Centre Challenges Foreign Arbitration Award to Vedanta Ltd in Delhi High Court

The Centre has filed a petition in the Delhi High Court challenging a foreign arbitration award that favored Vedanta Ltd, the company owned by Anil Agarwal, in a dispute over payout from its Rajasthan oil and gas fields.

According to the government’s petition, the arbitration award is deemed to be in conflict with India’s public policy. The dispute arose from the Directorate of Hydrocarbons’ disagreement with Vedanta and Cairn over incorrect cost recovery and non-allocation of common costs, leading to significant financial implications on the Profit Oil/Gas payable to the government.

Last year, Vedanta Ltd emerged victorious in the arbitration proceedings against the government’s demand for a higher payout, which stemmed from the disallowance of certain costs incurred in the Rajasthan oil and gas fields. The government had sought additional profit petroleum following the reallocation of costs between the fields and the disallowance of expenses related to laying a pipeline for oil evacuation.

As per the terms of the Production Sharing Contract for the Rajasthan Block, companies can recover costs before profit sharing with the government. Vedanta contested the government’s demand before the arbitration tribunal, which ruled in favor of the company.

Vedanta Ltd confirmed receiving the arbitration award in August 2023, stating that the tribunal upheld the company’s stance that additional profit petroleum was not payable as per the contract terms.

The legal battle between the Centre and Vedanta Ltd underscores the complexity of contractual agreements in the oil and gas sector and the implications for profit sharing between companies and governments.

legal development wherein the Centre challenges a foreign arbitration award favoring Vedanta Ltd. It provides essential details of the dispute and highlights the financial implications involved. Let me know if you need further assistance.