Hindustan Petroleum Corporation Ltd. and Prize Petroleum Company Ltd. v. M3nergy (M) Sdn. Bhd.

At a glance

Parties

Hindustan Petroleum Corporation Ltd. (HPCL) and Prize Petroleum Company Ltd. (PPCL) (India) v. M3nergy Sdn. Bhd. (formerly M3nergy Berhad) (Malaysia)

Case no.

Com. Appeal No. 317 of 2019 in Com. Arbitration Petition No. 76 of 2018; Appeal No. 333 of 2019 in Arbitration Petition No. 548 of 2014; Com. Appeal No. 348 of 2019 in Com. Arb. Petition No. 1101 of 2018

Court

High Court of Judicature at Bombay (Division Bench, Ordinary Original Civil Jurisdiction)

Judges

Pradeep Nandrajog, C.J. (author); Bharati Dangre, J.

Underlying award(s)

Partial Award on jurisdiction and liability (9 January 2014); majority Award on merits (27 September 2017); Award on costs (15 June 2018)

Treaty

Arbitration clause in the initialled Joint Executing Agreement (JEA); Arbitration and Conciliation Act, 1996

Sector

Oil and gas (offshore marginal field development)

Outcome

Appeals allowed. The Single Judge's set-aside rulings were reversed and the three petitions against the awards were sent back for fresh adjudication; no costs.

The dispute

HPCL, PPCL and the Malaysian company M3nergy formed a consortium that ONGC awarded a service contract to develop Offshore Marginal Field Cluster-7. The service contract required the consortium members to sign a Joint Executing Agreement (JEA). The members initialled a final draft in April 2007, and on 1 August 2008 the Management Committee recorded that this draft would be the final document. M3nergy then refused to sign it, and ONGC terminated the service contract. HPCL and PPCL started arbitration under the arbitration clause in the initialled JEA. The tribunal upheld its jurisdiction, found M3nergy in breach of Article 22.5 of the JEA and awarded damages and costs. A Single Judge set the awards aside, holding that no contract had been concluded. He did so after reappraising the evidence himself, without engaging with the tribunal's reasoning. The appeal raised one legal question: what standard of review a court applies when an award is challenged on jurisdiction.

Key holdings

1. Under Section 16 of the 1996 Act, a tribunal's ruling that it has jurisdiction can be challenged only under Section 34 once the award is made. The principles that limit court interference with awards on the merits apply with equal force to such a challenge. ¶ 21
2. Dallah v. Pakistan (2010 UKSC 46) does not support the respondent. Read with its paragraph 31, it requires the reviewing court to examine the tribunal's reasoning and conclusion on jurisdiction carefully and with interest. It set aside the ruling there because the tribunal applied the wrong law and drew wrong conclusions from the facts. ¶¶ 24–25
3. The law in India is the same, and only the wording differs. The wrong application of a principle of law vitiates an award, and drawing wrong conclusions from the evidence is a non-judicious approach. ¶ 26
4. The principle the Single Judge applied (independent reappraisal of the jurisdictional facts that ignores the tribunal's reasoning) is contrary to settled law. The judgment of 10 January 2019 and the order of 11 March 2019 were set aside, and the three petitions were restored for fresh adjudication. The Court expressed no view on whether a contract had been concluded. ¶¶ 19, 27
5. The parties bear their own costs of the appeals. ¶ 28

Procedural history

1. 29 June 2005HPCL, PPCL and M3nergy sign a Memorandum of Understanding to bid for OMFC-7. ONGC awards the contract on 31 March 2006, and the service contract is signed on 27 September 2006.
2. 16–18 April 2007The consortium members initial the final draft of the JEA. On 1 August 2008 the Management Committee records that this draft will be the document executed.
3. 4 September 2008ONGC gives 90 days' notice to submit the executed JEA. M3nergy refuses to sign, and ONGC terminates the contract.
4. 9 January 2014Partial Award: the tribunal upholds its jurisdiction and finds M3nergy in breach. M3nergy challenges it in Arbitration Petition No. 548/2014.
5. 27 September 2017Majority Award on the merits awards damages to HPCL and PPCL. It is challenged in Com. Arbitration Petition No. 76/2018.
6. 15 June 2018Award on costs, challenged in Com. Arbitration Petition No. 1101/2018.
7. 10 January 2019A Single Judge sets aside the partial and majority awards, holding that no contract was concluded. The costs award is set aside on 11 March 2019.
8. 16 October 2019The Division Bench allows the appeals and restores the three petitions for fresh adjudication.

Tribunal, counsel and experts

Decided by

• Pradeep Nandrajog Judge, High Court of Bombay (Chief Justice; author of the judgment)
• Bharati Dangre Judge, High Court of Bombay

For the claimant

Advani & Co.

For the respondent

Shardul Amarchand Mangaldas & Co.

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Keywords

• set-aside
• Section 34 Arbitration and Conciliation Act 1996
• Section 16
• kompetenz-kompetenz
• standard of review of jurisdiction
• existence of arbitration agreement
• Joint Executing Agreement
• unsigned initialled agreement
• Dallah v Pakistan
• New York Convention Article V(1)(a)
• ONGC
• OMFC-7
• offshore oil field
• consortium
• remand
• India

Summary generated with AI from the published documents — refer to the award for the authoritative text.