The Delhi High Court ruled that enforcement of a foreign award could be refused under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act, 1996”) if it was contrary to the fundamental policy of Indian law, the interests of India, or justice or morality.
Hon'ble Mr. Justice C. Hari Shankar opined that the execution of the Foreign Public Agreement of 2016, as sought by the Petitioner, would not be in line with the judicial approach or comply with the principles of natural justice.
Brief Facts:
An Execution Petition was filed before the Delhi High Court under Section 48 of the Act, 1996 seeking enforcement of the final partial award passed by the Arbitral Tribunal.
Brief Background:
The rights in petroleum located beneath the earth's surface, as a natural resource, were vested in the Government. Two Production Sharing Contracts ( “PSC”) were executed between the Petitioner and a group of Respondents, including RIL, British Gas Exploration and Production India Ltd ( “BGEIPL”), and Oil & Natural Gas Corporation Ltd ( “ONGC”). The PSC allowed the contractors to extract oil from the Tapti and Panna Mukta Oil Fields.
The Contractors were responsible for extracting the oil at their own cost, referred to as Cost Petroleum ( “CP”), with a specified upper-Cost Recovery Limit ( “CRL”). The contractors and the Petitioner were entitled to shares in the profit earned from the sale of the extracted petroleum, known as Profit Petroleum, based on an Investment Multiple formulae. Disputes between the parties were to be resolved through arbitration.
Several findings and clarifications were made by the Arbitral Tribunal and the UK High Court regarding the calculation of Investment Multiple, Development Cost, and Notional Income Tax. The Field Development Plan Agreement, 2016 (“FPA”) was remitted for reconsideration, resulting in the FPA, 2018. The jurisdiction of the AT to examine the entitlement to DC related to the Expanded Plan of Development was affirmed. An application for an increase in the CRL was pending.
Contentions of the Petitioners:
The payment for the dues owed to the Petitioners was sought based on the findings of the Arbitral Tribunal in their favour. The entitlement to the Profit Petroleum based on the Arbitral Tribunal’s findings and the statements of accounts submitted by the Respondents.
It was contended that the execution of the award should proceed. It was asserted that the subsequent FPAs did not hinder the enforcement of the FPA, 2016 and that the Respondents should pay the amount due.
It was asserted that the FPA, 2016 was clear and final in determining the parties' obligations and rights, and they were entitled to apply the declared principles and seek payment accordingly.
Contentions of the Respondents:
It was contended that Respondents had already paid the Petitioner its rightful share of certain payments according to the PSC.
It was asserted that the original CRL values in the PSC were outdated and revisable, as demonstrated by the substantial increase allowed in FPA, 2018 and FPA, 2021. It was emphasised that the learned Arbitral Tribunal would undertake the final quantification and determination of the revised CRL.
Observations of the Court:
It was ruled that the expression "public policy of India" in Section 48(2)(b) of the 1996 Act has a narrower scope than in Section 34(2)(b)(ii). The Court stated that enforcement of a foreign award would be refused under Section 48(2)(b) only if it is contrary to the fundamental policy of Indian law, the interests of India, or justice or morality.
The High Court determined that the execution of the FPA, 2016 sought by the Petitioner would not be adopting a judicial approach or complying with the principles of natural justice. It was found that the computation of the Petitioner's claimed amount in the execution petition was based on a contractual concept that was no longer applicable.
Hence, it was concluded that the FPA, 2016 was not an executable arbitral award for several reasons, including the absence of any amount awarded to the Petitioner, the transgression of the boundaries set by the FPA in the computation of liability, and the requirement for a final determination of essential issues to ascertain liability. The Petitioner's attempt to enforce the 2016 FPA while disregarding subsequent FPAs and the orders of the learned Arbitral Tribunal was deemed impermissible.
The decision of the Court:
Based on the aforementioned findings, the Delhi High Court dismissed the execution petition.
Case Title: The Union of India v Reliance Industries Ltd. & Anr.
Case No.: O.M.P.(EFA)(COMM.) 1 of 2019
Coram: Hon'ble Mr. Justice C. Hari Shankar
Advocates for Petitioner: Advs. Mr. Sanjay Jain, ASG, Ms.Mamta Tiwari, Ms. Swati Sinha, Mr.Vijay Kumar, Mr. Debesh Panda, Mr. Anurag Ahluwalia, Mr. Padmesh Mishra, Mr. Arkaj Kumar
Advocates for Respondent: Advs. Mr. Harish N. Salve, Sr. Adv., Mr.Sameer Parekh, Ms.Sonali Basu Parekh, Mr.Abhiram Naik, Mr.Ishan Nagar, Mr.Manu Bajaj and Mr.Prateek Khandelwal, Ms.Chetna Rai, Ms. Madhuriand Mr. Aruj Mal
Read Judgement @LatestLaws.com:
Picture Source :
