A three-judge bench led by Chief Justice Surya Kant and Justices Joymalya Bagchi and Vipul M Pancholi is hearing appeals by Reliance Industries Ltd (RIL), BP Exploration (Alpha) Ltd and Niko (NECO) Ltd against a Delhi High Court verdict that set aside an arbitral award in their favour. According to ETEnergyworld, senior advocate Abhishek Singhvi, appearing for RIL, strongly refuted the Centre's claim that the companies allegedly siphoned gas from the Krishna-Godavari basin deposits. Singhvi argued that gas migration cannot be caused intentionally and could be incidental, questioning how RIL and partners can be accused of causing migration when ONGC was sleeping over for 10 years while operationalising gas extraction. The bench agreed with this point, stating that gas migration cannot be caused intentionally and could be incidental.
The case centers on gas migration from ONGC's blocks to the KG-D6 field operated by the RIL-led consortium. As reported by ETEnergyworld, the oil ministry slapped a demand of $1.47 billion on the Reliance-BP-Niko combine for producing in seven years ending March 31, 2016 about 338.332 million British thermal units of gas that had seeped or migrated from ONGC's blocks into their adjoining KG-D6 in the Bay of Bengal. In 2013, ONGC raised concerns that gas reservoirs in its blocks might be connected to those in the KG-D6 field. RIL and ONGC jointly appointed the US consulting firm DeGolyer and MacNaughton (D&M) to examine the issue. In 2015, D&M concluded that gas worth over ₹11,000 crore had migrated from ONGC's fields to KG-D6 operated by the RIL-led consortium. Following this report, the Centre formed a committee headed by former Delhi High Court Chief Justice A.P. Shah, which concluded that RIL had been "unjustly enriched" and should compensate the government.
The case dates back to April 2000, when RIL and its partners signed a production sharing contract (PSC) with the government for the KG-D6 block off the coast of Andhra Pradesh. According to ETEnergyworld, RIL holds a 60% stake in the block, BP 30%, and Niko the remaining 10%. In November 2015, the oil ministry issued a demand notice seeking around $1.5 billion plus interest. RIL, BP and Niko initiated arbitration in 2016, with a three-member tribunal ruling 2:1 in favour of the consortium in July 2018, holding that the PSC did not prohibit extraction of naturally migrated gas as long as production occurred within the contract area. The tribunal also awarded $8.3 million compensation to the three partners, as reported by Reliance Industries in a regulatory filing.
The matter is being heard for the fourth straight day before the Supreme Court, with the hearing resuming on Friday. As reported by ETEnergyworld, Singhvi assailed the Delhi High Court division bench judgment setting aside the arbitral award, saying it impermissibly imported constitutional doctrines into a contractual arbitration dispute. He argued that the high court wrongly invoked Article 297 of the Constitution and the public trust doctrine to overturn concurrent findings of the arbitral tribunal and the single judge, despite neither principle prohibiting the extraction of migrated gas under the production sharing contract (PSC). The Centre challenged the tribunal award, with a single-judge bench ruling in favour of the RIL-led consortium in 2023, but a division bench set it aside in February 2025, paving the way for recovery proceedings against the consortium.
To be sure, Niko exited its 10% stake after settling with its partners RIL and BP for $36 million in 2019. According to ETEnergyworld, following Niko's exit, Reliance owns 66.67% and BP 33.33% in the asset. The Centre has now challenged the division bench's decision in the Supreme Court, with RIL and its partners challenging the division bench's decision in the Supreme Court. On Wednesday, the bench declined a submission by RIL to put the hearing in the case on hold for the time being as the company and two other foreign firms sought mediation or conciliation with the Centre for an amicable resolution.
