An initialled Joint Executing Agreement constitutes a binding contract even without formal signatures, affirming the existence of an enforceable arbitration agreement.

JUDGMENT :

Context and Factual Background:

1. This Petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an arbitral award titled ‘partial award’ dated January 9, 2014 (“Impugned Award”) passed unanimously by a three-member arbitral tribunal, returning a fundamental finding that a Joint Executing Agreement (“JEA”) that had been initialled by the parties (but not formally signed and executed) was validly in existence.

2. The Petitioner, M3nergy Sdn. Bhd. (“M3”) questions the very existence of an arbitration agreement under Section 7 of the Act in the absence of signatures on the JEA in which the arbitration clause is contained. The JEA had been initialled as an agreed draft at a meeting of an “Executing Committee” held between April 16, 2007 and April 18, 2007, attended by the representatives of M3; of Respondent No. 1, Hindustan Petroleum Corporation Ltd. (“HPCL”); and of Respondent No. 2, Prize Petroleum Company Ltd. (“PPCL”). PPCL at all times relevant to these proceedings, was itself a joint venture, with HPCL having a 50% ownership interest.

3. The following factual matrix would be relevant for purposes of adjudicating this Petition:

a) The Oil and Natural Gas Corporation (“ONGC”) invited tenders for development and exploitation of Offshore Margin Fields Cluster 7 Project (“Project”);

b) M3, HPCL and PPCL executed a Memorandum of Understanding dated June 29, 2005 (“MOU”) to form a consortium (“Consortium”) to bid for the Project. The bid was filed and coordinated by PPCL;

c) Under the MOU, the parties agreed to define the principles underlying a JEA that would be executed to implement the service contract, if the Project were to be awarded to the Consortium by ONGC. The MOU entailed participating interest proportions of the parties – M3 at 30%, HPCL at 60% and PPCL at 10%. M3 and PPCL were meant to jointly act as “Executing Contractors” for the Project;

d) On March 31, 2006, ONGC awarded the Project to the Consortium. The letter of award is addressed to PPCL on behalf of the Consortium;

e) A service contract dated September 27, 2006 (“Service Contract”) was executed between ONGC and the Consortium. One of the terms of the Service Contract is that the parties were to execute the JEA within 15 days – this deadline would fall on October 12, 2006. Such executed JEA was to be supplied to ONGC within 30 days i.e. by October 27, 2006;

f) Another integral feature of the Service Contract was that ONGC would interact with only one party as the Executing Contractor;

g) In the course of negotiating the JEA, M3 raised concerns about deviations from the MOU in particular in the matter of the joint Executing Contractors. PPCL countered this on the premise that the Service Contract having been executed among the same parties (along with ONGC), the MOU stood superseded. According to M3, the Service Contract did not close the issue and that the Service Contract did not define the term “Executing Contractor”;

h) Later, M3 expressed its willingness to let PPCL be the sole Executing Contractor provided the Project was jointly managed by an Integrated Project Management Team (“IPMT”) in terms of a pre-approved schedule and budget, provided decisions on governance of the Consortium entailed an affirmative voting percentage of 71%. In other words, if the IPMT could not decide upon any issue, that issue would need the positive vote of M3, without which no final decision could be taken just by the other two parties;

i) The parties met between April 16, 2007 and April 18, 2007 and initialled a draft of the JEA