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Govt to move Supreme Court on 3rd arbitrator in Reliance Industries’ KG-D6 gas case

In Nov 2011, Reliance Industries had started arbitration proceedings against the govt.

By: Press Trust of India | New Delhi |
July 20, 2014 3:12:20 pm
Oil Ministry may move the Supreme Court for appointment of an arbitrator in place of former Australian judge. (Reuters) Oil Ministry may move the Supreme Court for appointment of an arbitrator in place of former Australian judge. (Reuters)

Oil Ministry may move the Supreme Court for appointment of an arbitrator in place of former Australian judge who initially declined to become an umpire in Reliance Industries’ KG-D6 gas dispute but later relented on pleas made by the private firm.

The apex court had on April 29 named Michael Hudson McHugh, former judge of the High Court of Australia, as the third arbitrator in the dispute over cost recovery in KG-D6 gas block.

Sources said McHugh however, on May 20, withdrew as the chairman of the tribunal to which RIL had named former Chief Justice of Supreme Court S P Bharucha as its arbitrator and government appointed former Chief Justice of the apex court and V N Khare its counsel, saying he was not contacted before the appointment was made.

He however had a change of heart after counsels of the partners in KG-D6 block reportedly wrote to him.

The ministry, sources said, feels that an arbitrator appointed by the Supreme Court cannot reapoint himself once he has withdrawn.

Also, it views with suspicion the exparte emails exchanged between the counsels of KG-D6 parnters and the third arbitrator, subsequent to which McHugh had accepted to be the Chairman of the Tribunal, sources said, adding that the government has already asked McHugh not to act further in the matter.

The Oil Ministry has asked permission of the Law Ministry to file a petition under Section 11 read with Section 15(2) of the Arbitration and Conciliation Act 1996 for appointment of the third arbitrator on an urgent basis.

In November 2011, RIL had started arbitration proceedings against the government, seeking a decision on its entitlement to recover investments made in the KG-D6 gas field from sales.

The government had disallowed as much as USD 1.005 billion of its investment as KG-D6 output lagged targets. Production from main fields in the block was way short of 80 million standard cubic meters per day target.

The cost disallowed was raised to USD 2.376 billion for output lagging targets in four years ending March 31, 2014.

RIL and its partners say the action is not as per the Production Sharing Contract (PSC) and they are entitled to recover all costs of the block in the Bay of Bengal.

However, the arbitration couldn’t start as the government refused to play ball and it was only after two-and-a-half years that the third arbitrator was appointed by the Supreme Court.

Withdrawing from the Tribunal, McHugh had stated that would not be available before September 15 due to his previous preoccupations and since the Supreme Court wanted the process to be expedited, he would not be able to act as the Chairman of the tribunal.

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