Delhi HC dismisses govt appeal accusing Reliance of 'fraud, unjust enrichment of over $1.729 billion' for siphoning gas

 Synopsis

The Delhi High Court dismissed the Indian government's petition that accused Reliance Industries and its partners of "insidious fraud" and a "unjust enrichment" of $1.729bn by siphoning gas from deposits they did not have the right to exploit. The government had demanded $1.47bn from RIL in 2014 for draining and selling gas that migrated from neighbouring ONGC blocks that share borders with RIL's block. However, the RIL-led consortium including UK-based BP and Canada's Niko Resources was cleared by the International arbitration award on July 24, 2018.

In a set back to the government, the Delhi High Court on Tuesday dismissed its petition accusing Mukesh Ambani-led Reliance Industries (RIL) and its partners of committing an “insidious fraud” and “unjust enrichment of over $1.729 billion” by siphoning gas from deposits they had no right to exploit.

Justice Anup Jairam Bhambhani while upholding the international arbitration award of July 24, 2018, that ruled in favour of RIL-led consortium that includes UK-based BP Plc and Niko Resources of Canada said “no interference” is called for.

The government had sought setting aside of the arbitration award on the grounds that “the award strikes at the heart of the public policy and has given a premium to a contractor (RIL) that has amassed vast wealth by committing an insidious fraud as well as criminal offence …”

“The unjust enrichment amassed by the contractor had already reached more than $1.729 billion today (at the time of filing petition), and is since increasing as the production of migrated gas is still continuing,” it had stated in its petition.

Favouring RIL-led consortium in the so-called gas migration dispute case, the three-member tribunal headed by Singapore-based arbitrator Lawrence Boo in its 2:1 award in July 2018 had rejected the government’s contention. It said that the production sharing contract (PSC) doesn’t prohibit the contractor from producing gas—irrespective of its source—as long as the producing wells were located inside the contract area. It also had held that the consortium was not be liable to pay any amount to the government and had also directed the latter to pay $8.3 million as the cost of arbitration to the consortium.

The government had raised a demand of $1.47 billion in 2014 upon RIL, the contractor of KG-DWN-98/3 block in the KG basin in the Bay of Bengal, for disgorgement of unjust enrichment made by draining and selling the gas that migrated from adjacent ONGC blocks – Godavari PML and KG-DWN-98/2, which share borders with the RIL’s block. It said that RIL was neither entitled to produce as per the PSC nor had any express permission from the government.

In 2014, state-run ONGC approached the Delhi High Court, complaining that gas from its blocks was being produced by RIL.

The two companies had appointed US-based consulting agency DeGolyer and MacNaughton (D&M), to examine the issue. D&M said development of the RIL block would be “capable of depleting (original gas in-place) on the Godavari PML block.”