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Updated: April 18, 2012 22:27 IST

RIL moves court seeking arbitration on KG basin

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A view of Reliance KG D6
A view of Reliance KG D6

Move comes in the wake of Centre's refusal to settle dispute

Reliance Industries Ltd. (RIL), on Wednesday, approached the Supreme Court, seeking appointment of an arbitrator on behalf of the government to decide its dispute over recovery of cost in the Krishna-Godavari (KG) basin.

The move comes in the wake of government's refusal to settle the dispute through arbitration.

The petition, filed by RIL, said it had already appointed former Chief Justice of India S. P. Bharucha as arbitrator but the government had not done so as per the contractual obligation.

In the petition, RIL has asked the Chief Justice of India S. H. Kapadia to appoint a second arbitrator on behalf of the government.

The petition, filed through advocate Sameer Parekh, said that as per the contract, the government could not reduce the recovery amount.

The Petroleum Ministry had proposed to restrict the cost of around Rs.6,343 crore, which the company had sought to recover for developing the KG D6 field.

RIL had issued an arbitration notice to the government on November 23, 2011, proposing appointment of a former Chief Justice of India S. P. Barucha as arbitrator in the dispute and asked the Ministry to appoint a second arbitrator. However, the government had refused the plea of RIL, saying there was no dispute, the advocate said.

RIL's petition stated that instead of appointing an arbitrator as per the Arbitration Agreement contained in the Production Sharing Contract (PSC), dated April 12, 2000, the government had called upon the company to withdraw the November 23 arbitration notice.

It said the contentions raised by the government to deny the recovery cost were ‘entirely misconceived' and “are nowhere envisaged in the terms of the PSC.”

The petition stated that RIL and the Directorate General of Hydrocarbons and the Ministry of Petroleum and Natural Gas (MoPNG) had differed over the scope and interpretation of the provisions of the PSC relating to contractor's obligations in achieving rates of production, carrying out activities such as drilling of development wells and the consequent entitlement of the contractor to recover the incurred costs.

Seeking apex court's direction to appoint ‘a fit and proper person' as the second arbitrator, RIL said the “disagreements and differences, which have arisen, will inevitably lead to serious problems in the working of the PSC.''

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