On 9 June, India lost an appeal in the English high court against the arbitration award to Reliance Industries Ltd and BG Exploration related to production-sharing contracts concerning the Tapti and Panna-Mukta offshore oil fields.
In a statement on Monday, the Union ministry of petroleum and natural gas said: “The government of India has the right to seek leave of the English Commercial Court to challenge this judgment passed by it."
The matter is connected with Panna-Mukta and Tapti fields, where the Centre had executed two production-sharing contracts (PSCs) with Oil and Natural Gas Corp. Ltd, Reliance Industries and Enron (BG Exploration and Production India Ltd) on 22 December 1994.
Disputes arose between the parties, which were referred to arbitration for resolution in 2010. So far, the arbitral tribunal has passed eight substantial partial awards.
The ministry said that 66 of the 69 issues were decided in favour of the government in the final partial award passed by the tribunal in 2016.
Pursuant to the award, the Centre issued a demand letter to Reliance Industries and BG Exploration, calling upon them to pay an amount of $3.85 billion, excluding interest.
The ministry said that the companies failed to make the payment as per the award.
The government has also filed an application for execution of the final partial award 2016 before the Delhi high court.
The matter dates back to 2010, when the companies dragged India to arbitration over cost recovery provisions and profits due to the government, among other dues.
They sought to raise the limit of costs that could be recovered from the sale of oil and gas before profits were shared with the government.
In October 2016, an arbitration panel issued a final partial award (FPA) upholding the Centre’s view that the profit from the fields should be calculated after deducting the prevailing tax of 33% and not the 50% rate that existed earlier.
The panel also held that the cost recovery is fixed at $545 million in the Tapti gas field and $577.5 million in Panna-Mukta, turning down the appeal to raise the cost provision by $365 million and $62.5 million in Tapti and Panna-Mukta oil and gas fields, respectively.
Queries sent to spokespeople for Reliance and Shell remained unanswered till press time.
The Centre has been involved in long-drawn arbitration battles, including against British energy giant Cairn and telecom major Vodafone Group Plc.
Both these matters, however, pertained to retrospective taxation.
The government last year brought in the Taxation Laws (Amendment) Act, 2021 to amend the Income Tax Act, 1961 and the Finance Act of 2012, nullifying the retrospective taxation that was introduced with the Finance Act of 2012, thereby making way for settlement of protracted arbitration.
In the case of Cairn Energy, the Indian government has paid the company ₹7,900 crore to refund taxes it had collected to enforce a retrospective tax demand.
Vodafone Group had, in December last year, said that it had filed an application with the government to settle its ₹20,000 crore retrospective tax dispute.
In January last year, an arbitration tribunal ruled in favour of the two oil and gas companies. In its partial final award, the tribunal awarded around $111 million of the total of $260 million sought by them.
India then challenged the award under sections 68 and 69 of the Arbitration Act 1996 of Britain. The court, in its judgement last week, dismissed India’s argument under section 68.
India had claimed that the tribunal’s failure to apply principles of Indian constitutional law caused “substantial injustice".
