The prolonged litigation between ONGC and Reliance Industries Limited began when ONGC alleged gas reserves in the Reliance Block and ONGC Block were interlinked, resulting in the flow of natural gas. In a setback for Reliance Industries Limited (RIL), the Delhi High Court on February 15, 2025, set aside an international arbitral award of 2018 that had benefited the Reliance company and its foreign partners in their dispute over gas migration from fields that operated by the government-owned oil corporation i.e. Oil and Natural Gas Corporation (ONGC) in the Krishna Godavari (KG) basin. An international arbitration tribunal rejected the Indian government’s $1.55 billion claim against RIL and its partners as a basis for allegedly extracting gas from reservoirs it had no right to exploit during July 2018. The central government has appealed against a judgment dated May 9, 2023, by a single judge of the high court who had upheld the arbitral award for the benefit of Reliance Industries.
Delhi’s HC’s Ruling and Reversal of the Award :
In the impugned 79-page judgment, the bench said, “We have no option but to set aside the order impugned by the learned Single Judge and the Arbitral Award passed by the learned AT (arbitral tribunal)”. It added that, ‘in any case, the actions of RIL regarding the extraction of ‘Migrated Gas’ were contrary to NELP (New Exploration License Policy) and also other basic legislations of India.’
“Consequently, RIL in the context of the aforesaid violation not only could extract huge quantities of ‘Migrated Gas’ belonging to the ONGC Block but also was enriched out of the profits thereof at the cost of causing losses to the public exchequer more particularly as the subject matter was/is a precious natural resource trustee on behalf of UOI in the in the public interest of the citizens of this country,” remarked the judge.
“Such a private entity as RIL cannot be permitted to take over SOE for its private gain, meanwhile UOI would be fooled by a silence trick, and this is beyond the letter and the spirit of the PSC (Production Sharing Contract),” the judge remarked.
In a setback to Mukesh Ambani-controlled Reliance Industries Ltd (RIL), the Delhi High Court on Friday quashed an arbitral award that had dismissed the Central government’s claims against (RIL) in the Krishna Godavari (KG) basin displaced gas dispute.
Later the division bench of Delhi High Court had set aside the Impugned Order dated 9 May 2023 passed by the learned single judge and also the arbitral award passed by the learned arbitral tribunal in 2018 as being contrary to a settled position of law along with any pending applications, having condition that if any party leaves the contract, it has to bear the costs.
At present a detailed judgment has been awaited which will further elaborate on the complete issue.
Legal and financial implication of Product Sharing Contract (PSC) :
In April 2000, a group led by Reliance Industries Limited signed a production sharing contract (PSC) with the Central government for exploring and the extraction of natural gas from the Krishna-Godavari (KG) Basin, off the coast of Andhra Pradesh.
The production-sharing contract included the rights, obligations, and revenue-sharing terms between the parties, i.e. ONGC and RIL.
The ruling affirmed that the gas pools in the Reliance and ONGC blocks appeared connected, indicating possible transmission of natural gas from ONGC’s fields into Reliance’s manufacturing area.
After this finding, the Ministry of Petroleum and Natural Gas claimed compensation against Reliance and its partners, claiming approximately $1.5 billion, along with $174 million in interest as an addition. The claim was based on the statement that Reliance had unfairly benefited from the gas extraction that may have been transmitted from ONGC’s adjoining blocks.
In November 2016, the government’s argument was further strengthened after the submission of an expert report prepared by Justice AP Shah. The report skewed toward isolating gas migration as the cause, and the Ministry therefore maintained — and even increased — its total demand to over $1.5 billion, which includes interest.
Reliance Industries then invoked the arbitration provision as per the provisions of the PSC and sought reference to an international arbitration tribunal.
In July 2018, the arbitral tribunal passed its final award in the matter, largely for the benefit of Reliance Industries Limited. The tribunal ruled against most of the government’s claims, in what was a major legal win for Reliance in a protracted dispute.
Earlier, in May 2023, the Delhi High Court reaffirmed an arbitral award that dismissed the Central government’s demand against RIL in the dispute.
In a comprehensive order, Justice Anup Bhambhani ruled that the tribunal’s award does not conflict with the meaning of the term ‘’public policy of India’’ and that the public trust doctrine was not violated by Reliance company. The bench observed that the reasoning given by the tribunal are factual determinations that cannot be reconsidered by the Court in the exercise of its powers as per Section 34 of the Arbitration and Conciliation Act. The Court emphasized that conclusions of fact by the tribunal are entirely rational, cogent, and logical.
Thus, under Section 37 of the Arbitration Act, the Central government filed a plea in the court. The Delhi High Court on February 14th quashed an arbitration award that had gone in favor of Mukesh Ambani’s Reliance Industries Limited (RIL) in the ongoing gas migration dispute in the Krishna-Godavari (KG) basin. The supreme court’s decision comes as a setback for RIL, reviving the Indian government’s $1.5 billion claim against RIL for the 2012 gas pricing, alleging ‘unfair’ extraction of gas from ONGC’s fields. The court said the previous award was contrary to settled legal principles, dealing a significant legal blow to RIL. Mukesh Ambani‘s Reliance Industries Limited (RIL) has been dealt a major legal blow.
The Delhi High Court on Friday set aside an arbitration award that had previously dismissed the Indian government’s claims against Reliance Industries Ltd (RIL) in the Krishna Godavari (KG) basin gas migration case.
The legal battle between Reliance Industries Limited (RIL) and the Indian government, over an alleged gas migration from the adjacent fields of the Krishna-Godavari (KG) Basin, reached a pivotal moment when Justices Rekha Palli and Saurabh Banerjee delivered a ruling that overturned both May 9, 2023 order of the single judge and the 2018 arbitral award. Their decision was grounded in the premise that the prior judgments contravened established legal principles, and they ruled to annul the earlier verdict, leaving the parties to bear their respective costs.
The origins of this long-running dispute date back to April 2000, when RIL and its partners signed the contract namely the Production Sharing Contract (PSC) with the Indian government, granting the consortium the rights to explore and extract natural gas from the KG Basin off the Andhra Pradesh coast. The agreement delineated the operational responsibilities and revenue-sharing framework between the parties which further laid the foundation for years of collaboration as well as contention.
The situation took a sharp turn in 2013 when the Oil and Natural Gas Corporation (ONGC) raised concerns regarding the potential migration of natural gas from its fields to those under RIL’s control. In a letter to the Directorate General of Hydrocarbons (DGH), ONGC referenced technical studies suggesting that the gas reservoirs in its holdings were interconnected with those in the KG-D6 block, operated by RIL. This alleged migration of gas became the focal point of the dispute.
In response, the Ministry of Petroleum and Natural Gas (MoPNG) demanded that RIL and its consortium partners reimburse the government approximately $1.5 billion, with an additional $174 million in interest. The government’s position was that RIL had unlawfully extracted gas that rightfully belonged to ONGC, resulting in unjust enrichment for the company.
This assertion gained traction in 2016, when an independent report by Justice AP Shah, a former Chief Justice of the Delhi High Court, bolstered the government’s claims by affirming the likelihood of gas migration. As a consequence, the government revised its claim to an even larger sum.
RIL, however, vehemently disagreed with the government’s characterization of the situation and invoked the dispute resolution mechanism enshrined in the PSC, initiating proceedings before an international arbitration tribunal. In July 2018, the tribunal issued its ruling, largely siding with RIL. The tribunal concluded that RIL had not violated the terms of the PSC, as the extraction of the migrated gas from the KG-D6 block fell within the parameters of the contract. The tribunal also dismissed the government’s allegations of fraud and improper conduct.
Despite this favorable ruling, the Indian government remained resolute and sought to challenge the arbitration decision, arguing that it contravened public policy. In 2023, the Delhi High Court’s single bench upheld the tribunal’s verdict, with Justice Anup Bhambhani stating that the tribunal’s decision was neither inconsistent with India’s public policy nor a breach of the public trust doctrine.
Nevertheless, the government pursued further legal recourse, bringing the case before a division bench of the Delhi High Court, which, on February 16, 2025, sided with the government. Justices Palli and Banerjee, in their nuanced judgment, found that both the 2023 ruling and the arbitral award were in direct contradiction to established legal principles, thereby setting aside the previous decisions and reaffirming the government’s claims.
This legal battle has not only tested the boundaries of contract law and international arbitration but has also highlighted the complex interplay between state interests, corporate operations, and the protection of public resources.
Varsha, a socially conscious and driven law student from Nashik,maharashtra who believes in justice, equality, and policy reforms for a better society. She is analytical, solution-oriented, and committed to creating positive change through legal and ethical means.
