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Informist, Friday, Feb. 14, 2025

--HC rejects arbitral award favouring RIL in Krishna-Godavari-D6 block case 

NEW DELHI – In a win for the government, the Delhi High Court on Friday set aside a 2018 arbitral award favouring the Mukesh Ambani-led Reliance Industries Ltd. in the case pertaining to the Krishna-Godavari-D6 gas block. Accepting the $1.73-billion demand of the government against Reliance Industries, the bench of Justice Rekha Palli and Justice Saurabh Banerjee said, "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 Jul. 24, 2018, being contrary to the settled position of law along with pending applications".

In 2000, the Ministry of Petroleum and Natural Gas and a Reliance Industries-led consortium, which included UK-based British Petroleum Exploration (Alpha) Ltd. and Canada's Niko (NECO) Ltd., had signed a production sharing contract for exploration of natural gas in the Krishna-Godavari basin, where Oil and Natural Gas Corp. Ltd. and the Mukesh Ambani-promoted company had adjacent gas fields. Subsequently, Reliance Industries transferred a portion of its participating interest to British Petroleum Exploration (Alpha).

A dispute arose in 2013 when ONGC informed the Directorate General of Hydrocarbons that gas pools in its block were connected to those of Reliance Industries' Block KG-DWN-98/2, which is generally known as KG-D6. Reliance Industries contented that some gas from ONGC's block had "migrated" to its block.

In 2014, ONGC moved the Delhi High Court alleging that Reliance Industries may be getting gas from its pool. In 2015, the court directed the government to consider a report prepared by the agency DeGolyer & MacNaughton. The agency undertook independent third-party study to verify the claimed continuity and migration of gas from ONGC blocks to Reliance Industries' block. It released its final report in 2015, saying "integrated analyses indicated connectivity and continuity of the reservoirs across the blocks operated by ONGC and RIL."

In the same year, the government also appointed a committee of Justice A.P. Shah to consider the report by the agency. It must be noted that Reliance Industries withdrew halfway through the proceedings by the committee. The committee's report was based on written and oral submissions made by the parties and no experts appeared or rendered any assistance to it.

Based on the Shah committee's report, the petroleum and natural gas ministry, in a letter dated Nov. 3, 2016, raised a demand on Reliance Industries for $1.55 billion as computed provisionally along with interest up to Mar. 31, 2016, and $175 million towards revised additional cumulative profit petroleum claimed to be receivable up to Mar. 31, 2016, towards disgorgement of "unjust enrichment" claimed to have been made by Reliance Industries. 

After the government raised the demand against Reliance Industries, the latter invoked the arbitration, which rejected the government's demand and favoured the Mukesh Ambani-led company. Consequently, the government moved the single-judge bench of the high court, challenging the arbitration award. In May 2023, the single judge ruled in favour of Reliance industries, after which the government moved the division bench of Delhi High Court.

The government had asked the division bench to set aside the international arbitration award dated Jul. 24, 2018, which had ruled in favour of the Reliance Industries-led consortium. In its petition, the government had challenged the finding of the arbitration tribunal, which held that Reliance Industries was "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."

On Friday, shares of Reliance Industries ended flat at INR 1,217.25 on the National Stock Exchange.  End

Reported by Surya Tripathi

Edited by Ashish Shirke

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