Delhi high court rejects govt plea against RIL

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MUMBAI : The Delhi high court on Tuesday dismissed a petition filed by the Union government against a consortium led by Reliance Industries Ltd regarding a gas dispute in the Krishna Godavari basin.

The ministry approached the court after an international arbitration panel rejected its fine of $1.55 billion on Reliance Industries and partners BP Plc and Niko Resources for allegedly selling gas that migrated from Oil and Natural Gas Corp Ltd’s (ONGC) KG blocks to their block.

c “The inferences are factual conclusions arrived at by the arbitral tribunal, which cannot be second-guessed by this court in the exercise of its powers under Section 34 of the Arbitration & Conciliation Act,” the court observed.

A bench led by Justice Anup Jairam Bhambhani, while upholding the arbitral tribunal’s 2018 order, said, “This court is accordingly not persuaded to hold that the conclusions drawn by the arbitral tribunal are such that no reasonable person would reach. Suffice it to say that the view taken by the arbitral tribunal is most certainly a possible view, which calls for no interference.”

In 2013, state-run ONGC wrote to the director-general of hydrocarbons, alleging there was evidence of “lateral continuity” of gas pools between the Reliance block and the adjacent blocks allocated to ONGC. This meant the gas pools of the Reliance block and the ONGC blocks appeared to be connected, with possible gas migration between the two.

DeGolyer & MacNaughton, an independent agency, was asked to verify the claim, and it was found that there was indicated connectivity and continuity of the reservoirs across the blocks operated by ONGC and RIL.

Thereafter, based on the A.P. Shah committee report, the ministry raised a demand for $1.55 billion on Reliance as computed provisionally, along with interest up to 31 March 2016; and of $174.90 million towards revised additional cumulative profit claimed to be receivable up to the same period towards disgorgement of “unjust enrichment”.

Following this, Reliance invoked Section 33 of the production sharing contract (PSC), initiating an arbitration against the ministry in 2016. In its 2018 order, the arbitral tribunal gave a majority verdict of 2:1 in favour of Reliance. This verdict said, “Reliance is fully entitled to produce all hydrocarbons resulting from petroleum operations conducted within its contract area, which may include hydrocarbons that could have migrated from an adjacent block.”

According to the tribunal’s findings, the PSC permits Reliance to produce gas which migrates into the sub-sea reservoir lying within the contract area from an outside source.

As far as the ministry’s claim of unjust enrichment is concerned, the tribunal held that there is no question of “unjust enrichment” that requires further determination. The government challenged the order in the Delhi high court.

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