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2023 Supreme(Del) 1414
IN THE HIGH COURT OF DELHI AT NEW DELHI
Anup Jairam Bhambhani, J.
Union of India – Appellant
Versus
Reliance Industries Limited & Ors. – Respondents
O.M.P. (COMM) 487 of 2018 and I.A. 16396 of 2018 & 2448 of 2022
Decided On : 09-05-2023
Mr. K.K. Venugopal, Attorney General for India with Mr. A.K. Ganguli, Senior Advocate with Ms. Mamta Tiwari, Ms. Swati Sinha, Mr. Vijay Kumar & Mr. Debesh Panda, Advocates, for the Petitioner.
Mr. Harish Salve, Senior Advocate with Mr. Sameer Parekh, Mrs. Sonali Basu Parekh, Mr. Ishan Nagar, Mr.Prateek Khandelwal, Mr. Manu Bajaj and Ms. Chetna Rai, Advocates, for Rl.
Mr. Dayan Krishnan, Senior Advocate with Mr. Mahesh Agarwal, Ms. Niyati Kohli, Mr. Pranjit Bhattacharya Ms. Manavi Agarwal and Mr. Shravan Niranjan, Advocates, for R2.
Mr. Sasiprabhu, Mr. Vishnu Sharma, Mr. Tushar Bhardwaj, Mr. Vinayak Maini and Mr. Prakhar Agarwal, Advocates, for R3.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - SPRC containing provisions for the regulation of Petroleum Operations - Union of India challenged arbitral award on grounds including patent illegality and non-arbitrability - Court upheld the award, stating tribunal's view that reliance was entitled to produce hydrocarbons migrated from adjacent block was not perverse - Ministry failed to prove arbitrators ignored vital evidence or drawn conclusions without evidence. (Paras 1-59)
(B) Public Trust Doctrine - Arbitrators applied the doctrine correctly; extraction of migrated gas permitted under PSC - Ministry's contention that reliance committed fraud by non-disclosure of reports was rejected as non-material breaches. (Paras 16-49)
| Table of Content |
|---|
| 1. genesis of dispute arising from arbitration. (Para 1 , 4 , 5 , 6) |
| 2. summary of claims and tribunal's decisions. (Para 11 , 12) |
| 3. ministry challenges based on award legality. (Para 15 , 16 , 17) |
| 4. reliance's argument on intervention limits. (Para 20 , 21 , 24) |
| 5. court's assessment of arbitral proceeding's legality. (Para 28 , 29 , 30) |
JUDGMENT
Anup Jairam Bhambhani, J.
| S. No. | Particulars | Page No. |
| I | Introduction | 3 |
| II | Genesis of the Dispute Leading to Arbitration | 4 |
| III | Summary of Claims & Summary of Tribunal's Decisions | 6 |
| IV | Summary of the Production Sharing Contract | 10 |
| V | Legal and Contractual Architecture | 12 |
| VI | Ministry's Grounds of Challenge to the Arbitral Award | 19 |
| VII | Submissions on Behalf of Reliance | 31 |
| VIII | Ministry's Submissions in Rejoinder | 40 |
| IX | Discussion and Conclusions | 43 |
I. INTRODUCTION
1. By way of the present petition under section 34 of the Arbitration & Conciliation Act, 1996 (`A&C Act' for short), the petitioner Union of India (through the Ministry of Petroleum and Natural Gas) impugns Arbitral Award dated 24.07.2018 (`impugned award', for short) rendered by a 2:1 majority of the arbitral tribunal, which decided the disputes that had arisen between the Ministry of Petroleum & Natural Gas of the Government of India (`Ministry', for short) and M/s Reliance Industries Limited (`Reliance' for short), M/s. Niko (NECO) Limited (`Niko' for short) and M/s. British Petroleum Exploration (Alpha) Limited (`British Petroleum' for short) from a Production Sharing Contract dated 12.04.2000 (`PSC' for short). The PSC related to exploration and extraction of natural gas from Block KG-DWN-98/3 in the Krishna-Godavari Basin off the coast of Andhra Pradesh in India (`Reliance Block' for short). For abundant clarity, under the PSC, Reliance was one of the constituents of the `Contractor', the other two being Niko and (subsequently) British Petroleum; and Reliance was the `Operator'.
2. Reliance was the claimant in the arbitral proceedings; and the Ministry was the respondent. By way of the impugned award, two of the members of the arbitral tribunal have decided certain issues in favour of Reliance; whereas the third member has decided the matter in favour of the Ministry. In essence and substance the majority has held inter-alia that "Reliance is fully entitled to produce all hyrdrocarbons resulting from Petroleum Operations conducted within its Contract Area which may include hydrocarbons that could have migrated from an adjacent block."
3. The Ministry has now approached this court challenging the decision of the arbitral tribunal as held by the majority.
II. GENESIS OF THE DISPUTE LEADING TO ARBITRATION
4. The PSC was signed between the Ministry on the one hand and 02 corporate entities viz. M/s. Reliance Industries Limited and Niko on the other. Subsequently, by way of a Supplementary Contract dated 21.02.2011, Reliance transferred a portion of its `Participating Interest' under the PSC as defined therein, in favour of British Petroleum.
5. Disputes arose when, sometime in the year 2013, the Oil and Natural Gas Corporation Limited (`ONGC' for short), by its letter dated 22.07.2013 addressed to the Directorate General of Hydrocarbons (`DGH. for short), informed the latter that there was "evidence of lateral continuity of gas pools" as between the Reliance Block and the adjacent blocks allocated to ONGC bearing name `IG Block' and `Block KG-DWN-98/2' (`ONGC Blocks' for short). In simple terms, this meant that the gas pools of the Reliance Block and the ONGC Blocks appeared to be connected with possible migration of gas between the two blocks.
6. This led ONGC to file a writ petition bearin
