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Centre v Vedanta: Could Malaysian law be applied to determine challenge to foreign award? Supreme Court appoints Gourab Banerji as Amicus

The production sharing contract (PSC) between Cairn India (now Vedanta) and the Indian government stipulated that the contract shall be interpreted and governed as per Indian laws.

Shruti Mahajan

The Supreme Court on Monday appointed Senior Advocate Gourab Banerji to assist in determining the applicability of Malaysian laws in Vedanta's foreign award when the contract provided for Indian laws to govern the contract.

The special three-judge Bench of Justices S Abdul Nazeer, Indu Malhotra and Aniruddha Bose appointed Banerji as amicus curiae in the petition filed by the Union Ministry of Petroleum and Natural Gas against Vedanta over enforcement of a 2011 foreign award.

The Centre had moved the Supreme Court challenging the decision of the Delhi High Court which allowed Vedanta - formerly known as Cairn India - to implement the foreign award of 2011, which allowed the company to seek a larger sum of recovery instead of the amount that was capped by the Indian government.

The dispute pertained to a production sharing contract (PSC) between Cairn India and the Indian government with respect to the exploration of the Ravva oil fields in the Krishna-Godavari basin. This contract was for a period between 2000 and 2007.

When the dispute arose in the year 2008, a foreign award was passed by a Tribunal in Malaysia which ruled in favour of the company. This award was challenged by the Indian government before Malaysian courts, but to no avail. When Cairn moved the Delhi High Court for enforcement of the award, the same was allowed, prompting the Ministry to approach the Supreme Court in appeal.

Today, Attorney General for India KK Venugopal told the Court that the PSC drawn in 1994 between the two parties stipulated that the contract shall be interpreted and governed as per Indian laws, and that the contractor ought not act in any manner or exercise any power under the contract that would be in contravention of Indian laws.

The Court was informed that despite this negative covenant provided for in the contract, the objections to the contract have been decided by the Malaysian courts in line with the Malaysian public policy. Now, at the enforcement stage, the Indian courts are required to examine whether the award goes against Indian public policy, giving rise to a precarious situation.

The Court said,

"Whether the Malaysian Courts were justified in applying the Malaysian law to determine the challenge to the foreign award, particularly since the Production Sharing Contract dated 28.10.1994 was governed by Indian Law, and the PSC contained a negative covenant that the Respondent Companies were not entitled to exercise its power under the PSC in a manner which would contravene the laws of India. The Malaysian Courts have decided the objections by applying the Malaysian law, while the Indian courts are required to examine whether the award is in conflict with the public policy of India at the enforcement stage. This would create an anomalous situation."

Therefore, the Court sought the assistance of Banerji as amius curiae in the case, on this limited issue.

The Court will hear the matter again on August 26.

Senior Advocates CA Sundaram and Akhil Sibal appeared for Vedanta.

Read Order:

GOI vs Vedanta - 24.08.2020.pdf
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