Delhi HC rules against RIL in $1.7 billion gas dispute with govt

NEW DELHI: The Delhi High Court on Friday ruled against Reliance Industries Ltd and its foreign partners in a dispute over the government’s $1.7 billion claim against the Mukesh Ambani-led conglomerate for making “unjust enrichment” by extracting gas that migrated from state-run ONGC's blocks adjacent to their KG-D6 field off the Andhra coast.
The division bench of Justices Rekha Palli and Saurabh Banerjee quashed an international arbitration tribunal’s ruling rejecting the government’s claim and overturned justice Anup Jairam Bhambani’s verdict upholding the arbitral award in favour of the RIL-led consortium.
"We are setting aside the impugned order dated May 9, 2023 passed by the learned single judge, and the arbitral award passed by the learned arbitral tribunal dated 2018, being contrary to the settled position of law along the pending applications, if any, leaving the parties to bear their own costs," the division bench said.
Justice Bhambani had held that,"This court is 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... ... this court finds no ground to interfere with the majority arbitral award; which is accordingly upheld".

The case dates back to 2013 when ONGC claimed its IG and KG-DWN-98/2 blocks adjacent to RIL's KG-D6 field shared a common gas pool. It moved the court, saying RIL, which had already put KG-D6 into operation, was extracting gas that migrated from its blocks that were still under development.
The oil ministry approached the Delhi HighCourt after the arbitration panel led by Singapore-based Lawrence Woo struck down its demand for nearly $1.6 billion in cost, including interest, and $175 million as additional cumulative ‘profit petroleum’ payable till March 31, 2016 towards "disgorgement of unjust enrichment" made by RIL.
Once US consultant DeGolyer & MacNaughton (D&M), appointed under court order for an independent study, affirmed the continuity of the gas pool, the ministry appointed a one-man committee of retired Delhi HC chief justice A P Shah to suggest a course of action.
The committee said RIL had made "unfair" enrichment and was liable to pay. The ministry then slapped costs on RIL, which challenged it through international arbitration. The arbitration panel rejected the government's charges and asked the Centre to pay legal costs to RIL. The government challenged this in the court. The court upheld the arbitration tribunal's rejection of the government's allegation of unfair enrichment by RIL.
The tribunal had said "RIL extracted whatever gas became available in the course of petroleum operations within their contract area. Reliance deducted the 'cost petroleum', calculated the 'profit petroleum' and shared the requisite portion of the profit petroleum with the ministry.
The Ministry has not alleged that Reliance did not pay them their share of profit petroleum for the entire quantity of gas extracted by Reliance, including migrated gas."
On the allegation of RIL committing fraud by suppressing knowledge about the continuity of the gas pool, the tribunal had said "non-disclosure of one solitary D&M Report-2003, though a technical breach of terms of the PSC, was not a material breach of the contract.