The government on Monday said it will pursue recovery of USD 3.85 billion from Reliance Industries and its partners in Panna/Mukta and Tapti oil and gas fields case and is mulling an appeal against an English court order over cost recovery dispute in same fields.
Reacting to an English High Court last week dismissing India's appeal against a USD 111 million international arbitration award in favour of Reliance Industries Ltd and Shell-owned BG Exploration and Production India Ltd (BGEPIL), the government in a statement said it has right to seek leave of English commercial court to challenge this judgment.
Reliance and BGEPIL on December 16, 2010, dragged the government to arbitration over cost recovery provisions, profit due to state and amount of statutory dues including royalty payable. They wanted to raise limit of cost that could be recovered from sale of oil and gas before profits are shared with government.
The Government of India also raised counter claims over expenditure incurred, inflated sales, excess cost recovery, and short accounting. A three-member arbitration panel, headed by Singapore-based lawyer Christopher Lau, by majority issued a final partial award (FPA) on October 12, 2016.
It upheld government view that profit from fields should be calculated after deducting prevailing tax of 33 per cent and not 50 per cent rate that existed earlier. It also upheld that cost recovery in contract is fixed at USD 545 million in Tapti gas field and USD 577.5 million in Panna-Mukta oil and gas field. The two firms wanted that cost provision be raised by USD 365 million in Tapti and USD 62.5 million in Panna-Mukta. Royalty, it said, had to be calculated after the inclusion of marketing margin charged over and above the wellhead price of natural gas.
The government used this award to seek USD 3.85 billion in dues from Reliance and BGEPIL.
"Disputes arose between the parties which were referred to arbitration for resolution in 2010. So far, the Arbitral Tribunal has passed eight substantial partial awards. 66 of the 69 issues were decided in favour of the Government of India in the final partial award passed by the Tribunal in 2016," an official statement said. Pursuant to the 2016 award, the government sought payment of USD 3.85 billion-plus interest from Reliance and BGEPIL.
"The Contractor (Reliance-BGEPIL) failed to make the payment as per the Award. Therefore, the Government has filed an application for execution of final partial award 2016 before the Delhi High Court," the statement added.
Reliance-BGEPIL challenged the final partial award of 2016 before the English Commercial Court. The challenges were classified under nine broad heads. "In April, 2018 the English Court passed a judgment,
in favor of Union of India, dismissing eight out of nine challenges," statement said."Regarding the ninth challenge, the Court directed that matter be remitted back to Tribunal, for reconsideration. The Tribunal subsequently passed its order on this challenge, partly in favour of Contractors.