Supreme Court issues notice to Reliance & BG in Panna-Mukta arbitration

NEW DELHI: The Supreme Court has issued notices to Reliance Industries and BG Group after the Central government alleged that the arbitrator appointed by the companies in a dispute in the Panna-Mukta fields was biased and sought his removal.
The government and Reliance Industries are locked in several disputes that are under arbitration. The government has also questioned the credentials of arbitrators appointed by Reliance in other disputes, leading to a change in arbitrators. The same concerns have surfaced again in this row over tax-related issues and the recovery of costs in the light of a report by the Comptroller and Auditor General of India.

The arbitral panel initially consisted of Christopher Lau (chairman), Peter Leaver, appointed by RIL and BG, and Justice BP Jeevan Reddy as the government nominee. Reddy left the panel on February 4, 2014, and was replaced by former SC judge B Sudershan Reddy.

“Unfortunately, Respondent 3 (Leaver) made it evident by his conduct from day one that he was not only the nominee of respondents 1 and 2 (RIL, BG), but his duty was to protect their interest in all circumstances,” the government alleged. The government claimed that it had acted with utmost restraint with the expectation that Leaver would “eventually realise the call of his duties as a member of the tribunal and mend his ways. However, the expectations were totally belied”. He continued with his bias in favour of the claimants and his persistent efforts to harass and humiliate the counsel for the petitioner without any justification, the government said.

Fearing that the arbitrator’s bias would prejudice its case, the government wrote to the Arbitral Tribunal and later the Appointing Authority, but to no avail.

The government then approached the Delhi High Court, pointing out that Leaver was yet to make any disclosures on potential conflicts of interest even two-anda-half years after he was appointed as arbitrator by RIL and BG.

The High Court on July 3, 2014, refused to pass any orders on the government’s petition, saying it was not maintainable, leaving it to the top court to take a call on the issue. On Friday, a two-judge bench comprising Justices Dipak Misra and PC Pant issued notices to RIL, BG and Leaver and listed the case for further hearing on April 13. The arguments in court were heated, with angry words exchanged between Solicitor General Ranjit Kumar and RIL lawyers Abhishek Manu Singhvi and Shyam Divan.

RIL and BG claimed that the petitions were an abuse of the process of the court, a claim the government resisted. The bench said it would hear the questions of law involved in the case.

Reddy had resigned citing an adjournment of a year sought by RIL and BG and Leaver’s continued confrontational interruption of the government lawyer. The government quoted this to claim that the proceedings of the tribunal were not being conducted in a fair and impartial manner and that the award that may be passed may be a foregone conclusion.

The government had signed production sharing contracts with RIL, Enron Oil and Gas India, later known as BG Exploration and Production India, and Oil & Natural Gas Corporation on December 22, 1994. RIL and BG invoked the arbitration clause on December 16, 2010. ONGC did not join the claim nor was a party to it. A partial consent award was passed in the row on September 14, 2011, in which the government and the other two parties agreed to have London as the venue in any arbitration proceedings.