The Supreme Court on Friday referred a long-standing legal dispute between the Centre and a Reliance Industries Limited (RIL)-led consortium to mediation. The case, which concerns the alleged migration of natural gas from state-run ONGC blocks to RIL-operated fields in the Krishna-Godavari (KG) basin off the Andhra Pradesh coast, has been a subject of protracted litigation for over a decade.
A three-judge bench led by Chief Justice of India Surya Kant, along with Justices Joymalya Bagchi and Vipul M. Pancholi, appointed former Supreme Court judge Justice Ranjana Prakash Desai as the mediator. The court’s decision came after both parties informed the bench that previous efforts to reach a resolution had remained unsuccessful. During the proceedings, Attorney General R. Venkataramani, representing the Centre, and Senior Advocate Kapil Sibal, appearing for the consortium, formally urged the court to allow for a mediated settlement.
Highlighting the complexity of the commercial dispute, the Chief Justice noted that Justice Desai’s extensive experience made her an appropriate choice to oversee the negotiations. The bench further requested that the mediator utilize the assistance of two domain experts to be recommended by the involved parties, providing a structured framework for the upcoming discussions.
The roots of this conflict trace back to a production-sharing contract signed in 2000, which granted an RIL-led consortium rights to explore and extract natural gas from the KG basin. Commercial production at the assets began in April 2009, with RIL holding a 60 percent stake, BP Plc 30 percent, and Niko Resources holding the remaining 10 percent. The operational areas were located adjacent to ONGC’s Godavari mining lease and the KG-DWN-98/2 block.
In 2013, ONGC raised allegations that RIL had been illegally extracting natural gas from its blocks. The state-run company contended that RIL’s drilling activities near the boundary of the hydrocarbon blocks allowed gas to flow from ONGC's fields into RIL’s KG-D6 block between 2009 and 2013. The government subsequently sought disgorgement from the consortium, demanding approximately $1.5 billion, along with an additional $174 million in interest, alleging "unjust enrichment."
The dispute eventually reached an arbitral tribunal, which in July 2018 ruled in favor of the RIL consortium. The tribunal rejected the government’s claims, asserting that the production-sharing contract did not explicitly prohibit contractors from extracting or selling gas that had migrated from an external source. While the Centre initially challenged this award in the Delhi High Court, a single-judge bench dismissed the petition in May 2024. However, a subsequent appeal to a division bench of the Delhi High Court resulted in that order being set aside, with the court ruling that the arbitral award contradicted the settled position of law.
Following the reversal in the Delhi High Court, the RIL-led consortium moved the Supreme Court, leading to the current appointment of a mediator. As the matter moves toward mediation, both the government and the corporate consortium are expected to explore a viable, negotiated path to resolve the substantial financial and legal questions raised by the alleged migration of natural gas.
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