Delhi High Court Upholds Arbitral Awards Favoring Vedanta and Ravva Oil
In a significant legal development, the Delhi High Court has dismissed objections raised by the Central Government, allowing the enforcement of foreign arbitral awards totaling USD 99 million in favor of Vedanta Limited and Singapore-based Ravva Oil. This decision stems from a prolonged dispute regarding the production sharing contract for the Ravva oil field.
Justice Jasmeet Singh, on July 1, granted the enforcement petition filed by Vedanta and Ravva Oil. The Court directed that the bank guarantees furnished by the companies be released within eight weeks. This enforcement pertains to a partial award from 2004 and a final award from 2016, both issued by an arbitral tribunal based in Kuala Lumpur, Malaysia.
Previous Supreme Court Rulings
The Supreme Court had previously addressed the government’s objections in Union of India v. Vedanta Ltd., (2020) 10 SCC 1. Justice Singh emphasized that these findings are binding and that the High Court cannot reassess them. “The substantial objections raised by the respondent have already been decided by the Hon’ble Supreme Court, and this Court cannot revisit them,” stated Justice Singh.
The enforcement petition by Vedanta and Ravva Oil was filed under Sections 47 and 49 of the Arbitration and Conciliation Act, 1996, while the Centre opposed it under Section 48.
Background of the Dispute
The dispute centers around a Production Sharing Contract (PSC) from 1994, signed by the Government of India, Videocon Petroleum, ONGC, Ravva Oil, and Command Petroleum (later Cairn Energy India, which merged with Vedanta). The contract aimed to attract private investment for developing the Ravva oil field in the Krishna Godavari Basin.
The arbitration primarily revolved around the interpretation of the PSC, particularly concerning the “ONGC Carry Issue.” The key question was whether amounts paid by the companies to ONGC under Article 3.3 of the PSC should be included when calculating the Post Tax Rate of Return (PTRR).
Arbitral Findings and Court Proceedings
The arbitral tribunal’s partial award in 2004 decided two issues in favor of the companies and four in favor of the government, leaving the issue of quantification open. Initially set aside by the Kuala Lumpur High Court in 2009, the partial award was restored by the Malaysian Court of Appeal and upheld by the Malaysian Federal Court in 2011.
In 2014, the Central Government issued a notice claiming USD 99 million. Vedanta and Ravva Oil sought quantification from the arbitral tribunal, leading to the final award in 2016, which was also upheld by Malaysian courts.
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Government’s Objections and Court’s Rejection
The Centre argued that the awards violated India’s public policy, alleging that the tribunal had altered the PSC and reduced the government’s profit share by USD 99 million. It further claimed the enforcement petition was time-barred and that the arbitral tribunal had become functus officio before issuing the final award.
The High Court rejected these objections. Citing the Supreme Court’s ruling in Union of India v Vedanta Ltd, the Court held that the enforcement petition was filed within the limitation period as per Article 137 of the Limitation Act. The Court clarified that the limitation period commenced with the issuance of the show-cause notice on July 10, 2014.
Furthermore, the Court noted that interference with foreign awards under Section 48 is limited in scope and does not encompass the merits of the dispute. It reiterated that enforcement proceedings cannot serve as an appeal on merits.
Legal Representation
Senior Advocate Akhil Sibal, along with advocates Shruti Sabharwal, Surabhi Lai, and Rachit Bansal, represented Vedanta and Ravva Oil. Additional Solicitor General Vikramjit Banerjee, alongside advocates Abhishek Singh, Anuja Tiwari, Amitesh Chandra Mishra, Vishakha, Mrityunjai Singh, Aparna Tiwari, Shikhar Thukral, and Harshit S Gahlot, appeared for the Government of India.
[Read Judgment]
