The Delhi High Court has allowed Vedanta Limited’s petition seeking enforcement of foreign arbitral awards against the Union Government arising out of disputes under the Production Sharing Contract (PSC) for the Ravva Oil Field, holding that the Government’s objections under Section 48 of the Arbitration and Conciliation Act, 1996 were meritless and amounted to an impermissible review on merits. The Court also directed release of the bank guarantees furnished by Vedanta within eight weeks.
Justice Jasmeet Singh was dealing with an enforcement petition filed by Vedanta Limited and Ravva Oil (Singapore) Pte. Ltd. seeking enforcement of the Partial Award dated October 12, 2004 and the Final Award dated October 26, 2016, rendered in arbitration seated in Kuala Lumpur concerning the interpretation of the Production Sharing Contract executed with the Government of India for the Ravva Oil Field in the Krishna-Godavari Basin.
The Union Government resisted enforcement, contending that the awards were contrary to the fundamental policy of Indian law, violated public policy, resulted in unjust enrichment of the petitioners at the cost of public revenue, wrongly interpreted the Production Sharing Contract, and were barred by limitation. It also argued that the arbitral tribunal had become functus officio before rendering the final award.
Rejecting the limitation objection, the Court held that the petition was governed by Article 137 of the Limitation Act and was filed within three years from the issuance of the Show Cause Notice dated July 10, 2014, following the Supreme Court’s decision in Union of India v. Vedanta Ltd. (2020) 10 SCC 1. The Court observed that the right to seek enforcement accrued upon issuance of the show cause notice and not on the date of the arbitral award.
On the merits, the Court reiterated that the scope of interference under Section 48 is extremely narrow and does not permit a review of the correctness of the arbitral tribunal’s interpretation of the contract. Referring to Explanation 2 to Section 48(2), the Court emphasised that the test of violation of the fundamental policy of Indian law“shall not entail a review on the merits of the dispute.”
The Court observed that the Government’s objections regarding the interpretation of the Production Sharing Contract and the computation of the Post Tax Rate of Return (PTRR) sought nothing but a reconsideration of the arbitral tribunal’s findings, which is impermissible in enforcement proceedings. The Court held that the tribunal’s interpretation was “both reasonable and plausible” and refused to substitute it with another possible interpretation.
Rejecting the Government’s reliance on public policy and the doctrine of public trust, the Court noted that the Supreme Court had already considered similar contentions in Union of India v. Vedanta Ltd. and held that disputes under the Production Sharing Contract arise out of the contractual rights and obligations of the parties and are not contrary to India’s fundamental policy or notions of justice. The Court further observed that the Government itself had extended the Production Sharing Contract by another ten years, undermining its contention that the contract or the awards were against public interest. It remarked:
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“If the contention of the respondent is to be accepted that the impugned Awards are in violation of public policy and against the people of India, then no justifiable reason has been given by the respondent for extending the PSC with the petitioners for another period of 10 years (after passing of the impugned Awards). The respondent cannot blow hot and cold at the same time.”
The Court also rejected the contention that the reconstituted arbitral tribunal lacked jurisdiction to render the Final Award, holding that the issue had already been examined by the Malaysian courts, which upheld the tribunal’s jurisdiction.
Concluding that the Government’s objections had either already been settled by the Supreme Court in Union of India v. Vedanta Ltd. or sought an impermissible review of the arbitral tribunal’s findings, the Court dismissed the objections under Section 48, allowed the enforcement petition, and directed that the bank guarantees furnished by Vedanta be released within eight weeks.
