Vedanta Oil Block Contract Extension: Delhi High Court Asks Centre To Clarify If Rejection Was A Policy Decision

The Delhi High Court on Monday asked the Union Government to clarify in an affidavit whether its decision refusing to extend Vedanta Ltd.'s Production Sharing Contract (PSC) for an oil block off the Gujarat coast was based on a broader policy decision.

The court asked whether the refusal was aimed at securing higher public revenue from petroleum resources or moving away from extending legacy PSCs, or whether it was confined to the reasons recorded in the Ministry of Petroleum and Natural Gas's rejection order dated September 19, 2025.

That order rejected Vedanta's application of June 28, 2021, seeking the extension of its Production Sharing Contract.

The Court was hearing Vedanta's appeal against the judgment of single judge bench of High Court which on July 22, 2026 upheld the Ministry's rejection order, holding Vedanta had rendered itself ineligible by unilaterally deducting the Government's share of profit petroleum to offset its Special Additional Excise Duty liability (SAED) contrary to the PSC and the public trust governing natural resources.

A Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta suggested that the Union place its stand on an affidavit if it intended to justify the decision on grounds beyond those contained in the rejection letter. The Court then posted the matter on August 5 for further hearing.

Senior Advocate Jayant Mehta, appearing for Vedanta, argued that the company had applied for a ten-year extension well before the PSC expired in June 2023 but the Government kept the application pending for nearly four years while granting successive interim extensions.

He submitted that the Directorate General of Hydrocarbons (DGH) in its recommendation dated October 29, 2024, had not recommended rejection of the extension request on the ground of any default but had merely requested the Ministry of Petroleum and Natural Gas to take a decision in public interest.

Mehta contended that the principal ground relied upon in the rejection order was Vedanta's adjustment of the government's share of profit petroleum against its SAED claim. According to him, those alleged dues arose after the extension application had been filed and therefore could not retrospectively render the application ineligible.

The bench appeared to find the submission significant, observing:

"Normally, a person's application will be seen on the date of the application. If those dues are found to be for a period post that application, can his application be rejected on that ground because it was the Government which took four years to decide his application?"

Mehta further submitted that even assuming the SAED adjustment constituted a contractual breach, the alleged default had been cured before the rejection order. He pointed out that after DGH called upon Vedanta to repay the amount by its letter dated 28 January 2025, the company deposited the amount without prejudice on 12 September 2025, a week before the Ministry rejected the extension application on 19 September 2025 while simultaneously invoking the contractual dispute resolution mechanism.

Relying on the case of Mohinder Singh Gill v. Chief Election Commissioner, Mehta argued that the Union could not supplement the rejection order by advancing fresh reasons during appellate proceedings. He further submitted that the Single Judge had rejected the writ petition only on the SAED issue and that the Union, having neither filed an appeal nor cross-objections, could not seek to sustain the judgment on grounds which had not been considered by the Single Judge.

"The Single Judge only goes on SAED. They can't now bring anything else against me. They are not in appeal. They're not in cross-objection.", he submitted.

The bench, however, questioned whether the remaining grounds could be left undecided merely because the Single Judge had not examined them. The Court said that if it accepted Vedanta's submissions on the SAED issue alone, the other issues would remain unresolved and the dispute would continue.

"Suppose if we agree with you, then the Single Judge does not decide this issue. So we'll say this issue remains to be decided.", Justice Mehta asked.

The Bench further remarked that it was inclined to ensure that the entire controversy reached finality instead of deciding only one issue.

"We are very seriously concerned because if we don't decide, it doesn't make sense. Ultimately, we don't know which way we go."

During the hearing, the court also indicated that if the government intended to defend its decision on the basis of a broader policy, such as securing higher public revenue from petroleum resources or moving away from extending legacy PSCs, that position should be formally placed before the Court.

"If the Government thinks that we can get better revenue... we just want that somebody has applied the mind.", Justice Mehta remarked.

While clarifying that it was not compelling the Union to file an affidavit, the Court observed that doing so would assist in determining whether the decision flowed from a considered policy choice.

"In the meantime, if you want, we don't compel you to file an affidavit. You can file two pages, three pages."

Responding to the Court's queries, Attorney General R. Venkataramani, appearing for the Union of India, submitted that the issue could not be viewed only through the prism of the SAED dispute. He argued that the Government's decision must also be assessed in the context of the public trust doctrine governing natural resources and the possibility of securing greater public benefit.

Seeking time to obtain instructions on the affidavit, the Attorney General requested that the matter be taken up on August 5 when he would complete his submissions.