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IN THE HIGH COURT OF DELHI AT NEW DELHI
RAJIV SHAKDHER, J.
Cairn India Ltd. and Others – Petitioners
Versus
Government of India – Respondent
O.M.P. (EFA) (COMM.) No. 15 of 2016, I.A. Nos. 20459 of 2014, 3558 of 2015
Decided On : 19-02-2020
The Court held that the enforcement petition was not barred by limitation and condoned the delay in filing the petition. The Court also held that the arbitral tribunal had jurisdiction to award increased costs under Article 15.5(e)(iii)(dd) of the PSC and that the GOI's objections under Section 48 of the 1996 Act were not meritorious.
Fact of the Case:
Cairn India Limited (CIL), Ravva Oil (Singapore) Pvt. Ltd. [in short "ROS"] and Videocon Industries Limited (in short "VIL") issued a Notice of Arbitration (in short "NOA") dated 18.08.2008 under the provisions of Article 34.3 of the Production Sharing Contract (in short "PSC") executed between the parties herein and Oil and Natural Corporation Limited [hereafter referred to as "ONGC"] to work what is known as the Ravva Oil and Gas Field. The dispute between the parties revolves around the recovery of development costs by petitioners beyond the cap provided for Base Development Cost (in short "BDC") under Article 15.5(b) read with proviso to Article 15.5(c) of the PSC.
Finding of the Court:
The Court held that the enforcement petition was not barred by limitation and condoned the delay in filing the petition. The Court also held that the arbitral tribunal had jurisdiction to award increased costs under Article 15.5(e)(iii)(dd) of the PSC and that the GOI's objections under Section 48 of the 1996 Act were not meritorious.
Issues: 1. Whether the enforcement petition was barred by limitation and, in construing the period of limitation, whether Article 136 or Article 137 of the Limitation Act would apply? 2. Whether the arbitral tribunal acted beyond its jurisdiction in awarding USD 278.87 million to the petitioners by ignoring the provisions contained in the proviso to Article 15.5(e)(iii) of the PSC? 3. Whether the objections filed on behalf of the GOI under Section 48 of the 1996 Act are merited?
Ratio Decidendi: 1. The Court held that the enforcement petition was not barred by limitation and condoned the delay in filing the petition. The Court held that the period of limitation provided under Article 137 of the Limitation Act would apply to an enforcement petition and that the petitioners had explained the reasons for the delay in approaching the Court with an enforcement petition. 2. The Court held that the arbitral tribunal had jurisdiction to award increased costs under Article 15.5(e)(iii)(dd) of the PSC and that the GOI's argument that the increase in BDC cost could only have been ascertained, if at all, and quantified by the management committee was not tenable. The Court held that the arbitral tribunal had noted that neither party contended that it did not have jurisdiction to determine either as to whether or not the capped cost should be increased or that what should be the amount of any such increase. 3. The Court held that the GOI's objections under Section 48 of the 1996 Act were not meritorious. The Court held that the GOI's arguments on merits of the dispute pertaining to the BDC costs were not tenable and that the Court, while deciding objections under Section 48 of the 1996 Act, is required to keep away from the merits of the dispute as those aspects fall within the domain of the supervisory Court.
Final Decision: The Court allowed the petitioners' application for condonation of delay and dismissed the GOI's objections under Section 48 of the 1996 Act. The Court also allowed the declaratory prayer made by the petitioners in the enforcement petition.
JUDGMENT :
RAJIV SHAKDHER, J.
Preface:
1. I have before me, for adjudication, one enforcement petition and two applications. The enforcement petition has been filed under Sections 47 and 49 of the Arbitration and Conciliation Act, 1996 [hereafter referred to as the “1996 Act”] by Cairn India Limited (in short “CIL”) Ravva Oil (Singapore) Pvt. Ltd. [in short “ROS”] and Videocon Industries Limited (in short “VIL”).
1.1. CIL, ROS and VIL, wherever necessary, will collectively be referred to as petitioners.
1.2. The enforcement petition is numbered as OMP (EFA) (COMM.) 15/2016 [originally numbered as OMP 1269/2014].
1.3. The petition seeks enforcement of a unanimous final foreign award dated 18.01.2011 (in short “award”).
1.4. First of the two applications i.e. I.A. 20459/2014 has been preferred by the petitioners to seek condonation of delay in filing OMP (EFA) (COMM) 15/2016.
1.5. The second application is I.A. 3558/2015. This application has been preferred by the Government of India (in short “GOI”). The GOI, via this application, has preferred its objections qua the award under Section 48 of the 1996 Act.
1.6. For the sake of convenience, the petitioners and GOI will be collectively referred to as parties unless in the context of the discussion they are required to be referred to separately.
2. The dispute between the parties revolves around the recovery of development costs by petitioners beyond the cap provided for Base:
19.12.2016
O.M.P. 1269/2014 and I.A. Nos. 20459/2014 and 3558/2015
1. The petition be renumbered as a Commercial Enforcement petition.
2. The learned Additional Solicitor General representing the Respondent is stated to be in some personal difficulty. List on 15th February 2017.”
Development Cost (in short “BDC”) under Article 15.5(b) read with proviso to Article 15.5(c) of the Production Sharing Contract (in short “PSC”) executed between the parties. The PSC was entered into between the parties herein and Oil and Natural Corporation Limited [hereafter referred to as “ONGC”] to work what is known as the Ravva Oil and Gas Field.
3. Broadly, it is the stand of GOI that petitioners were not entitled to recover development costs above 105% of the amount at which BDC had been capped. The BDC, under Article 15.5 of the PSC, has been capped at USD 188.98 million. Therefore, according to the GOI, in terms of the provisions of Article 15.5(b), the petitioners could recover development costs incurred after the effective date in connection with development operations, an amount which was not more than 5% of the BDC. As noted above, BDC was pegged at USD 188.98 million. In a nutshell, as per the GOI, the total development cost that the petitioners could recover was USD 198.43 million.
Background:
4. Thus, the core issue, which has been etched out hereinabove, is required to be examined in the backdrop of the following broad facts.
5. On 28.10.1994, the petitioners executed the PSC with the GOI concerning the Ravva Oil and Gas Field.
5.1. Since disputes erupted between the parties with regard to recovery of development costs beyond USD 198.43 million, CIL on behalf of itself as also ROS and VIL, issued a Notice of Arbitration (in short “NOA”) dated 18.08.2008 under the provisions of Article 34.3 of the PSC. In this notice, the petitioners set out the name of its nominee-arbitrator, one, Mr. Andrew Berkeley.
5.2. Having received the NOA, the GOI, on 05.03.2009 appointed Hon’ble Dr. Justice Adarsh Sein Anand, former Chief Justice of India, as its nominee-arbitrator.
5.3. The third and the presiding arbitrator was appointed on 07.04.2009 by the aforementioned nominee-arbitrators. The nominee-arbitrators chose Rt. Hon’ble Sir Anthony Evans as the chairperson of the arbitral tribunal.
5.4. Between 07.07.2009 and 12.01.2011, eight (8) procedural orders were issued by the arbitral tribunal. In the interregnum, pleadings were completed by t
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