Source: The Economic Times
The Delhi High Court has permitted Vedanta Ltd to keep deducting from the government’s revenue share from its Rajasthan oil and gas fields as it pursues its legal dispute with the government regarding recovery of costs and revenue sharing.
The company has already deducted $377 million. The latest ruling allows Vedanta to further deduct another $157 million as it awaits the final amount to be paid out by an arbitration tribunal. Once this final amount is deducted, the total deductions will total $534 million.
The government sought the court’s assistance to halt these deductions. It asked the court to prevent Vedanta from altering the provisional estimates of revenue for the second, third and fourth quarters of financial year 2023-24. Collectively, these estimates total to over $300 million. The Government stated that until the Tribunal finishes the final calculations, these new adjustments should not be allowed.
However, the High Court dismissed the appeal. Justice Jasmeet Singh ruled that Vedanta is entitled to continue the deductions permitted by the award of arbitration. The court accordingly permitted the company to proceed to make adjustments to its revenue estimates for Q2 and Q3 of FY24, and to also revise their adjustments occasioned for Q4 of FY23.
This legal battle started between Vedanta (formerly Cairn India) and the Directorate General of Hydrocarbons (DGH). Vedanta is accused by the government of incorrectly recovering costs and improperly allocating cost recovery for common costs between different fields. The government has claimed this resulted in significant financial loss in the share of profit oil and gas to which it was entitled under the Production Sharing Contract (PSC).
An arbitral tribunal made an award in favor of Vedanta in August 2023, it was later modified in December 2023. The Government has filed an appeal against the arbitral award in the Delhi High Court asserting that the award is contrary to India’s public policy and basic principles of law. This appeal is still pending and no decision has yet been rendered regarding the validity of the arbitration award.
At this time, the court’s order is only interim, not final. A written judgment of the detail will become available from the court, but that has not yet been released.
In the meantime, Vedanta can continue with deductions as indicated by the tribunal.
