The Indian government has lost its appeal in the English High Court against a $111-million arbitration award made in favour of Reliance Industries (RIL) and Shell-owned BG Exploration and Production India (BGEPIL), in a dispute related to the Tapti and Panna Mukta oil and gas fields off the coast of Mumbai.

The order was pronounced on June 9 by Sir Ross Cranston at the English Commercial Court, and relates to the two production-sharing contracts (PSCs) — Tapti PSC and Panna Mukta. India had appealed against the award under sections 68 and 69 of the Arbitration Act 1996, according to sources.

Government sources indicated that the issue is being examined, and a review will take place to ascertain legal options available. No response was offered by the Ministry of Petroleum and Natural Gas (MoPNG), RIL and Shell India till the time of going to the press.

India had challenged the January 2021 order by the Arbitral Tribunal, where it awarded RIL and BGEPIL around $111 million of the total $260 million they had sought.

The key issue raised in India’s application under section 69 is whether the arbitration tribunal was correct to decide an issue of ‘Res Judicata’ according to English law, because the seat of arbitration is in London. Res Judicata is a doctrine which generally prevents a party from re-litigating any claim or defence that has been already litigated, one of the sources added.

While, the contention under section 68 was that there is a serious irregularity causing substantial injustice in the award through the failure of the arbitration tribunal to apply principles of Indian constitutional law — Articles 297 and 299.

Article 297 states that natural resources in Indian waters vest in the Union, whereas Article 299 lists out formalities in the execution of government contracts.

The English Court dismissed the Indian government’s arguments under Section 68 and 69 of the Arbitration Act 1996. Ross Cranston turned down India’s appeal under Section 69, stating that the Tribunal’s approach had been correct.

He also dismissed arguments under section 68, including on the point of unfairness, where the tribunal stopped the Indian government from advancing certain arguments. On India’s challenge that the “award is contrary to public policy”, Cranston, while dismissing the argument, said the provision is not an avenue to reargue the merits.

In December 2010, RIL and BGEPIL (JV Partners) invoked an international arbitration (UNCITRAL claim) against India on cost recovery provisions, profit due to the State, and amount of statutory dues, including royalty payable. Both wanted to raise the limit of cost that could be recovered from oil and gas sales before profits were shared with the government.

On December 22, 1994, India had entered into a PSC with state-run ONGC, RIL and BGEPIL. The government granted exclusive rights to the three entities to exploit both the fields for 25 years. The PSCs for Panna Mukta and Mid & South Tapti expired on December 21, 2019.

ONGC had 40 per cent Participating Interest (PI) and was the Joint Operator in Panna-Mukta and Mid and South Tapti Fields, along with RIL and BGEPIL, each having 30 per cent PI.

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