Why the Court Overturned the Award
On February 15, 2025, a division bench of Justice Rekha Palli and Justice Saurabh Banerjee ruled that the arbitral tribunal’s decision suffered from "patent illegality." The court stated, "We have no alternative but to set aside the impugned order passed by the learned Single Judge along with the Arbitral Award rendered by the learned AT (arbitral tribunal)."
This verdict also overturned a May 9, 2023, single-judge ruling that had upheld the arbitration award. The bench found that RIL’s extraction of migrated gas from the Krishna-Godavari (KG) basin violated India’s New Exploration License Policy (NELP) and fundamental legal principles governing natural resources.
The Dispute: ONGC vs. RIL
The conflict dates back to allegations by ONGC that RIL was extracting gas that had naturally migrated from its own adjoining fields in the KG basin. ONGC claimed that this resulted in unjust enrichment for RIL at the cost of the public exchequer.
The Indian government, supporting ONGC’s claims, demanded $1.55 billion in compensation from RIL and its partners—BP Plc (30%) and Niko Resources (10%). However, in 2018, an international arbitration panel ruled in favor of RIL, stating that its Production Sharing Contract (PSC) did not restrict the extraction of naturally migrating gas.
The government then moved the Delhi High Court, arguing that the arbitral award went against public interest.
Key Investigations and Findings
- The dispute gained momentum in 2013 when ONGC informed the Directorate General of Hydrocarbons (DGH) about potential gas migration.
- A joint investigation involving U.S. consultancy firm DeGolyer and MacNaughton (D&M) confirmed in 2015 that gas worth ₹11,000 crore had flowed from ONGC’s fields into RIL’s KG-D6 block.
- Following this, a committee led by former Delhi High Court Chief Justice A.P. Shah recommended that RIL compensate the government for the extracted gas.
- The government then issued a demand notice of $1.5 billion in damages, plus $174 million in interest, leading to RIL’s arbitration plea in 2016.
What Happens Next?
With this ruling, the Indian government is now in a strong position to enforce its $1.7 billion claim against RIL. However, RIL can still challenge the decision in the Supreme Court of India.
Legal experts believe this ruling will have significant implications for India’s arbitration framework, particularly regarding disputes in the energy sector. The court emphasized that private companies cannot exploit national resources for profit at the cost of government oversight.
As the legal battle continues, industry observers are keenly watching whether RIL will escalate the matter further.
keywords: delhi high court, ril arbitration, ongc gas dispute, krishna-godavari basin, gas migration, energy arbitration, nelp policy, supreme court appeal
