Court rules award unenforceable under Arbitration and Conciliation Act, 1996 due to unresolved key issues
In a significant judgment delivered on February 2, 2026, the Division Bench of the Delhi High Court, comprising Justice Navin Chawla and Justice Madhu Jain, upheld the decision of the Single Judge refusing the enforcement of a foreign arbitral award in the case of Union of India v. Reliance Industries Limited. The court ruled that the award was unenforceable under Section 48 of the Arbitration and Conciliation Act, 1996 due to unresolved issues, specifically the determination of the Cost Recovery Limit (CRL), which is crucial for calculating liabilities under the Production Sharing Contracts (PSCs).
The case arose from a dispute between the Union of India and Reliance Industries Limited concerning the development of Tapti and Panna Mukta Oil and Gas Fields. The dispute was initially arbitrated under English law, resulting in multiple awards, including the Final Partial Award (FPA) dated October 12, 2016. The Union of India sought the enforcement of this award in India to recover approximately USD 3.8 billion. However, the Single Judge dismissed the enforcement petition, citing the award's premature nature and lack of finality in key determinations.
The Division Bench's judgment emphasized that for a declaratory award to be enforceable, it must be practically executable, which requires the award to clearly stipulate a quantifiable liability and the method of calculation. The court noted that the FPA 2016 does not meet these criteria, as the determination of CRL remains unresolved by the Arbitral Tribunal, impacting the calculation of Cost Petroleum and Profit Petroleum entitlements.
Furthermore, the court highlighted the procedural requirements under the Arbitration and Conciliation Act, 1996 for the enforcement of foreign awards, which necessitate simultaneous consideration of maintainability and enforceability to avoid multiplicity of proceedings. The court reaffirmed that appeals under Section 50 of the Act are permissible when an order refuses enforcement based on grounds within Section 48.
The judgment underscores the importance of resolving all pertinent issues in arbitration before seeking enforcement in Indian courts. It also serves as a reminder of the limited grounds for refusing enforcement under Indian law, promoting the expeditious resolution of arbitration disputes.
The appeal is now set to be heard on merits by the Roster Bench on February 17, 2026, which will further delve into the substantive aspects of the award and its enforceability.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Section 50(1)(b) - Appeal maintainability against refusal to enforce a foreign award under Section 48. Refusal to enforce an award under Section 48 is appealable under Section 50(1)(b).
Statutory provision(s):
Arbitration and Conciliation Act, 1996 - Sections 46, 47, 48, 49, 50
Union of India v. Reliance Industries Limited, (Delhi)(DB) : Law Finder Doc id # 2847593
