Delhi High Court dismisses Central government plea for removal of arbitrators in dispute with Reliance Industries on KG Basin

The Delhi High Court on Friday dismissed on maintainability grounds a petition by the Central government seeking removal of two of the three arbitrators in its ongoing arbitration proceedings against Mukesh Ambani owned Reliance Industries Limited (RIL) [Union of India v Reliance Industries Limited and Ors]..Union government’s Ministry of Petroleum and Natural Gas had approached the High Court alleging that the two arbitrators –chairman Sir Michael D Kirby and Sir Bernard Rix – dealing with the cost recovery dispute in RIL’s KG-D6 gas block are biased and, therefore, they should be declared de jure or de facto unable to discharge their functions.Though an application to that effect was already pending before the arbitral tribunal, the government argued that once an allegation of bias or justifiable doubt is raised, it would be wholly inequitable for a party to seek a ruling in that respect from the very members of the tribunal against whom such allegations have been levelled..A preliminary objection was raised by the RIL stating that challenge to an arbitrator on grounds enumerated in Section 12(3) of the Arbitration and Conciliation Act would have to follow the procedure laid down in Section 13 of the Act. The said Section says that if an arbitrator fails to withdraw from office, the arbitral tribunal would have to necessarily rule upon the challenge..Single-judge Justice Yashwant Varma agreed with the preliminary objection and said that he does not find any merit in the government’s arguments that the members of the arbitral tribunal have already prejudged the entire issue and that relegating the petitioner to pursue the pending application before the tribunal would be an empty formality.It added that the members clearly appear to have acted in accord with the challenge procedure which stands engrafted in Sections 12 and 13 of the Act.“Accordingly, and for all the aforesaid reasons, the preliminary objection is upheld. The petition shall consequently stand dismissed as being not maintainable,” the Court held.The Court added that its present order will not preclude the government from pursuing its application preferred before the arbitral tribunal.“While that application is titled as having been preferred under Section 14 of the Act, since an application under the aforenoted provision can only be presented before a court as defined, it would be open for the petitioner to amend the nomenclature of the said application, if so chosen and advised.”.The bench further clarified that it has neither considered nor ruled upon the allegations that have been levelled by the petitioner against the members of the arbitral tribunal and all contentions of respective parties in that respect are kept open..Senior Advocate AK Ganguli along with advocates Shailendra Swarup, Bindu Saxena, Kirit Javali, Mamta Tiwari, Arunav Ganguli and Charu Ambwani appeared for the UOI.RIL was represented through Senior Advocates Harish N Salve with advocates Sameer Parekh, Shonali Basu, Ishan Nagar, Prateek Khandelwal, Abhishek Thakral and Chetna Rai.Advocates KR Sasiprabhu, Mahesh Agarwal, Rishi Agrawala, Niyati Kohli, Pranjit Bhattacharya and Pratham Vir Agarwal appeared for other respondents. .[Read Order]