The Supreme Court on Monday dismissed the Union government’s appeal against a Delhi high court order allowing Vedanta Ltd and Ravva Oil (Singapore) Pvt Ltd to enforce foreign arbitration awards involving claims of $99 million, criticising the Centre for resisting enforcement of awards that date back more than two decades and warning that such litigation could undermine confidence in India’s arbitration regime.
A bench of justices JB Pardiwala and Manmohan questioned the government’s approach to arbitration, asking why it was frustrating enforcement of an arbitral award even after the dispute had been adjudicated by foreign courts. The bench also questioned the Centre’s commitment to promoting arbitration as an effective means of dispute resolution. It left the quantification of the ONGC Carry issue unresolved, retaining jurisdiction to determine the amount if the parties failed to reach an agreement. The government challenged the partial award before Malaysian courts.
The dispute traces its origins to a 1994 production-sharing contract between the government and a consortium comprising ONGC, Videocon Petroleum, Ravva Oil and Cairn Energy (whose interest subsequently passed to Cairn India and later Vedanta) for the development of the Ravva oilfield in the Krishna-Godavari basin. In October 2004, the arbitral tribunal delivered a partial award, ruling in favour of the companies on two of six issues while deciding the remaining four in favour of the government. the Malaysian Court of Appeal restored it in September that year, a decision subsequently upheld by the Malaysian Federal Court in October 2011 Although it was initially set aside by the Kuala Lumpur High Court in January 2009. In July 2014, the government issued show-cause notices seeking recovery of approximately $64 million from Vedanta and $35 million from Ravva Oil, threatening to adjust the amounts against proceeds payable to the companies from oil sales.
“And we talk about all of this arbitration and seat and this and that?…Nobody will trust you,” said the court, questioning the government’s continued resistance to the awards. “We are of the view that no error, not to speak of any error of law, could be said to have been committed by the high court in passing the impugned judgment and order,” said the Supreme Court while dismissing the appeal.
