In a recent decision, the Delhi High Court dismissed a petition filed by the Union of India seeking enforcement of a Final Partial Award (FPA) against Reliance Industries Limited (RIL). The court held that an execution petition could not be filed under Section 48 of the Arbitration and Conciliation Act, 1996 for a partial award that only decided some issues while deferring the decision on others. The judgment emphasized the importance of determining all issues to ascertain the liability of the parties involved.
The case revolved around the extraction of petroleum from the Tapti and Panna Mukta Oil Fields. The Union of India, RIL, British Gas Exploration and Production India Ltd (BGEIPL), and Oil & Natural Gas Corporation Ltd (ONGC) had entered into Production Sharing Contracts (PSCs) with specified participating interests. The PSCs allowed the contractors to extract oil at their own cost, recoverable as “Cost Petroleum” (CP), and entitled the parties to shares in the profit earned from the sale of extracted petroleum, known as “Profit Petroleum” (PP).
Arbitral proceedings were initiated by RIL and BGEIPL, who alleged that RIL failed to distribute the Petitioner’s share of the PP correctly. The 2016 FPA, which was the subject of the enforcement petition, did not award any specific amount to the petitioner but claimed an amount of US $2,314,040,750 payable by the respondents.
The High Court, in its judgment, stated that a partial award that merely sets out the manner in which liability is to be computed and leaves the parties to calculate the amount themselves cannot be executed like a money decree. The court held that for a purely declaratory award to be executed as a money decree, it must identify one party entitled to receive a quantifiable sum of money from the other and provide the principles for quantification.
The court also highlighted that the liability of the parties could not be definitively quantified until a pending request for an increase in the Cost Recovery Limit (CRL) was resolved. Therefore, the 2016 FPA, which did not determine the entitlements of the parties in CP or PP, could not serve as a basis for enforcing a specific amount payable.
The High Court emphasized that an award must determine all the issues necessary to fix the liability of the parties before it can be enforced. Without such determination, the award remains inchoate and unenforceable. In this case, since the Arbitral Tribunal had not resolved all the issues, the court declared the petition seeking enforcement of the FPA to be not maintainable. A partial award that does not provide a quantifiable sum of money and leaves the parties to calculate the amount themselves cannot be enforced as a money decree. Parties should ensure that all relevant issues are addressed and resolved in the award to avoid difficulties in enforcement.
