Delhi High Court Enforces $454 Million Foreign Arbitral Awards In Favour Of Vedanta, Ravva Oil

The Delhi High Court has enforced two foreign arbitral awards in favour of Vedanta Limited and Ravva Oil (Singapore) Pte. Ltd. in a long-running dispute over the sharing of profit petroleum from the Ravva Oil Field in Andhra Pradesh. It ruled that the Union government's objections amounted to an impermissible attempt to reopen the merits of the awards.

Justice Jasmeet Singh delivered the judgment. He held that the dispute arose from the interpretation of the parties' Production Sharing Contract (PSC) and did not justify refusing enforcement of the awards.

The court observed, "The parties share a contractual relationship and how the PTRR must be calculated in terms of the PSC, to my mind cannot by any stretch of imagination lead to alleged violation of public policy of India neither can the findings arrived by the AT in this regard be said to be against justice or morality."

The dispute arose from a Production Sharing Contract executed on October 28, 1994 between the Union government, Oil and Natural Gas Corporation, Videocon Petroleum Ltd., Ravva Oil (Singapore) Pte. Ltd. and Command Petroleum (India) Pty. Ltd., which was later renamed Cairn Energy India Pty. Ltd. The agreement related to the development of the Ravva Oil Field in the Krishna-Godavari Basin.

Under the contract, the government's share of profit petroleum depended on the Post Tax Rate of Return achieved by the private contractors.

The dispute centred on whether payments made by the private contractors towards ONGC's carry obligations could be included while calculating the Post Tax Rate of Return.

The Union government argued that the payments represented ONGC's past costs and reduced its share of profit petroleum by USD 99 million. Vedanta and Ravva Oil maintained that they were allowable contract costs.

The dispute went to arbitration in 2004. The arbitral tribunal accepted the contractors' interpretation and later quantified the relief in their favour.

It retained jurisdiction to determine quantification if the parties failed to reach an agreement.

The Kuala Lumpur High Court later set aside the award. The Malaysian Court of Appeal restored it in September 2009, and the Malaysian Federal Court affirmed that decision in October 2011.

After the Union government issued a show cause notice in July 2014 seeking USD 64 million from Vedanta and USD 35 million from Ravva Oil, the contractors returned to the tribunal for quantification. A Final Award was delivered in October 2016 and was upheld by the Malaysian Federal Court in February 2019.

The Union government resisted enforcement before the Delhi High Court. It argued that the awards violated public policy, rewrote the PSC, caused loss to the public exchequer, were barred by limitation and had been rendered by a tribunal that had become functus officio.

Rejecting those objections, the court held that the Union government was effectively inviting it to undertake a merits review of the tribunal's interpretation of the PSC. It held that such an exercise falls outside the scope of proceedings to enforce a foreign award.

The court also rejected the contention that the tribunal had become functus officio. It held that the tribunal had retained jurisdiction to decide quantification if the parties failed to reach an agreement.

Finding no ground to refuse enforcement, the court enforced both awards. It also directed that the bank guarantees furnished pursuant to its interim order be released within eight weeks.

For Vedanta Limited and Ravva Oil (Singapore) Pte. Ltd.: Senior Advocate Akhil Sibal with Advocates Shruti Sabharwal, Surabhi Lai and Rachit Bansal.

For Union of India: Additional Solicitor General Vikramjeet Banerjee, with Advocates Abhishek Singh, Anuja Tiwari, Amitesh Chandra Mishra, Vishakha, Mrityunjai Singh, Aparna Tiwari, Shikhar Thukral and Harshit S. Gahlot.