Delhi HC asks Cairn to go for arbitration in 2 weeks

The dispute is about refund of payment made by Cairn for operating Ravva oilfield in K-G basin

The Delhi High Court on Wednesday directed Cairn India Limited to commence arbitration on an ongoing dispute with Videocon Industries Limited, Oil and Natural Gas Corporation (ONGC) and Ravva Oil, regarding the refund of payments made by Cairn on behalf of Videocon for the operation of the Ravva oilfield in the Krishna Godavari basin, within two weeks.

The Ravva oil and gas field is being operated in partnership by Cairn, which has a 22.5 per cent participating interest, ONGC with a 40 per cent share and Videocon and Ravva Oil, with 25 per cent and 12.5 per cent stakes, respectively. The dispute arose after Videocon failed to pay its share of operating costs under the production sharing contract (PSC), which on default was supposed to be borne by the remaining entities as per their respective stakes, according to a joint operational agreement (JOA) signed by the companies.

Cairn alleges that it has had to bear the entire share of Videocon's burden in order to continue operations on the oilfield, after ONGC and Ravva Oil refused to respond to cash calls demanding their respective portions of payment, in lieu of the default. Aggrieved by the inaction on the part of the other entities, Cairn approached the high court seeking interim relief against the other companies, before taking the matter to arbitration.

On Wednesday's hearing, senior advocate C A Sundaram, appearing on behalf of Cairn, pressed for the amounts due to be immediately secured on the grounds of financial inconvenience, balance of equity and public interest. The counsel justified seeking of the immediate relief on the reasoning that it had a lien on Videocon's share of petroleum as per the JOA, since it had made the entire payment on the default.

Justice Muralidhar however, refused to make an interim adjudication in favour of Cairn, as the arguments of ONGC were yet to be heard. Instead, the court came to the conclusion that the commencement of arbitration would help expedite the resolution of the dispute and instead directed Cairn to constitute an arbitral tribunal by issuing requisite notices to all parties and approach the International Chamber of Commerce in accordance with the JOA, within a period of two weeks.

The bench has allowed the high court matter to continue simultaneously and listed the case for further hearing on February 20.