The Supreme Court on Friday referred one of India's longest-running energy disputes, the Krishna-Godavari basin gas migration case involving Reliance Industries and the Government of India, to mediation. Former Supreme Court judge Justice Ranjana Prakash Desai will act as mediator, assisted by two domain experts to be suggested by the parties, in an attempt to settle a controversy that has travelled through committees, arbitration and the courts for more than a decade.
A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul M Pancholi passed the order after being told that the two sides had tried, over repeated adjournments, to find a negotiated solution but had not succeeded. Attorney General for India R Venkataramani, appearing for the Centre, and senior advocate Kapil Sibal, appearing for Reliance, informed the court that their discussions had not produced a viable resolution.
The bench recorded that both sides had sought time from time to time to explore settlement, and that they themselves had not been able to find a workable answer.
In its order, the court said that, in view of the request made on behalf of the parties, it was requesting Justice Desai to act as mediator, with the assistance of two domain experts as suggested by the parties. The court did not fix a timeline for the mediation. The parties may contact Justice Desai during the course of the day or by the following day to fix a date and time for proceedings, and they may make written and oral presentations before the mediator.
The court will review progress after four weeks, when the parties are to inform it about developments in the mediation. Both sides assured the court of full cooperation with the mediator.
The dispute concerns allegations that Reliance Industries extracted natural gas that had migrated from an adjoining block operated by the Oil and Natural Gas Corporation, ONGC, into its own block in the Krishna-Godavari basin, off the Andhra Pradesh coast. ONGC alleged that the gas reservoirs in the two blocks were interconnected, so that gas from its block seeped into the Reliance-led block, known as KG-D6, and was then produced and sold.
Reliance is the operator of KG-D6 with a sixty per cent interest, while BP Exploration holds thirty per cent and Niko Resources holds ten per cent.
The controversy has a long and layered history. Following a study by DeGolyer and MacNaughton which indicated connectivity between the reservoirs, the Union Government constituted a committee headed by former Supreme Court judge Justice A P Shah to examine the issue. The Shah Committee, in its report of August 28, 2016, concluded that there had been unjust enrichment and that Reliance had gained from gas that had migrated.
Acting on that report, the oil ministry issued a demand notice.
Reports of the demand have varied over the years as interest and related claims were added: the ministry's November 2016 demand was for about 1.47 billion dollars for gas produced over the seven years ending March 31, 2016, while later accounts put the government's claim at about 1.55 billion dollars plus interest, and Live Law's account of the committee's findings records a demand of approximately 1.74 billion dollars along with interest.
The different figures reflect the way the claim has been stated at different stages, with interest and related amounts, rather than a single settled sum.
Reliance challenged the demand through arbitration under the production sharing contract governing its exploration and extraction operations. The production sharing contract for the KG-DWN-98/3 block was signed in April 2000 between the Union of India, Reliance and Niko.
In July 2018, an international arbitration tribunal rejected the government's claim, and in its majority award the tribunal held that although Reliance had breached certain contractual obligations, the breach did not amount to a material violation warranting the relief sought by the government. The government challenged that award before the Delhi High Court.
The Delhi High Court litigation then produced a further twist. A single-judge bench upheld the arbitral award in favour of Reliance and its partners, but on February 14, 2025, a division bench set aside the award, holding that it suffered from patent illegality. The division bench observed that the government, as trustee of the country's natural resources, could not be presumed to have permitted the extraction of migrated gas merely because it had remained silent.
It emphasised that natural resources are held by the state in trust for the people, and that their extraction must comply with the applicable legal and contractual framework. It also rejected the approach of treating the alleged contractual violations as insignificant, and found that Reliance and its partners had unjustly enriched themselves by extracting and selling gas that legally belonged to ONGC or the government.
Reliance, BP Exploration (Alpha) and Niko (NECO) then appealed to the Supreme Court against the Delhi High Court's verdict. The Supreme Court was hearing those appeals when the question of mediation arose. On May 20, the apex court had declined a submission by Reliance to put the hearing on hold while the company and two other foreign firms sought mediation or conciliation with the Centre.
By Friday, however, the position had shifted: both sides acknowledged that their own settlement efforts had not succeeded, and the court moved to appoint a mediator rather than leaving the parties to further unstructured talks.
The choice of Justice Desai is significant. The bench noted her background in commercial litigation, and Chief Justice Surya Kant observed that she handles complex commercial disputes well. In a dispute that turns on geology, reservoir engineering, contract interpretation and public trust principles, the assistance of two domain experts will be central.
The experts, to be suggested by the parties, are expected to help the mediator work through technical questions about migration, connectivity and quantification that have divided the sides for years.
Mediation offers a different path from continued litigation. A court judgment would settle the legal questions but could still leave room for further challenge and delay, while a mediated settlement, if reached, could resolve the financial and operational questions in a single agreement. For the government, the case raises a matter of principle about natural resources held in trust and the recovery of value from gas that migrated across block boundaries.
For Reliance and its partners, the case concerns the sanctity of an arbitral award that had gone in their favour and the interpretation of a production sharing contract signed more than two and a half decades ago. A mediator's task will be to find ground that both sides can accept without surrendering those positions entirely.
The stakes are also commercial and practical. The KG basin is one of India's most important offshore gas provinces, and the KG-D6 block has been a major source of domestic natural gas. How the migration dispute is resolved could influence how future production sharing arrangements treat connected reservoirs, how operators and the state handle gas that moves across boundaries, and how quickly other offshore disputes are settled.
A negotiated outcome could also reduce the time and cost of litigation for all sides, including the public sector undertakings and government departments involved.
What happens next depends on the mediation itself. The parties are to contact Justice Desai promptly, fix dates, and present their cases. The court has deliberately avoided imposing a deadline, while retaining oversight by listing the matter for further consideration after four weeks.
If mediation produces a settlement, it will return to the court for appropriate orders. If it does not, the appeals will continue, and the Supreme Court will have to decide the legal questions that the Delhi High Court's division bench and the arbitral tribunal answered differently.
For now, the referral marks a pause in adversarial proceedings and a deliberate attempt at resolution. After years of committee findings, arbitration, and conflicting court decisions, the Supreme Court has placed the dispute in the hands of a former judge with commercial expertise and two technical experts, and asked the parties to make a genuine effort.
Whether that effort succeeds will determine whether one of India's most complex energy disputes ends by agreement or returns to the courtroom for a final judicial answer.
(Reporting based on Live Law and Bar and Bench.)