PMT Gas Fields Case: SC dismisses plea of Centre against Arbitrator [Read the Judgment]

PMT Gas Fields Case: SC dismisses plea of Centre against Arbitrator [Read the Judgment]

The Supreme Court on Tuesday dismissed Centre’s plea seeking removal of foreign arbitrator Peter Leaver, in a dispute between Reliance Industries and the Government over Panna Mukta and Tapti (PMT) oil and gas fields.

The Government’s case was argued by Solicitor General Ranjit Kumar, while the opposite party was represented by senior counsels Abhishek Manu Singhvi and Sameer Parekh.

The Government had moved the Court to remove Peter Leaver, who was appointed by RIL and British Gas, on the ground of bias. The arbitration was initiated in 2010.

In December 2010, differences had arisen on issues of payment and reimbursement of royalties, cess and service tax, and conduct of performance audit by the Comptroller and Auditor General, following which Reliance invoked foreign arbitration clause. At the start of the arbitration itself, the Government had challenged the arbitrability of the disputes.

The Court also rejected the plea that the arbitration must take place in this country instead of London, hence allowing Leaver to continue as an arbitrator in London, who was appointed the arbitrator after itsMay 28, 2014 order.

While turning down the Centre’s request, a Bench of Justices A K Sikri and Rohinton F Nariman outlined certain situations where domestic arbitration law would apply to International Commercial Arbitration and also clarified certain legal points regarding the place of arbitration in international contracts.

The decision has been hailed as a “significant clearing up of the law” and as sending a positive message to investors, domestic and overseas, who get dragged into arbitration by the government.

The Apex Court said that Indian courts have no jurisdiction over Arbitration under Part I of the Arbitration and Conciliation Act, 1996. Therefore, the petition seeking the removal of the arbitrator was not maintainable.

In May last year, the Apex Court had allowed the PMT arbitration over disputes related to cost recovery, royalty and tax to take place in London. It had set aside the Delhi High Court order over entertaining the government’s objection against the arbitration in London.

The Supreme Court said that the High Court committed jurisdictional error in agreeing to hear the government’s plea. It added that in the production-sharing contract, RIL and the Petroleum Ministry had “consciously agreed” for arbitration in London in case of any dispute.

The court also termed the Special Leave Petition of the Government, as gross “abuse of power” and “abuse of the process of the court” as the same issue existing between the same parties was already decided by the Court.

Read the Judgment here.