Former CJ Khare to defend Centre in arbitration case against RIL

Centre asks DGH to take further necessary action as per the notice given to the contractors

After having charged Reliance Industries Limited (RIL) with “deliberate and wilful” breach of production sharing contract (PSC), the government has decided to appoint former Chief Justice of India V. N. Khare to head the team that includes law firm Swarup & Co and possibly former Solicitor General Gopal Subramanium to defend it in its arbitration battle in the KG-D6 cost recovery dispute.

Sources in the Petroleum and Natural Gas Ministry said that the government had given its nod for the appointment of Dr. Khare and the file had been sent to the Law and Justice Ministry for approval. In addition, the government had also decided to appoint Swarup & Co as solicitors to deal with the arbitration issues. The law firm will be closely associated with Mr. Subramaninum in contesting the arbitration notice served on the Ministry by RIL in November last year. RIL had subsequently gone to the Supreme Court with its grievance.

The Hindu had, on May 10, reported that Mr. Subramanium had been sounded by the government to be part of the arbitration panel against RIL. Mr. Subramanium was the Solicitor General and advising the government, during the gas dispute case between the Ambani brothers.

At the same time, the government has also asked the Directorate-General of Hydrocarbons (DGH) to take further necessary action as per the notice given to the contractors — RIL, Niko and BP — as being the nominees of the government in the management committee (MC) and also to ensure compliance of the directives given to the contractors in the said notice. The Ministry had also charged RIL with being only interested in recovering its cost, which it is not entitled to under the PSC. The Solicitor General had, in his legal opinion to the Petroleum Ministry, stated that media reports could not be a basis for arbitration as cited by RIL and it was now time for the government to go in for arbitration to put things in perspective. The Solicitor-General has felt that $1 billion was cost recoverable from RIL and RIL would only have minimum loss in terms of interest of $1 billion.

In the notice to RIL, Petroleum and Natural Gas Ministry Joint Secretary Giridhar Aramane had stated that “While you (RIL) have failed to observe and comply with the amended initial field development plan (IDP) and are in breach of PSC, you have only been interested in recovery of your own costs, which you are not entitled to under the PSC. Despite repeated requests by the government in various correspondences and also in the MC meetings to comply with your commitments in terms of the approved amended IDP, you have also, till date, failed to satisfactorily respond to and perform your obligations in terms of good international petroleum industry practices as required under the PSC.” The government had disallowed RIL’s $1.2-billion cost recovery from its investment in the KG-D6 field. The Petroleum Ministry had disallowed a cost recovery of $457 million for 2010-11 and $778 million for 2011-12 due to RIL’s failure to meet drilling commitments.