SC rejects Niko plea for court-appointed independent arbitrator

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Sep 3 2013, 06:12am hrs
The Supreme Court on Monday dismissed Canadian oil exploration firm Niko Resources' plea seeking to declare reference of a dispute over a gas supply agreement with Gujarat State Energy Generation (GSEGL) to a sole arbitrator as invalid, illegal and non-binding.

A bench headed by Justice GS Singhvi while dismissing Niko's appeal said the company was free to raise objections before the sole arbitrator former Supreme Court judge MB Shah.

Niko, which holds 33% stake in the Hazira gas fields, sought quashing of the Gujarat High Court's October last year order that allowed Justice Shah to go ahead with the arbitration proceedings. The Canadian firm alleged that as a result of the business proximity, its JV partner GSPC and GSEGL have colluded with each other and jeopardised the rights and interests of the JV.

According to the petition, the two PSUs have perpetrated fraud on the petitioner (Niko) and that by acting in collusion proceeded to appoint Shah as the arbitrator so as to defeat and prejudice the rights and interest of the petitioner/JV.

However, Niko's nomination for appointing former chief justice of India AM Ahamadi as arbitrator was rejected by its JV partner who also allegedly colluded with GSEGL for appointment of Justice Shah as the sole arbitrator.

The foreign firm also sought to restrain GSPC from exercising its majority voting right based on the proportionate participating interest ie 67.67% in the JV.

However, GSEGL argued there was no indication on the number of arbitrators in the deal, thus such disputes are required to be referred only to the sole arbitrator with the consent of the parties. Besides, it said Niko was not entitled to any injunction against the commencement of arbitration proceedings.

Niko and GSPC had entered into a contract in 2000 with GSEGL.