The arbitration is significant for Indian companies, as the earlier Attorney General had termed the call option given to Sterlite Industries to buy out the residual stake legally invalid. This case has implications for other call options given to joint venture partners in several businesses.

"Most of the insurance companies in India are working under joint ventures and the result of the arbitration is keenly awaited," said a person familiar with the issue.

Justice Khare represents the government on the panel, while Justice Bharucha represents Sterlite Industries. The three-member arbitration panel is scheduled to meet in the last week of this month to resolve the five-year issue. The third member is retired Supreme Court judge B P Jeevan Reddy, who was selected by the other two members.

Sterlite, a subsidiary of London-listed Vedanta, bought 51 per cent of Balco in March 2001 for Rs 552 crore, when the National Democratic Alliance government decided to divest the government's stake in the public sector company. Sterlite owned the right to buy the remaining stake in the aluminium producer after a three-year period, but ran into differences with the government over valuation.

After the embargo expired in March 2004, Sterlite sent the government a call notice and a cheque of Rs 1,099 crore for Balco's residual stake, in accordance with the shareholders' agreement.

However, differences in the value of the government's residual stake cropped up after the United Progressive Alliance came to power in May 2004 and the issue was referred to the Attorney General, who termed the call option invalid under Section 111 A of the Companies Act. He said, however, that the residual stake could be sold at the market price.

In 2006, Sterlite moved the Delhi High Court for interim relief, to ensure the government did not sell the stake to anyone else. The high court asked for reconciliation and arbitration.

"The arbitration is expected to get over by the end of this year," said a person close to the development. If the arbitration fails, the case may be settled before a Supreme Court bench.