New Delhi, Sep 22 (IANS): In a setback to the central government, the Supreme Court on Tuesday dismissed its petition that sought the ouster of an arbitrator in its dispute with the consortium of Reliance Industries and British Gas over the Panna-Mukta and Tapti (PMT) oil fields.

The court also termed the special leave petition of the government -- fourth in the series -- as gross "abuse" of power.

A bench of Justice A.K. Sikri and Justice Rohinton Fali Nariman dismissed the plea in a decision that has been hailed as a "significant clearing up of the law" and as sending a positive message
to investors, domestic and overseas, who get dragged into arbitration by the government.

This verdict now paves the way of the resumption of the five-year-old arbitration taking place in London, involving the disputes over cost recovery of oil, royalties and tax. The apex court in May 2014 had allowed international arbitration on the matter.

In seeking the removal of arbitrator Peter Leaver, the government had alleged he biased in favour its nominee, the Reliance Industries-British Gas.

The apex court said that Indian courts have no jurisdiction over arbitration under Part I of the Arbitration and Conciliation Act, 1996. Therefore, the petition seeking the removal of the arbitrator was not maintainable.

In giving the verdict, the court relied on two seminal cases on the matter: Bhatia International versus Bulk Trading, and what is now called the Bharat Aluminium case.

The court also said that issue was already decided in an earlier litigation involving the same parties and as such the present plea by the central government was an "abuse of the process of the court".

In the international arbitration involving government of India and private entities, while substantive issues of the matter under arbitration are covered under Indian law, arbitration as such is covered under the British law.

The procedure is covered under United Nations Commission on International Trade Law (UNCITRAL).

The government's case was argued by Solicitor General Ranjit Kumar, while the other party was represented by senior counsels Abhishek Manu Singhvi and Sameer Parekh.