Union’s long fight over foreign arbitral awards tests India’s credibility

An empirical study published in Arbitration International revealed that government entities were among the most common challengers of arbitral awards in the Delhi High Court. The study analysed over 2000 petitions filed between 2021 and 2024. It found that government entities challenged awards in 825 cases, compared with 412 where they defended awards. Moreover, the appeals challenging awards had a success rate of 14.66 per cent, with 50 in their favour out of 341 decided cases.

The researchers—Mohit Yadav, Gaurav Pathak and Anush Ganesh—found a mismatch between India’s policy of promoting arbitration and the government’s propensity to challenge adverse awards. While their study focused on appeals under Section 34 of the Arbitration and Conciliation Act, 1996, the findings help explain the government’s attempts to block the enforcement of  arbitral awards. 

In November 2026, the Union government challenged the enforcement of two foreign arbitral awards in favour of Vedanta Limited and Ravva Oil (Singapore) Pte Limited. The Supreme Court Bench of Justices J.B. Pardiwala and Manmohan questioned the government’s resistance to enforcing the award even after Malaysian courts had examined them. 

The Bench orally observed: “And we talk about all of this arbitration and seat and this and that?… Nobody will trust you”. The Bench seemed to be raising concerns about the impact of protracted litigation on India’s credibility as an arbitration destination. It went on to dismiss the Union government’s appeal against a Delhi High Court judgement delivered on 1 July 2026. The Court noted that the High Court had considered all relevant matters. No part of it warranted the Supreme Court’s intervention. 

India has tried to establish itself as a venue for international commercial arbitration. Its success depends on parties agreeing to resolve disputes through arbitration. When the government is a party, its willingness to accept an adverse award assumes special significance.

How a contract dispute became a long-running court case

The issue traces back to the development of the Ravva oilfield in the Krishna-Godavari basin. In October 1994, the Union government had entered into a contract with a consortium of ONGC, Videocon Petroleum, Ravva Oil and Command Petroleum. Their interests were later transferred to Cairn India and then Vedanta.

The agreement let the companies recoup some petroleum-operation costs and share the remaining production revenues with the government. Further, the companies could recover costs incurred in exploring and developing the oilfield. After accounting for these costs, the value of the remaining oil and gas, known as profit petroleum, was shared between the government and the companies. The dispute concerned whether the companies’ payments towards ONGC’s earlier costs could be included in calculating their post-tax rate of return, which determined their respective shares of profit petroleum. 

In October 2004, an arbitral tribunal in Kuala Lumpur issued a partial award, ruling on two points for the companies and four for the government. It left open how to quantify the consequences of its findings if the parties did not agree.

The government challenged the award in Malaysia. The Malaysian High Court set it aside in January 2009. The Court of Appeal reinstated it in September 2009. The Malaysian Federal Court affirmed that decision in October 2011.

In July 2014, the government issued show-cause notices seeking to recover $64 million from Vedanta’s predecessor and $35 million from Ravva Oil—approximately $99 million. This led to further arbitration proceedings to quantify the amounts. In October 2016, the reconstituted tribunal issued its final award and, ultimately, in February 2019, the Malaysian Federal Court rejected the government’s challenge to that award.

The private companies had agreed to bear certain costs on ONGC’s behalf to compensate it for its earlier investment in the oilfield. The dispute arose when the companies included these payments in calculating their rate of return, which determined how petroleum profits were shared with the government. The government argued that this calculation reduced its share by $99 million and sought to recover that amount. The companies disputed the claim, arguing that the payments were legitimate expenses incurred under the production-sharing contract and that the government had agreed to this arrangement when it signed the contract. The arbitral tribunal accepted the companies’ interpretation. 

The companies meanwhile approached the Delhi High Court in 2017 to enforce the awards under Sections 47 and 49 of the Arbitration and Conciliation Act. The government opposed the proceedings on several grounds, including limitation, the tribunal’s jurisdiction, and the alleged conflict between the awards and India’s public policy.

In a 67-page judgement delivered on 1 July 2026, Justice Jasmeet Singh dismissed these objections and allowed the companies’ petition.

Is resistance to an award justified to protect public resources?

The Union government had emphasised on the public character of the production-sharing contract. It submitted before the Delhi High Court that contracts concerning the exploitation of natural resources differed from ordinary commercial contracts. Relying on the public trust doctrine, Article 14 and Article 39(b) of the Constitution, it argued that natural resources must be managed in the public interest. The Union submitted that the arbitral tribunal’s interpretation of the contract gave the private firms an unwarranted financial gain. It contended that the contract should be read to safeguard public revenue.

When governments sign commercial contracts involving natural resources, they must protect the public assets and be accountable for the terms on which those resources are exploited. Nevertheless, the parties are also bound by the resulting contractual obligations. Any dispute over their interpretation must be settled through the agreed legal process.

The Delhi High Court dealt with the Union’s objections under Section 48 of the Arbitration and Conciliation Act, which empowers Indian courts to refuse the enforcement of a foreign arbitral award on grounds including the validity of the arbitration agreement, procedural fairness, the tribunal’s jurisdiction and contravention of India’s public policy. 

Justice Singh of the Delhi High Court said the tribunal had taken a plausible view and the government’s disagreement did not show that enforcement would violate fundamental values of Indian law.

The public trust doctrine may affect the State’s choices in negotiating and administering contracts. But to invoke it at the enforcement stage, the State must meet the requirements of Section 48.

A more expansive view of public policy would allow the parties to re-open contractual disputes every time an arbitral tribunal made a ruling. This would be contrary to the very purpose of international arbitration.

The significance of an earlier Supreme Court ruling

The Union had to consider the contentions against an earlier judgement involving the same parties and production-sharing contract.

On 16 September 2020, a three-judge Bench of the Supreme Court, in Government of India v Vedanta Limited, dealt with enforcement of a different foreign arbitral award, delivered in January 2011, arising out of the Ravva project.

The Court held that petitions seeking enforcement of foreign arbitral awards were governed by Article 137 of the Limitation Act, 1963, which prescribed a three-year limitation period from the date the right to apply accrued.

It addressed the government’s submission that contracts in relation to natural resources were special contracts that invoked India’s public policy considerations. The Court held that the disputes concerned the rights and obligations of the parties under the contract. The award did not offend the fundamental policy of Indian law.

The Supreme Court clarified that an Indian court examining enforcement under Section 48 must independently consider the statutory grounds for refusal.

Justice Singh relied on this judgement in July 2026. On limitation, he held that the companies’ right of enforcement arose when the government issued its recovery notices in July 2014. 

The High Court also said the Supreme Court had already dealt with several substantive objections raised by the government in 2020. On the argument that the reconstituted tribunal lacked jurisdiction to make the 2016 award, Justice Singh accepted the tribunal’s reasoning that it had jurisdiction to decide the remaining quantification issue.

The previous judgement is particularly useful in evaluating the government’s litigation strategy. Although it concerned a different arbitral award, the Supreme Court laid down binding principles on limitation, public policy and the enforceability of foreign awards arising from the same contractual relationship. The government nevertheless continued to resist enforcement of the 2004 and 2016 awards until November 2026, when the top court dismissed its challenge.

The difference between arbitration policy and practice

India is a party to the New York Convention of 1958, which provides the international framework for recognising and enforcing foreign arbitral awards. It obliges contracting states to give effect to such awards as binding, subject to certain limited exceptions.

Research across jurisdictions suggests courts are inclined to favour enforcement. Roger Alford, Crina Baltag, Matthew Hall and Monique Sasson studied decisions on international arbitral awards in 74 jurisdictions from January 2010 to June 2020 in a 2022 study. They found that courts enforced foreign awards in 73 per cent of the cases in their dataset.

This same preference for limited judicial intervention is reflected in the Indian legal framework. But the effectiveness of that framework also depends on how often unsuccessful parties can use the exceptions provided and how courts handle their objections.

A 2026 study by Yadav, Pathak and Ganesh indicates the problem in India. The researchers found that government entities were involved in 62.28 per cent of the Section 34 cases. The study also found that cases involving government entities on both sides took an average of 491.75 days to resolve, compared with 297.41 days for disputes involving private parties.

The findings relate to challenges to arbitral awards under Section 34, while the Ravva dispute relates to enforcement of foreign awards under Section 48. Both demonstrate how post-arbitration award litigation can affect the time and cost of achieving a final resolution.

In the Ravva case, the first award was made in 2004; the government pursued the challenges in Malaysia, a final award followed in 2016 and enforcement proceedings continued before Indian courts until 2026.

An interesting detail in the Ravva litigation is that the parties agreed in October 2019 to extend the production-sharing contract for another ten years, to October 2029. The commercial relationship continued even as the litigation over the contract’s interpretation was unresolved.

The contractual extension was a factor in the Supreme Court’s 2020 judgement, which rejected the government’s public policy objections. The Delhi High Court relied on the same circumstance in 2026.

What the Supreme Court’s observations leave open

The Supreme Court’s order dated 2 November 2026 is confined to dismissing the Union’s special leave petition. It neither sets new standards for government departments in deciding whether to challenge arbitral awards, nor does it consider the institutional reasons for the protracted litigation surrounding arbitration.

The Bench’s oral observations put those questions into a wider policy debate.

The government has enacted legislative changes and institutional initiatives to promote arbitration and reduce judicial intervention. But the conduct of government departments and public sector bodies remains crucial to the success of these reforms, as empirical evidence and the Ravva litigation show.

The Supreme Court’s concern about India’s credibility as an arbitration destination arises from this gap between government policy and practice. Parties entering into long-term commercial contracts will consider the legal remedies available if a dispute arises, including the enforceability of an award after the arbitral and judicial process.

So the Ravva dispute raises a question for the government beyond the particular financial claim: How should public authorities decide when it is in the public interest to continue litigation, particularly when courts in more than one jurisdiction have considered their objections?

The answer will affect the practical value of India’s arbitration reforms and the confidence commercial parties have in the agreements they sign with the State.