The Hindu : Union Government wins major arbitration in London

Online edition of India's National Newspaper
Friday, Feb 20, 2004

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National

Union Government wins major arbitration in London

By J. Venkatesan

NEW DELHI, FEB. 19. The Government of India has won a major international arbitration held in London against Videocon Petroleum Ltd. to decide certain disputes under a Production Sharing Contract.

The International Arbitral Tribunal by an award last week rejected the claim of Videocon for a declaration that there was no due date for payment of the Government's share of profit in petroleum products. The Tribunal by an order dated September 27, 2003 had directed Videocon to clear a sum of $27 million outstanding to the Government of India on this account.

According to sources in the Ministry of Petroleum and Natural Gas, this decision in favour of the Government is a very significant one inasmuch as the Government has by now entered into nearly 100 production-sharing contracts.

This decision will further send a strong message to all contractors to strictly adhere to the terms of the contract and any default will not be tolerated in view of the fact that the industry concerned is of strategic importance to the nation.The Government entered into a contract in connection with an offshore oil and gas field called Ravva Field with a Consortium of companies consisting of Cairn Energy (India) Pvt. Ltd, M/s Ravva Oil Singapore (P) Ltd, Videocon Petroleum Ltd and Oil and Natural Gas Commission on October 28, 1994.However, Videocon was not paying Government's share of profit on petroleum in accordance with the terms of contract.

A dispute was raised before the Tribunal, and counsel R. Sasiprabhu, who represented the Government, submitted that the practice followed by the contracting parties was to sell the production of oil and gas and give the Government its share of revenue by the end of each quarter.

However, Videocon defaulted in paying the Government share by the end of each quarter on the ground that there was no due date for payment in the production-sharing contract.

Counsel for Videocon, Pallavi Shroff, sought a declaration from the Tribunal that there was no due date stipulated in the contract and the obligation to pay would arise only after final determination of the account, and the Government was not entitled to demand interest for alleged delay in profit from petroleum.

The Tribunal held in favour of the Government holding that the Government was entitled to receive its share on the basis of the contract.

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