Delhi High Court Greenlights Hearing for Centre's $2.31 Billion Recovery Claim Against RIL
In a significant development in the long-running Panna-Mukta and Tapti offshore oilfields dispute, a division bench of the Delhi High Court has paved the way for hearing the Central government's appeal seeking to recover approximately $2.31 billion from Reliance Industries Ltd and its consortium partners. The bench, comprising Justice Navin Chawla and Justice Madju Jain, delivered this procedural ruling on Monday, rejecting RIL's preliminary objection that the Centre's appeal was not maintainable.
Court Rejects Maintainability Challenge, Awaits Detailed Order
The court's decision marks a crucial step forward in this nearly three-decade-old legal battle. While a detailed written order is still awaited, the bench has cleared the maintainability hurdle, allowing the substantive appeal to proceed. The matter is now expected to be placed before the roster bench of the Chief Justice of the Delhi High Court before 17 February 2026 to determine the further course of hearing.
This appeal originates from a June 2023 single-judge ruling that had dismissed the Centre's attempt to recover money based on a 2016 partial arbitration decision. That ruling emphasized that arbitration proceedings between the parties were still ongoing and no final, quantified amount payable by either side had been established by the tribunal.
Background: The Panna-Mukta and Tapti Offshore Fields Dispute
The roots of this complex dispute trace back to December 1994, when production-sharing contracts were signed between the Union government and a consortium led by Reliance Industries Ltd, along with British Gas and ONGC. These contracts granted the companies rights to extract oil and gas from the Panna-Mukta and Tapti offshore fields.
Key contractual provisions included:
- Companies were permitted to first recover their project development costs
- A specified cap on recoverable development costs, known as the cost recovery limit
- Profit-sharing arrangements with the government after cost recovery
Disagreements subsequently emerged over the calculation methodologies for both costs and profits. The government alleged that RIL had exceeded the cost recovery limit and retained more money than contractually permitted, while the conglomerate contended that the government's calculation approach unfairly diminished its profit share.
Arbitration Proceedings and Partial Decisions
In 2010, RIL and British Gas initiated international arbitration proceedings, leading to the establishment of a tribunal in London. Over the following years, the tribunal issued several partial decisions that:
- Clarified how costs and profits should be calculated
- Defined which costs fell within the recovery limit
- Explained treatment of development costs for profit sharing
- Addressed tax calculation methods and government approval requirements
Notably, the October 2016 partial decision proved particularly significant, though it did not mandate any fixed payment from either party. These partial decisions faced challenges in UK courts, which largely upheld the tribunal's findings while remanding some issues for reconsideration, resulting in further partial decisions in 2018 and 2021.
Legal Timeline and Parallel Disputes
Despite the ongoing arbitration, the Union government approached the Delhi High Court in 2019 seeking immediate recovery of $2.31 billion, alleging RIL had retained excessive funds. RIL opposed this move, arguing the arbitration remained incomplete and the government was attempting to recover a self-calculated amount without final tribunal determination.
The legal journey includes:
- June 2022: UK High Court rejects Centre's plea to enforce arbitral award against RIL
- June 2023: Delhi High Court single judge dismisses government's recovery plea
- February 2025: Delhi High Court sets aside $1.7-billion arbitral award in separate KG basin dispute
This case represents the second major arbitration-related dispute involving RIL and the Union government recently. A separate high-value case concerning the Krishna-Godavari basin gas migration dispute with ONGC is currently pending before the Supreme Court.
Next Steps and Implications
With the division bench now having resolved the maintainability question, the case advances to a full hearing that will determine whether the Centre can pursue its $2.31-billion recovery claim immediately or must await the complete conclusion of the arbitration process. The outcome will have substantial implications for contractual interpretations in India's energy sector and the enforcement of partial arbitration awards in commercial disputes.
The prolonged nature of this dispute—spanning international arbitration, multiple court jurisdictions, and nearly three decades—underscores the complexities involved in interpreting production-sharing contracts and implementing profit-sharing mechanisms in India's offshore oil and gas sector.
