The Delhi High Court Today (Feb 14) canceled an arbitration ruling that had earlier favored Mukesh Ambani’s Reliance Industries Limited (RIL) in the Krishna-Godavari (KG) basin gas migration dispute. This decision revives the Indian government’s $1.5 billion claim against RIL, alleging unfair extraction of gas from ONGC’s fields. The court ruled that the previous award was against settled legal principles, marking a major legal blow for RIL.
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NEW DELHI: Mukesh Ambani‘s company, Reliance Industries Limited (RIL), has faced a big legal setback. The Delhi High Court today canceled an arbitration decision that had earlier rejected the Indian government’s claims against RIL in the Krishna Godavari (KG) basin gas migration case.
The case was heard by Justices Rekha Palli and Saurabh Banerjee, who said:
“In view of the above, 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 dispute dates back to April 2000, when RIL, along with its partners, signed a Production Sharing Contract (PSC) with the Indian government. This contract allowed RIL to explore and extract natural gas from the Krishna-Godavari (KG) Basin, located near the Andhra Pradesh coast. The agreement set clear rules about revenue sharing and operational responsibilities between both parties.
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In 2013, the Oil and Natural Gas Corporation (ONGC), a government-owned company, wrote to the Directorate General of Hydrocarbons (DGH), raising concerns. ONGC’s letter stated that its technical studies showed a possible connection between its gas reservoirs and those in RIL’s allocated area. The findings suggested that natural gas from ONGC’s fields might have moved (migrated) into RIL’s production zone.
After receiving this information, the Ministry of Petroleum and Natural Gas (MoPNG) took action. The government demanded that Reliance and its partners pay back around $1.5 billion, along with an extra $174 million in interest. The government claimed that RIL had unfairly extracted gas that originally belonged to ONGC, thereby making an unjust profit.
In November 2016, the government’s case became stronger when Justice AP Shah, the former Chief Justice of the Delhi High Court, submitted an independent expert report. This report supported the argument that gas migration had likely happened. Based on this, the Ministry increased its total claim against RIL to over $1.5 billion, including interest.
Reliance, however, disagreed with the government’s claims and decided to use the dispute resolution process outlined in the PSC agreement. It referred the matter to an international arbitration tribunal.
In July 2018, the arbitration tribunal announced its final decision, mostly ruling in favor of RIL. The tribunal dismissed most of the Indian government’s claims. This decision was seen as a big legal win for Reliance in this long-running conflict.
Later, in May 2023, a single judge of the Delhi High Court reviewed the case again. The judge upheld the tribunal’s decision, confirming that the Indian government’s claims were not valid.
In a detailed ruling, Justice Anup Bhambhani stated that the arbitration tribunal’s decision did not violate India’s public policy. He also ruled that Reliance had not broken the public trust doctrine.
The judge further explained that the tribunal’s findings were based on facts and that the court could not interfere with them under Section 34 of the Arbitration and Conciliation Act.
The judge strongly emphasized that-
“The factual conclusions by the tribunal are perfectly rational, coherent and logical.”
However, the Indian government did not accept this decision and decided to challenge it under Section 37 of the Arbitration Act.
The Indian government’s legal team included some of the country’s top lawyers—Attorney General for India (AGI) R Venkatramani, Senior Advocates KK Venugopal, and Gopal Jain. On the other hand, Reliance Industries was represented by Senior Advocate Harish Salve.
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