Award Is Incapable Of Execution If Arbitral Tribunal Has Not Determined All Issues To Ascertain Liability Of Parties: Delhi HC

While observing that an execution petition under Section 48 of the Arbitration and Conciliation Act, 1996 could not lie for the execution of a partial award which decided only some of the issues, while deferring the decision regarding the remaining issues for later, the Delhi High Court has dismissed a petition seeking enforcement of Final Partial Award passed against RIL.

Finding that the 2016 FPA does not award any amount to the Petitioner, a Single Judge Bench of Justice C. Hari Shankar observed that “The 2016 FPA cannot be likened to an award which sets out the manner in which the liability is to be computed, and leaves the parties to do the math. The manner of computation of liability, in the Execution Petition, goes far beyond a mere academic exercise, and transgresses the boundaries of the 2016 FPA”.

ASG Sanjay Jain appeared for the Decree Holder, whereas Senior Advocate Harish N. Salve appeared for the Judgment Debtor.

The Single Judge Bench was adjudicating applications preferred by the Union of India under Section 48 of the Arbitration and Conciliation Act, 1996 seeking enforcement of a Final Partial Award passed by the Arbitral Tribunal (2016 FPA). Though the 2016 FPA did not specifically award any amount to the petitioner, the Execution Petition claimed that an amount of US $ 2314040750 is payable to the Petitioner by the Respondents-Judgment Debtors under the 2016 FPA, and sought recovery thereof.

In a brief background, the rights in petroleum situated below the surface of the earth, as a natural resource, vest in the Government. Two Production Sharing Contracts (PSCs) were, executed between the Petitioner and a conglomeration of the Respondents RIL, British Gas Exploration and Production India Ltd (BGEIPL) and Oil & Natural Gas Corporation Ltd (ONGC) (contractors), with participating interests of 30%, 30% and 40% as per Article 1.63. These PSCs permitted the contractors to extract oil from the Tapti and Panna Mukta Oil Fields. The contractors were to extract the oil at their own cost, recoverable as "Cost Petroleum" (CP), in the manner specified in the PSCs, from the Petitioner; subject, however, to a specified upper Cost Recovery Limit (CRL). Additionally, the contractors and the Petitioner were entitled to shares in the profit earned by sale of the extracted petroleum – referred to as "Profit Petroleum" (PP). Arbitral proceedings commenced with the tendering of Notice of Arbitration by RIL and BGEIPL, the Respondents on the petitioner, under Section 21. The principal grievance of the Petitioner was that RIL failed to part with the Petitioner’s share in the PP and appropriated, to itself, a larger part of the share in the PP than was its due.

After considering the submission, the High Court observed that so long as the request for CRL increase, made in accordance with Article 13.1.4(c) of the PSCs, was pending, there could be no determination of the entitlements of the Petitioner or the Respondents in the CP or PP.

“The liability of the respondents to the petitioner being, at that stage, not therefore definitively quantifiable, it was obviously both illogical and illegal for the petitioners to contend that any specific amount was payable by the respondents to the petitioner merely on the basis of the findings in the 2016 FPA which were by themselves insufficient to work out liability, till the CRL was definitely known”, added the Bench.

Noticing the fact that the 2016 FPA is purely declaratory in nature, and does not specifically award a single farthing to the Petitioner, the High Court referring to Russell’s principle on Arbitration, stated that “What would be required, therefore, for a purely declaratory award to be executed like a money decree is, therefore, that the award must, firstly, identify one of the parties to the dispute as entitled to receive a quantifiable sum of money from the other, and, secondly, to set out the principles on the basis of which such quantification is to be done, so that all that is required to be done by the executing Court is application of pure arithmetic.”

With respect to the issues regarding the maintainability of the execution petition and enforceability of the 2016 FPA, the High Court observed that actual executability would require determination by the Arbitral Tribunal of all the issues based on which the liability of the parties towards each other can be fixed.

Absent such determination, the award remains inchoate, as in the present case and ex facie unenforceable, clarified the Court.

Thus, allowing the application seeking determination of the aspects of maintainability of the present execution proceedings and enforceability of the 2016 FPA, the Bench declared the petition to be not maintainable. 

Cause Title: THE UNION OF INDIA v. RELIANCE INDUSTRIES LTD. and ANR. [Neutral Citation: 2023: DHC: 4018]

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