The Supreme Court has referred the long-standing dispute between Reliance Industries Limited (RIL) and the Union Government over the alleged extraction of natural gas that migrated from adjoining Oil and Natural Gas Corporation (ONGC) fields into Reliance’s KG-D6 block to mediation.
A Bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana requested former Supreme Court judge Justice Ranjana Prakash Desai to mediate the dispute. The mediator has also been requested to seek assistance from two domain experts, to be suggested by the parties.
The order was passed after the Court was informed that repeated attempts by the parties to explore an amicable settlement had failed to produce a mutually acceptable resolution.
Attorney General R. Venkataramani, appearing for the Union Government, and Senior Advocate Kapil Sibal, representing Reliance, informed the Bench that despite seeking adjournments on earlier occasions to facilitate settlement discussions, the parties had been unable to arrive at a workable solution.
Taking note of the submissions, the Bench observed that both sides had been given opportunities to explore a negotiated resolution but had not succeeded in identifying a viable settlement.
In these circumstances, the Court considered it appropriate to appoint an independent mediator with experience in handling complex disputes. It accordingly requested Justice Desai to undertake the mediation process, assisted by two technical experts whose names would be proposed by the parties.
The proceedings arise out of a contentious dispute concerning the alleged migration of natural gas between neighbouring blocks in the Krishna-Godavari basin off the eastern coast of India.
The controversy dates back to allegations raised by ONGC in 2013 that natural gas from its adjoining exploration blocks had migrated into the KG-D6 block operated by Reliance and its consortium partners, British Petroleum Exploration (Alpha) Limited and Niko (NECO) Limited.
ONGC maintained that the reservoirs in the neighbouring blocks were interconnected and that gas originally belonging to its fields had flowed into the Reliance-operated area, where it was subsequently extracted and sold.
A technical assessment conducted by DeGolyer and MacNaughton indicated connectivity between the reservoirs. Following the findings, the Union Government constituted a committee headed by former Supreme Court judge Justice A.P. Shah to examine the allegations.
Subsequently, the Government raised a demand of approximately USD 1.74 billion, along with interest, against Reliance for the alleged extraction of migrated gas.
Reliance disputed the demand and invoked arbitration under the Production Sharing Contract (PSC) governing exploration and production activities in the KG-D6 block.
In 2018, a majority of the arbitral tribunal ruled in favour of Reliance and its consortium partners. Although the tribunal found that Reliance had failed to disclose certain technical information relating to reservoir connectivity, it concluded that the contractual breach did not constitute a material violation warranting the relief claimed by the Government.
The Union Government challenged the arbitral award before the Delhi High Court.
On February 14, 2025, a Division Bench of the Delhi High Court set aside the arbitral award, holding that it suffered from patent illegality and was contrary to public policy.
The High Court underscored that natural resources are held by the State in trust for the people and that the Government’s failure to immediately object could not be construed as permission to extract gas belonging to an adjoining block.
It also questioned the arbitral tribunal’s approach to the alleged non-disclosure of technical information and its implications for the contractual obligations of the consortium.
Aggrieved by the High Court’s decision, Reliance and its consortium partners approached the Supreme Court, challenging the setting aside of the arbitral award.
The Supreme Court’s decision to refer the dispute to mediation offers the parties another opportunity to resolve the complex contractual and technical issues through a negotiated settlement, potentially bringing an end to litigation that has continued for several years.
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