HPCL, BRPL may contest verdict

Hindustan Petroleum Corporation Ltd and Bongaigaon Refinery and Petrochemicals Ltd have been advised to contest an adverse arbitrage decision taken in London, that directed them to pay a higher rate to Videocon for purchase of crude oil.

The dispute centres around the exchange rate to be used for paying Videocon on the purchase of crude from the Ravva fields in Andhra Pradesh by the two companies. The opinion to contest the decision was given by Additional Solicitor-General Gopal Subramanium.

While the production sharing contract states that both companies would pay in rupees at the buying rate of dollars, Videocon wanted the selling rate should be used. The selling rate of dollars is higher than the buying rate.

When the matter was taken up in the arbitrage tribunal based in London, it had ordered in 2005 that the average of buying and selling rate be used.

As the dispute was between the government and Videocon, the tribunal directed the government to pay according to the average rate for all purchases made by government nominees during 2001-03. This is despite the fact that the actual purchases were made by HPCL and BRPL.

Ravva is the off-shore field in Andhra Pradesh being contracted out to Cairn Energy, Oil and Natural Gas Corporation, Videocon Petroleum Ltd and Ravva Singapore.

Under the production sharing contract, the government nominees (Hindustan Petroleum and Bongaigoan Refinery) were to be given preference in sale of crude from the fields.

Subramanium said the award could be contested on the grounds that it was given without any notice to the companies and without giving them any opportunity to defend.

Many documents pertaining to the case could not be presented before the tribunal as Hindustan Petroleum and Bongaigaon Refinery were not involved in the hearings directly as the case was filed against the government.

The Arbitration and Conciliation Act, 1996 provides for such an appeal against decision taken by the arbitrage tribunal in countries, which are members of the New York Convention.

The convention requires courts in subscribing countries to enforce arbitration awards as if the awards were made in that country. Both London and India are the signatories to the convention.