Supreme Court dismisses Central Govt's appeal: Clears path for Reliance Industries Ltd. Arbitration

Supreme Court dismisses Central Govt's appeal: Clears path for Reliance Industries Ltd. Arbitration

The Supreme Court by its division bench comprising of Chief Justice DY Chandrachud and Justice PS Narasimha dismissed the appeal moved by appellant- Union of India praying to cease arbitration proceedings initiated by Reliance Industries Ltd, BP Exploration and Niko Resources- respondents against the Ministry of Petroleum and Natural Gas. The cost of recovery dispute in arbitration proceedings is over $400 million involving natural gas exploration in KG-D6 block.

Natural gas output from Dhirubhai-1 and 3 gas fields in the KG-D6 block in the Bay of Bengal started to delay company projections from second year of production itself in 2010 and the field stopped producing in February 2020, much in advance of the projected life. The government blamed it on the company for not adhering to the approved development plan and disallowed over $3-billion exploration costs. The company disputed this and dragged the government to arbitration.

Initially, the Central Government had approached the Delhi High Court asking the High Court to order a stay on the arbitration proceedings, however the Delhi High Court had refused for the same.

The bench heard the averments forwarded by Senior Advocate AK Ganguly, who alleged that the two foreign arbitrators — former Australian judge Michael Kirby and former UK judge Sir Bernard Rix — have been ex-facie biased against the Union government as was evident from the series of procedural orders passed by them. The Senior Counsel drew Court's attention to various procedural orders passed by the arbitral tribunal and stated that no arbitrator could decide allegations against himself and the same could only be done by the court.

Senior Advocate Harish Salve appearing for Reliance Industries opposed to Central Government's averments and remarked that the arguments raised were nothing but 'delaying tactics' adopted by the government to halt the international arbitration from proceeding further.

The bench did not seem convinced with the arguments raised by the Centre. Chief Justice DY Chandrachud remarked – "It is not bias, unless you show some element of motivated error."