Delhi HC clears way for ONGC takeover of Vedanta-operated Gujarat block

The court upheld the Centre's refusal to extend Vedanta's production sharing contract, citing unilateral deductions from the government's share of profit petroleum

State-run Oil and Natural Gas Corporation (ONGC) is now in a position to take control of the assets and operations of an offshore oil-and-gas block off the Gujarat coast after the Delhi High Court upheld the Union government’s decision refusing to extend Vedanta’s production-sharing contract (PSC) for it.

 

 Justice Purushaindra Kumar Kaurav dismissed Vedanta’s challenge to the order of the Ministry of Petroleum and Natural Gas on September 19 last year.

 

The ministry had rejected the company’s request for a 10-year extension of the PSC, and directed ONGC to immediately take over the offshore block, located near Suvali, Gujarat.

   

An earlier status quo order passed by the court now stands vacated.

 

The court ruled that Vedanta was not entitled to an extension after it unilaterally adjusted around ₹88 crore from the government’s share of profit petroleum to offset its liabilities arising from special additional excise duty (SAED).

 

“Ex facie the said unilateral deduction was not bona fide. The petitioner is handling public resources of the people of India. The scheme of the PSC is such as would require the private company to give the share of the Government,” the court said.

 

The block comprises the Lakshmi and Gauri gas fields. It was awarded in 1998 to a consortium of Cairn Energy, Tata Petrodyne and ONGC. Vedanta later became the operator and currently holds a 40 per cent participating interest, while ONGC owns 50 per cent and Invenire Petrodyne (formerly Tata Petrodyne) the remaining 10 per cent.

 

The PSC expired on June 29, 2023.

 

Vedanta and the other consortium members had sought a fresh term till June 2033 by filing an application in June 2021. While the request remained pending, the Centre granted five interim working permits to allow petroleum operations to continue.

 

Following the introduction of SAED in 2022, Vedanta sought to recover the tax by adjusting it against the government’s share in profit petroleum. The proposal was rejected by the ministry, which said such a course would violate the PSC.

 

Despite this, the company deducted $9.33 million (around ₹88 crore) between the second quarter of FY23 and the second quarter of FY25.

 

The Directorate General of Hydrocarbons later asked for a recovery of $10.13 million along with interest. Vedanta repaid the principal on September 12 last year, a week before the government rejected its extension request while reserving its rights in arbitration.

 

The court held that repaying the amount did not cancel out its earlier conduct or prevent the government from considering it while deciding whether Vedanta should continue operating a public resource.

 

“The Government cannot be held ransom to the whims of a private company, which as per its fancies, interpretations, wishful dreamy adjudications tramples upon the Union’s share,” the judgment said.

 

The court further observed: “The petitioner, while unilaterally deducting the Government of India’s share of Profit Petroleum, unfortunately, has utilised India’s natural resources for its own benefits, rather than for the interest of the Country. In doing so it has breached the obligations under the Public Trust Doctrine, which in turn flow from the Constitution of India.”

 

The court also rejected Vedanta’s argument that the extension should be treated as automatically approved because the ministry did not decide its application within the timeframe prescribed under the 2017 “Extension Policy”.

 

It held that the policy did not provide for deemed approval and that the government was entitled to take into account developments occurring after the extension application was filed while deciding whether to grant a fresh term.

 

Vedanta Oil and Gas stated: “The Hon’ble Delhi High Court pronounced its order in the matter pertaining to the CB-OS/2 block on 22 July 2026. Vedanta Oil and Gas have filed an appeal against the said order, before the Division Bench of the High Court. The matter is now subjudice.”