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Informist, Friday, Jul. 11, 2025

 

--HC refuses to stop Vedanta's recoveries in oil field dispute with govt 

--CONTEXT: Govt sought to restrain Vedanta from implementing arbitral award 

 

NEW DELHI – The Delhi High Court on Friday refused to restrain Vedanta Ltd. and its arm Cairn Energy Hydrocarbons Ltd. from implementing a 2023 final partial award and recovering their costs incurred on exploration, development, and production regarding Rajasthan Block RJ-ON-90/1, an onshore oil and gas block in India. The government had argued that Vedanta and its arm had unilaterally deducted approximately $377 million from the claimed total of $534.3 million, without any mutual agreement or formal adjudication of liabilities.

 

The government had sought the high court to restrain Vedanta and its arm from unilaterally implementing the 2023 award pending quantification of liabilities pursuant to the mechanism set out in the award. Further, the high court refused to restrain Vedanta from making any further unilateral deductions or re-adjustment in the calculations made in furtherance of the award to the provisional estimates of Q2 and Q3 for financial year 2023-24 (Apr-Mar) as it existed prior to the arbitral award. 

 

"...I am of the view that stopping the parties from adjustments would curtail the ongoing contractual obligations which will contradict both the letter and spirit of the PSC (production sharing contract) and the FPA (final partial award)," said Justice Jasmeet Singh. As of now, Vedanta and its arm have adjusted $377 million and are yet to adjust $157 million in recoveries. After the high court's order, Vedanta and its arm were free to adjust the remaining amount till quantification of the final liabilities.

 

The high court said it was within the limited jurisdiction to not re-evaluate the merits or alter the view taken by the arbitral tribunal, particularly when the latter had passed a well-reasoned order and reserved the government's entitlement to seek re-adjustment. "As a result, I find no reasons to interfere with the Impugned Order. Hence, the instant appeal is devoid of merit, and is accordingly dismissed," said Justice Singh.

 

The case has its genesis from the production sharing contract executed in 1995 between the government, the Shell India Production Development and Oil and Natural Gas Corp. Ltd. for exploration, discovery, development and production of petroleum resources in relation to the Rajasthan block. On the same day as the contract was entered into, Shell India and ONGC entered into an operating agreement for the purpose of governing their relationship in connection with exploring, developing and producing petroleum in the Rajasthan block. Thereafter, Vedanta and its arm acquired Shell India's interest in the contract and agreement, and were effectively substituted as an operator.

 

Disputes occurred between the parties relating to Vedanta and its arm's recovery of their costs incurred for exploration, development, and production. The dispute also includes an issue as to their allocation amongst various development areas in the Rajasthan block. The petitioner alleged that Vedanta and its arm failed to adhere to the terms set out in the production sharing contract and the accounting procedure in several aspects. The government said that Vedanta and its arm improperly reduced the share of profits payable to the petitioner and took other decisions which were prejudicial to the appellant. 

 

At 1350 IST, shares of Vedanta Ltd. were up nearly 1% at INR 443 on the National Stock Exchange.  End

 

US$1 = INR 85.85

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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