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Informist, Wednesday, Jul. 22, 2026

 

--HC rejects Vedanta plea vs govt refusal to extend contract for CB-OS/2 Block 

 

By Surya Tripathi

 

NEW DELHI – The Delhi High Court Wednesday rejected Vedanta Ltd.'s plea against the Ministry of Petroleum and Natural Gas' refusal to extend the production sharing contract for the CB-OS/2 Block on western coast to the company. The high court also declined Vedanta's request to extend status quo on the CB-OS/2 Block, which it had earlier directed through an interim order. 

 

The high court upheld the oil ministry's direction to Oil & Natural Gas Corp. Ltd. to immediately take over the assets and operations of the petitioner over the contract area. Vedanta, while unilaterally deducting the Centre's share of profit petroleum, had used India's natural resources for its own benefits rather than for the interest of the country, the high court said. In doing so, it has breached the obligations under the public trust doctrine, which in turn flow from the Constitution of India, said the court.

 

The government cannot be held ransom to the whims of a private company, which as per its fancies, tramples upon the Centre's share, said the court. The act of Vedanta, belatedly, remitting the amounts it had deducted, was not found by the oil ministry to rectify the defect in the petitioner's candidature and cure its misconduct, noted the court. 

 

Upon the expiry of the timelines provided in the extension policy, an application seeking an extension of a production sharing contract is not automatically granted, said the court. Further, events subsequent to the making of an application for extension could be taken cognisance of by the ministry while considering such an application, said the court.  

 

In September, the oil ministry had denied extension of the production sharing contract for the CB-OS/2 Block to contractor parties Vedanta Ltd., Tata Petrodyne Ltd., and Oil & Natural Gas Corp. Ltd. The ministry had asked Vedanta to cease and desist from carrying out any further petroleum operations on the block and immediately hand over its custody and possession to ONGC. The Centre had said it was purely an interim measure to maintain continuity of petroleum operations in public interest and safeguard petroleum reserves until the block is awarded to another party.

  

In 1998, a production sharing contract was entered into between the Centre, ONGC, Tata Petrodyne and Cairn Energy India Pty. Ltd., a division of Vedanta, with respect to the block with an aim to exploit the petroleum resources. Initially, the term of the contract was 25 years, which was extended from time to time. However, the government refused to extend the contract to the petitioner on the grounds of Vedanta unilaterally deducting from the Centre's share of profit petroleum under the contract, the amount of special additional excise duty which the petitioner was liable to pay to the Central Excise Department

 

The CB-OS/2 Block is an offshore oil and gas block on India's western coast. It was awarded to the contractors in 1998 under a Pre-New Exploration Licensing Policy production sharing contract. The block, consisting of the Lakhsmi and Gauri fields, is currently producing 3,400 barrels of oil and 340,000 standard cubic metres of gas per day.

 

Vedanta argued that the government's move was violative of its extension policy, and the order was passed on irrelevant considerations and without due application of mind. Once the government had decided the pathway to grant extensions concerning specific blocks, it was bound to tread that road and any deviation from that would be violative of Article 14 and be arbitrary, Vedanta said. 

 

It said that the government's order to hand over custody and possession of the block to ONGC and cease and desist from carrying out any further petroleum operations was not possible as petroleum operations were continuing and couldn't be turned off immediately. The subject site was in the middle of the ocean and the iron pillars had been rigged into the ocean bed, and couldn't be removed instantly, as has been directed by the government, said the petitioner. 

 

The government argued that Vedanta did not have any vested legal right or Constitutional right for further extension of the contract. Vedanta's petition couldn't be maintainable in cases that were strictly contractual in nature and wherein, no statutory obligation was cast on the government for extension of a contract especially in favour of a particular person or entity, said the Centre.

 

At 1105 IST, shares of Vedanta Ltd. were down 1.0% at INR 262.15 on the National Stock Exchange, and shares of ONGC Ltd. were up 0.5% at INR 251.25.  End   

 

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

 

Edited by Avishek Dutta

 

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