(June 1, 2000) 2001 (TLS)125228

2001-DLT-93-12 :: 2001-AD (Del)-6-345

NIKO RESOURCES LIMITED Vs. Union of India

Sanjay Kishan Kaul

( 1 ) THESE appeals arise from a common order passed by the learned Single Judge on 8/3/2001 dismissing the applications of the appellants filed under Section 9 of the Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996), hereinafter referred to as the Act.

( 2 ) THE Government of India invited bids for the development of petroleum resources in the "hazira Fields" which culminated into a Production Sharing Contract being signed on 23/9/1994 between the President of India, Gujarat State Petroleum Corporation Limited, respondent No. 2 and the appellant. The appellant and respondent No. 2 were collectively defined under the said Production Sharing Contract (PSC in short) as the contractors. The said contract provided for arbitration for settlement of disputes under Article 31 of the contract. The said article required that initially all disputes/differences or claims arising out of or in connection with any of the terms and conditions of the contract or concerning the interpretation or performance thereof, shall be settled by the parties amicably. In the eventuality of the disputes remaining unresolved the same are liable to be referred to an Arbitral Tribunal of three Arbitrators. The said clause requires the party or parties instituting the arbitration to appoint one Arbitrator and the party or parties responding to appoint another Arbitrator. The two Arbitrators appointed are to appoint the third Arbitrator.

( 3 ) A Joint Operating Agreement (JOA in short) was also executed on 5/12/1994 between the appellant and respondent No. 2 for the purpose of defining the respective rights and obligations of the said two parties with respect to the operation to be conducted under PSC. The said agreement also contained an arbitration clause incorporated in Article 13.

( 4 ) THE controversy relating to the present disputes arises from the appellant and respondent No. 2 laying a 36" pipeline for transmission of gas. This was to be done in pursuance to a resolution dated 8/1/1999 of the Operating Committee. It will be relevant to reproduce the extracts of the said minutes dealing with this subject:

"36" Trunk Line: mr. Sanjay Gupta briefed the Forum on the background of the 15 km. long 36" Trunk Line project and brought out the progress achieved in obtaining the ROU as well as in completion of design engineering. The consortium agreed to finalize the suppliers for the various long-lead items like pipes, pipe-bends, launches and receivers, fittings valves, meter runs etc. as well as the agency for laying the pipeline to enable the commissioning of the pipeline prior to the onset of the 1999 monsoons. it way decided that GSPL should take immediate action in procurement of the pipes (including pipe bends) and MIKE should proceed with the procurement of all valves, fittings, flanges including meter runs. It was decided that NIKO, being the Operator, would be responsible for the overall supervision and coordination of the various activities involved in the execution of the project. It was also agreed that once the pipeline was laid for operation and the maintenance of the pipeline would continue to be the responsibility of NIKO as the Operator during the life of its operatorship. GSPL also pointed out that they have earlier written to Directorate General of Hydrocarbon (DGH) stating that this project be given a "cost Recovery Status" under relevant clauses of the Production Sharing Contract (PSC ). Despite repeated reminders, DG 1-1 is yet to clarify its stand on this issue. Therefore, in the absence of a firm directive from DGH, the consortium agreed to undertake the pipeline project as a joint venture project and be funded by the consortium. The consortium agreed to put up this issue at the forthcoming GCM with DGH and it hopes that DG would grant the project the Cost Recovery Status. However, it w