The Supreme Court on Monday accepted Reliance Industries Ltd's long pending plea by appointing a former chief justice of New South Wales James Jacob Spigelmen as the third arbitrator in the government versus RIL dispute over sharp fall in Krishna-Godavari D6 basin and cost recovery.
RIL and the government had, respectively, nominated former chief justices S P Bharucha and V N Khare as first two arbitrators.
The apex court said there was a need for a foreign arbitrator in the RIL-government case to avoid biases. RIL had initiated the arbitration against the government in November 2011 after the government slapped a penalty notice amounting to $1.8 billion against the company for falling way short of the 80 million metric standard cubic metre per day (mmscmd) production target and being denied of cost recovery.
Since then, the government and RIL could never decide on the presiding arbitrator. While the Mukesh Ambani-owned company wanted a third arbitrator of foreign origin, the government wanted to have someone from Indian origin as the issue was domestic. RIL wanted an arbitrator of foreign origin from "a country other than India, UK or Canada", as its other contract partners -- Cayman Islands-based Niko and BP Exploration are foreign companies.
RIL has been struggling to arrest the decline in natural gas output from the block citing technical problems. Gas output from the D6 block was targeted at 80 mmscmd, but after reaching 69.43 mmscmd in March 2010, the production has dwindled to around 12 mmscmd at present. Gas produced from the block was earmarked for major power and fertiliser companies.
RIL shares on Monday hit a 52-week high of Rs 939 on the BSE following reports of appointment of an arbitrator. Analysts said the news was slightly positive for the company but there are still several issues such deferment of gas price hike which needs clarity. Most considered the rally in the stock as a part of overall market rally.
The court is hearing public interest litigations filed by Communist Party of India leader Gurudas Dasgupta and advocate Prashant Bhushan-led non-government organisation seeking scrapping of RIL's contract for gas production from KG basin.
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