Govt loses appeal against Vedanta on $499 million arbitration award
In a major set-back for the government, the Supreme Court on Wednesday upheld an arbitration award relating to recovery of $ 499 million towards the cost of development of Revva oil and gas field that a Kuala Lumpur tribunal had ruled in favour of Vedanta and Videocon. The court said the award does not contravene the public policy of India.
The Ravva oil and gas fields, off the coast of Andhra Pradesh, were developed between 2000 and 2007 based on the production sharing contract (PSC) valid for 25 years.
The top court ruling now allows Vedanta and Videocon to recover $499 million for the development of project, an amount that was capped at $198 million by the Centre,
The government had moved the top court against the Delhi High Court's February 19, 2020, judgment upholding the tribunal award.
Rejecting the government's contention that award was against the public policy of the country, a bench comprising Justices S. Abdul Nazeer, Indu Malhotra and Aniruddha Bose said, "We conclude that the enforcement of the foreign award does not contravene the public policy of India, or that it is contrary to the basic notions of justice."
Affirming the February
19 judgment of the Delhi High Court, the top court said the award of January
18, 2011 passed by the tribunal is held to be "enforceable in accordance with the provisions of Sections 47 and 49 of the Arbitration & Conciliation Act, 1996."
Referring to the government stand that the PSCs are "special contracts" pertaining to the exploration of natural resources, which concerns the public policy of India, Justice Indu Malhotra, speaking for the bench said, "We are of the view that the disputes raised by the claimants emanate from the rights and obligations of the parties under the PSC. The award is not contrary to the fundamental policy of Indian law, or in conflict with the notions of justice, … the performance of the obligations under the PSC were not contrary to the interests of India.".
The court also noted that the PSC contract that was entered on October 28, 1994 for a period of 25 years ended on October 27, 2019 and the same has been extended for a further period of 10 years, through the mutual agreement between the parties.
Having noted the extension of the contract, the court said, "This itself would reflect that the performance of the obligations under the PSC were not contrary to the interests of India."