Supreme Court notice to Oilmin on RILs appeal

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Jul 13 2013, 10:39am hrs
The Supreme Court on Friday sought response from the Centre on a joint petition filed by Mukesh Ambanis firm Reliance Industries and BG seeking settlement of issues with the oil ministry over reimbursement of royalties and taxes in the Panna, Mukta and Tapti (PMT) fields through arbitration in London.

However, the oil ministry is opposing arbitration proceedings in London saying that the matter should be settled in an Indian court.

A bench headed by Justice SS Nijjar issued notice to the ministry of petroleum and natural gas on the petition challenging the Delhi High Court's March order that upheld the government's stand that the HC has jurisdiction over the matter.

The ministry had moved the HC against the claims

of BG Group and RIL for reimbursement of royalties and various taxes in the PMT fields. The government's petition is still pending before the HC.

It had argued against the foreign tribunal's award that held the companies' claim in respect of royalties, cess, service tax and CAG audit as arbitrable.

The international arbitrator in 2012 directed the government to reimburse the companies to the tune

of $11,413,172, besides additional cess recovered from them.

Senior counsel Abhishek Manu Singhvi, appearing for RIL, claimed the parties had agreed that the seat

of arbitration would be London and that the Uncitral Rules of 1976 would apply; thus courts in India have

no jurisdiction to decide the matter and only courts

of England have an exclusive jurisdiction in this regard.

According to the Ambani firm, Part II of the Arbitration and Conciliation Act 1996 does not empower the Indian courts to set aside a foreign arbitral award.

As per the terms of the arbitration agreement the courts of the seat would exercise exclusive supervisory jurisdiction over any arbitration proceedings, and any arbitration proceedings resulting in a foreign award could not be challenged in the Indian courts.

At the time the agreement was entered into, the Foreign Awards (Recognition and Enforcement) Act 1961 (the pre-cursor to Part II of the current Act), regulated the enforcement of the foreign awards in India, and the 1961 Act did not contain any provision empowering Indian courts to set aside foreign awards, the consortium partners stated.

The ministry on December 22, 1994, had entered into two Production Sharing Contracts (PSCs) with RIL and Enron Oil and Gas India (the predecessor to BG Exploration and Production India) and ONGC for the exploration and production of petroleum from the Tapti and Panna Mukta fields.

The two contracts were to be operative for a period of 25 years and would expire only in 2019 unless it is terminated earlier or mutually extended by the parties.

Earlier in 2011, the BG Group and RIL had approached the government to appoint an arbitrator for reimbursement for royalties and cess paid to the government on account of differences over methods to calculate cost recovery. Since the government refused, the firms approached the Court of Arbitration, Hague.