators appointed by the parties differed when deciding the claim and the dispute was eventually resolved by an umpire who held that ONGC should pay SHIL 129 million yen, plus interest and costs. ONGC appealed to a single judge of the Bombay High Court who stated that the award was based on an interpretation of the agreement that was "clearly an impossible one" and that the court would therefore be justified in interfering with the award. SHIL appealed this decision, and, although this appeal was initially dismissed by the Bombay High Court, it was finally upheld by the Supreme Court.

In making its decision the Supreme Court looked in detail at the analysis of the umpire and found that it was, in fact, detailed and nuanced and had given due weight to all the terms of the contract. It held that the High Court had been in error when it observed that the decision of the umpire was not a "plausible or possible view". It stated that, for an award to be "perverse" it would need to be "not only against the weight of evidence but altogether against the evidence". It went on to say that "the umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."

The Supreme Court was clear in its criticism of the "errors" of the High Court, and has, once again, made clear its commitment to ensuring that arbitration decisions are not challenged without good, and clearly reasoned, arguments.