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IN THE HIGH COURT OF DELHI AT NEW DELHI
SANJEEV SACHDEVA, J.
Prize Petroleum Company Ltd. – Petitioner
Versus
ABG Energy Limited & Anr. – Respondents
ARB.P. No. 296 of 2017
Decided On : 22-09-2017
Arbitration - Appointment of Arbitrators - Arbitration & Conciliation Act, 1996 - Clause 16(b) of the Agreement - [Arbitration] - [Appointment of Arbitrators] - [Arbitration & Conciliation Act, 1996, Section 11] - The court discussed the Joint Study and Bidding Agreement dated 03.03.2011, the Production Sharing Contract, and the arbitration clause contained in the agreement. The court determined that the disputes raised by the petitioner arose out of the Joint Study and Bidding Agreement and were liable to be referred to arbitration. The court also addressed the issue of limitation and the involvement of respondent no. 2 in the arbitration agreement.
Fact of the Case:
The petitioner sought appointment of Arbitrators under Section 11 of the Arbitration & Conciliation Act, 1996, based on a Joint Study and Bidding Agreement dated 03.03.2011. The petitioner alleged that respondent no. 1 breached its obligations under the agreement, leading to termination of the Production Sharing Contract and the threat of liquidated damages. The respondents contended that the arbitration agreement did not cover the disputes and that the invocation was barred by limitation.
Finding of the Court:
The court found that the disputes raised by the petitioner were related to the Joint Study and Bidding Agreement and were liable to be referred to arbitration. The court also held that the invocation was not barred by limitation and that only disputes between the petitioner and respondent no. 1 were subject to arbitration.
Issues: The issues involved the interpretation of the arbitration clause in the Joint Study and Bidding Agreement, the termination of obligations under the agreement, the involvement of respondent no. 2 in the arbitration agreement, and the applicability of limitation to the invocation of arbitration.
Ratio Decidendi: The court determined that the disputes raised by the petitioner arose out of the Joint Study and Bidding Agreement and were subject to arbitration. The court also held that the arbitration agreement survived the termination of corresponding obligations and that the invocation was not barred by limitation. Additionally, the court found that disputes with respondent no. 2 were not covered by the arbitration agreement.
Final Decision: The court appointed Arbitrators for the petitioner and respondent no. 1 in accordance with Clause 16 of the Joint Study and Bidding Agreement. It ruled that only disputes between the petitioner and respondent no. 1 were liable to be referred to arbitration.
SANJEEV SACHDEVA, J.
1. The petitioner, by this petition under Section 11 of the Arbitration & Conciliation Act, 1996 seeks appointment of Arbitrators in terms of Clause 16(b) of the Agreement dated 03.03.2011 between the parties.
2. As per the petitioner, around October 2010, the Government of India invited bids under NELP IX round for exploration of oil and natural gas.
3. The petitioner as well as respondent no. 1, being desirous of exploring the possibility of bidding jointly or in association with other companies, had entered into a Joint Study and Bidding Agreement dated 03.03.2011 and petitioner and respondent no. 1 applied on 28.03.2011 for exploration of oil and natural gas of a particular block.
4. Application of the consortium was accepted and the said consortium was awarded exploration block vide order dated 28.04.2012.
5. In terms of the allotment of exploration they entered into a Production Sharing Contract with the Government of India on 30.08.2012.
6. It is the case of the petitioner that in terms of the Joint Study and Bidding Agreement dated 03.03.2011, respondent no. 1 had undertaken to bear all the expenditure, inter-alia, including furnishing of the bank guarantee on behalf of the petitioner.
7. It is contended that by letter dated 27.08.2012, respondent no. 1 had agreed to submit 100% bank guarantee to the Government or issue a 20% back to back guarantee to the petitioner to enable the petitioner to furnish its share of the bank guarantee.
8. Further it is contended that by letter dated 27.08.2012, respondent no. 1 agreed to bear liquidated damages if any imposed by the Government on account of breach of the Production Sharing Contract to be entered with the Government.
9. It is further contended that since respondent No. 1 failed to furnish 100% guarantee or 20% back to back guarantee, the requirement of submission of the bank guarantee in terms of the Production Sharing Contract could not be met and accordingly the said contract was terminated.
10. It is contended that the Director General of Hydrocarbons, Ministry of Petroleum and Natural Gas has issued a show cause notice both to the petitioner and respondent no. 1, the members of the consortium as to why the contract be not terminated and liquidated damages be not recovered as stipulated in the Production Sharing Contract.
11. As per the petitioner, respondent no. 1 has breached its obligations under the joint study and bidding agreement dated 03.03.2011. It is further contented that respondent no. 2 which is the parent holding company of respondent no. 1 had also by its letter dated 24.03.2011 and 29.08.2012 agreed to step in to meet the obligations of respondent no. 1. It is contended that accordingly respondent no. 2 is also liable under the Joint Study and Bidding Agreement dated 03.03.2011 entered into between the petitioner and respondent no. 1.
12. Per contra, learned counsel for respondents, at the outset, contends that respondent no. 2 is not a signatory of any arbitration agreement or the said Joint Study and Bidding Agreement dated 03.03.2011 and the Production Sharing Contract signed on 30.08.2012.
13. It is further contended that there is no agreement between the petitioner and respondent no. 2 to refer any disputes to arbitration. It is submitted that the letter dated 24.03.2011 relied on by the petitioner was written to Director General of Hydrocarbons and only stated that in case of any default by respondent no. 1, respondent no. 2 would step in.
14. It is contended that the said document does not constitute an agreement between the petitioner and respondent No. 2 agreeing to refer any disputes to arbitration.
15. With regard to respondent no. 1, it is contended that the Joint Study and Bidding Agreement dated 03.03.2011 specifically stipulated that the obligations there under would terminate automatically upon the parties entering into any further agreement.
16. It is contended that thereafter as the parties entered into the Production Sh
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