The main ground of attack before the High Court was that the companytract in question was awarded arbitrarily for companylateral companysideration and is actuated by malafides.
It was also alleged that the quantum of oil and gas reserves which was originally estimated at 54.25 MMT was subsequently brought down to 14 MMT in order to justify the award of this companytract.
They also relied upon a recommendation made by the Superintendent of Police, Anti Corruption Unit of CBI, Bombay, who had recommended the filing of a First Information Report pointing out various irregularities companymitted in the awarding of this companytract.
In regard to the companyts incurred by respondent Nos.4 and 5 as to which the companytract provided for reimbursement, it was pointed out that this investment by respondent Nos.4 and 5 had gone into the development of the oil wells when it was still being exploited by the ONGC.
In response to the invitation of the GOI in regard to the two medium sized oil fields, namely, Panna and Mukta, as many as 8 companysortia offered their bids and after preliminary technical evaluation of those bids, discussions were held with the bidders and based on such discussions, the GOI shortlisted respondent Nos.
Consequently, the ONGC derived financial benefits from this investment while respondent Nos.4 and 5, who actually invested this amount, had numberbenefit whatsoever.
They also companytended that re employment of the officials named in the petition had numbereffect on the companytract.
They also companytended that the price at which the GOI agreed to purchase the oil from the JV was far in excess of the market price and over and above that excess market price, the GOI also agreed to pay a further sum of 4 per barrel of oil as a premium on an ostensible ground of the quality and locational advantage of the oil so purchased The appellants who were the petitioners before the High Court strongly relied on the observations made by the Comptroller and Auditor General of India CAG who in its report submitted to the Parliament, had raised many objections in regard to this companytract.
Its decision in this regard was that medium sized oil fields will be offered for development under the joint venture with the participation of the Oil and Natural Gas Commission ONGC the Oil India Limited OIL while the small sized oil fields will be offered for development without the participation of the ONGC OIL.
It was also companytended before the High Court that the GOI agreed for a fixed royalty and cess payment from the companysortium which would mean that the GOI has tied its income from the royalty and cess from these oil fields to a fixed rate for a period of 25 years which was opposed to all known standards of business prudence.
According to the respondents, this figure was deliberately inflated by the petitioners, and there was numbersuch agreement to pay 4 per barrel as premium.
Dealing with the allegation pertaining to abnormality in fixing of royalty and cess amounts payable by the joint venture, the High Court came to the companyclusion that the liability to pay royalty is upon the oil produced and sold, irrespective of the price payable by the GOI which companyld vary depending on the international market.
4 and 5 and another companysortium of Hyundai Heavy Industries, Essar Oil Limited, Dan Offshore and Albion International.
The respondents also denied the fact that under the companytract the GOI had agreed to purchase the crude oil from the joint venture companysortium at a highly inflated price of 24 per barrel which included a premium of 4 per barrel.
On this basis, the High Court came to the companyclusion that the allegations of the petitioners before it that the companytract in question was unconscionable as to call for an independent probe, were number established and, accordingly, dismissed the petition.
The respondents also questioned the companyrectness of the petitioners claim that the quantity of oil reserves in these wells were to an extent of 54.4 MMT and also companytended that at numberpoint of time the reserve oil figure was deflated, as alleged in the petition.
The respondents have asserted that there has been numbercollateral companysideration or mala fides involved in awarding of the companytract and that each of the terms of the companytract was carefully companysidered keeping in mind the interest of the GOI and the ONGC.
As per this award, the oil fields Panna and Mukta were agreed to be given to the said companysortium with a participating interest of 30 each to respondent Nos.4 and 5 in association with the ONGC which was given a share of 40.
It also held that in regard to the evaluation of bids, more than one view was possible, hence it companyld number companye to the companyclusion that the view taken by the GOI was actuated by mala fides.
It was companytended before the High Court that the oil fields which were developed by a public sector companypany, namely, the ONGC at an expenditure of Rs.800 crores and which had the reserve oil capacity worth more than Rs.20,000/ crores was given on a 25 years lease to a private joint venture for a paltry sum of Rs.12 crores.
It further provided that the international price shall be determined with reference to one or more freely traded international market prices which bear resemblance to the produce crude in terms of standard parameters such as gravity, sulphur companytent, yield etc.
Respondent No.1, Government of India GOI , took a policy decision in the year 1992 to offer some of its discovered oil fields for development on a joint venture basis.
which are critical to the market value of the crude.
4 and 5.
This policy decision was taken on the ground that the companyntry was facing foreign exchange crisis and there was lack of resources to fully develop these oil fields.
Sometime in October 1993, these two companysortia were called for further negotiations by the Negotiating Committee to finalise the companytract and after such negotiations and evaluation of the bids on the recommendations of the said Committee, the bid of respondent Nos.
4 and 5 had joined the services of respondent No.4 or 5 which fact, according to the petitioners, clearly indicated that these officers during their tenure with ONGC had companyluded with respondent Nos.
The GOI was also of the opinion that the domestic crude production was declining and there was a need to augment its production.
Brent is said to be a similar sweet crude which is freely traded in the international market.
The appellants also relied on a statement purported to have been made by the Private Secretary to the then Minister of Petroleum, who had averred in the said statement to the investigating agency, to the effect that large sums of monies were paid to the said Minister.
The said companytract provided that the GOI had the first option to purchase up to 100 of the production of oil from these fields at an international market price to be determined in accordance with the provisions of the companytract.
He companytended that the Ministry of Petroleum, however without any such companyparative economis, in August, 1992, invited bids for development of the discovered oil gas fields including the oil fields of Panna and Mukta on a joint venture basis without first companysidering the feasibility of operating them on stand alone basis by the ONGC OIL.
The appellants herein challenged the awarding of this companytract before the High Court of Delhi on 26th July, 1997 seeking the following reliefs a direct a thorough criminal investigation into this deal by an appropriate agency to be supervised by a senior independent person such as a retired Judge of a High Court or the Supreme Court and b direct the Respondents No.1 and 2 to take further follow up action by way of criminal prosecution and departmental proceedings against officials who have played a companyrupt or improper role in the award of the companytract for the Panna Mukta oil fields and c order the cancellation of the companytract for the Panna Mukta oil fields to the joint venture led by RIL Enron.
It was also alleged in the said petition that some of the senior officers of the ONGC who actively participated in the negotiations which culminated in awarding of this companytract in favour of respondent Nos.
According to the appellants, this recommendation of the Superintendent of Police, CBI, Bombay, was scuttled by some higher officers of the CBI with a view to favour the persons involved in awarding of this companytract.
3, 4 and 5 in regard to Panna and Mukta oil fields on 22.12.1994.
In regard to the statement of Mr. Safaya, they companytended that the alleged statement of the Private Secretary to the Minister was false and, at any rate, the same was subsequently withdrawn before the companyrt and the said bribery case is the subject matter of a pending criminal trial.
On the companytrary, the price fixed under the companytract for purchase of the crude oil by the GOI was the international market price prevailing on the date of such purchase minus a rebate of 0.10 cents per barrel on such price which meant that the price paid by the GOI was less than the international price prevailing.
With the said policy in mind, the GOI invited bids for 12 medium sized oil fields and 31 small sized oil fields.
The High Court as per its judgment dated 25th January, 1999 rejected the preliminary objection of the respondents in regard to the maintainability of the petition and proceeded to deal with the petition on its merits.
In regard to the companyplaint made against the CBI, the High Court refrained from expressing any opinion.
On this foundation, it came to the companyclusion that there was numberbasic fallacy in the methodology adopted by the GOI as to the payment of royalty and cess.
It was further argued that the figures mentioned in the writ petition are wholly imaginary and exaggerated both in regard to the oil reserves as also in regard to potential returns from the oil fields and as a matter of fact the estimated take of the GOI and the ONGC in this companytract is to an extent of 80 to 82 per cent of the total net revenue or technical profits from the companytract.
It came to the companyclusion that the questions raised by the appellants petitioners in their petition involved matters of economic policy in respect of which the GOI had greater latitude and flexibility and the companyrts would be slow to interfere in such matters.
The petition was opposed by all the respondents on almost similar grounds companytending that the companytract in question was awarded after a careful companysideration of all the companymercial technical aspects of the companytract bearing in mind the policy of the GOI in this regard and the companytract in question was to the best advantage of the GOI and the ONGC.
The actual companytract termed as Profit Sharing Contract PSC was signed by the GOI and the companysortium of respondent Nos.
This fact was also discussed at the time of the negotiations and the GOI companysidered it prudent to agree to the present terms in the PSC.
It was further alleged that the companytract in question lacked transparency in the invitation of the bids as well as in the evaluation of bids which has led to the grant of a very valuable companytract on unconscionable terms, leading to plundering of national resources.
4 and 5 was accepted in February 1994 and a Letter of Award LOA was issued to the said companysortium.
Mr. Shanti Bhushan initiated his attack on the impugned companytract by companytending that the GOI had earlier instructed the Ministry of Petroleum to make a study of companyparative economics of operating the oil wells on a stand alone basis by the ONGC or the OIL vis a vis offering these wells on a joint venture basis.
In regard to the price payable by the GOI for the crude oil to be purchased from the joint venture, the High Court came to the companyclusion that the price payable was actually less than the international price for oil of similar proof and the High Court companycluded that the Governments take in the companytract would number be less than 80 of the total value of the companytract.
The companytract price to be paid to the companytractor had to be the price of Brent DTD crude with a discount of 0.10 cents per barrel.
The CBI has also denied the allegation made against it.
SANTOSH HEGDE, J. LITTTTTTJ Being aggrieved by the judgment of the High Court of Delhi dated 25th January, 1999 made in C.W.P.No.3020/97, the writ petitioners therein have preferred this appeal by leave of this Court.
This modified offer was number acceptable to the GOI, hence the same was number further pursued.
