The KG Basin is considered to be the largest natural gas basin in India; spreads across 50,000 sq km in the Krishna and Godavari river basins near the coast of Andhra Pradesh. The site Dhirubhai-6 (D6) is where Reliance Industries (RIL) has been in government records, granted the 7,645 sq km block known as the KG-DWN-98/3.
After the Government of India opened up hydrocarbon exploration and production (E&P) in the country to private and foreign players in 1991, small and medium sized blocks were opened up and it was furthered by giving out bigger blocks in 1999 as per the New Exploration and Licensing Policy (NELP). Through this NELP, RIL with a UK based company and NIKO (a Canadian company) bagged the rights to explore the D6 block.
Arbitration dispute
The crux of the dispute between RIL and the Central Government relates to cost recovery. It mainly refers to the government's decision to penalise RIL for the drastic fall in output. The Arbitration petition was filed by RIL and the two other companies to appoint a third and presiding arbitrator of a neutral nationality as the two arbitrators appointed i.e. Justice Bharucha by RIL and Justice V.N.Khare by Union, failed to appoint a third arbitrator, as per the Arbitration agreement. The dispute relates to financial year 2010-2011 when differences relating to scope and interpretation of the contract arose after publication of some media reports. These reports suggested that the Union of India was planning to disallow cost recovery of expenditures incurred by contractors since production from the gas fields had fallen drastically.
Ongoing PILs
Apart from this, there is an ongoing final hearing pertaining to PILs filed by CPI MP Mr. Gurudas Dasgupta and Common Cause, an NGO heard by a 3 judge bench of the Supreme Court. Mr. Gurudas Dasgupta has requested an order for relinquishment of the area given to RIL and NIKO, for directing Union to effect reversal of cost recovery for the amount of US $ 1.8 Billion and staying the arbitration proceedings. Common cause, on the other hand seeks cancellation of the PSC concerning the KG block based on gold plating, quashing of increase in gas prices, relinquishment and ordering a thorough investigation by monitoring the investigations in the FIR filed by the Kejriwal led Delhi Govt through Anti corruption Bureau or forming a Special Investigation Team into alleged money laundering of Rs. 6500 crores by RIL.
Twin Aspects
1.) In a sensitive matter like this, where serious allegations of collusion between RIL and Government are still being heard very carefully by a 3 judge bench of the Supreme Court, it is extremely hard to expect an arbitration
proceeding to give any fruitful result. Moreover, a monitored criminal investigation is being demanded into the matter with an FIR already lodged by the erstwhile Delhi Government on gas pricing, which also is being considered by the court, which may make any arbitration proceeding infructuous as matters of criminal nature as per the settled legal regime are not arbitrable.
2.) It is settled law that once a judgment is pronounced by a judicial authority it cannot just ‘withdraw’ it. The remedies available are to file an appeal or a review or whatsoever. But a court cannot cleverly use ‘withdraw’ instead of a harsh ‘cancel’ to just nullify a duly pronounced and reportable judgment like this.
So, does the arbitration stand cancelled or its on hold for now? What if a communication has been sent to the Australian arbitrator and he agreed? As per the law, any challenge to the jurisdiction of an arbitrator can be raised only in front of him. Statute books are thus, once again kept aside.
Let us now see, the effect of any order passed in the PIL on arbitration so achieved by RIL after years of correspondence and litigation. Fingers crossed.
Namit Saxena is law graduate from Dr. RML National law University, Lucknow and currently working as a Law Clerk cum Research Assistant in the Supreme Court.