New Delhi: Mukesh Ambani-led Reliance Industries Ltd (RIL) Wednesday approached Supreme Court seeking appointment of an arbitrator on behalf of government to decide its dispute with it over recovery of cost for developing the country's key natural gas field in the Krishna-Godavari (KG) basin.
The move came in the wake of government's refusal to settle the dispute through arbitration over recovery of cost incurred by the company in developing the D6 hydrocarbon field in the KG basin.
The petition filed by RIL said it has already appointed former Chief Justice of India S P Bharucha as arbitrator but the government has 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 government cannot 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 has refused the plea of RIL saying there is no dispute, the advocate said.
RIL's petition stated that instead of appointing an arbitrator as per the Arbitration Agreement contained in Production Sharing Contract (PSC) dated April 12, 2000, the government has called upon the company to withraw 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 Production Sharing Contract,"
The petition stated that RIL and the Directorate General of Hydrocarbons and the Ministry of Petroleum and Natural Gas (MoPNG) have 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 like 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 PSC".
"The Petitioners submit that even on technical and factual issues, serious disputes/disagreements have come about as to the state of the hydrocarbon reservoir and the need to carry out certain activities.
"The disputes have reached a point that the respondent (Centre) has refused to approve the revised work program and budgets for 2010-11 and 2011-12 until such time as the petitioners (RIL) agree, as it were, to a schedule to drill, complete and connect more development wells as per addendum to initial development plan," it stated.
The company said the problems may also lead to situation where the government "may deny the right of the contractors to recover the actual costs incurred by it".
RIL said the government has "wrongfully" called upon it to withdraw the notice of arbitration.
It said "clearly there is no scope of the differences, disagreement or controversy being settled amicably given the respondents calling upon the petitioner to withdraw the notice of arbitration.
"It is clear that the respondent has no intent or willingness to negotiate or amicably settle the same and is unwilling to aim for a mutually acceptable solution".
RIL was the successful joint bidder in respect of the KG-D6 in the off shore fields on the east coast of India.
Niko (NECO) Ltd, a company incorporated in the Cayman Islands, is also one of the petitioners in the plea filed by RIL. Niko has been a party to the PSC from the time of its execution on 12th April, 2000.
BP Exploration (Alpha) Ltd, (a company incorporated in England and Wales) is a consortium partners of RIL as defined in the PSC.
Centre had on August 8, 2011 granted approval to RIL to assign 30 percent of its participating interest under the PSC to BP, hence making BP a partner in the Block KG-D6.
The PSC relates to the exploration of petroleum resources in the block KG-D6.
RIL has maintained that the costs incurred by it in the exploration, development and production of hydrocarbons, are fully recoverable as per the PSC.
The petition states that RIL had on November 23, 2011, served an arbitration notice to the Centre calling upon the government to nominate the second arbitrator within a period of 30 days as \ contemplated under the PSC.
RIL said after requesting extension of time the Centre "failed to appoint the second arbitrator"
"On the contrary, by a letter dated January 25 2012, addressed to RIL in reply to RIL, the respondent called upon petitioner to withdraw the notice of arbitration on the ground that the same was premature," it said.
First Published: Wednesday, April 18, 2012, 14:55