Supreme Court Rules In Vedanta’s Favour In 2011 Arbitration Award

The Supreme Court rejected the central government’s plea challenging the enforcement of a tribunal ruling that allowed Vedanta Ltd. to recover development costs of around $476 million in favour of Cairn India Ltd. and Videocon Industries Ltd.

The judgment was delivered by a three-judge bench of the top court which included Justice S Abdul Nazeer, Justice Indu Malhotra and Justice Aniruddha Bose and was authored by Justice Indu Malhotra.

An arbitration tribunal, had in 2011, rejected the government’s contention which argued that only $198 million can be allowed to be recovered. The tribunal comprised former Chief Justice of India Dr AS Anand and Andrew Berkeley. Sir Anthony Evans was the chairperson of the tribunal.

The dispute arose from the production sharing contract—which was executed in 1994 and was to be in effect for 25 years—over exploration and development of the Ravva Oil and Gas field in Andhra Pradesh.

The contention in the contract was over the base development costs which the companies incurred to develop the oil field. The central government claimed that the recovery would be limited to $198 million.

The tribunal’s ruling was appealed in the Malaysian courts which declined to interfere. Subsequently, Vedanta approached the Delhi High Court seeking enforcement of the award, which the central government opposed on the ground that the plea was barred by limitation and enforcement will be against the public policy of India. The high court allowed the award’s enforcement, leading to the case landing in the Supreme Court.

Indian law allows for the setting aside of a foreign arbitration award in cases where it’s against the public policy of India. In an 1994 judgment referred to as the Renusagar case, the top court had said the phrase public policy of India, in the context of foreign awards, would be:

• fundamental policy of Indian law;
• or the interests of India;
• or justice or morality.

In the current case, the top court didn’t agree with the government’s stand that the enforcement of the award will be against the public policy of India.

“Firstly, the Appellants have not made out a case of violation of procedural due process in the conduct of the arbitral proceedings.... Secondly, the Appellants have not made out as to how the award is in conflict with the basic notions of justice, or in violation of the substantive public policy of India,” the judgment read.