Delhi High Court Reserves Verdict In Vedanta's Appeal Against Rejection Of Oil Block Contract Extension Bid

The Delhi High Court on Thursday reserved judgment in Vedanta Ltd.'s appeal challenging the July 22, 2026 judgment of a Single Judge which upheld the Ministry of Petroleum and Natural Gas's rejection of Vedanta's application for extension of the Production Sharing Contract (PSC) for the CB-OS/2 oil and gas block in Gujarat.

The Single Judge held that Vedanta had rendered itself ineligible for extension by unilaterally deducting the Government's share of profit petroleum towards its Special Additional Excise Duty (SAED) liability while directing that the block and its assets be handed over to ONGC for continuation of petroleum operations.

A division bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta after hearing the parties, reserved judgment in the matter.

Appearing for Vedanta, Senior Advocate Jayant Mehta submitted that Vedanta was not claiming an automatic right to extension but only a right to fair consideration of its application.

“I am not saying you must give it to me but the consideration in the rejection is completely attacked to that extent.”, Mehta submitted.

On the SAED issue, Mehta submitted that Vedanta had repeatedly approached the Government for resolution before making the deduction and that the adjustment was made without prejudice to its rights.

Mehta also relied on the Government's stated shift from revenue maximisation to production maximisation.

“The minister is on record, on the floor of the House, it binds the Government, to say that from revenue maximisation, we are shifting to production maximising.”

The Bench questioned whether Vedanta was effectively seeking an entitlement to continue operating a public natural resource after expiry of the contractual term.

“Why should the Government not get better revenue, better resources, technology, people?”

Mehta reiterated, “I am arguing a right of fair consideration.”

Concluding his argument, Jayant Mehta argued that Vedanta's extension application had to be considered fairly and in accordance with the Government's own policy, rather than being rejected on the basis of the SAED dispute without properly examining the circumstances.

Also appearing for Vedanta, Senior Advocate Mukul Rohatgi submitted that the reasons cited in the rejection letter, including alleged poor performance and non-payment, were effectively afterthoughts. He argued that Vedanta's conduct had to be assessed over its nearly 28-year operation of the block.

“Let the rejection letter refer to poor performance and non-payment. If that is a bit... this is only an afterthought, because my conduct has to be seen from 1998.”

Rohatgi pointed out that there had been no allegation of poor performance or non-payment for most of the period during which Vedanta operated the block.

“From '98 to 2023, never below till the start of this dispute was there ever an issue about my performance or alleging non payment of certain dues.”

He also argued that although the Government was required to decide the extension application within nine months, it took around four years while permitting operations to continue.

He further submitted that the Government could not travel beyond the policy and invoke the public trust doctrine to introduce a ground for rejection that was not contained in the policy.

On revenue maximisation, Rohatgi pointed to the policy itself, which contemplated a 10% increase in the Government's profit share if an extension was granted.

“Please take it from the time that I applied for extension beyond 25 years. I have paid 10% extra profit to the Government of India.”

He also relied on a statement made by the Union Minister on the floor of Parliament indicating a shift from revenue maximisation towards maximising production.

“The Government has moved away from maximisation of revenue to maximise the production.”

Rohatgi submitted that increasing domestic production was particularly important because India imports a substantial portion of its petroleum requirements.

“90% of our needs of petroleum are imported. What is the price element compared to the huge imports? To be self-sufficient, my Lord, you need to ramp up production.”

Rohatgi relied on the Supreme Court's decision in Energy Watchdog on change in law provisions, submitting that contractual mechanisms exist to address unforeseen changes affecting the economic balance of long term arrangements.

Appearing for the Union of India, Attorney General R. Venkataramani submitted that Vedanta's claim had to be examined first from the standpoint of whether any legal right to extension existed. He argued that in the absence of such a right, the scope of judicial review over the Government's decision would necessarily be limited.

“If there is no right, then the next question of asking, is there any other justiciability? The answer will be no.”

The Attorney General submitted that there was a distinction between a right to obtain an extension and a right to have an application considered under the applicable policy.

“Maybe you're right in saying that right of getting extension is not right. But right to being considered for extension, right?”

It was also argued that despite the alleged delay, Vedanta did not immediately approach the Court claiming a right to have its application decided within the prescribed period. Instead, it waited until the impugned decision was eventually communicated.

The Attorney General concluded that where no vested right to extension existed, the Court should examine whether the reasons given by the Government had a sufficient connection with the applicable policy and contractual framework.

Appearing for Oil and Natural Gas Corporation of India, Additional Solicitor General Chetan Sharma argued that Vedanta's appeal was required to be examined within the limited scope of an intra court appellate jurisdiction.

Relying on the Supreme Court's decision in Hindustan Petroleum Corporation Ltd. v. Scope Sales Pvt. Ltd., Sharma submitted that a Division Bench hearing an intra-court appeal should not substitute its own view merely because another view of the facts was possible.

He referred to the Supreme Court's observation that both the Single Judge and Division Bench exercise jurisdiction under Article 226, and that interference in an intra-court appeal is warranted only where the judgment under challenge is demonstrably erroneous or suffers from perversity.

“At best at the highest, my Lords, what they have argued is a view. The highest that they can argue is that it's a plausible view,” Sharma submitted.

He argued that even if the Division Bench considered Vedanta's position plausible, that would not satisfy the threshold for interference with the Single Judge's judgment.

“I want to start jurisdiction ought not to be invoked merely because another view is possible of the same set of facts, particularly where the view adopted by the learned Single Judge is plausible and reasonable. In other words, an intra-court appellate bench ought not to substitute its own view merely because the Bench considers its view to be better than the one taken by this Bench. So long as the view taken by the Single Bench is a plausible one, interference should stay at a distance.”

Sharma also relied upon Supreme Court precedents concerning the limited parameters of intra court appellate jurisdiction, submitting that Vedanta had not demonstrated either perversity or a demonstrable error in the Single Judge's reasoning.

The Bench however, pointed out that ONGC was itself a party to the PSC and had participated in the relevant contractual correspondence.

“Let us be conscious and acknowledge under this that you are also part of the contract,” the Bench observed.

Sharma responded that although ONGC was a party to the contract, it was not responsible for any alleged default.

“My friends are correct. I'm a party but a party to the contract, not a party to the default. That's the difference.”

He submitted that ONGC's position was that it had not committed any default and that the rejection of the extension could not be attributed to ONGC.

The Bench noted that ONGC's signatures appeared on the correspondence concerning the extension and therefore its contractual role could not be ignored.

The Court thereafter proceeded to reserve its judgment in the appeal.