Delhi HC upholds Centre's move to take Gujarat offshore block from Vedanta

Vedanta Ltd's attempt to retain its offshore oil and gas block in Gujarat suffered a setback on Wednesday after the Delhi High Court upheld the Centre's decision to deny the company a contract extension and transfer the asset to state-run Oil and Natural Gas Corporation Ltd (ONGC).

Justice Purushaindra Singh Kaurav dismissed Vedanta's challenge to the Ministry of Petroleum and Natural Gas's decision rejecting its request for a 10-year extension of the production sharing contract (PSC) for the CB-OS/2 offshore block in Gujarat's Cambay Basin.

The ruling also upheld the Centre's order directing Vedanta to cease petroleum operations and hand over the block to ONGC.

Soon after the judgment was pronounced, Vedanta's senior counsel Jayant Mehta sought continuation of the status quo and interim protection to allow the company to challenge the order before a higher court. The court declined the request, clearing the way for the government to implement its decision.

An email query sent to Vedanta seeking its response remained unanswered till press time.

According to the judgment copy reviewed by Mint, the high court held that although Vedanta's petition was maintainable, the company was not entitled to an extension of its PSC under the Centre's 2017 policy governing pre-New Exploration Licensing Policy (pre-NELP) oil and gas blocks. The court said the policy does not confer an automatic right to an extension, even if the government delays deciding an application.

It also held that the central government, as the trustee of the country's natural resources under the Public Trust Doctrine, is entitled to assess not only an applicant's technical eligibility but also its conduct before granting an extension.

The judgment recorded that the company had unilaterally deducted about ₹88 crore ($9.33 million) from the government's share of Profit Petroleum to adjust its Special Additional Excise Duty (SAED) liability despite being directed not to do so.

“Since there is no explicit bar from taking into account events subsequent to the making of the application, the State is well within its right to examine, whether a given applicant has done certain acts which disentitle it, under the Extension Policy, from becoming the beneficiary of exploitation of the country's reserves,” the court observed.

A PSC allows an oil and gas company to explore and produce hydrocarbons from a designated block in return for sharing output and revenue with the government.

Vedanta shares fell on the news, trading at ₹262.10 apiece as of 1103 am, India time, on the National Stock Exchange. The stock had opened at ₹264.85.

According to a PTI report, the CB-OS/2 block—home to the Lakshmi and Gauri fields—produces about 3,400 barrels of oil a day and 3.4 lakh standard cubic metres of gas a day.

The original PSC expired in June 2023. Before its expiry, Vedanta applied for a 10-year extension under the Centre's 2017 policy, which permits extensions of certain pre-New Exploration Licensing Policy (pre-NELP) oil and gas contracts subject to specified conditions.

While the application remained pending, the government allowed Vedanta to continue operating the field through a series of interim extensions.

That changed in September 2025, when the Centre rejected the extension request, citing alleged outstanding dues and non-compliance with the 2017 policy. It directed Vedanta to immediately cease operations, vacate the block and hand over its assets to ONGC on an “as is where is” basis.

Vedanta challenged the decision in the Delhi High Court, arguing that it had applied for the extension well before the contract expired and that the government took several years to decide the application even as it allowed the company to continue operating the field.

The company contended that the dues cited by the government were disputed, that some liabilities related to consortium partners, and that it had subsequently paid the disputed amounts under protest to avoid further controversy. Vedanta also argued that an abrupt shutdown of offshore oil and gas operations would be operationally difficult and unsafe.

The Centre argued that an extension under the 2017 policy is discretionary rather than a matter of right. It maintained that Vedanta had failed to meet the policy conditions and that rejecting the extension request was lawful and in the public interest.

In January, the high court had granted interim relief by directing both sides to maintain status quo, preventing the Centre from transferring the block to ONGC while the case was pending.

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