“This Court is not persuaded to hold that the findings arrived at by the arbitral tribunal are such that a reasonable person would not reach. Suffice it to say that the approach taken by the arbitral tribunal is certainly a ‘probable approach’ which does not call for any interference… … this Court finds no ground to interfere with the majority arbitration 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 upheld its demand for about $1.6 billion in costs including interest and $175 million in additional cumulative profit petroleum payable till March 31, 2016, as “unjust enrichment”. Paid for. by RIL.
The case dates back to 2013 when ONGC shared a common gas pool by claiming its IG and KG-DWN-98/2 blocks adjacent to RIL’s KG-D6 field. ONGC further said that RIL, which had already commissioned KG-D6, was extracting gas from its blocks which were under development and moved court.
Once US consultants DeGolier & McNaughton (D&M), appointed under court orders for an independent study, confirmed the continuity of the gas pools, the ministry appointed a one-member committee headed by retired Delhi HC chief justice AP Shah to suggest a course of action. Committee appointed.
The committee said that RIL had made “undue” enrichment and was liable to pay. The ministry then imposed costs on RIL, which challenged it through international arbitration. The arbitration panel rejected the government’s allegations and asked the Center to pay legal costs to RIL. The government challenged this in the court.
The court upheld the arbitral tribunal’s dismissal of the government’s allegation of undue enrichment by RIL. “In the opinion of this Court, firstly, the above findings are factual findings drawn by the arbitral tribunal, which cannot be second guessed by this Court…Secondly, in the opinion of this Court, the factual findings are entirely reasonable , consistent and logical, especially considering what was involved in the PSC (Production Sharing Contract) was a purely commercial transaction entered into by the two contracting parties,” the court said.
The tribunal had said, “RIL extracted whatever gas became available in the course of petroleum operations within its contract area. Reliance deducted ‘cost of petroleum’, calculated ‘profit petroleum’ and required share of profit petroleum. The ministry has not alleged that Reliance did not pay its share of petroleum profit for the entire quantity of gas extracted by Reliance including migrated gas.
On the allegation of fraud by RIL by concealing knowledge about the continuity of the gas pool, the tribunal had said, “Non-disclosure of a single D&M Report-2003, though a technical breach of the terms of the PSC, was not a material breach Contract. The arbitral tribunal also observes that the ministry would not have ordered unit-development. The arbitral tribunal observes that the ministry was not deprived of the benefits of Reliance’s gas production from the contract area.