Supreme Court Appoints Justice RP Desai To Mediate Reliance-Government Dispute Over KG Basin Gas Extraction
The Supreme Court on Friday referred the long standing dispute between Reliance Industries Limited (RIL) and the Union Government over the extraction of natural gas from the Krishna Godavari (KG) basin to mediation.
A bench comprising Chief Justice of India Surya Kant, Justices Joymalya Bagchi and V. Mohana requested former Supreme Court judge Justice Ranjana Prakash Desai to mediate the dispute.
It also asked her to take assistance from two domain experts to be suggested by the parties. The Court noted that despite repeated adjournments to facilitate settlement discussions, the parties had failed to arrive at a mutually acceptable resolution.
"Both sides have requested adjournment from time to time to enable the parties to explore settlement. We are informed that they themselves have not been able to find out a viable solution. In view of the request made on their behalf, we request Justice Ranjana P. Desai to act as the mediator. We also request her to have the assistance of two domain experts as may be suggested by the parties.", the Court ordered.
Attorney General R. Venkataramani and Senior Advocate Kapil Sibal informed the bench that the discussions had not yielded a settlement.
The dispute stems from allegations by the Oil and Natural Gas Corporation (ONGC) that natural gas from its adjoining block in the KG basin had migrated into the block operated by RIL and was extracted by the latter. A study conducted by DeGolyer and MacNaughton indicated connectivity between the reservoirs, following which the Union Government constituted a committee headed by former Supreme Court judge Justice A.P. Shah to examine the issue.
Based on the committee's findings, the Government issued a demand notice seeking approximately USD 1.74 billion, along with interest, from RIL for the alleged extraction of migrated gas. RIL challenged the demand through arbitration under the Production Sharing Contract governing its exploration and extraction operations.
The arbitral tribunal, by a majority award, held that although RIL had breached certain contractual obligations, the violations did not constitute a material breach warranting the relief sought by the Government. The Centre challenged the award before the Delhi High Court, which set it aside in February 2025 on the ground of patent illegality.
The High Court observed that the Government, as trustee of the country's natural resources, could not be presumed to have consented to the extraction of migrated gas merely because it had remained silent. It emphasised that natural resources are held by the State in trust for the public and must be exploited in accordance with the applicable legal and contractual framework.