Union Of India vs Reliance Industries Ltd And Ors & … on 9 December, 2022 – Case Summary

In the case of Union of India vs Reliance Industries Ltd and Others, heard in the Delhi High Court on 9th December 2022, the Ministry of Petroleum and Natural Gas in the Union Government initiated proceedings under Sections 14(2) and 15(2) of the Arbitration and Conciliation Act, 1996. The Union Government sought a declaration that the majority of the members of the Arbitral Tribunal, consisting of the Chairman Sir Michael D. Kirby AC CMG and Sir Bernard Rix, the two Arbitrators nominated by respondent Nos. 1 to 3, were de jure/de facto unable to discharge their functions. Consequently, their mandate stands terminated in terms of Section 14 of the Act.

The arbitration proceedings originated from a Production Sharing Contract dated 12 April 2000, executed between the petitioner and the respondent Nos. 1 to 3. This contract pertained to the development and production of gas from D1 to D3 gas discoveries in the D-6 block and the marketing of gas.

The petitioner alleged that the various procedural orders passed by the Arbitral Tribunal and the manner in which proceedings have been conducted led them to apprehend evident bias. They harbored justifiable doubts about the independence and impartiality of the arbitrators. The petitioner claimed that the Tribunal’s various procedural orders indicated unfair treatment towards them, denial of reasonable opportunity, and favoring the cause of respondent Nos. 1 to 3.

However, before proceeding to elaborate on the submissions in support of the petition, the Court considered a preliminary objection raised by Mr. Harish Salve, the Senior Counsel appearing for respondent Nos. 1 to 3, regarding the maintainability of the petition itself. Mr. Salve contended that the challenge to the Arbitral Tribunal in the present case was raised on the ground of bias and a justifiable doubt with respect to the independence and impartiality of the arbitrators. Therefore, it was the procedure specified in Section 13 alone which could have been pursued.

Mr. Salve further argued that a de jure disqualification, which could possibly form the subject matter of a petition under Section 14, would have to necessarily be confined to the arbitrator suffering a disqualification by virtue of the provisions contained in the Seventh Schedule. The de jure disqualification, according to Mr. Salve, could not extend to bias or justifiable cause, which would necessarily be subjects confined to Sections 12 and 13 of the Act.

The Court also referred to the Supreme Court’s decisions in HRD Corporation (Marcus Oil and Chemical Division) versus GAIL (India) Limited and Bharat Broadband Network Ltd. v. United Telecoms Ltd. to further elaborate on the dichotomy in the challenge procedure with respect to persons who may become ineligible to be appointed as arbitrators and persons against whom a justifiable doubt may exist.

The case is a significant examination of the procedures and grounds for challenging the appointment and conduct of arbitrators under the Arbitration and Conciliation Act, 1996. It underscores the importance of impartiality and independence in arbitration proceedings and the legal remedies available when these principles are perceived to be compromised.