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“This court is not persuaded to hold that the conclusions drawn by the arbitral tribunal are such that no reasonable person would reach. Suffice it to say that the view taken by the arbitral tribunal is most certainly a ‘possible view’, which calls for no interference… … this court finds no ground to interfere with the majority arbitral award; which is accordingly upheld,” justice Anup Jairam Bhambani said in his judgement.
The oil ministry had approached the Delhi High Court after an international arbitration tribunal struck down its demand for about $1.6 billion in cost, including interest, and $175 million as additional cumulative profit petroleum payable till March 31, 2016 towards “disgorgement of unjust enrichment” made by RIL.
The case dates back to 2013 when ONGC stirred the hornet’s nest by claiming its IG and KG-DWN-98/2 blocks adjacent to RIL’s KG-D6 field shared a common gas pool. ONGC further said RIL, which had already put KG-D6 into operation, was extracting gas that migrated from its blocks that were under development and moved the court.
Once US consultant DeGolyer & MacNaughton (D&M), appointed under court order for an independent study, affirmed the continuity of the gas pool, the ministry appointed a one-man committee of retired Delhi HC chief justice A P Shah to suggest a course of action.
The committee said RIL had made “unfair” enrichment and was liable to pay. The ministry then slapped costs on RIL, which challenged it through international arbitration. The arbitration panel rejected the government’s charges and asked the Centre to pay legal costs to RIL. The government challenged this in the court.
The court upheld the arbitration tribunal’s rejection of the government’s allegation of unfair enrichment by RIL. “In the opinion of this court, firstly, the aforesaid inferences are factual conclusions arrived at by the arbitral tribunal, which cannot be second-guessed by this court… Secondly, in the opinion of this court, the factual conclusions are perfectly rational, coherent and logical, especially considering what was comprised in the PSC (production sharing contract) was a purely commercial transaction entered into by two contracting parties,” the court said.
The tribunal had said “RIL extracted whatever gas became available in the course of petroleum operations within their contract area. Reliance deducted the ‘cost petroleum’, calculated the ‘profit petroleum’ and shared the requisite portion of the profit petroleum with the ministry. The Ministry has not alleged that Reliance did not pay them their share of profit petroleum for the entire quantity of gas extracted by Reliance, including migrated gas.”
On the allegation of RIL committing fraud by suppressing knowledge about the continuity of the gas pool, the tribunal had said “non-disclosure of one solitary D&M Report-2003, though a technical breach of terms of the PSC, was not a material breach of the contract. The arbitral tribunal also holds that the ministry would not have ordered unit-development. The arbitral tribunal holds that the ministry was not deprived of the benefits of Reliance producing gas from the contract area.”
#rejects #govts #petition #RIL
