RIL tells SC KG Basin arbitration was international dispute, not domestic

Reliance Industries Ltd (RIL) on Wednesday told the Supreme Court that the Delhi high court wrongly treated the $1.7 billion Krishna-Godavari (KG) Basin gas transit arbitration dispute as an internal dispute by ignoring the involvement of foreign partners BP Exploration and Niko Resources.

In an almost five-hour-long hearing before a bench led by Chief Justice Surya Kant, RIL’s lawyer Abhishek Manu Singhvi argued that the conglomerate was not pursuing the arbitration on its own but was merely acting as an operator under the production sharing agreement (PSC) on behalf of the entire consortium comprising RIL, BP and Niko.

Singhvi claimed that all investments under PSC were made by all three parties and not just by RIL. Therefore, the profit must be shared between three people.

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“These are all contractors and the PSC accepts that the operator, unlike the contractor, will act on behalf of the contractor. All investments are financed not only by the petitioner (RIL) but also by other parties, namely Nico and BP. And they have equal rights to the cost recovered and the profit earned.”

He argued that all three entities were collectively treated as “contractors” under the PSC, based on the notice calling for arbitration, the statement of claim, the hearing transcripts, and the arbitration award.

According to Singhvi, the arbitration notice stated that RIL had initiated proceedings “in the name and on behalf of all the constituents of the contractor”, namely RIL, BP and Niko, which hold 60%, 30% and 10% participating interest respectively in the KG-D6 block.

Senior counsel argued that the Delhi high court had selectively relied on the costs-related parts of the arbitration award to conclude that BP and Niko were not parties to the proceedings.

According to him, the tribunal comprising Singapore-based arbitrator Lawrence Boo, Supreme Court justices Justice GS Singhvi and Justice RV Raveendran had dismissed the claims for separate costs only because RIL was managing the proceedings as the operator and this cannot be used to convert an international commercial arbitration into a domestic arbitration.

Singhvi also relied on an earlier Supreme Court judgment from the same PSC to argue that the top court had already recognized the international nature of the disputes involving RIL, BP and Niko.

Ahead of the hearing, RIL and two other foreign firms had told the high court that they would write to the Center seeking mediation in the KG basin gas transit dispute. However, Solicitor General R. Venkataramani urged the top court to continue the hearing of the case. SC refused to stay the hearing in the case.

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On Tuesday, Singhvi said the cost of exploration and gas extraction was too high and the government was not investing anything. He said the consortium has created world-class deepwater infrastructure for the first time in India. He shares the gas, sells it to the person determined by the government, pays taxes, but is accused of theft. “This is something to be proud of and I am accused of theft with great respect,” Singhvi said.

The arguments came during the hearing of petitions filed by the RIL-led consortium challenging the Delhi high court’s order quashing the February order. ₹12,800 crore arbitration award in their favor in the dispute with the Union government and ONGC.

The hearing will continue on Thursday.

Conflict

The case dates back to April 2000, when RIL and its partners signed a PSC with the government for the KG-D6 block off the Andhra Pradesh coast. RIL holds 60% stake in the block, BP 30% and Niko the remaining 10%.

Of course, Niko exited his 10% stake after reaching an agreement with his partners for $36 million in 2019. The Canadian company defaulted on cash exploration payments for its investment share in the development of the gas field, leading to arbitration between the partners. After Niko’s departure, 66.67% of the asset belonged to Reliance and 33.33% to BP.

In 2013, ONGC had expressed concerns that gas reservoirs in its blocks could be linked to those in the KG-D6 field.

RIL and ONGC have jointly appointed US consultancy firm DeGolyer and MacNaughton (D&M) to study the matter. In 2015, D&M concluded that the value of the gas was above 2015. ₹11,000 crore had migrated from ONGC’s fields to KG-D6.

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Following the report, the Center constituted a committee headed by former Delhi high court chief justice AP Shah, which concluded that RIL was “unjustly enriched” and should pay compensation to the government. In November 2015, the oil ministry issued a demand notice seeking approximately $1.5 billion with interest.

RIL, BP and Niko initiated the arbitration in 2016. In 2018, the three-member arbitral tribunal ruled 2:1 in favor of the consortium and ruled that the PSC does not prohibit the extraction of naturally transported gas as long as production occurs within the contract area.

The Center objected to the award. While the single judge of the Delhi high court had ruled in favor of the RIL-led consortium in 2023, the division bench in February 2025 set aside this order, paving the way for recovery proceedings against the consortium.

RIL and its partners have now challenged the division bench order before the Supreme Court.