Supreme Court revokes Australian judge appointment in RIL's KG-D6 dispute

The Supreme Court on Wednesday withdrew its decision of appointing former Australian judge James Jacob Spigelman as the third arbitrator to head a three-member arbitration panel for the ongoing dispute between Reliance Industries (RIL) and the government over fall in gas production in Krishna Godavari (KG) D6 basin.

A bench headed by Justice S S Nijjar recalled the order after the government counsel cited that the name of Spigelman, a former Chief Justice and Lieutenant Governor of New South Wales, figured in the list of seven probables suggested by RIL for appointment as the third arbitrator. He however indicated that the court would soon appoint a new arbitrator in place of Spiegelman.

On Monday, the apex court had appointed Spigelman as the third arbitrator saying that there was a need for a foreign arbitrator in the RIL-government case to avoid biases.

The counsel on Wednesday argued that the apex court should have preferred someone who was not in the list of probables suggested by either the government or by RIL. The private refiner and the government had nominated former chief justices S P Bharucha and V N Khare, respectively, but were divided on the selection of the third arbitrator.

Earlier on Monday Justice Nijjar had said that both the Centre and RIL provided the list of eminent foreign arbitrators but he preferred to conduct his own survey for maintaining neutrality and chose the name of Justice Spigelman.

"Although two lists have been duly supplied by the learned counsel for the parties, I am of the opinion, in the peculiar facts and circumstances of this case, it would be appropriate if an individual not named by any of the parties is appointed as the third arbitrator. I have discretely conducted a survey to find a suitable third arbitrator who is not a national of any of the parties involved in the dispute," he had said.

It appears that that the name of the Australian arbitrator was present in the list supplied by RIL, which might have been overlooked by the judge.

On Tuesday, the Mukesh Ambani-owned company had welcomed the Supreme Court's decision saying that with the constitution of the 'Arbitration Tribunal', the path had been cleared for a speedy resolution of various disputes relating to the KG D6 block.

Analysts agreed that this was one more negative news for the company.

SP Tulsian, an independent expert on RIL, said, "It's definitely negative for the stock as it will further delay the procedures. However, it must be noted that negative news have not affected the stock much in the recent past." Despite the deferment of gas price hike and allegations over collusion between the company and the government by Aam Aadmi Party leader Arvind Kejriwal, shares of Reliance Industries have risen by 19% to Rs 958 in the past one month, where as Nifty has risen 8.5% in the same period.

RIL had initiated the arbitration process against the government in November 2011 after the government slapped a penalty amounting to $1.8 billion against the company for falling way short of the 80 million metric standard cubic metre per day (mmscmd) production target and being denied of cost recovery.

Since then, the government and RIL could never decide on the presiding arbitrator. While the Mukesh Ambani-owned company wanted a third arbitrator of foreign origin, the government wanted to have someone from Indian origin as the issue was domestic. RIL wanted an arbitrator of foreign origin from "a country other than India, UK or Canada", as its other contract partners-- Cayman Islands-based Niko and BP Exploration are foreign companies.

RIL has been struggling to arrest the decline in natural gas output from the block citing technical problems. Gas output from the KG D6 block was targeted at 80 mmscmd, but after reaching 69.43 mmscmd in March 2010, the production has dwindled to around 12 mmscmd at present. Gas produced from the block was earmarked for major power and fertiliser companies.

—(With agency inputs)