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RIL moves SC against HC ruling in $1.5 bn gas dispute with Centre

Reliance Industries Limited (RIL) has moved the Supreme Court, challenging the Delhi high court (HC) order which upheld the Centre's claim that the Mukesh Ambani-led company and its consortium partners had siphoned gas from deposits of ONGC block in the Krishna-Godavari (KG) Basin, off the coast of Andhra Pradesh. RIL's allocated gas block was next to the one being operated by ONGC. Sources said RIL has, in its plea, contended that the division bench of the Delhi HC should not have gone into the merits of the case since the matter had been heard and decided by a three-member tribunal headed by Singapore-based arbitrator Lawrence Boo. RIL has also pleaded that the order passed by the international tribunal was binding on the parties under the terms of the production-sharing contract (PSC). In arbitration disputes, courts generally do not delve into the merits of the case and their role is to ensure the existence of an arbitration agreement, and that the arbitration process itself was conducted fairly and lawfully, a senior advocate said. RIL has also said in its plea that the Delhi HC division bench order had mixed up the relief granted under Section 34 and Section 37 of the Arbitration Act, sources said. Section 34 of the Arbitration and Conciliation Act, 1996, in India, deals with the setting aside of an arbitral award. Section 37 of the Act outlines the scope of appeals against orders of the arbitral tribunal or the court in an arbitration proceeding. The division bench of the Delhi HC had earlier this year overturned a single-judge bench order of 2023 upholding the ruling of the arbitration tribunal in RIL's favour in 2018. The tribunal had rejected the government's contention and said that the PSC doesn't prohibit the contractor from producing gas, irrespective of its source, as long as the producing wells were located inside the contract area. In its ruling, the division bench of Justices Rekha Palli and Saurabh Banerjee had also said that the arbitration award of July 24, 2018, in favour of the RIL-led consortium, was 'contrary to public policy'. The consortium includes UK-based BP Plc and Niko Resources of Canada. BP and Niko have filed separate but related pleas contesting the findings of the Delhi HC. The Dispute In April 2000, the RIL-led consortium entered into a PSC with the Centre for the exploration and extraction of natural gas from the KG Basin. But in 2013, state-owned ONGC shot off a letter to the Directorate General of Hydrocarbons (DGH), claiming that gas pools in the RIL and adjoining ONGC blocks were connected and that RIL has been siphoning huge amounts of gas from its block. The Ministry of Petroleum and Natural Gas (MoPNG) accused RIL and its partners of an 'unjust enrichment of over $1.729 billion' by siphoning gas from deposits they had no right to exploit. It was then that ONGC filed a writ petition in the Delhi HC in which the petroleum ministry, DGH and RIL were made parties. The petition was disposed of by the court, which directed MoPNG to consider the upcoming report by the expert agency by the name of DeGolyer & MacNaughton (D&M) — a petroleum consulting company based in Dallas, Texas. The agency was to undertake an independent third-party study to verify the claimed continuity and migration of gas from the ONGC block to the Reliance block. On November 19, 2015, D&M said that 'the integrated analyses indicated connectivity and continuity of the reservoirs across the blocks operated by ONGC and RIL', validating the central government and ONGC's stand. The MoPNG also appointed a one-man committee of former Chief Justice of Delhi HC Justice A P Shah on December 15, 2015, to consider the D&M report and recommend a future course of action in light of the findings contained in the report. Based upon the Shah Committee report, the MoPNG raised a demand for $1.5 billion and $174 million in interest from RIL for 'unjust enrichment' made by the company. Reliance then approached the three-member tribunal headed by Singapore-based arbitrator Lawrence Boo. The tribunal rejected the government's contention and said that the PSC doesn't prohibit the contractor from producing gas, irrespective of its source, as long as the producing wells were located inside the contract area. The government then approached the Delhi HC against this order. When the single-judge bench of the HC ruled in favour of RIL, the Centre appealed before the division bench. The government had contended that RIL was guilty of fraud and unjust enrichment totalling over $1.5 billion. 'It is contended that the migrated gas alone was valued at about $1.5 billion as of June 30, 2016,' the Centre had then told the Delhi HC. It had further argued that though RIL had claimed there was no connectivity between their block and the government's, they had consciously siphoned gas from the ONGC block without the government's knowledge. The Centre also argued that the arbitral award it challenged was 'against India's public policy'. The division bench sided with the central government and set aside the arbitral award after which RIL approached the Supreme Court.