Vedanta Limited vs. Union Of India & Ors.

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
nd
Reserved on: 22 December, 2025
th
Pronounced on: 6 January, 2026


+ W.P.(C) 14738/2025, CM APPL. 60479-80/2025 & 77491/2025

VEDANTA LIMITED .....Petitioner

Through: Mr. Mukul Rohatgi, Senior Advocate
with Ms. Anuradha Dutt, Mr. Anish
Kapur, Ms. Nikhita K. Suri, Ms.
Suman Yadav, Mr. Gurudas Khurana,
Mr. Raghav Dutt and Mr. Keshav
Sehgal, Advocates.
versus

UNION OF INDIA & ORS. .....Respondents

Through: Mr. Ashish K. Dixit, CGSC with MR.
Umar Hashmi, Mr. Shivam Tiwari, Ms.
Iqra Sheikh and Ms. Urmila Sharma,
Advocates for R-1.
Mr. R. Venkataramani, AGI with Mr.
Nakul Sachdeva, Mr. Sagar Arora, Mr.
Shreyansh Rathi, Ms. Shrinkhla Tiwari,
Mr. Abhinandan Sharma, Mr. Kartikay
Aggarwal and Ms. Yamika Khanna,
Advocates for R-2.
Mr. Ajoy Roy, Ms. Avlokita Rajni, Mr.
Lakshya Khanna and Ms. Shradha
Sriram, Advocates for R-3.
Mr. Chetan Sharma, ASG with Mr.
Abhishek Gupta, Mr. Shaswat Kumar
Pandey, Mr. Dhananjay Singh, Mr.
Amit Sharma and Mr. Kumar
Signature Not Verified
Digitally Signed By:NEETI
KUMARI SHARMA
Signing Date:06.01.2026
20:05:22
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Kartikeya, Advocates for R-4/ONGC.

CORAM:
HON'BLE MR. JUSTICE AMIT SHARMA

JUDGMENT
AMIT SHARMA, J.

1. The present petition under Articles 226 and 227 of the Constitution of
India, 1950, has been filed seeking the following prayers: -

“a) Issue a writ of Certiorari, in the nature of Certiorari or any other
writ order or direction quashing the Rejection Letter dated
19.09.2025 of Respondent No.1 rejecting the Application dated
28.06.2021 and all consequent actions/directions of the Respondent
No. 1 & 2 including the Direction dated 19.09.2025 (not in the
possession of the petitioner) to Respondent No. 4 to take over the
assets and Petroleum Operations of the Block;

b) Issue a Writ of mandamus or in the nature of Mandamus and/or
any other appropriate writ, order or direction to Respondent Nos. 1
and 2 to issue written confirmation of extension of the Production
Sharing Contract dated 30.06.1998 in relation to the Contract Area
identified as CB/OS-2 for a further term of ten (10) years from
30.06.2023 to 29.06.2033 as also the approval for extension of the
of Petroleum Mining Lease till 29.06.2033; and

c) Pass any other order(s) as this Hon'ble Court may deem fit and
proper in the facts and circumstances of the case.”


Signature Not Verified
Digitally Signed By:NEETI
KUMARI SHARMA
Signing Date:06.01.2026
20:05:22
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BACKGROUND

2. Brief facts necessary for the disposal of the present petition, as stated
by the petitioner, are as under: -

i) On 30.06.1998, a Product Sharing Contract (for short, ‘ PSC’ ) was
entered between the Government of India (Respondent No.1), Oil and Natural
Gas Corporation Ltd. (Respondent No.4; for short, ‘ONGC’), Invenire
Petrodyne Ltd., which was earlier known as ‘Tata Petrodyne Limited.’ , i.e.,
Respondent No.3 herein, and Cairn Energy India Pty. Ltd. which is a Division
of the Petitioner herein with respect to contract area of approximately 3534
sq. Kms. located offshore in Suvali, Gujarat, with an objective to exploit the
petroleum resources in accordance with good international petroleum industry
practices.

ii) The term of the PSC, as per Article 2.1 which provided for duration,
was for a period of 25 years. All the parties in the PSC were contractors and
the Petitioner herein, as per Article 3, was the designated operator under PSC
with initial 45% Participating Interest (PI) in the block and was performing
operating functions required on behalf of the contracting parties. The PI of the
respondent No.3, Invenire Petrodyne Ltd. (earlier known as ‘Tata
Petrodyne’), and respondent No.4/ONGC, was 45% and 10% respectively.
The PI of the parties concerned has changed over the tenure of PSC and now
the petitioner (operator) has 40% PI, Invenire Petrodyne Limited has 10% and
respondent No.4/ONGC has 50% PI in the PSC.

Signature Not Verified
Digitally Signed By:NEETI
KUMARI SHARMA
Signing Date:06.01.2026
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iii) In 2017, respondent No.1 approved and enacted a policy for the grant
of extension of the PSCs signed by Govt. of India awarding Pre-New
Exploration Licensing Policy (Pre-NELP) Exploration Blocks to have a
transparent and defined framework for granting extension vide Notification
dated 07.04.2017 published in Extraordinary Part I, Section 1 of the Gazette
of India.

iv) As per the policy for the grant of Extension to the PSCs regarding
exploration blocks the submission, consideration, and approval of request for
extension of Contract was provided under Clause (1). The Clause (1) of the
extension policy reads as under: -

“ 1. Submission, Consideration and Approval of request for
extension of Contract: The Contractor should submit the
application duly approved by the Operating Committee for
extension of Contract to Ministry of Petroleum & Natural Gas
(MoPNG) at least 2 years in advance of the expiry date of Contract,
but not more than 6 years in advance, with a copy to Directorate
General of Hydrocarbons (DGH). DGH will make a
recommendation to MoPNG within 6 months of submission of
application by the contractor. The Government will take a decision
on the request for extension within 3 months of receipt of the
proposal from DGH.”

v) While the PSC was subsisting and in terms of the aforesaid extension
policy, the Petitioner applied for extension of PSC in its favour vide
application on 28.06.2021. The term of PSC expired on 29.06.2023.
Respondent No.1 vide letter dated 05.07.2023 granted an interim extension of
3 months to the petitioner for continuing with the petroleum operations in
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Signing Date:06.01.2026
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respect of CB-OS/2 block w.e.f. 30.06.2023 by addressing the following letter
to the contracting parties: -

“ Subject: Continuing Petroleum Operations in respect of CB-OS/2
Block w.e.f. 30.06.2023.

Sir,
I am directed to refer to letter dated 28.06.2021 and 19.06.2023
of the Contractors of the Production Sharing Contract (PSC) dated
30.06.1998 of CB-OS/2 Block requesting for extension of the term of
PSC under the PSC Extension Policy for Pre- NELP blocks dated
07.04.2017 for a period of 10 years beyond the existing PSC period.

2. Pending the decision on your application for extension of PSC of
the subject Block and other operational issues, the Contractor is
hereby permitted in the public interest, to continue petroleum
operations in CB-OS/2 Block till the execution of the Addendum to
PSC or for three (3) months from 30.06.2023, whichever is earlier,
subject to the following conditions:

a) This shall be purely interim measure of facilitation to continue
petroleum operations pending the decision on Contract extension
and signing of Addendum to PSC, and shall not be construed as
government giving effect to the extension of the PSC.

b) During this period the provisions of the PSC, as modified by
the Policy for the Grant of Extension to the Production Sharing
Contracts signed by Government of India awarding Pre-New
Exploration Licensing Policy (PreNELP) Exploration Blocks
(Extension Policy dated 07.04.2017) shall govern all petroleum
operations and the financial rights and obligations of the parties
namely, the Government of India and the Contractor.

c) The Government shall bear no liability, whatsoever on this
account, in the event of Contract is not extended beyond
29.06.2023.

d) The Effective Date of the Addendum of PSC, if executed,
towards extension of the PSC, shall be on and from 30.06.2023
as per the Extension Policy dated 07.04.2017 of Government of
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KUMARI SHARMA
Signing Date:06.01.2026
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India.

3. This has approval of the competent authority.”

vi) The aforesaid interim extension was extended in favour of the
petitioner on 17.10.2023, 30.01.2024, 29.04.2024, and lastly, on 27.06.2024.
Thereafter, respondent No.2/DHG directed the petitioner to halt all drilling
related activities/services in the subject oil block as there was no valid PSC or
interim approval post 29.09.2024 and on 19.12.2024, respondent No.2
directed the petitioner to halt/drop all plans relating to drilling activities
immediately in absence of valid PSC extension and Petroleum Mining
License (PML) in the block and that, in view of the same, the petitioner is not
authorized to perform petroleum operations in the block.

vii) Vide letter dated 30.01.2025, the petitioner informed respondent
No.2/DGH that it has deferred the operational activities in pursuance of the
aforesaid directions received from the latter. Subsequently, vide
letter/rejection order dated 19.09.2025 issued by respondent No.1, the
application for extension of PSC of Block CB-OS/2 filed on behalf of the
petitioner on 28.06.2021 under the extension policy dated 07.04.2017 was
rejected and following directions were issued to the petitioner/operating
contractor: -

“2. In view of the above, the Government has decided that the
application for extension of the PSC filed by the Contractor shall not
be accepted. Accordingly, the contractor is hereby directed to:

a. cease and desist from carrying out any further petroleum
operations;
b. immediately handover over custody and possession of the
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Signing Date:06.01.2026
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block (including all government assets) to ONGC;
c. ensure that all petroleum operations can be continued by
ONGC without obstruction or hindrance and render all necessary
assistance to ONGC to complete the takeover of assets and
operations on as is where is basis; and
d. vacate the premises immediately upon receipt of this
communication.

3. Further, it is hereby directed to take the following actions
immediately upon receipt of this letter:

a. clear assets relating to the block of all unauthorized charges
created.
b . pay all pending contractual and statutory payments due to the
Government together with the applicable interest.
c. make outstanding payments to the Site Restoration Fund.”

viii) Pursuant to the aforesaid rejection order, ONGC/R-4 issued a letter
dated 20.09.2025 to the petitioner informing them that pursuant to the
aforesaid directions, an ONGC team has commenced the process of taking
over operations of the block and to ensure a smooth, amicable, and
uninterrupted transition, their cooperation is required and they are requested
to depute their authorized representatives at site to facilitate in completion of
the handover and takeover formalities including preparation of documentation
as may be necessary in pursuance of the aforesaid directions.

ix) Thus, the present petition has been filed seeking quashing of impugned
rejection letter/order dated 19.09.2025 issued by respondent No.1 including
the directions to respondent No.4/ONGC to take over the assets and
petroleum operations in the block in terms of said order. Further, direction has
been sought by way of the present petition to respondent Nos.1 and 2 to issue
written confirmation of extension of PSC dated 30.06.1998 in relation to the
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KUMARI SHARMA
Signing Date:06.01.2026
20:05:22
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Contract Area, CB/OS-2, for a further term of 10 years from 30.06.2023 to
29.06.2033 as also the approval for extension of PML till 29.06.2033.

x) The arbitration clause as envisaged in Article 33 of the PSC was not
invoked by the petitioner as the tenure of 25 years of the PSC had expired on
29.06.2023 and even the interim extensions granted to the petitioner has been
discontinued from 29.09.2024 and the said PSC is no longer subsisting.
Hence, the present petition has been filed assailing the impugned rejection
order.

SUBMISSIONS ON BEHALF OF THE PETITIONER/OPERATING
CONTRACTOR

3. Following submissions have been made by learned Senior Counsel
appearing on behalf of the petitioner in support of the present petition: -

i) Learned Senior Counsel appearing on behalf of the petitioner/operating
contractor has submitted that the latter and respondents had been in
contractual relationship for sharing of the petroleum excavated from the
subject contract area (CB/OS-2 block) by virtue of the aforesaid PSC for last
more than 27 years inclusive of the 2 years of interim extensions which were
granted by respondent No.1 after the expiry of the PSC on 29.06.2023. It is
submitted that even after the expiry of PSC, the petitioner was granted 5
interim extensions on 05.07.2023, 17.10.2023, 30.01.2024, 29.04.2024,
27.06.2024, and no objection or claim, whatsoever, with respect to the
outstanding dues or non-payment of royalty was ever raised by respondent
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No.1. It is the case of the petitioner that the impugned rejection order has been
passed by respondent No.1 in complete disregard of various Clauses of its
own extension policy which was enacted for grant of extension to the PSC
signed by Government of India for awarding pre-NELP exploration blocks. It
is submitted that as per Clause (1) of the said policy, the application for
extension was to be made to Ministry of Petroleum & Natural Gas (MoPNG)
at least 2 years in advance of the expiry date of contract with a copy to
respondent No.2/DGH and the latter was to make recommendation to
MoPNG within 6 months of submission of application by the contractor and
the Government will to make decision on the request for extension within 3
months of receipt of the proposal from DGH. Learned Senior Counsel has
submitted that this timeline for consideration of extension application has not
been adhered to at all by respondent No.1 in the present case as the
application for extension was submitted by the petitioner on 28.06.2021 , i.e.,
2 years in advance of the expiry date of PSC, and thereafter, within 9 months,
decision was to be taken on the said application. However, in the present case,
respondent No.1, while acting arbitrarily, had rejected the extension
application of the petitioner vide the impugned rejection order dated
19.09.2025.

ii) Learned Senior Counsel for the petitioner has further submitted that,
while the PSC was subsisting and even during the interim extensions after
29.06.2023, respondent No.1 never took any objection nor complained about
the performance or non-performance its contractual obligations. There was
never any issue of lack of performance of the petitioner as contractual
operator. He has further submitted that respondent No.1 has passed the
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Signing Date:06.01.2026
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impugned rejection order on the basis of wholly irrelevant and extraneous
considerations. It is pointed out that the conditions for consideration and
prerequisites for evaluation of application for grant of extension of PSC and
criteria for evaluation of request as provided under Clauses 3 & 4,
respectively, of the extension policy has not been taken into consideration by
respondent No.1, at all, while passing the impugned rejection order.

iii) Learned Senior Counsel has raised three contentions in support of the
case of the petitioner. Firstly, that the said order has been sought to be
assailed on the ground of the legitimate expectation as no due consideration
has been given to the fact of past performance of the petitioner under PSC
from 1998 to 2023 and the five interim extensions given to the petitioner.
Secondly, the arbitrariness in the decision taken by respondent No.1 as the
same is based on the material which was never brought to the notice of the
petitioner, and the manner in which the petitioner has been sought to be
ousted from the contract area by directing it to hand over the onshore as well
as offshore operations undertaken under the PSC at the subject area to
respondent No.4/ONGC on “as is where is basis”. Thirdly, it is the case of the
petitioner that no opportunity of hearing was provided by respondent Nos.1
and 2 with respect to the alleged dues/outstanding amount and grounds
mentioned in the impugned letter. It is therefore, submitted that this overall
conduct of respondent Nos.1 and 2 in arbitrarily rejecting the extension
application of the petitioner can be reviewed under Article 226 of the
Constitution of India. Reliance has been placed on Sivanandan C.T. & Ors.
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Digitally Signed By:NEETI
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Signing Date:06.01.2026
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1
v. High Court of Karnataka & Ors. , to contend that in view of the past
relationship between the parties for 27 years including 2 years of interim
extensions, as well as the parameters for evaluation of the application of
extension under Extension Policy of 2017, the petitioner has legitimate
expectation that it’s application for extension would have been allowed.
Reliance has been placed on following paragraphs of Sivanandan C.T.
( supra ) : -

“45. The underlying basis for the application of the doctrine of legitimate
expectation has expanded and evolved to include the principles of good
administration. Since citizens repose their trust in the State, the actions
and policies of the State give rise to legitimate expectations that the State
will adhere to its assurance or past practice by acting in a consistent,
transparent, and predictable manner. The principles of good
administration require that the decisions of public authorities must
withstand the test of consistency, transparency, and predictability to
avoid being regarded as arbitrary and therefore violative of Article 14.

46. From the above discussion, it is evident that the doctrine of
substantive legitimate expectation is entrenched in Indian administrative
law subject to the limitations on its applicability in given factual
situations. The development of Indian jurisprudence is keeping in line
with the developments in the common law. The doctrine of substantive
legitimate expectation can be successfully invoked by individuals to
claim substantive benefits or entitlements based on an existing promise
or practice of a public authority. However, it is important to clarify that
the doctrine of legitimate expectation cannot serve as an independent
basis for judicial review of decisions taken by public authorities. Such a
limitation is now well recognised in Indian jurisprudence considering the
fact that a legitimate expectation is not a legal right. [Union of
India v. Hindustan Development Corpn., (1993) 3 SCC 499; Bannari
Amman Sugars Ltd. v. CTO, (2005) 1 SCC 625; Monnet Ispat & Energy
Ltd. v. Union of India, (2012) 11 SCC 1; Union of India v. P.K.
Choudhary, (2016) 4 SCC 236 : (2016) 1 SCC (L&S) 640; State of
Jharkhand v. Brahmputra Metallics Ltd., (2023) 10 SCC 634.] It is

1
(2024) 3 SCC 799
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merely an expectation to avail a benefit or relief based on an existing
promise or practice. Although the decision by a public authority to deny
legitimate expectation may be termed as arbitrary, unfair, or abuse of
power, the validity of the decision itself can only be questioned on
established principles of equality and non-arbitrariness under Article 14.
In a nutshell, an individual who claims a benefit or entitlement based on
the doctrine of legitimate expectation has to establish : (i) the legitimacy
of the expectation; and (ii) that the denial of the legitimate expectation
led to the violation of Article 14.”

iv) He has further submitted that as per first ground of rejection, the
petitioner though in terms of Article 2.1 of the PSC does not has any
entitlement to the grant of extension, however, the rejection of application for
extension in terms of extension policy has to be on relevant considerations
otherwise the same would suffer from the vice of arbitrariness. It is further
submitted that all the compliances and eligibility conditions, in terms of the
extension policy, have to be evaluated as on the date when the application for
extension was made by the petitioner. It has also been pointed out that
respondent No.1, vide the impugned order, has taken the ground of
outstanding statutory or other dues to it in terms of Clause 3.2 (g) of the
Policy, however, there were no such dues or short payment of royalty as well
as the profit petroleum payable by the petitioner to respondent No.1. In this
regard, the case of the petitioner is that amount mentioned in the impugned
letter , i.e., payment of profit petroleum due to recovery of excess drilling cost
and Geostatistical inversion study amounting to USD 14.54 Million and
deduction of SAED (Special Additional Excise Duty) unilaterally from
Govt.’s share of profit petroleum amounting to USD 10.13 Million for Q2 of
FY 2022-23 to Q2 of FY 2024-25 and dues for settlement of past audit
exceptions and approval of accounts by Management Committee to the tune
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of USD 1.54 Million upto 2020-21, have been arbitrarily considered as
ground of rejection by respondent No.1 as the same were never raised while
the PSC was subsisting nor during the period while the interim extensions
were granted to the petitioner till 29.09.2024. It is also the case of the
petitioner that PSC in Article 33 provides for Arbitration and Article 30 of
PSC provides for Termination of Contract. Attention of this Court has been
drawn towards Article 30.2 of PSC which provided for “Circumstances in
which Government May Terminate” wherein, it has been mentioned that the
PSC can be terminated by the Government upon giving 90 days written notice
of its intention to do so. Further attention has been drawn towards the
following clauses of Article 30.2 of PSC: -

“30.2 Circumstances in which Government May Terminate



(d) has -assigned any interest in the Contract without the prior consent of
the Government as provided in Article 28; or

(e) fails to make any monetary payment required by law with respect
to Petroleum Operations (but not otherwise) or under this Contract
by the due date or within such further period after the due date as
may be specified in this Contract, the Operating Agreement or Law;
or

(f) fails to comply with or . contravenes the provisions of this
Contract in a material particular; or

”

Learned Senior Counsel has further submitted that if there was any
default on behalf of the petitioner in clearing the dues as has been mentioned
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in para (ii) of the impugned letter then, the respondent No.1 could have taken
recourse to the following covenant of the PSC: -

“30.4 Remedy of Default
If the circumstance or circumstances that give rise to the right of
termination under _Article 30.2 (e) or (f) or Article 30. 3 are remedied
(whether by the Defaulting Company or by another Party or Parties on its
behalf) within the ninety (90) day period or such extended period as may
be granted by the Government, following the notice of the Government’s
intention to terminate the Contract as aforesaid, such termination shall
not become effective.”

In view of the aforesaid clause of PSC, it is the submission of learned
Senior Counsel for the petitioner that the respondent No.1 had not raised any
claim with respect to any of the dues as mentioned in the impugned letter, as
noted hereinbefore and thus, the same cannot be a ground of rejection of the
application of extension of PSC filed by the petitioner and the impugned letter
has been passed arbitrarily on the basis of wholly extraneous and irrelevant
considerations. It is further submitted that after the application seeking
extension was filed by the petitioner in 2021, there was no discussion with
respect to the dues mentioned in the impugned rejection letter and the same
were brought to its notice in 2025 itself.

v) Further, learned Senior Counsel has submitted that if respondent No.1
was not inclined to provide extension of the PSC to the petitioner, then, why 5
interim extensions were granted to the petitioner. It is further submitted that
direction of respondent No.1 to the petitioner to hand over custody and
possession of the block to ONGC and cease and desist from carrying out any
further petroleum operations is not possible as the petroleum operations are
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continuing and the same cannot be turned off immediately. It is not possible
to shut down the operations immediately and close the offshore as well as
onshore activities. Learned Senior Counsel has handed up a compilation of
documents wherein; photographs of the subject oilfield have been annexed. It
is contended that the subject site is in the middle of the ocean and the iron
pillars have been rigged into the ocean bed and the same cannot be removed
instantly as has been directed by respondent No.1 vide the impugned rejection
letter/order. It is thus, the case of the petitioner that the subject site does come
within the purview of Public Premises Act, 1971, as well and the respondent
No.1 ought to have file a suit for eviction of the petitioner under the
provisions of Transfer of Property Act, 1882, in accordance with law.
Reliance has been placed on following observations of Hon’ble Supreme
2
Court in Express Newspapers (P) Ltd. v. Union of India : -

“ 85. For the sake of completeness, I wish to clear the ground of a
possible misconception. Learned counsel appearing for Respondent 1 the
Union of India while contending that the impugned notice dated March
10, 1980 was of an exploratory nature, fairly conceded that the lessor i.e.
the Union of India must enforce its right of re-entry upon forfeiture of
lease under clause 5 of the lease-deed by recourse to due process of law
and wanted to assure us that there was no question of marching the army
or making use of the demolition squad of the Delhi Development
Authority or the Municipal Corporation of Delhi in demolishing the
Express Buildings. As we felt that there was some ambiguity in the
expression “due process of law”, we wanted a categorical answer
whether by this he meant by a properly constituted suit. Without
meaning any disrespect, the learned counsel adopted an ambivalent
attitude saying that the due process may not only consist in the filing of a
suit by the lessor or re-entry upon forfeiture of the lease but that in the
case of lease of Government lands, the authorities may also take recourse
to the Public Premises (Eviction of Unauthorised Occupants) Act, 1971.
I have no doubt in my mind that the learned counsel is not right in

2
(1986) 1 SCC 133
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suggesting that the lessor i.e. the Union of India, Ministry of Works &
Housing can in the facts and circumstances of the case, take recourse to
the summary procedure under that Act. The Express Newspapers Pvt.
Ltd. having acted upon the grant of permission by the lessor i.e. the
Union of India, Ministry of Works & Housing to construct the new
Express Building with an increased FAR of 360 together with a double
basement was clearly not an unauthorised occupant within the meaning
of Section 2( g ) of the Act which runs as under:

“2 ( g ) ‘unauthorised occupation’, in relation to any public
premises, means the occupation by any person of the public
premises without authority for such occupation, and includes the
continuance in occupation by any person of the public premises
after the authority (whether by way of grant or any other mode of
transfer), under which he was allowed to occupy the premises has
expired or has been determined for any reason whatsoever.”

86. The Express Buildings constructed by Express Newspapers Pvt. Ltd.
with the sanction of the lessor i.e. the Union of India, Ministry of Works
and Housing on plots Nos. 9 and 10, Bahadurshah Zafar Marg demised
on perpetual lease by registered lease-deed dated March 17, 1958 can, by
no process of reasoning, be regarded as public premises belonging to the
Central Government under Section 2( e ). That being so, there is no
question of the lessor applying for eviction of the Express Newspapers
Pvt. Ltd. under Section 5(1) of the Public Premises (Eviction of
Unauthorised Occupants) Act, 1971 nor has the Estate Officer any
authority or jurisdiction to direct their eviction under sub-section (2)
thereof by summary process. Due process of law in a case like the
present necessarily implies the filing of suit by the lessor i.e. the Union
of India, Ministry of Works & Housing for the enforcement of the
alleged right of re-entry, if any, upon forfeiture of lease due to breach of
the terms of the lease.”

vi) Reliance has also been placed by learned Senior Counsel for the
petitioner on Section 4 of the Oil Fields (Regulation and Development) Act,
1948, and it is submitted that the present case is of lease and not ‘license’ and
the petitioner is a lessee, and therefore, cannot be removed from the subject
oil block site without following the due process of law. It is submitted that the
Signature Not Verified
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subject oil field is a leasehold site and on account of the infrastructure build at
the subject site onshore or offshore, it is an ‘immovable property’ falling
within the meaning of Transfer of Property Act, 1882, as well as General
Clauses Act, 1897, and thus, the petitioner cannot be ousted from the subject
oil block in the manner directed by respondent No.1. Attention of this Court
has been drawn towards the definitions of “immovable property”, “attached to
the earth” under Transfer of Property Act, 1882, and definition of
“immovable property” under General Clauses Act, 1897.

vii) During the course of arguments on 25.09.2025, learned Senior Counsel
for the petitioner, has submitted that the liability to pay the aforesaid amount
is not entirely of the petitioner and the same has to be paid by all the
contracting parties in correspondence to their participating interest as per PSC
and the petitioner is ready and willing to pay its share of the aforesaid
amount, under protest as the same has also been done earlier on 12.09.2025,
subject to respondent No.1 providing extension of the PSC to the petitioner
for a period of 10 years as has been sought in the prayers clause of the present
petition. In view thereof, it is submitted that the present petition be allowed
and the reliefs sought in the present petition be granted to the petitioner.

viii) Reliance has been placed by learned Senior Counsel in support of the
case of the petitioner on the following judgments: -

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3
a) On S.L. Kapoor v. Jagmohan & Ors. , to contend that the Court may
issue writ to press observance of natural justice, if the situation demands of
natural justice to be met or otherwise, the very object of the provision would
be frustrated. It is further contended that the non-observance of natural justice
is itself prejudicial to any person, and proof of prejudice independently of
proof of denial of natural justice is unnecessary. Reliance has been placed on
the following paragraphs of the aforesaid judgment: -

“ 11. Another submission of the learned Attorney-General was that
Section 238(1) also contemplated emergent situations where swift action
might be necessary to avert disaster and that in such situations if the
demands of natural justice were to be met, the very object of the
provision would be frustrated. It is difficult to visualise the sudden and
calamitous situations gloomily foreboded by the learned Attorney-
General where there would not be enough breathing time to observe
natural justice, at least in a rudimentary way. A municipal committee
under the Punjab Municipal Act is a public body consisting of both
officials and non-officials and one cannot imagine anything momentous
being done in a matter of minutes and seconds. And, natural justice may
always be tailored to the situation. Minimal natural justice, the barest
notice and the “littlest” opportunity, in the shortest time, may serve. The
authority acting under Section 238(1) is the master of its own procedure.
There need be no oral hearing. It is not necessary to put every detail of
the case to the committee: broad grounds sufficient to indicate the
substance of the allegations may be given. We do not think that even
minimal natural justice is excluded when alleged grave situations arise
under Section 238. If indeed such grave situations arise, the public
interest can be sufficiently protected by appropriate prohibitory and
mandatory action under the other relevant provisions of the statute in
Sections 232 to 235 of the Act. We guard ourselves against being
understood as laying down any proposition of universal application.
Other statutes providing for speedy action to meet emergent situations
may well be construed as excluding the principle audi alteram partem.
All that we say is that Section 238(1) of the Punjab Municipal Act does
not.

3
(1980) 4 SCC 379
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16. Thus on a consideration of the entire material placed before us we
do not have any doubt that the New Delhi Municipal Committee was
never put on notice of any action proposed to be taken under Section 238
of the Punjab Municipal Act and no opportunity was given to the
Municipal Committee to explain any fact or circumstance on the basis
that action was proposed. If there was any correspondence between the
New Delhi Municipal Committee and any other authority about the
subject-matter of any of the allegations, if information was given and
gathered it was for entirely different purposes. In our view, the
requirements of natural justice are met only if opportunity to represent is
given in view of proposed action. The demands of natural justice are not
met even if the very person proceeded against has furnished the
information on which the action is based, if it is furnished in a casual
way or for some other purpose. We do not suggest that the opportunity
need be a “double opportunity” that is, one opportunity on the factual
allegations and another on the proposed penalty. Both may be rolled into
one. But the person proceeded against must know that he is being
required to meet the allegations which might lead to a certain action
being taken against him. If that is made known the requirements are met.
We disagree with the finding of the High Court that the Committee had
the opportunity to meet the allegations contained in the order of
supersession.

24. ….


In our view the principles of natural justice know of no exclusionary rule
dependent on whether it would have made any difference if natural
justice had been observed. The non-observance of natural justice is itself
prejudice to any man and proof of prejudice independently of proof of
denial of natural justice is unnecessary. It ill comes from a person who
has denied justice that the person who has been denied justice is not
prejudiced. As we said earlier where on the admitted or indisputable facts
only one conclusion is possible and under the law only one penalty is
permissible, the court may not issue its writ to compel the observance of
natural justice, not because it is not necessary to observe natural justice
but because courts do not issue futile writs. We do not agree with the
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contrary view taken by the Delhi High Court in the judgment under
appeal.



26. In the light of the discussion we have no option but to hold that
the Order dated February 27, 1980, of the Lt. Governor superseding the
New Delhi Municipal Committee is vitiated by the failure to observe the
principle audi alteram partem. The question is what relief should be
given to the appellant? The term of the Committee is due to expire on
October 3, 1980 which means that just a few days more are left for the
term to run out. If now the order is quashed and the Committee is
directed to be reinstated with liberty to the Lt. Governor to proceed
according to law — this should be our order ordinarily — it may lead to
confusion and even chaos in the affairs of the municipality. Shri
Sorabjee, learned Counsel for the appellant, had relieved us of our
anxiety by stating:
“In view of the fact that the term expires on October 3, 1980, and as
the appellant is anxious to have the stigma cast on him by the notification
removed, the appellant does not press either for reinstatement in office or
for striking down the notification so long as there is a just determination
of the invalidity of the notification.””

In view of the aforesaid, it is submitted that the petitioner ought to have
been provided an opportunity to explain or clear the outstanding dues as
mentioned in the impugned rejection order as the same were put to it only for
the first time in 2025.

4
b) In Kumari Shrilekha Vidyarthi & Ors. v. State of UP & Ors. ,
reliance has been placed on following paragraphs: -

“ 33. No doubt, it is true, as indicated by us earlier, that there is a
presumption of validity of the State action and the burden is on the
person who alleges violation of Article 14 to prove the assertion.

4
(1991) 1 SCC 212
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However, where no plausible reason or principle is indicated nor is it
discernible and the impugned State action, therefore, appears to be ex
facie arbitrary, the initial burden to prove the arbitrariness is discharged
shifting onus on the State to justify its action as fair and reasonable. If
the State is unable to produce material to justify its action as fair and
reasonable, the burden on the person alleging arbitrariness must be held
to be discharged. The scope of judicial review is limited as indicated
in Dwarkadas Marfatia case [(1989) 3 SCC 293] to oversee the State
action for the purpose of satisfying that it is not vitiated by the vice of
arbitrariness and no more. The wisdom of the policy or the lack of it or
the desirability of a better alternative is not within the permissible scope
of judicial review in such cases. It is not for the courts to recast the
policy or to substitute it with another which is considered to be more
appropriate, once the attack on the ground of arbitrariness is successfully
repelled by showing that the act which was done, was fair and reasonable
in the facts and circumstances of the case. As indicated by Diplock, L.J.,
in Council of Civil Service Unions v. Minister for the Civil
Service [(1984) 3 All ER 935] the power of judicial review is limited to
the grounds of illegality, irrationality and procedural impropriety. In the
case of arbitrariness, the defect of irrationality is obvious.

34. In our opinion, the wide sweep of Article 14 undoubtedly takes
within its fold the impugned circular issued by the State of U.P. in
exercise of its executive power, irrespective of the precise nature of
appointment of the Government Counsel in the districts and the other
rights, contractual or statutory, which the appointees may have. It is for
this reason that we base our decision on the ground that independent of
any statutory right, available to the appointees, and assuming for the
purpose of this case that the rights flow only from the contract of
appointment, the impugned circular, issued in exercise of the executive
power of the State, must satisfy Article 14 of the Constitution and if it is
shown to be arbitrary, it must be struck down. However, we have
referred to certain provisions relating to initial appointment, termination
or renewal of tenure to indicate that the action is controlled at least by
settled guidelines, followed by the State of U.P., for a long time. This too
is relevant for deciding the question of arbitrariness alleged in the present
case.

35. It is now too well settled that every State action, in order to
survive, must not be susceptible to the vice of arbitrariness which is the
crux of Article 14 of the Constitution and basic to the rule of law, the
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system which governs us. Arbitrariness is the very negation of the rule of
law. Satisfaction of this basic test in every State action is sine qua non to
its validity and in this respect, the State cannot claim comparison with a
private individual even in the field of contract. This distinction between
the State and a private individual in the field of contract has to be borne
in the mind.

36. The meaning and true import of arbitrariness is more easily
visualized than precisely stated or defined. The question, whether an
impugned act is arbitrary or not, is ultimately to be answered on the facts
and in the circumstances of a given case. An obvious test to apply is to
see whether there is any discernible principle emerging from the
impugned act and if so, does it satisfy the test of reasonableness. Where a
mode is prescribed for doing an act and there is no impediment in
following that procedure, performance of the act otherwise and in a
manner which does not disclose any discernible principle which is
reasonable, may itself attract the vice of arbitrariness. Every State action
must be informed by reason and it follows that an act uninformed by
reason, is arbitrary. Rule of law contemplates governance by laws and
not by humour, whims or caprices of the men to whom the governance is
entrusted for the time being. It is trite that ‘be you ever so high, the laws
are above you’. This is what men in power must remember, always.”

c) Reliance has been placed on Allied Motors Ltd. v. Bharat Petroleum
5
Corporation Ltd. , to contend that the State while dealing with public cannot
act arbitrarily and its action must be in conformity with principles of
reasonableness and relevance. Reliance has been placed on following portion
of the aforesaid judgment: -

“ 56. Reliance has also been placed on Gujarat State Financial
Corpn. v. Lotus Hotels (P) Ltd. [(1983) 3 SCC 379] In this case the
Court held that the public corporation dealing with the public cannot act
arbitrarily and its action must be in conformity with some principles
which meets the test of reason and relevance.


5
(2012) 2 SCC 1
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57. We have heard the learned counsel for the parties at length and
have perused the decisions relied on by the parties.

58. In the instant case, samples were taken on 15-5-2000. On the very
next day i.e. on 16-5-2000, without even giving a show-cause notice
and/or giving an opportunity of hearing, the respondent Corporation
terminated the dealership of the appellant. The appellant had been
operating the petrol pump for the respondent for the last 30 years and
was given 10 awards declaring its dealership as the best petrol pump in
the entire State of NCT of Delhi. During this period, on a number of
occasions, samples were tested by the respondent and were found to be
as per specifications.

59. In the instant case, the haste in which 30 years old dealership was
terminated even without giving show-cause notice and/or giving an
opportunity of hearing clearly indicates that the entire exercise was
carried out by the respondent Corporation on non-existent, irrelevant and
on extraneous considerations. There has been a total violation of the
provisions of law and the principles of natural justice. Samples were
collected in complete violation of the procedural laws and in non-
adherence of the guidelines of the respondent Corporation.

60. On consideration of the totality of the facts and circumstances of
this case, it becomes imperative in the interest of justice to quash and set
aside the termination order of the dealership. We, accordingly, quash the
same. Consequently, we direct the respondent Corporation to hand over
the possession of the petrol pump and restore the dealership of petrol
pump to the appellant within three months from the date of this
judgment.”

d) Reliance has been placed on M.P. Power Management Company
6
Limited v. Sky Power South East Solar India Private Limited & Ors. , to
contend that an order or decision would be arbitrary if the same is not based
on any principle or it shows caprice or it has been passed without any
reasonable rational and if there is total non-application of mind with respect to

6
(2023) 2 SCC 703
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rights of parties and public interest. Reliance has been placed on following
portion of the aforesaid judgment: -

“ 67. ABL [ABL International Ltd. v. Export Credit Guarantee Corpn.
of India Ltd., (2004) 3 SCC 553] marks a milestone, as it were, in the
matter of the superior court interfering in contractual matters where the
State is a player even after the contract is entered into. A petition was
filed under Article 226 wherein the respondent which was incorporated
under the Companies Act repudiated an insurance claim made by the
appellant writ petitioner. This Court undertook an elaborate discussion of
the earlier case law. We find that this Court dealt with several obstacles
which were sought to be posed by the respondent. They included
disputed questions of facts being involved, availability of alternate
remedy, and the case involving entertaining a money claim. This Court
went on to hold as follows : (SCC p. 572, para 27)

“27. From the above discussion of ours, the following legal
principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an
instrumentality of a State arising out of a contractual obligation is
maintainable.
(b) Merely because some disputed questions of fact arise for
consideration, same cannot be a ground to refuse to entertain a writ
petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary
claim is also maintainable.”

68. No doubt, we must also notice para 28 of ABL [ABL
International Ltd. v. Export Credit Guarantee Corpn. of India Ltd.,
(2004) 3 SCC 553] which serves as an admonition against considering
the availability of the remedy under Article 226 as an absolute charter to
invoke jurisdiction in all cases : (ABL case [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553]
, SCC p. 572, para 28)

“28. However, while entertaining an objection as to the
maintainability of a writ petition under Article 226 of the
Constitution of India, the court should bear in mind the fact that the
power to issue prerogative writs under Article 226 of the
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Constitution is plenary in nature and is not limited by any other
provisions of the Constitution. The High Court having regard to the
facts of the case, has a discretion to entertain or not to entertain a
writ petition. The Court has imposed upon itself certain restrictions
in the exercise of this power. (See Whirlpool Corpn. v. Registrar of
Trade Marks [Whirlpool Corpn. v. Registrar of Trade Marks,
(1998) 8 SCC 1] .) And this plenary right of the High Court to issue
a prerogative writ will not normally be exercised by the Court to
the exclusion of other available remedies unless such action of the
State or its instrumentality is arbitrary and unreasonable so as to
violate the constitutional mandate of Article 14 or for other valid
and legitimate reasons, for which the Court thinks it necessary to
exercise the said jurisdiction.”
(emphasis supplied)



81. We have already concluded that PPA is not a statutory contract.
However, that would not be the end of enquiry. Dr A.M. Singhvi, learned
Senior Counsel, would point out that the contract, not being a statutory
contract, assumes relevance only for the purpose of deciding as to
whether the Court should relegate the writ applicant, to alternate
remedies. In other words, while the Court would retain its discretion to
entertain the petition or decline to do so, in the facts of each case, there is
no absolute taboo against the Court granting relief, even if the challenge
to the termination of a contract is made in the case of a contract, which is
not statutory in nature, when the offending party is the State. In other
words, the contention is that the law in this field has witnessed an
evolution and, what is more, a revolution of sorts and a transformatory
change with a growing realisation of the true ambit of Article 14 of the
Constitution of India. The State, he points out, cannot play the Dr Jekyll
and Hyde game anymore. Its nature is cast in stone. Its character is
inflexible. This is irrespective of the activity it indulges in. It will
continue to be haunted by the mandate of Article 14 to act fairly. There
has been a stunning expansion of the frontiers of the Court's jurisdiction
to strike at State action in matters arising out of contract, based,
undoubtedly, on the facts of each case. It remains open to the Court to
refuse to reject a case, involving State action, on the basis that the action
is, per se, arbitrary.

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82. We may cull out our conclusions in regard to the points, which
we have framed:

82.1. It is, undoubtedly, true that the writ jurisdiction is a public law
remedy. A matter, which lies entirely within a private realm of affairs of
public body, may not lend itself for being dealt with under the writ
jurisdiction of the Court.

82.2. The principle laid down in Bareilly Development
Authority [Bareilly Development Authority v. Ajai Pal Singh, (1989) 2
SCC 116] that in the case of a non-statutory contract the rights are
governed only by the terms of the contract and the decisions, which are
purported to be followed, including Radhakrishna
Agarwal [Radhakrishna Agarwal v. State of Bihar, (1977) 3 SCC 457] ,
may not continue to hold good, in the light of what has been laid down
in ABL [ABL International Ltd. v. Export Credit Guarantee Corpn. of
India Ltd., (2004) 3 SCC 553] and as followed in the recent judgment
in Sudhir Kumar Singh [State of U.P. v. Sudhir Kumar Singh, (2021) 19
SCC 706 : 2020 SCC OnLine SC 847] .

82.3. The mere fact that relief is sought under a contract which is not
statutory, will not entitle the respondent State in a case by itself to ward
off scrutiny of its action or inaction under the contract, if the
complaining party is able to establish that the action/inaction is, per se,
arbitrary.

82.4. An action will lie, undoubtedly, when the State purports to
award any largesse and, undoubtedly, this relates to the stage prior to the
contract being entered into (see Ramana Dayaram Shetty [Ramana
Dayaram Shetty v. International Airport Authority of India, (1979) 3
SCC 489] ). This scrutiny, no doubt, would be undertaken within the
nature of the judicial review, which has been declared in the decision
in Tata Cellular v. Union of India [Tata Cellular v. Union of India,
(1994) 6 SCC 651] .

82.5. After the contract is entered into, there can be a variety of
circumstances, which may provide a cause of action to a party to the
contract with the State, to seek relief by filing a writ petition.

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82.6. Without intending to be exhaustive, it may include the relief of
seeking payment of amounts due to the aggrieved party from the State.
The State can, indeed, be called upon to honour its obligations of making
payment, unless it be that there is a serious and genuine dispute raised
relating to the liability of the State to make the payment. Such dispute,
ordinarily, would include the contention that the aggrieved party has not
fulfilled its obligations and the Court finds that such a contention by the
State is not a mere ruse or a pretence.

82.7. The existence of an alternate remedy, is, undoubtedly, a matter
to be borne in mind in declining relief in a writ petition in a contractual
matter. Again, the question as to whether the writ petitioner must be told
off the gates, would depend upon the nature of the claim and relief
sought by the petitioner, the questions, which would have to be decided,
and, most importantly, whether there are disputed questions of fact,
resolution of which is necessary, as an indispensable prelude to the grant
of the relief sought. Undoubtedly, while there is no prohibition, in the
writ court even deciding disputed questions of fact, particularly when the
dispute surrounds demystifying of documents only, the Court may
relegate the party to the remedy by way of a civil suit.

82.8. The existence of a provision for arbitration, which is a forum
intended to quicken the pace of dispute resolution, is viewed as a near
bar to the entertainment of a writ petition [see in this regard, the view of
this Court even in ABL [ABL International Ltd. v. Export Credit
Guarantee Corpn. of India Ltd., (2004) 3 SCC 553] explaining how it
distinguished the decision of this Court in State of U.P. v. Bridge & Roof
Co. (India) Ltd. [State of U.P. v. Bridge & Roof Co. (India) Ltd., (1996)
6 SCC 22] , by its observations in SCC para 14 in ABL [ABL
International Ltd. v. Export Credit Guarantee Corpn. of India Ltd.,
(2004) 3 SCC 553] ].

82.9. The need to deal with disputed questions of fact, cannot be
made a smokescreen to guillotine a genuine claim raised in a writ
petition, when actually the resolution of a disputed question of fact is
unnecessary to grant relief to a writ applicant.

82.10. The reach of Article 14 enables a writ court to deal with
arbitrary State action even after a contract is entered into by the State. A
wide variety of circumstances can generate causes of action for invoking
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Article 14. The Court's approach in dealing with the same, would be
guided by, undoubtedly, the overwhelming need to obviate arbitrary
State action, in cases where the writ remedy provides an effective and
fair means of preventing miscarriage of justice arising from palpably
unreasonable action by the State.

82.11. Termination of contract can again arise in a wide variety of
situations. If for instance, a contract is terminated, by a person, who is
demonstrated, without any need for any argument, to be the person, who
is completely unauthorised to cancel the contract, there may not be any
necessity to drive the party to the unnecessary ordeal of a prolix and
avoidable round of litigation. The intervention by the High Court, in such
a case, where there is no dispute to be resolved, would also be conducive
in public interest, apart from ensuring the fundamental right of the
petitioner under Article 14 of the Constitution of India. When it comes to
a challenge to the termination of a contract by the State, which is a non-
statutory body, which is acting in purported exercise of the powers/rights
under such a contract, it would be over simplifying a complex issue to
lay down any inflexible rule in favour of the Court turning away the
petitioner to alternate fora. Ordinarily, the cases of termination of
contract by the State, acting within its contractual domain, may not lend
itself for appropriate redress by the writ court. This is, undoubtedly, so if
the Court is duty-bound to arrive at findings, which involve untying
knots, which are presented by disputed questions of facts. Undoubtedly,
in view of ABL [ABL International Ltd. v. Export Credit Guarantee
Corpn. of India Ltd., (2004) 3 SCC 553] , if resolving the dispute, in a
case of repudiation of a contract, involves only appreciating the true
scope of documentary material in the light of pleadings, the Court may
still grant relief to an applicant. We must enter a caveat. The Courts are
today reeling under the weight of a docket explosion, which is truly
alarming. If a case involves a large body of documents and the Court is
called upon to enter upon findings of facts and involves merely the
construction of the document, it may not be an unsound discretion to
relegate the party to the alternate remedy. This is not to deprive the Court
of its constitutional power as laid down in ABL [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553]
. It all depends upon the facts of each case as to whether, having regard
to the scope of the dispute to be resolved, whether the Court will still
entertain the petition.

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82.12. In a case the State is a party to the contract and a breach of a
contract is alleged against the State, a civil action in the appropriate
forum is, undoubtedly, maintainable. But this is not the end of the matter.
Having regard to the position of the State and its duty to act fairly and to
eschew arbitrariness in all its actions, resort to the constitutional remedy
on the cause of action, that the action is arbitrary, is permissible (see in
this regard Shrilekha Vidyarthi v. State of U.P. [Shrilekha
Vidyarthi v. State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S) 742] ).
However, it must be made clear that every case involving breach of
contract by the State, cannot be dressed up and disguised as a case of
arbitrary State action. While the concept of an arbitrary action or inaction
cannot be cribbed or confined to any immutable mantra, and must be laid
bare, with reference to the facts of each case, it cannot be a mere
allegation of breach of contract that would suffice. What must be
involved in the case must be action/inaction, which must be palpably
unreasonable or absolutely irrational and bereft of any principle. An
action, which is completely mala fide, can hardly be described as a fair
action and may, depending on the facts, amount to arbitrary action. The
question must be posed and answered by the Court and all we intend to
lay down is that there is a discretion available to the Court to grant relief
in appropriate cases.

82.13. A lodestar, which may illumine the path of the Court, would
be the dimension of public interest subserved by the Court interfering in
the matter, rather than relegating the matter to the alternate forum.

82.14. Another relevant criteria is, if the Court has entertained the
matter, then, while it is not tabooed that the Court should not relegate the
party at a later stage, ordinarily, it would be a germane consideration,
which may persuade the Court to complete what it had started, provided
it is otherwise a sound exercise of jurisdiction to decide the matter on
merits in the writ petition itself.

82.15. Violation of natural justice has been recognised as a ground
signifying the presence of a public law element and can found a cause of
action premised on breach of Article 14. (See Sudhir Kumar Singh [State
of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706 : 2020 SCC OnLine
SC 847] ).”


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SUBMISSIONS ON BEHALF OF RESPONDENT NO.2/DHG

4. Learned Attorney General for India, while refuting the submissions
made by learned Senior Counsel on behalf of the petitioner, has made the
following submissions: -

i) At the very outset, learned Attorney General for India, has raised an
issue with respect to the maintainability of the present petition under Article
226 of the Constitution on the ground that by way of the present petition, the
petitioner is trying to invoke writ jurisdiction for seeking direction for
extension of PSC for a further term of 10 years. He submitted that the
petitioner does not have any vested legal right or Constitutional right for
further extension of contract. It is submitted that writ petition cannot be
maintainable in cases which are strictly contractual in nature and wherein, no
statutory obligation is casted on the Government for extension of a contract
especially in favour of a particular person/entity. He further submitted that the
origin of PSC in the oil and gas sector is traceable to Article 297 of the
Constitution of India under which Union Government is the custodian of
natural resources vested in the people of nation and thus, judicial review of
contractual interpretation in such matters is necessarily circumscribed and
must be exercised with due regard to public interest and sovereign control
over natural resources.

ii) It is submitted that in 2017, Government of India, has enacted a Policy
for Grant of Extension to the Production Sharing Contract (PSCs) signed by it
for awarding Pre-New Exploration Licensing Policy (Pre-NELP) Exploration
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Blocks, by which procedure and criteria on which application for extension of
an already existing PSC were to be assessed was provided. It is further
submitted that said Policy provided for Fisal Parameters for Extension,
Prerequisites for Evaluation, Criteria for Evaluation, on the basis of which
any such application for extension is to be considered and in the present case,
the application of the petitioner for extension was not found satisfactory in
terms of the said policy. Even as per this policy, no right for extension of PSC
was vested in the petitioner, who is merely a contractor, and therefore, no
question of providing exclusive right of hearing to the petitioner arise. It is the
case of respondent No.2/DGH that, in fact, the petitioner was granted various
opportunity of being heard and thus, respondent No.2 had complied with the
principles of natural justice while passing the impugned rejection order.
Attention of this Court has been drawn towards the letters forming part of
correspondences between the petitioner and respondent No.2 from 2021
onwards. Learned AGI has further submitted that the petitioner has not
approached this Court with clean hands and has suppressed material facts and
various communications forming part of correspondences amongst the parties
concerned have not been placed on record by the petitioner to enable this
Court for proper adjudication of the matter. He has further submitted that the
subject oil premises/site belong to respondent No.4/ONGC as the same has
been vested with right of lessee and therefore, no obligation as such has been
casted, either statutory or otherwise, on the respondent No.2/DGH to take
recourse under Public Premises Act, 1971, for eviction of petitioner from
subject site.

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iii) Learned AGI has further submitted that as per the Extension Policy,
Clause 3 provides for Prerequisites for Evaluation, Clause 4 provides for
Criteria for Evaluation of Request and Clause 5 provides that in the event of
failure to comply with any of the conditions, mentioned in clauses 3 and 4,
Government shall have the option to invite fresh bids for further development
of the area and to award the field to the most competitive bid and while doing
so, Government would also take into account pending arbitration while
considering extension requests. He further submitted that the natural resources
of this country belong to people of India and the Government is merely a
custodian and no one has a vested right to continue with the prolonged
excavation of said resources and claim extension of PSC in its favour as a
matter of right. Reliance has been placed on following observations of
Hon’ble Supreme Court in Natural Resources Ltd. v. Reliance Industries
7
Ltd. : -

“ 122. From the above analysis, the following are the broad
sustainable conclusions which can be derived from the position of the
Union:

( 1 ) The natural resources are vested with the Government as a matter
of trust in the name of the people of India. Thus, it is the solemn duty of
the State to protect the national interest.

( 2 ) Even though exploration, extraction and exploitation of natural
resources are within the domain of governmental function, the
Government has decided to privatise some of its functions. For this
reason, the constitutional restrictions on the Government would equally
apply to the private players in this process. Natural resources must
always be used in the interests of the country, and not private interests.

7
(2010) 7 SCC 1
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( 3 ) The broader constitutional principles, the statutory scheme as well
as the proper interpretation of the PSC mandates the Government to
determine the price of the gas before it is supplied by the contractor.

( 4 ) The policy of the Government, including the gas utilisation policy
and the decision of EGOM would be applicable to the pricing in the
present case.

( 5 ) The Government cannot be divested of its supervisory powers to
regulate the supply and distribution of gas.



Summary of our conclusions



E. Role of the Government

128. In a constitutional democracy like ours, the national assets
belong to the people. The Government holds such natural resources in
trust. Legally, therefore, the Government owns such assets for the
purposes of developing them in the interests of the people. In the present
case, the Government owns the gas till it reaches its ultimate consumer.
A mechanism is provided under the PSC between the Government and
the contractor (RIL, in the present case). The PSC shall override any
other contractual obligation between the contractor and any other party.


231. The principal themes in Production Sharing Contracts would appear
to be that the sovereignty over the petroleum produced continues to be
with the nation, and the contractor bears varying levels of and forms of
risk with respect to exploration activities and what is allowed to be
recovered as costs (called contract costs) and to what extent in each year
(called cost petroleum). According to Daniel Johnston, who was cited by
learned Solicitor General Gopal Subramanium:
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“ Contractual arrangements are divided into service contracts and
production contracts . The difference between them depends on
whether or not the contractor receives compensation in cash or in
kind (crude) . This is a rather modest distinction and, as a result,
systems on both branches are commonly referred to as PSCs or
sometimes production sharing agreements (PSAs).”
(emphasis supplied)

( 1 ) transfer title of those resources after their extraction unless the
Union receives just and proper compensation for the same;

( 2 ) allow a situation to develop wherein the various users in different
sectors could potentially be deprived of access to such resources;

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( 3 ) allow the extraction of such resources without a clear policy
statement of conservation, which takes into account total domestic
availability, the requisite balancing of current needs with those of future
generations, and also India's security requirements;

( 4 ) allow the extraction and distribution without periodic evaluation
of the current distribution and making an assessment of how greater
equity can be achieved, as between sectors and also between regions;

( 5 ) allow a contractor or any other agency to extract and distribute the
resources without the explicit permission of the Union of India, which
permission can be granted only pursuant to a rationally framed utilisation
policy; and

( 6 ) no end user may be given any guarantee for continued access and
of use beyond a period to be specified by the Government.

Any contract including a PSC which does not take into its ambit stated
principles may itself become vulnerable and fall foul of Article 14 of the
Constitution.

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In view of the aforesaid, it is contended that no transfer of title had ever
taken place in favour of the petitioner and the Government receives only just
and fair compensation by letting out the excavation of natural resources while
working on the principle of sustainable development and making an
endeavour to preserve the natural resources for future generations.

iv) Learned AGI while addressing the argument of petitioner being ‘lessee’
under PSC has drawn attention of this Court towards the following
recitals/covenants mentioned at the very outset of PSC dated 30.06.1998: -
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v) Further, learned AGI has drawn attention of this Court towards the
following definitions enumerated in ‘Article 1: Definitions’ of the PSC: -

“1.22 "Contract' Area" means, on the Effective Date, the area described
in Appendix :A and delineated on the map attached as Appendix B, or
any portion of the said area remaining after ,relinquishment or surrender
from time to time pursuant to the terms of this Contract.

1.23 "Contract Costs" means costs incurred by the Contractor in
accordance • with the provisions of this Contract in connection with
Petroleum Operations including Exploration Costs, Development Costs
and Production Costs.



1.31 "Development Costs" means· those costs and expenditures incurred
in carrying out· Development Operations, as classified and defined in
Section 2 of the Accounting Procedure and allowed to be recovered in
terms of this Contract.

1.32 "Development Operations” means operations conducted in
accordance with the Development Plan and shall include the purchase,
shipment or storage of equipment and materials used in developing
Petroleum accumulations, the drilling, completion and testing of
Development Wells, the drilling and completion of Wells for gas or
water injection, the laying of gathering lines, the installation of offshore
platforms and installations, the installation of separators, tankage,
pumps, artificial lift and other producing and injection facilities required
to produce, process and transport Petroleum into main oil storage or gas
processing facilities, either on shore or offshore, including the laying of
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pipelines within or outside the Contract Area, storage and Delivery Point
or Points, the installation of said storage or gas processing facilities, the
installation of export and loading facilities and other facilities required
for the development and production of the said Petroleum accumulations
and for the delivery of Crude Oil and/or Gas at the Delivery. Point and
also including incidental operations not specifically referred to herein as
required for the most efficient and. economic development and
production of the said Petroleum accumulations in accordance with good
international petroleum industry practices.



1.41 "Exploration Costs" means those costs and expenditures incurred in
carrying out Exploration Operations, as classified and defined in Section
2 of the Accounting Procedure and allowed to be recovered in terms of
this Contract.



1.70 “Production Costs" means those costs and expenditures incurred in
carrying out· Production Operations as classified and defined in Section
2 of the Accounting Procedure and allowed to be recovered in terms of
this Contract.”

In view of the aforesaid definitions, it is submitted that the contract
costs (1.23) is inclusive of development costs, exploration costs, and
production costs and once the contract costs is recovered, there is no other
right of the petitioner which subsists in the petroleum block or PSC.

vi) Attention of this Court has also been drawn towards the following
definitions enumerated in ‘Article 1: Definitions’ of the PSC: -

“l.54 "Licence" means the petroleum exploration licence or letter of
authority in respect of an area known as Block CB/OS-2, - issued under
the Rules or the Territorial Waters, Continental Shelf, Exclusive
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Economic Zone and Other Maritime Zones Act, 1976 respectively, for
the purpose of carrying out Petroleum Operations in the Contract Area.



1.65 “Participating Interest" means in respect of each Party constituting
the Contractor, the undivided share expressed as a percentage, of such
Party in the rights and obligations under the Contract including without
limitation, the Party's rights and obligations in relation to a Development
Area) and the Operating Agreement.”

It is, therefore, submitted that term ‘lease’ has not been defined in the
PSC and the subject site/Petroleum block has been termed as ‘contract area’.
The petitioner being a contractor only has ‘participating interest’ in the
undivided share expressed as percentage under the Contract and the operating
agreement.

vii) Learned AGI has drawn attention of this Court towards Article 2:
Duration of the PSC and submitted that as per Article 2.1, the term of PSC
was for a period of 25 years which ‘may be’ extended by the Government for
a further period not exceeding 5 years and in event of commercial production
of non-associated natural gas, the contract may be extended by the
Government for a period up to and not exceeding 35 years. It has, thus, been
argued that a discretion has been conferred to the Government in respect of
extension of an existing PSC; however, there is no vested right to claim
extension of PSC in favour of the particular entity. It is further submitted that
the Government has decided the application of the petitioner seeking
extension of PSC on the touchstones of the parameters laid out in the policy
for grant of extension of PSC, as pointed out hereinabove, and this action has
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been done by following the principles of natural justice, fairness, justness, and
reasonableness. The relevant covenant(s) of ‘Article 2: Duration’ reads thus: -

“ARTICLE 2
DURATION

2.1 The term of this Contract shall be for a period of twenty five (25)
years from the Effective Date, unless the Contract is terminated
earlier in accordance with its terms, but may be extended by the
Government for a further Period not exceeding five (5) years;
provided that in the event of Commercial Production of Non
Associated Natural Gas, the Contract may be extended by the
Government for a period up to but not exceeding thirty five (35)
years from the Effective Date.”

In view of the aforesaid, it is submitted that this discretionary and
permissive of term ‘may be’ is used keeping in mind the public trust doctrine,
which is underlying premise of the contract emanating from Article 297 of the
Constitution. It, thus, submitted that even broader interpretation of the
extension policy as well as the terms of PSC does not provide an impression
of any legitimate expectation on behalf of respondent No.2 to provide an
extension of PSC as a matter of right. It has been further argued that the
doctrine of Legitimate Expectation would not be applicable to the present
category of cases as the Government is merely acting as a custodian of the
natural resources and has to make best of them. Learned AGI further
submitted that all the 10 blocks of petroleum excavation sites under the
extension policy have to be dealt with fairly by respondent No.2.

viii) Attention of this Court has been drawn towards Articles 13, 13.8, 13.9,
14.1, 14.8, 14.7, 14.9, 27, 27.1, 27.4, 28.7 of the PSC and in view of these
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covenants of the PSC, it is submitted by learned AGI that the same are based
on Article 297 of the Constitution and public trust doctrine, and thus, there is
no vested right in excavation contracts.

ix) During the course of proceedings in the present case on 04.12.2025,
learned Senior Counsel for the petitioner has submitted that the latter has paid
an amount of 7.34 million USD to respondent No.2 as its share of 40% PI as
the same was a ground of rejection of the petitioner’s application seeking
extension. He further submitted that SAED as claimed by respondent No.2
has already been paid, and thus, if the non-payment of dues was a ground to
reject the petitioner’s application for extension, then, the same have been paid
and now, respondent No.2 may consider to review their decision. Learned
AGI has confirmed that they have received the money; however, the same
will not be consideration for granting extension of PSC to the petitioner.

x) Learned AGI has drawn attention of this Court towards Clause 3.2 of
the Extension Policy wherein it has been provided that the application of
extension of contract should fulfil the certain conditions for consideration. It
is further submitted that as per Clause 3.2(g), all statutory dues and payment
to Government should have been cleared and the contractor should not be a
defaulter to the Government on any account and as per Clause 4 which
provides for criteria for evaluation of request for extension, the performance
of the contractor should be satisfactory for the request of extension to be
favourably considered. He further submitted that as per Clause 5 of the policy
in the event of failure to comply with any of the conditions mentioned in
Clauses 3 and 4, Government has the option to invite fresh bids for further
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development of the area and to award the field to the most competitive bid.
Further, as per Clause 9 of the policy, providing for other conditions,
Government has right not to extend PSC without assigning any reason thereof
and the conditions stipulated in the policy will override the existing provision
of the PSC. The said relevant Clauses of the extension policy read as under: –

“3. Prerequisites for Evaluation:



3.2 The application of extension of contract should fulfill the following
conditions for consideration:



g) All the statutory dues and payment due to Government should have
been cleared and the contractor should not be a defaulter to the
Government on any account.


4 Criteria for Evaluation of Request :

4.1 The past performance of the. contractor should be satisfactory for the
request of extension to be favourably considered. The past performance
would be judged on the basis of following criteria:

a) Contractor should have drilled at least 70% of the development wells
of development plan approved by the Management Committee (MC) due
for drilling as on date of application for last 10 years, or, must have
achieved 70% of the committed production as on date with reference to
the earlier approved FOP or approved Work Programme for the last 10
years.

b) Contractor should have complied with the provisions of creation of
Site Restoration Fund (SRF) and Site Restoration Plan (SRP) as per PSC.
Wherever PSC does not provide for SRF and SRP, the Contractor should
propose SRF and SRP as a part of extended Contract.

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5. In the event of failure to comply with any of the above conditions,
mentioned in clauses 3 and 4 above, Government shall have the option to
invite fresh bids for further development of the area and to award the
field to the most competitive bid. Government would also take into
account pending arbitration while considering extension requests.



9. Other conditions:

a) Government shall have the right to stipulate any further conditions
specific to any particular Production Sharing Contract.
b) Government shall reserve the right not to extend PSC without
assigning any reason thereof.
c) The condition stipulated in this policy will override the existing
provision of the PSC.
d) In case any contractor is not agreeable to this policy then the field will
be considered for rebidding, on as is where is basis. Government would
also have the right to assign the same to National Oil Companies (NOCs)
i.e. ONGC or OIL.”

In view of the aforesaid provisions of extension policy, learned AGI has
submitted that, the scheme of policy enacted by respondent No.1 emanates
from Article 297 of the Constitution and is based on ‘public trust doctrine’
that all natural resources of this country vests in the people of India and the
government is merely a custodian of the same. It is further submitted by
learned AGI that this extension policy governs 10 Exploration Blocks details
of which has been annexed along with the policy and therefore, the option to
revisit its decision would be highly prejudicial and will include highly
cumbersome procedure.

xi) Learned AGI has placed on record some
communications/correspondences by way of an affidavit dated 08.12.2025
sent by respondent Nos.1 and 2, after the application for extension was made
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by the petitioner whereby, petitioner who was put to notice with respect to its
defaults, short payment of profit petroleum, applicable royalty and to make
good of the same. Reliance has been placed on letter dated 21.09.2021,
addressed to petitioner and ONGC/respondent No.4 wherein, the audit
exceptions reported by the auditor, for which necessary compliance and
corrective action was required on the part of operator/contractor, that is,
petitioner, were notified and annexed with the said letter. It is further
submitted that in the said letter, it was brought to notice of the petitioner that,
since it has applied for extension of PSC and one of the conditions for
extension of the same is that all statutory dues and payment due to the
Government should have been cleared and the contractor should not be
defaulter to the Government or any account, and in such condition, replies to
the Audit Exceptions shall be provided and contractors account/consequential
adjustments to the Government's share of Profit Petroleum shall be made at
the earliest. It is pointed out that the petitioner despite being informed of
making timely payment of Government's share of Profit Petroleum has not
done so. The relevant portion of the said letter dated 21.09.2021 reads as
under: -

“Pursuant to the exercise of rights of Government Audit for the
financial year 2018-19 in Article 25.5 of the CB/OS-2 PSC, the
audit has been conducted by M/s Grant Thornton Bharat LLP. The
Audit exceptions reported by the Auditor for which necessary
compliance and corrective action required by the
Operator/Contractor are notified herewith and placed at Annexure-
I.

The Contractor has submitted application for extension of PSC
which Is due to expire on 30.06.2023. One of the conditions for
extension of the PSC is that all the statutory dues and payment due
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to Government should have been cleared and the contractor should
not be defaulter to the Government or any account.

Accordingly, the replies to the Audit Exceptions shall be provided
and agreed adjustments in the Contractors account/consequential
adjustments to the Government's share of Profit Petroleum shall be
made at the earliest. In any case, the action should not be delayed
beyond the timelines prescribed in PSC.

If the exceptions are not replied within the time limit prescribed in
PSC, the exceptions shall prevail.”

xii) Attention of this Court has been drawn towards the letter dated
22.03.2022, with respect to the short payment of profit petroleum and royalty
dues to Government of India in respect of the subject oil field. In this letter, it
has been recorded that the contractor/petitioner had submitted its response
vide letter dated 14.01.2022, whereby, it did not agree to any of the audit
exceptions except for Audit Exception No. 6 (Inadmissible cost recovery of
local community charges). The relevant portion of the letter dated 22.03.2022
reads as under: –

“1. This has reference to the above mentioned letter dt.
21.09.2021 on the subject matter wherein, the Contractor was
requested to provide the replies to Audit Exceptions, make
necessary adjustments in the accounts and remit Government of
India (GoI) share of Profit Petroleum along with applicable interest.
Contractor’s in the response submitted by the Operator vide letter
dt. 14.01.2022, did not agree to any of the Audit Exceptions except
for Audit Exception No. 6 (Inadmissible Cost recovery of local
community charges.)

2. It has been observed that the replies submitted are not in line
with the provisions of PSC, Oil fields (Regulation and
Development) Act 1948, PNG Rules 2003 and amendments therein
and Contractor has short-paid Profit Petroleum share of Gol and
Royalty dues. After review of the responses, as referred above, it is
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observed that the Contractors have short-paid Profit Petroleum
share of Govt of India on account of the following:

(a) Non-allocation of common expenditure in the Development
Areas (Lakshmi, Gauri and Transition Zone) as required under
PSC,

(b) Wrong cost recovery of expenses incurred beyond Delivery
Point and

(c) Inadmissible Cost recovery of local community charges.

3. The Profit Petroleum share payable to Government has been
recomputed after correct allocation of common expenditure
between the Development Areas, exclusion of cost incurred beyond
Delivery Point along with the exclusion of the inadmissible Cost
recovery of local community charges. The Short-paid Profit
Petroleum payable to the Government amounts to US$ 27,149,542
(as on 31.03.2019) (prov.)

4. The Contractor is required to remit the unpaid Profit
Petroleum of US$ 27,149,542 (provisional) as above, along with
applicable interest @ LIBOR plus 2% liable under Section 1.7.3 of
Appendix C of PSC till the date of actual remittance of such dues
forthwith in favour of the Government of India.

5. The Licensee/Lessee of the Block has already been requested
to remit the short-paid Royalty (reference is invited to DH letter
dated 14.09.2021, wherein the short-paid amount of INR
120,94,79,889 (provisional) upto the Financial year 2020-21
calculated upto 31.03.2021 along with applicable penal Royalty as
per PNG rules was already communicated). The Licensee/Lessee is
again requested to remit the short-paid Royalty along with penal
royalty.”

xiii) Reliance has been placed on a letter dated 28.09.2022 whereby
respondent No.1 in consultation with respondent No.2/DGH had examined
the request of the petitioner with respect to adjustment of the amount payable
towards Special Additional Excise Duty “SAED” and after examining the said
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request for adjustment from the dues to the government of India, on account
of profit petroleum were found unreasonable and untenable. It is submitted
that by this letter it was drawn to the attention of the petitioner that PSC is a
contract related to exploration and exploitation of a natural resource which is
vested with the Union of India under Article 297 of the Constitution of India
and that the Government of India, without prejudice, has specifically reserved
all its rights and remedies under PSC as well as under law, equity, or
otherwise, in respect of all the matters. The relevant portion of the said letter
reads as under: –

“vii. As you are aware, the PSC is a contract related to the exploration
and exploitation of a natural resource which is vested with the Union of
India under Article 297 of the Constitution of India. Thus, there is an
inherent character of national and public interest in the implementation
of the PSC. This Ministry understands that SAED has been imposed on
domestic crude producers to curb the windfall gains accrued on account
of sale on international parity prices. This is applicable across all the oil
and gas contracts awarded by the Government of India, subject to the
conditions contained in the notification related to SAED and not just to
the present PSC. Therefore, your unilateral request for adjustment from
the dues to the Government of India on account of Profit Petroleum is
unreasonable and untenable.

viii. In the event the Contractor parties proceed to adjust the amount
paid under SAED from the dues on account of Profit Petroleum, such
action will be in breach of the provisions of the PSC and accordingly, the
Government of India reserves its rights to take appropriate steps in
accordance with law in this regard.

ix. The present letter is without prejudice to any of Government of
India's rights and Government of India specifically reserves all its rights
and remedies under the PSC as well as under law, equity or otherwise, in
respect of the matters referred to in this reply or even otherwise.”

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xiv) Attention of this Court has further been drawn towards letter dated
08.05.2023, with respect to audit exceptions for the subject oil block for the
year 2019–20. It is the case of the respondent No.2 that by way of this letter it
was brought to the notice of the petitioner as it is in default and there is short
payment of profit petroleum to the share of government along with interest. It
is further submitted that with this letter, prior years’ Audit exceptions which
were still pending at the petitioner/operator’s end were also annexed and it
was directed to send compliance report immediately on prior years’ Audit
exceptions. It is the case of respondent No.2 that there were total 37 audit
exceptions which were held by the petitioner against the dues payable by it to
the Government of India under PSC and same was well within the knowledge
of the petitioner as it was put to notice time and again every year; however,
the petitioner chose not to pay the said dues and deliberately kept them
pending.

xv) Reliance has also been placed on a letter dated 28.01.2025, addressed
to the petitioner by respondent No.2/DGH with respect to short payment of
Government of India’s share of profit petroleum on account of adjustment of
SAED in respect of the subject oil field. The averments made in the said letter
read as under: –

“Your attention is invited to the above captioned subject, whereby
DGH/Gol has directed you to pay the Short paid GOI share of PP
on account of adjustment of Special Additional Excise Duty
(SAED) while remitting the GOI share of PP. However, till date the
said amount has not been deposited.

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This conduct of Vedanta is serious breach of the agreed terms and
conditions of the PSC causing huge financial losses to Central
Exchequer.

Vedanta / CEHL is once again called upon to deposit the short paid
GOI share of PP amounting to USD 10.13MM along with
applicable interest on account of SAED adjustment made while
remitting the GOI share of PP till 30.09.2024 within 7 days of the
receipt of this letter. In case the amount is not paid within 7 days,
GOL may initiate actions under Article 30 of the PSC.

The forgoing is without prejudice to the GOT's right under the PSC
and applicable law.”

xvi) Learned AGI, while placing reliance on the aforesaid
letters/correspondences exchanged between the petitioner and respondents,
has argued that the petitioner was well aware of their outstanding dues and
defaults under PSC towards Government of India including SAED, profit
petroleum etc., from the day, it preferred application seeking extension of
policy in 2021 which continued during the period of interim extensions
granted to the petitioner after the expiry of PSC on 29.06.2023 till the passing
of impugned rejection letter on 19.09.2025, and still the amounts mentioned
in the impugned letter were not deposited by the petitioner, despite repeated
reminders and opportunities given for rectifying such defaults. It is the case of
respondent No.2 that the aforesaid letters show that the conduct of the
petitioner during the extension period was not satisfactory and the said letters
have not been placed on record by the petitioner alongwith the present
petition.

xvii) It is further submitted that as per Article 27.4 of the PSC, the title of the
assets purchased by the contractor/petitioner for use in petroleum operations
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was to be in proportion to their Participating Interests; however,
ONGC/respondent No.4 had vested right of full title and ownership in the said
assets. Further, the assets owned by the contractor/petitioner were to be vested
in ONGC when 95% of the cost of the original asset acquired has been written
off in accordance with the depreciation rates as the schedule specified in
Companies Act. It is therefore, submitted that on recovery of costs of the
assets acquired by the contractor/petitioner, such assets were to be vested in
full title and ownership of ONGC/respondent No.4 and the
petitioner/contractor no right to claim any kind of ownership right on the
assets existing at the subject oil field or which have been acquired by it during
the subsistence of PSC. As per learned AGI, the rationale behind the same is
public trust doctrine as all the natural resources vests in the citizens of this
country and the Government is merely acting as a custodian/trustee of such
resources and its endeavour is to get best out of them.

xviii) With respect to the reliance placed by learned Senior Counsel for the
petitioner on the doctrine of Legitimate Expectation, learned AGI has
submitted that there was neither any practice nor any promise by respondent
Nos.1 and 2 from which it could be inferred that the petitioner was to be
granted extension under PSC as has been allegedly claimed by it. Further,
there was no standard procedure to presume that there was Legitimate
Expectation. It is the case of the respondent No.2 that petitioner’s application
seeking extension of PSC was to be assessed on the basis of the parameters
and yardsticks provided under the extension policy, as noted hereinbefore,
and as per said policy, no right for extension was conferred on the petitioner.
It is further submitted that as per Clauses 3.2(g), 5, and 9 of the policy, the
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exercise of authority under the policy cannot be questioned and the same is
ought to be seen from the context of public trust doctrine and thus, no
argument of unreasonableness can be considered by the Court. He further
submitted that in absence of any vested right to extension, doctrine of
Legitimate Expectation cannot be invoked to compel or presume a renewal or
continuance of PSC. It is further the case of respondent No.2 that by way of
the present petition, the petitioner attempts to seek a post facto hearing based
on shortfalls on its part. Further, the interim permissions/provisional
extensions pending consideration of petitioner’s application seeking extension
does not create, confer, or crystallise any vested right or Legitimate
Expectation in favour of the petitioner and any administrative indulgence or
tolerance on part of the Government cannot be construed as waiver,
acquiescence, or estoppel.

xix) Reliance has been placed on a judgment of learned Division Bench of
8
this Court in Union of India v. Vedanta Ltd. and Ors. , wherein while
dealing with an appeal against the judgment passed by learned Single Judge
directing Union of India to extend the tenure of the contract in question for a
period 10 years beyond it’s the then existing tenure on the same terms and
conditions when the contract was initially executed. The grievance of the
appellant/UOI therein was that the learned Single Judge had directed the
extension of the tenure of the contract/PSC on the same terms and conditions
as existed in 1995, and without any increase in share of profit petroleum. The
contention of UOI was that on extension of the tenure of the contract/PSC, it

8
2021 SCC OnLine Del 1336
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is entitled to 10% increase in the share in ‘Profit Petroleum’ under PSC. The
brief facts of the said judgment read as under: -

“ 3. At the outset, it needs to be pointed out that the question involved
in this appeal is an extension of a Production Sharing Contract between
the original petitioner (Respondent herein) and the Government of India
with regard to exploration, exploitation and sale of petroleum and natural
gas. The Production Sharing Contract, by its very nature, is a different
nature of contract where a private party shares the national wealth/natural
mineral by exploiting, excavating and selling the same and gives to the
Government of India its share called “profit petroleum”. This contract,
therefore, cannot be considered as mere regular commercial contract in
view of the fact that all such natural resources are held by the
Government of India for and on behalf of People of India and as a
trustee. Undisputedly, the Hon'ble Supreme Court has read ‘public trust
doctrine’ in case of natural resources which are ‘vested’ in the
Government of India as a trustee.

4. The following conspectus of facts needs to be borne in mind,
which are not in dispute-
a) The question pertains to a Production Sharing Contract which is
entered into by Union of India in discharge of its sovereign function
and entered into and executed in the name of Hon'ble President of
India as a trustee of the citizens of the country.
b) The term of Production Sharing Contract having the initial period of
25 years between the Appellant-Union of India and the respondent
company has expired in the year 2020 as the initial contractual period
commenced from the year 1995.
c) There is a provision for extension of tenure/period of this contract in
the Production Sharing Contract.
d) The said extension clause in the Production Sharing Contract viz.
Article 2.1 of PSC makes it clear that any subsequent extension (after
initial period of 25 years) shall be only “subject to applicable laws”.
e) Union of India does not object to the request of the Respondent for 10
years extension.
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f) Government of India, has, however, as a trustee of national wealth and
th
natural resources made an all-India policy dated 7 April, 2017 in
which it is stipulated that if a private party seeks extension of contract
in all Production Sharing Contracts after initial contract period is
over, such an extension would be granted on payment of additional
10% profit to the Government of India. As per the all-India policy of
the Central Government, in case of an extension after the original
contract, extension will be granted only if the Government gets 10%
more of profit petroleum.
At this juncture, it needs to be noted that under the Production
Sharing Contract, private party is required to pay a particular
percentage to the Government of India which is called “profit
petroleum”.
The Government of India, as a national policy applicable to all
extensions of all such blocks in the country after 2017, has decided to
extend the PSCs only if there is an increase in profit petroleum by
10%.

g) This policy is applicable to all petroleum blocks in the country and not
only to the Respondent herein.
h) The said policy which is framed in exercise of statutory powers as
well as Constitutional powers discussed hereunder, is not challenged
by the original petitioner-respondent herein.
i) Not only the policy is not under challenge, the quantification of
addition in the profit petroleum viz. 10% increase is also not
questioned, either as arbitrary or irrational or even excessive.
j) The only argument canvassed by the original petitioner (Respondent
herein) and accepted by the learned Single Judge is that the
Respondent herein is entitled to an extension as of right, without any
condition.
In view of the aforesaid position, the question involved is how a
contract involving Government of India, its right to put condition in
larger national interest and as a trustee of natural resources in which
the natural resources “vest” constitutionally needs to be interpreted
by a Constitutional Court.”

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In the aforesaid facts, after hearing learned counsels for the parties and
perusing the record, learned Division Bench had observed and held as under: -

“43. The Production Sharing Contracts, is evident, are
distinguishable from other types of commercial contracts in the
following two ways: —
a) The Government continues to be the owner of the petroleum products
and holds them as a trustee for and on behalf of the people of India
as ‘custodia legis’ ;
b) The Contractor carries the exploration risk and if no oil is found, he
receives no compensation.

44. It is undisputed between the parties that petitioners are private oil
companies and Respondent No. 4 herein/ONGC is a national oil
company. PSC is a contract entered into by the Government of India in
discharge of its sovereign powers and the same is executed in the name
of Hon'ble President of India. The preamble of the PSC unambiguously
provides that it has been entered into for the purpose of “.. petroleum
resources which may exist in India be discovered and exploited with
utmost expedition in the overall interest of India….”.



67. In view of the aforesaid dicta of the Hon'ble Supreme Court, it
can be safely held by us that “ right to extension of a contract is a
valuable right of the Contractor but such a right is not an absolute
right” . The words “ as may be mutually agreed between the parties ”
used in Article 2.1 of the PSC very obviously include the right of the
State to grant extension of the period of contract with an
additional/varied condition/economic stipulation, subject, however, to
the other party willing to agree to the said condition and needless to
state, if the other party does not wish to agree to the changed term, it has
the freedom to refuse extension of the contract.

68. The terms of the PSC therefore clearly entail change of terms and
conditions of the PSC during the extended period and it is not open to the
Courts in a judicial review under Article 226 of the Constitution of India
to rewrite the contract between the parties or revisit its terms and
conditions. The Courts, as held by the Hon'ble Supreme Court, cannot
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substitute their own understanding or wisdom for the understanding of
the commercial terms of the parties to the contract which is explicit in
the provisions of the contract. The learned Single Judge has by the
impugned judgment directed extension of the tenure of the PSC for a
further period of 10 years, on same terms as existed earlier, overlooking
the power of the State to vary the condition. This is impermissible in the
eyes of law.

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77. For all the aforesaid reasons, we hold that there cannot be
extension of the Production Sharing Contract unconditionally, on
the same terms and conditions which were prevailing 25 years ago
th
i.e. on 15 May, 1995, the effective date . By issuing a mandamus to the
contrary, the learned Single Judge has erred in law and the impugned
judgment deserves to be set aside.

78. As a cumulative effect of the aforesaid facts, reasons, provisions
of the PSC and the judicial pronouncements, we hereby set aside the
impugned judgment of the learned Single Judge dated 31 May, 2018 in
W.P.(C) No. 11599/2015.

79. It needs to be recorded that the parties have addressed the
arguments on merits and had categorically submitted that
objections/grounds regarding maintainability of the petition were not
pressed.”

In view of the aforesaid observations, it has been contended by learned
AGI that in Government contracts, wherein overwhelming public interest is
involved, concerning the utilization of natural resources held in public trust,
the doctrine of legitimate expectations cannot be invoked and the extension
policy which is uniformly applicable to all PSCs in the country has its genesis
in public interest and Constitutional mandate. It is further submitted that the
Government has to make an effort to get the best price for the valuable natural
resources of the country as the same cannot be thrown away and such stand of
the Government cannot be made subject to judicial review under writ
jurisdiction.

xx) Reliance has also been placed on judgment passed by learned
Coordinate Bench of this Court in Himalayan Flora and Aromas Ltd. v.
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9
MCD , wherein MCD had declined to extend the contracts/allotments of the
petitioners therein for display of advertisements through unipoles for a further
period of two years. The petitioners therein had raised an argument of
Legitimate Expectation and the same was rejected by observing that there
cannot be any Legitimate Expectation in contractual matters. The relevant
paragraphs of the said judgment read as under: -
“

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14. The petitioners have not been able to establish that the decision taken
by the respondent is arbitrary, unreasonable or discriminatory, in any
way. The decision taken by the respondent is plausible, and has been
undertaken in exercise of the authority and discretion vested in it. The
petitioners cannot claim extension of contract as a matter of right, merely
on the basis of satisfactory performance of contract for the initial three
years of the contract. The terms of the contract are categorical in their
stipulation that the application for extension of contract does not entitle
any right of extension of contract. It is clearly stipulated that the
Commissioner, MCD or any officer authorized by him, shall be at liberty
to grant or reject request for extension of contract. The reasons given by
the respondent for rejection of the request of the petitioners for grant of
extension are tenable, and this Court will not go into the merits of the
said decision, in the absence of any arbitrariness or unreasonableness.



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16. The fact that on previous occasions, extensions have been granted by
the respondent to the petitioners or other contractors, does not connote
that the respondent is bound to grant such extensions for subsequent
contracts also, when a uniform decision has been taken by the respondent
to not grant such extensions. No instance has been brought forth before
this Court that the respondent is not following its decisions uniformly, by
granting extensions to other contractors during the current year, while
denying the same to the petitioners. When uniform decisions are being
taken by the respondent and no discriminatory treatment has been meted
out to the petitioners, no ground is made out to interfere with the
decision taken by the respondent in exercise of the authority vested in it.
17. It has been held time and again that Courts ought to exercise judicial
restraint in respect of the decisions made by various authorities. In the
absence of constitutional or legal violations, the Courts should respect
the policy choices made by the authorities. If the decision is within the
W.P.(C) 5350/2025 & W.P.(C) 5360/2025 Page 17 of 24 executive’s
legal authority and has been made following proper procedures, the
Courts ought not to interfere, even if the said decision appears unwise or
imprudent. It is not the role of the Courts to question the wisdom or
fairness of such decisions. Thus, in the case of Kirloskar Ferrous
Industries Limited and Another Versus Union of India and Others,
2024 SCC OnLine SC 3192 , it has been held as follows:

“xxx xxx xxx

54. Judicial restraint is rooted in the understanding that courts
should respect the decisions made by the legislative and executive
branches, provided these decisions are legally sound and
constitutionally valid. By adhering to judicial restraint, courts
avoid overstepping their constitutional role and thereby prevent
potential conflicts with the executive and legislative branches.
The principle of separation of powers supports the idea that each
branch has a unique role, and mutual respect between these
branches is essential for the proper functioning of the
Government. The courts are to ensure that laws and policies do
not infringe upon citizens' rights or exceed the authority granted
by law. However, this role does not extend to evaluating whether a
policy is “wise” or whether a better one could be devised, and
rather this process is entrusted to the legislature and executive,
which have the expertise to make these determinations.

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55. The doctrine of judicial restraint, which is central to this
discussion, emphasises that courts should exercise caution and
avoid involvement in policy decisions, as these are complex
judgments that require a balancing of diverse and often
competing interests. Policies are crafted based on thorough
analysis of social, economic, and political factors, considerations
beyond the court's purview. The court is tasked with ensuring that
policies do not breach constitutional provisions or statutory
limits; however, they should not replace policy-makers’
judgments with their own unless absolutely necessary

56. Policy decisions often require the expertise of professionals and
specialists in fields such as economics, public health, national
security, and environmental science. These domains involve
specialised knowledge that Judges, as generalists in legal matters,
may lack. For instance, in economic policy, the executive may
decide on trade tariffs or subsidies based on extensive data and
projections that aim to balance domestic industry support with
global trade commitments. The courts, lacking the same level of
economic expertise and without the authority to make trade-offs
among competing policy objectives, are typically not equipped to
second- guess these kinds of decisions.

57. While courts have the power of judicial review to ensure that
executive actions and legislative enactments comply with the
Constitution, this power is not absolute. Judicial review is meant to
act as a safeguard against actions that overstep legal boundaries or
infringe on fundamental rights, but it does not entail a
comprehensive re-evaluation of the policy’s wisdom. The judicial
review of policy decisions is limited to assessing the legality of the
decision-making process rather than the substantive merits of the
policy itself. For example, if a government policy infringes on
fundamental rights or discriminates against a particular group, the
courts have a duty to strike down such policies. However, in the
absence of constitutional or legal violations, the courts should
respect the policy choices made by the executive or legislature.

58. The duty of the court in policy-related cases is primarily to
determine whether the policy falls within the scope of the authority
granted to the relevant body. If the policy decision is within the
executive’s legal authority and has been made following proper
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procedures, the courts should defer to the expertise and discretion
of the policy-makers, even if the policy appears unwise or
imprudent. This restraint ensures that the courts do not impose its
own perspective on policy matters that are rightly the responsibility
of other branches.

xxx xxx xxx
60. The courts should assume that policy-makers act in good faith
unless there is clear evidence to the contrary. As long as the policy
does not contravene the Constitution or violate statutory provisions,
it is not the role of the courts to question the wisdom or fairness of
such policy.

Xxx xxx xxx”
(Emphasis Supplied)



20. The contention of the petitioners that the subsequent tenders floated
by the MCD also contain similar clause regarding extension of contract
for two years after initial period of three years, does not benefit the
petitioners in any manner. The said clause of the subsequent tenders
simply connotes the discretion vested in the MCD for extension of
contract, after the initial period of three years, which discretion shall be
exercised by the MCD on rational basis. Existence of such a clause for
extension does not indicate that such extension has to be granted
mandatorily by the MCD.



25. Considering the aforesaid detailed discussion, no error is found in the
decision of the respondent/MCD in declining to extend the contract of
the petitioners, for further period.”

It is therefore, contended by learned AGI that there cannot be any
Legitimate Expectation in contractual matters. It is submitted that a higher
standard of judicial non-interference has to be followed in the present case as
it involves exploitation of natural resources and ‘satisfactory performance’
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throughout the term of PSC cannot be sole basis on which contract can be
extended further.

xxi) Learned AGI has further submitted that an appeal, LPA 351/2025 , by
the petitioner/appellant therein against the aforesaid judgment of learned
Coordinate Bench in Himalayan Flora and Aromas Ltd. ( supra ) was also
10
dismissed by learned Division Bench of this Court by observing as under : -

“17. If we carefully examine Clauses 7 and 15 of the contract, what we
find is that the contract period initially was for a period of three years
which was extendable for another two years. However, such extension
was subject to not only satisfactory performance of the appellant but also
subject to decision to be taken by the Commissioner. Clause 7 of the
earlier contract is very clear which enables the contractor to seek
extension and also enables the MCD to extend the term, however, in our
opinion, satisfactory performance of the contractor is not the only or sole
basis for conferment of any right of extension in that contract.



25. Thus, in our opinion, Clause 7, as noticed above, gives a larger
discretion to the Commissioner of the MCD in the present case and,
therefore, apart from satisfactory performance of the firm other relevant
aspects could also have been taken into account by the Commissioner
while taking a decision on the prayer made by the appellant seeking
extension in the term of the contract. The judgment in SK Associates
(supra) is thus clearly distinguishable.

26. So far as the scope of interference or judicial scrutiny under Article
226 of the Constitution of India is concerned, we are in complete
agreement with the findings recorded in that regard by the learned Single
Judge which are based on well known pronouncements of the Hon’ble
Supreme Court.”


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xxii) Learned AGI has, therefore, submitted that there is no fundamental right
to carry on a trade with Government of India and the petitioner cannot claim
exclusive right to trade with Government of India. It has also been argued that
this Court cannot go into the question whether a different view could have
been taken by respondent Nos.1 and 2, on the petitioner’s extension
application as there was no Legitimate Expectation on the part of respondent
Nos.1 and 2 as there was neither any practice nor promise nor any statutory
obligation on the said respondents to grant extension of PSC in favour of the
petitioner. It is also submitted that the extension policy did not provide any
promise for absolute right of extension.

xxiii) Reliance has also been placed on the judgement of Hon’ble Supreme
11
Court in Army Welfare Education Society v. Sunil Kumar Sharma , to
contend that the doctrine of Legitimate Expectation cannot govern the
operation of contracts between the parties as in such cases doctrine of
promissory estoppel is applicable. It is contended by learned AGI that the
Legitimate Expectation was a device created in order to maintain check on
arbitrariness in States’ action; however, it cannot be made applicable to purely
administrative decisions. Attention of this Court has been drawn towards the
following observations in Army Welfare Education Society v. Sunil
Kumar Sharma ( supra ): -

“ 43. There are three decisions of this Court we must look into and
discuss.


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44. The first judgment is Andi Mukta Sadguru Shree Muktajee
Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R.
Rudani [ Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna
Jayanti Mahotsav Smarak Trust v. V.R. Rudani , (1989) 2 SCC 691] and
the other two judgments, we are talking about are K.
Krishnamacharyulu v. Sri Venkateswara Hindu College of Engg. [ K.
Krishnamacharyulu v. Sri Venkateswara Hindu College of Engg. , (1997)
3 SCC 571 : 1997 SCC (L&S) 841] and Satimbla Sharma v. St Paul's
Senior Secondary School [ Satimbla Sharma v. St Paul's Senior
Secondary School , (2011) 13 SCC 760 : (2012) 2 SCC (L&S) 75] .

45. In Andi Mukta Sadguru [ Andi Mukta Sadguru Shree Muktajee
Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani ,
(1989) 2 SCC 691] , dispute arose between the Trust which was
managing and running science college and teachers of the said college. It
pertained to payment of certain employment related benefits like basic
pay, etc. The matter was referred to the Chancellor of Gujarat University
for his decision. The Chancellor passed an award, which was accepted by
the University as well as the State Government and a direction was
issued to all affiliated colleges to pay their teachers in terms of the said
award. However, the aforesaid Trust running the science college did not
implement the award. Teachers filed the writ petition seeking mandamus
and direction to the Trust to pay them their dues of salary, allowances,
provident fund and gratuity in accordance therewith. It is in this context
an issue arose as to whether the writ petition under Article 226 of the
Constitution was maintainable against the said Trust which was
admittedly not a statutory body or authority under Article 12 of the
Constitution as it was a private trust running an educational institution.
The High Court held that the writ petition was maintainable and the said
view was upheld by this Court in the aforesaid judgment.

46. The discussion which is relevant for our purposes is contained in
paras 15 to 20 of Andi Mukta Sadguru [ Andi Mukta Sadguru Shree
Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak
Trust v. V.R. Rudani , (1989) 2 SCC 691] . However, we would like to
reproduce paras 15, 17 and 20, which read as under: ( Andi Mukta
Sadguru [ Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna
Jayanti Mahotsav Smarak Trust v. V.R. Rudani , (1989) 2 SCC 691] ,
SCC pp. 698-700)

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“ 15 . If the rights are purely of a private character no mandamus
can issue. If the management of the college is purely a private body
with no public duty mandamus will not lie. These are two
exceptions to mandamus. But once these are absent and when the
party has no other equally convenient remedy, mandamus cannot be
denied. It has to be appreciated that the appellant Trust was
managing the affiliated college to which public money is paid as
government aid. Public money paid as government aid plays a
major role in the control, maintenance and working of educational
institutions. The aided institutions like government institutions
discharge public function by way of imparting education to
students. They are subject to the rules and regulations of the
affiliating university. Their activities are closely supervised by the
University authorities. Employment in such institutions, therefore,
is not devoid of any public character. [ See, The Evolving Indian
Administrative Law by M.P. Jain (1983), p. 226.] So are the service
conditions of the academic staff. When the University takes a
decision regarding their pay scales, it will be binding on the
management. The service conditions of the academic staff are,
therefore, not purely of a private character. It has super-added
protection by University decisions creating a legal right-duty
relationship between the staff and the management. When there is
existence of this relationship, mandamus cannot be refused to the
aggrieved party.
*
17 . There, however, the prerogative writ of mandamus is
confined only to public authorities to compel performance of public
duty. The “public authority” for them means every body which is
created by statute — and whose powers and duties are defined by
statute. So government departments, local authorities, police
authorities, and statutory undertakings and corporations, are all
“public authorities”. But there is no such limitation for our High
Courts to issue writs “in the nature of mandamus”. Article 226
confers wide powers on the High Courts to issue writs in the nature
of prerogative writs. This is a striking departure from the English
law. Under Article 226, writs can be issued to “any person or
authority”. It can be issued “for the enforcement of any of the
fundamental rights and for any other purpose”.
*
20 . The term “authority” used in Article 226, in the context,
must receive a liberal meaning unlike the term in Article 12. Article
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12 is relevant only for the purpose of enforcement of fundamental
rights under Article 32. Article 226 confers power on the High
Courts to issue writs for enforcement of the fundamental rights as
well as non-fundamental rights. The words “any person or
authority” used in Article 226 are, therefore, not to be confined
only to statutory authorities and instrumentalities of the State. They
may cover any other person or body performing public duty. The
form of the body concerned is not very much relevant. What is
relevant is the nature of the duty imposed on the body. The duty
must be judged in the light of positive obligation owed by the
person or authority to the affected party. No matter by what means
the duty is imposed. If a positive obligation exists mandamus
cannot be denied.”
(emphasis supplied)

47. In para 15 the Court in Andi Mukta Sadguru [ Andi Mukta
Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav
Smarak Trust v. V.R. Rudani , (1989) 2 SCC 691] spelled out two
exceptions to the writ of mandamus viz.: ( i ) if the rights are purely of a
private character, no mandamus can issue; and ( ii ) if the management of
the college is purely a private body “with no public duty”, mandamus
will not lie. The Court clarified that since the Trust in the said case was
an aided institution, because of this reason, it discharges public function,
like government institution, by way of imparting education to students,
more particularly when rules and regulations of the affiliating university
are applicable to such an institution, being an aided institution. In such a
situation, the Court held that the service conditions of academic staff
were not purely of a private character as the staff had superadded
protection by the University's decision creating a legal right and duty
relationship between the staff and the management. Further, the Court
explained in para 20 that the term “authority” used in Article 226, in the
context, would receive a liberal meaning unlike the term in Article 12,
inasmuch as Article 12 was relevant only for the purpose of enforcement
of fundamental rights under Article 32, whereas Article 226 confers
power on the High Courts to issue writs not only for enforcement of
fundamental rights but also non-fundamental rights. What is relevant is
the dicta of the Court that the term “authority” appearing in Article 226
of the Constitution would cover any other person or body performing
public duty. The guiding factor, therefore, is the nature of duty imposed
on such a body, namely, public duty to make it exigible to Article 226.

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48. In K. Krishnamacharyulu [ K. Krishnamacharyulu v. Sri
Venkateswara Hindu College of Engg. , (1997) 3 SCC 571 : 1997 SCC
(L&S) 841] , this Court again emphasised that where there is an interest
created by the Government in an institution to impart education, which is
a fundamental right of the citizens, the teachers who impart the education
get an element of public interest in performance of their duties. In such a
situation, remedy provided under Article 226 would be available to the
teachers.

49. However, both the decisions referred to above pertain to
educational institutions and in the said cases, the function of imparting
education was treated as the performance of the public duty, that too by
those bodies where, the aided institutions were discharging the said
functions like government institutions and the interest was created by the
Government in such institutions to impart education.

50. In Satimbla Sharma [ Satimbla Sharma v. St Paul's Senior
Secondary School , (2011) 13 SCC 760 : (2012) 2 SCC (L&S) 75] , the
school therein was initially established as a mission school by
Respondent 2. The school adopted the 10+2 system in 1993 and got
affiliated to the Himachal Pradesh Board of School Education. Before
Independence in 1947, the school was receiving grant-in-aid from the
British Indian Government and thereafter from the Government of India
up to 1950. Between 1951 and 1966, the school received grant-in-aid
from the State Government of Punjab. After the State of Himachal
Pradesh was formed, the school received grant-in-aid from the
Government of Himachal Pradesh for the period between 1967 and 1976.
From the year 1977-1978, the Government of Himachal Pradesh stopped
the grant-in-aid. In such circumstances, the teachers of the school were
paid less than the teachers of the government schools and the
Government-aided schools in the State of Himachal Pradesh. This led to
filing of a writ petition in the High Court of Himachal Pradesh seeking a
direction to pay the salary and allowances on a par with the teachers of
government schools and the Government-aided schools. A learned Single
Judge of the High Court allowed the writ petition and directed the
respondents therein to pay to the writ petitioners therein salary and
allowances on a par with their counterparts working in the government
schools from the dates they were entitled to and at the rates admissible
from time to time. Respondents 1 and 2 therein preferred letters patent
appeal before the Division Bench of the High Court. The appeal came to
be allowed and the writ petition filed by the teachers was dismissed.”
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xxiv) Reliance has also been placed by learned AGI on State of Rajasthan v.
12
Sharwan Kumar Kumawat , to contend that the decision taken by the
Government in accordance with a policy in public interest cannot be fettered
by applying the principle of Legitimate Expectation. It is contended that the
same is a very weak right and if Government decides to introduce fair play,
then, one cannot claim entitlement merely on the basis of pending application
for extension and long relationship. Attention of this Court has been drawn
towards the following observations in Sharwan Kumar Kumawat ( supra ): -

“Discussion
Vested right
17. It is far too settled that there is no right vested over an application
made which is pending seeking lease of a government land or over the
minerals beneath the soil in any type of land over which the government
has a vested right and regulatory control. In other words, a mere filing of
an application ipso facto does not create any right. The power of the
Government to amend, being an independent one, pending applications
do not come in the way. For a right to be vested there has to be a
statutory recognition. Such a right has to accrue and any decision will
have to create the resultant injury. When a decision is taken by a
competent authority in public interest by evolving a better process such
as auction, a right, if any, to an applicant seeking lease over a
government land evaporates on its own. An applicant cannot have an
exclusive right in seeking a grant of licence of a mineral unless
facilitated accordingly by a statute : ( Hind Stone [ State of T.N. v. Hind
Stone , (1981) 2 SCC 205] , SCC pp. 219-20, para 13)

“ 13 . Another submission of the learned counsel in connection
with the consideration of applications for renewal was that
applications made sixty days or more before the date of GOMs No.
1312 (2-12-1977) should be dealt with as if Rule 8-C had not come
into force. It was also contended that even applications for grant of
leases made long before the date of GOMs No. 1312 should be
dealt with as if Rule 8-C had not come into force. The submission

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was that it was not open to the government to keep applications for
the grant of leases and applications for renewal pending for a long
time and then to reject them on the basis of Rule 8-C
notwithstanding the fact that the applications had been made long
prior to the date on which Rule 8-C came into force. While it is true
that such applications should be dealt with within a reasonable
time, it cannot on that account be said that the right to have an
application disposed of in a reasonable time clothes an applicant
for a lease with a right to have the application disposed of on the
basis of the rules in force at the time of the making of the
application. No one has a vested right to the grant or renewal of a
lease and none can claim a vested right to have an application for
the grant or renewal of a lease dealt with in a particular way, by
applying particular provisions. In the absence of any vested rights
in anyone, an application for a lease has necessarily to be dealt
with according to the rules in force on the date of the disposal of
the application despite the fact that there is a long delay since the
making of the application. We are, therefore, unable to accept the
submission of the learned counsel that applications for the grant of
renewal of leases made long prior to the date of GOMs No. 1312
should be dealt with as if Rule 8-C did not exist .”
(emphasis supplied)

Fundamental right
18. The question of applicants not having fundamental right in
mining is no longer res integra, Monnet Ispat & Energy Ltd. v. Union of
India [ Monnet Ispat & Energy Ltd. v. Union of India , (2012) 11 SCC 1]
may shed some light : (SCC pp. 81-82, para 133)

“No fundamental right in mining
133. The appellants have applied for mining leases in a land
belonging to the Government of Jharkhand (erstwhile Bihar) and it
is for iron ore which is a mineral included in Schedule I to the 1957
Act in respect of which no mining lease can be granted without the
prior approval of the Central Government. It goes without saying
that no person can claim any right in any land belonging to the
Government or in any mines in any land belonging to the
Government except under the 1957 Act and the 1960 Rules. No
person has any fundamental right to claim that he should be
granted mining lease or prospecting licence or permitted
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reconnaissance operation in any land belonging to the
Government. It is apt to quote the following statement of O.
Chinnappa Reddy, J. inHind Stone[State of T.N. v. Hind Stone,
(1981) 2 SCC 205] (SCC p. 213, para 6) albeit in the context of
minor mineral,
‘6. … The public interest which induced Parliament to make the
declaration contained in Section 2 … has naturally to be the
paramount consideration in all matters concerning the regulation
of mines and the development of minerals.’
He went on to say : (Hind Stone case [State of T.N. v. Hind
Stone, (1981) 2 SCC 205] , SCC p. 217, para 10)
‘10. … The statute with which we are concerned, the Mines and
Minerals (Development and Regulation) Act, is aimed … at the
conservation and the prudent and discriminating exploitation of
minerals. Surely, in the case of a scarce mineral, to permit
exploitation by the State or its agency and to prohibit exploitation
by private agencies is the most effective method of conservation
and prudent exploitation. If you want to conserve for the future, you
must prohibit in the present.’ ”
(emphasis supplied)
Legitimate expectation
19. Legitimate expectation is a weak and sober right as ordained by a
statute. When the Government decides to introduce fair play by way of
auction facilitating all eligible persons to contest on equal terms,
certainly one cannot contend that he is entitled for a lease merely on the
basis of a pending application. The right being not legal, apart from
being non-existent, it can certainly not be enforceable. The principle of
law on these aspects, as settled decades ago in State of T.N. v. Hind
Stone [ State of T.N. v. Hind Stone , (1981) 2 SCC 205] , is being
reiterated from time to time. ( Monnet Ispat & Energy [ Monnet Ispat &
Energy Ltd. v. Union of India , (2012) 11 SCC 1] , SCC pp. 106 & 110,
paras 183 & 188)

“ Principles of legitimate expectation
183 . As there are parallels between the doctrines of promissory
estoppel and legitimate expectation because both these doctrines
are founded on the concept of fairness and arise out of natural
justice, it is appropriate that the principles of legitimate
expectation are also noticed here only to appreciate the case of the
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appellants founded on the basis of the doctrines of promissory
estoppel and legitimate expectation .
*
188 . It is not necessary to multiply the decisions of this Court.
Suffice it to observe that the following principles in relation to the
doctrine of legitimate expectation are now well established:
*
188.3 . Where the decision of an authority is founded in public
interest as per executive policy or law, the court would be reluctant
to interfere with such decision by invoking the doctrine of
legitimate expectation. The legitimate expectation doctrine cannot
be invoked to fetter changes in administrative policy if it is in the
public interest to do so .
188.4 . The legitimate expectation is different from anticipation
and an anticipation cannot amount to an assertable expectation.
Such expectation should be justifiable, legitimate and protectable .
188.5 . The protection of legitimate expectation does not require
the fulfilment of the expectation where an overriding public interest
requires otherwise. In other words, personal benefit must give way
to public interest and the doctrine of legitimate expectation would
not be invoked which could block public interest for private
benefit .”
(emphasis supplied)

20. Kerala State Beverages (M&M) Corpn. Ltd. v. P.P.
Suresh [ Kerala State Beverages (M&M) Corpn. Ltd. v. P.P. Suresh ,
(2019) 9 SCC 710 : (2019) 2 SCC (L&S) 821] : (SCC pp. 719-20, paras
14-20)

“B. Legitimate expectation
14 . The main argument on behalf of the respondents was that
the Government was bound by its promise and could not have
resiled from it. They had an indefeasible legitimate expectation of
continued employment, stemming from the Government Order
dated 20-2-2002 which could not have been withdrawn. It was
further submitted on behalf of the respondents that they were not
given an opportunity before the benefit that was promised, was
taken away. To appreciate this contention of the respondents, it is
necessary to understand the concept of legitimate expectation.
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15 . The principle of legitimate expectation has been recognised
by this Court in Union of India v. Hindustan Development
Corpn. [ Union of India v. Hindustan Development Corpn. , (1993) 3
SCC 499] If the promise made by an authority is clear, unequivocal
and unambiguous, a person can claim that the authority in all
fairness should not act contrary to the promise.
16 . M. Jagannadha Rao, J. elaborately elucidated on legitimate
expectation inPunjab Communications Ltd. v. Union of
India [ Punjab Communications Ltd. v. Union of India , (1999) 4
SCC 727] . He referred (at SCC pp. 741-42, para 27) to the
judgment inCouncil of Civil Service Unions v. Minister for the Civil
Service [ Council of Civil Service Unions v. Minister for the Civil
Service , 1985 AC 374 : (1984) 3 WLR 1174 (HL)] in which Lord
Diplock had observed that for a legitimate expectation to arise, the
decisions of the administrative authority must affect the person by
depriving him of some benefit or advantage which : ( Punjab
Communications case [ Punjab Communications Ltd. v. Union of
India , (1999) 4 SCC 727] , SCC p. 742, para 27)
‘ 27 . … ( i ) he had in the past been permitted by the decision-
maker to enjoy and which he can legitimately expect to be
permitted to continue to do until there have been communicated to
him some rational grounds for withdrawing it on which he has been
given an opportunity to comment; or
( ii ) he has received assurance from the decision-maker that they
will not be withdrawn without giving him first an opportunity of
advancing reasons for contending that they should not be
withdrawn .’ (AC p. 408)
17 . Rao, J. observed in this case, that the procedural part of
legitimate expectation relates to a representation that a hearing or
other appropriate procedure will be afforded before the decision is
made. The substantive part of the principle is that if a
representation is made that a benefit of a substantive nature will be
granted or if the person is already in receipt of the benefit, that it
will be continued and not be substantially varied, then the same
could be enforced.
18 . It has been held by R.V. Raveendran, J. inRam Pravesh
Singh v. State of Bihar [ Ram Pravesh Singh v. State of Bihar ,
(2006) 8 SCC 381 : 2006 SCC (L&S) 1986] that legitimate
expectation is not a legal right. Not being a right, it is not
enforceable as such . It may entitle an expectant : (SCC p. 391, para
15)
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‘ 15 . … ( a ) to an opportunity to show cause before the
expectation is dashed; or
( b ) to an explanation as to the cause for denial. In appropriate
cases, the courts may grant a direction requiring the authority to
follow the promised procedure or established practice.’
Substantive Legitimate Expectation
19 . An expectation entertained by a person may not be found to
be legitimate due to the existence of some countervailing
consideration of policy or law . [ H.W.R. Wade & C.F. Forsyth
: Administrative Law (Eleventh Edn., Oxford University Press,
2014).] Administrative policies may change with changing
circumstances, including changes in the political complexion of
Governments. The liberty to make such changes is something that is
inherent in our constitutional form of Government .
[ Hughes v. Deptt. of Health & Social Security , 1985 AC 776, 788 :
(1985) 2 WLR 866 (HL).]

20 . The decision-makers’ freedom to change the policy in public
interest cannot be fettered by applying the principle of substantive
legitimate expectation . [ Findlay, In re , 1985 AC 318 : (1984) 3
WLR 1159 (HL).] So long as the Government does not act in an
arbitrary or in an unreasonable manner, the change in policy does
not call for interference by judicial review on the ground of a
legitimate expectation of an individual or a group of individuals
being defeated .”

(emphasis in original and supplied)”

xxv) Reliance has also been placed by learned AGI on the judgment of
learned Division Bench of Hon’ble Bombay High Court in Sugati Beach
13
Resort Pvt. Ltd. v. Union of India & Ors. , wherein it was observed as
under: -

“ 5. We have heard the learned Counsel for the parties. We have also
perused the documents as placed on record. It is not in dispute that the

13
2017 SCC OnLine Bom 9418
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petitioner is a beneficiary of lease deed dated 10 October, 1997 which
was in respect of the tourist complex which was granted to the petitioner
under a tender dated 7 May, 1997 which was described as under:

“………leasing out the entire tourist complex (Flamingo
Resort) Ghoghla, Diu, i.e. tourist cottages and Bar-cum-Restaurant
and Conference Hall, described in the Schedule annexed to these
presents at Ghoghala-Diu………”
This extract is taken from Sugati Beach Resort Pvt. Ltd. v.
Union of India, 2017 SCC OnLine Bom 9418 : (2018) 1 Mah LJ
939 at page 941
It is not in dispute that the lease was for a period of twenty years
and the same expired in May, 2017. The clauses relevant in the
context of the present dispute are clauses 2, 11, 16, 25 and 28
which read thus:
“2. The lease initially shall be for a period of 20 years which
may be renewed for a further period of 10 years at the option of the
Lessor at the market rates prevailing at the end of the said period of
20 years and other things being equal, the lessee shall have first
preference for allotment of Tourist Complex.
………… ……… ………
11 The lessee shall not make any structural or other additions or
alterations in the tourist complex or affix or attach thereto any
fitting or fixtures or fastening whatsoever without the written
permission of the Collector, Diu.
……… ……… ……
16. The leasee shall provide the furniture and the other
equipment of good quality for the cottages and shall also provide all
vessels, utensils, cutlery, crockery and all other equipment
necessary for running the complex and maintain the same in good
hygienic condition to the satisfaction of the Tourism
Department, Diu. Similarly, good quality of table linen, bed
sheets etc. shall also be provided for by the leasee.
……… ……… ………
25. The leasee shall construct at its own cost a swimming pool
at appropriate place along with its maintenance within the complex
with the approval of Collector, Diu and within the first three years
of lease period. After the expiry of the lease period the assets will
be the property of u.t. Administration of Daman and Diu.
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28. The Collector, Diu, reserves the right to amend, revoke or
modify the lease at his discretion as well as to withdraw all or any
of the Terms and Conditions at any stage without assigning any
reason whatsoever.”
(emphasis supplied)

6. Perusal of the above clauses clearly indicate that the rights as
conferred under the lease agreement on the petitioner to use and utilize
the lease property were restricted. It is not in dispute that the lease period
was initially for twenty years and there is no mandate under the
agreement, for the respondent to renew the same in favour of the
petitioner. In any case clause 2 which uses the word “may be renewed” is
however would be subject to the conditions as contained in clause 28.
The parties have agreed to qualify clause (2) by clause (28) by which the
Collector, Diu reserves the right to amend, revoke or modify the lease at
his discretion and also withdraw all or any of the conditions at any stage
without assigning any reason whatsoever.

7. On the above clear terms as contained in the lease agreement
entered between the parties, we do not find that the approach of the
respondent-Union Territory Administration is in any manner arbitrary or
contrary to law in issuing the order dated 13 October, 2017 in deciding
not to grant further extension of lease to the petitioner but to initiate
bidding process through retender for entering into a fresh lease. In any
event the action to reauction the said government property for a fresh
lease to be entered into is being done after completion of twenty years of
lease and it is not something premature before the lease period could
expire. The petitioner had adequate notice in view of the terms and
conditions of the lease deed that at the end of the lease period of twenty
years, a consequence of this nature is the fall out of the agreed terms and
conditions of the lease deed. It also cannot be accepted that the petitioner
being in this business is not aware of the policy of the Union Territory
Administration.

8. We are also not impressed on the submission as urged on behalf of
the petitioner that there is legitimate expectation of the petitioner for
extension of lease in favour of the petitioner. This for the reason that if it
was to be so then, clause (2) and clause (28) of the lease deed would not
have been framed in the manner they appear in the lease deed, or clause
28 of the lease deed would not have formed part of the lease deed. We
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also cannot accept the contention of the petitioner only because certain
construction is made and amounts are spent, there would be legitimate
expectation of continuation of lease period. Whatever expenditure was
incurred or investment made during past twenty years during the
subsistence of the lease, was for commercial exploitation of leased
property and the petitioner has already reaped financial benefits by
commercial use of the lease land in a tourist place like Diu. We,
therefore, outrightly reject the submissions of the petitioner on legitimate
expectation.

9. We are of the clear opinion that there is nothing arbitrary in the
order dated 13 October, 2017 passed by the respondents calling upon the
petitioner to vacate the suit premises and to grant an opportunity to the
petitioner to enter into an ad hoc agreement of three months to continue
in the premises till the tender process is completed. It appears to be the
policy of the respondents to avail of a maximum benefit from the
Government property and gain more revenue by initiating a new tender
process. There would be nothing wrong in such a policy if the Union
Territory Administration in public interest desires to enhance its revenue
in such a manner. It therefore cannot be said that such a policy would
breach any of the legal rights much less fundamental rights of the
petitioner. There cannot be any fundamental right guaranteed to the
petitioner to compel the respondent-Union Territory Administration to
enter into a lease only with the petitioner. It is not the case that the
petitioner is precluded from participating in fresh tender which may be
floated by the Union Territory Administration and compete with the
other market players. However, the intention of the petitioner is to avoid
such fresh participation in the fresh bids to be invited by the Union
Territory Administration and in some manner hang on to the property
raising such untenable contentions as noted by us above.

10. Apart from the above observations, we are also surprised at the
approach of the petitioner to invoke the jurisdiction of this Court under
Article 226 of the Constitution when the dispute that the petitioner is
raising is purely under a lease deed, a contract between the parties, and
the contentions as raised are in the nature of a challenge to the terms and
conditions of the contract on a spacious plea that the lease deed created
an absolute right in the petitioner for extension of the lease, however,
which we see none.”

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In view of the aforesaid, it is submitted that there would be nothing
wrong in a policy if the Government in public interest desires to enhance its
revenue and merely, because the petitioner has made certain construction or
substantial investment or spent amount for improvement in a leasehold
property, it cannot on said basis, claim Legitimate Expectation of continuation
of PSC in its favour.

xxvi) Reliance has also been placed on the judgment of Hon’ble Supreme
14
Court in Silppi Constructions Contractors v. Union of India & Anr. , to
contend that the Courts should exercise a lot of restraint while exercising their
powers of judicial review in contractual or commercial matters as the same
are purely administrative decisions and falls within the realm of contract.
These decisions are neither judicial nor quasi-judicial and the State must be
given sufficient leeway in this regard. Attention of this Court has been drawn
towards the following paragraphs: -

“25. That brings us to the most contentious issue as to whether the
learned Single Judge of the High Court was right in holding that the
appellate orders were bad since they were without reasons. We must
remember that we are dealing with purely administrative decisions.
These are in the realm of contract. While rejecting the tender the person
or authority inviting the tenders is not required to give reasons even if it
be a State within the meaning of Article 12 of the Constitution. These
decisions are neither judicial nor quasi-judicial. If reasons are to be given
at every stage, then the commercial activities of the State would come to
a grinding halt. The State must be given sufficient leeway in this regard.
Respondents 1 and 2 were entitled to give reasons in the counter to the
writ petition which they have done.



14 (2020) 16 SCC 489
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29. However, as far as the first objection is concerned, merely
because extension of time has been granted, it does not in any manner
mean that the Department has come to the conclusion that the contractor
is not at fault. Sometimes extension is granted because a lot of money
has already been invested and cancellation of contract and appointment
of new contractors would lead to unnecessary litigation and increase in
costs. We may also point out that though we have held that the petitioner
firm can challenge the correctness of the material used against the sister
concern, we cannot lose sight of the fact that in the present case the sister
company has not got its enlistment renewed. Some of the adverse
remarks were conveyed to the sister company much prior to the issuance
of notice inviting tenders in the present case. The sister company not
only did not get its enlistment renewed but also did not care to even
represent against the adverse remarks. It has been pointed out to us that
as per the Manual on Contracts, 2007 if any adverse remarks are
conveyed to the enlisted contractor the said contractor has a right to
represent against the same. If no representation is made it is obvious that
the contractor has accepted the adverse remarks. In this case the adverse
remarks were accepted by the sister company. At the least, there was
acquiescence if not acceptance. Therefore, this was a factor which could
be taken into consideration by the respondents.

30. The eligibility criteria provided in the tender lays down that there
should be no adverse remarks in the WLR of the competent engineering
authority. Admittedly, there are adverse remarks in work load return
(WLR) of the sister company. It is obvious that the sister company
having realised that it would not be awarded any contract neither got its
enlistment renewed nor tried to submit the tender. The Directors of the
sister company tried to get over these insurmountable objections by
applying for the tender in the name of the petitioner firm. Not only are
the names similar but as pointed above, all the Directors of the sister
company are partners in the petitioner firm. Therefore, these adverse
remarks passed against the sister company could not be ignored.



34. It was faintly contended that the requirement of being a company
would be only for MES enlisted contractors and not for other contractors.
The answer to this lies in the eligibility criteria for other contractors
referred to above wherein it has been clearly mentioned that they should
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meet the enlistment criteria of Class “SS” MES Contractors. Even
otherwise it would be a travesty of justice if enlisted contractors should
only be limited companies and unlisted unknown contractors, could be a
firm, individual, etc. This is not the purpose of the criteria.

35. In view of the above discussion, we find no merit in the petitions
which stand dismissed vide order dated 21-6-2019. Application(s), if
any, shall also stand dismissed.”

Thus, it is contended that merely because extensions were granted to
the petitioner, the same would not lead to conclusion that the petitioner’s
application for extension must be allowed.

xxvii) At last, learned AGI has submitted that the petitioner in their petition
had suppressed material facts and had not placed on record
letters/correspondences, as pointed out hereinbefore, which would be relevant
for the adjudication of the present petition. The issues raised by the petitioner
are disputed questions of facts for which they could have invoked arbitration
in terms of the PSC as well as Extension Policy and this Court under Article
226 of the Constitution cannot exercise its jurisdiction to adjudicate on such
questions. It is the case of respondent No.2 that if the present petition is
allowed, the same would defeat the larger public interest as the Government
as a trustee/custodian could do best of the natural resources to generate
revenue as it has power to call for competitive bids in terms of the Extension
Policy. It is further pointed out that no right was vested in the petitioner to
claim extension for a period of 10 years either in the PSC or in the Extension
Policy. It is further submitted that the impugned decision was purely
administrative in nature and the petitioner is at liberty to take part in the fresh
bids which would be called by respondent Nos.1 and 2. Thus, it is submitted
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that the present petition be dismissed as the same is not maintainable in the
present form.

xviii) Reliance has also been placed by learned AGI on following judgments
in support the aforesaid submissions: -

15

a. Joshi Technologies International v. Union of India ;
b. Natural Resources Allocation, In re: Special Reference No. 1 of
16
2012;
17
c. K.D. Sharma v. Steel Authority of India Limited and Ors. ;
18
d. Sisters of Our Lady Fatima v. State of Maharashtra and Ors. ;
e. National High Speed Rail Corporation Limited v. Monetecarlo
19
Limited and another ;
20
f. C.K. Achuthan v. State of Kerala and Ors. ;
g. Narang’s International Hotels Private Limited v. Delhi
21
International Airport Limited ;
22
h. Nagpur Improvement Trust and Another v. Jain Kalar Samaj .

SUBMISSIONS ON BEHALF OF RESPONDENT NO.4/ONGC

5. Learned ASG for respondent No.4/ONGC has made the following
submissions: -

15
(2015) 7 SCC 728
16
(2012) 10 SCC 1
17
(2008) 12 SCC 481
18
2025 SCC OnLine Bom 399
19
(2022) 6 SCC 401
20
1959 SC 490
21
2021 SCC OnLine Del 4197
22
2024 SCC OnLine Bom 3257
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i) He has submitted that ONGC has 50% participating interest (PI) in the
PSC and the same was valid till 29.06.2023. The application made on behalf
of the petitioner seeking extension of PSC for a period of 10 years under the
extension of policy was dismissed by respondent No.1 vide impugned letter
dated 19.09.2025. It is further submitted that after the expiry of PSC purely
as an interim measure of facilitation to continue petroleum operations,
pending the decision of contract extension, the said five interim extensions
were granted to the petitioner and no right of continuing the operations was as
such promised to the petitioner. It is further submitted that after passing the
impugned rejection letter, ONGC has not been allowed to take over the
petroleum operations by the petitioner in pursuance of the directions given in
paragraph 3 of the rejection letter. It is the case of ONGC that the overall
operation operations at the subject oil field , i.e., production, process, product,
dispatch, and maintenance of all the stationary and non-stationary assets, are
being carried out by various contractors and there are total 15 contractors
engaged by the operator for this block. It is further the case of ONGC that it
has established an effective plan for transition and takeover protocols to
ensure that ongoing production and safety critical operations continue without
disruption and as a part of the transition plan, it has already identified a team
comprising of 30 experience professionals, which are currently posted at
ONGC’s Hazira Pant, to assume control of the subject oil block. It is further
submitted that the short payment of profit petroleum is wholly on account of
the petitioner and there is no short payment of profit petroleum by ONGC. It
is further pointed out that the petitioner has unilaterally deducted SAED from
Government’s share of profit petroleum. It has been argued that since
respondent No.4/ONGC has been precluded from taking over the oil block,
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the petitioner ought to be directed to honour, all demands, dues, liabilities
etc., until the takeover is effectuated. It is further pointed out that this Court
has to look upon the conduct of the petitioner, and state of events which have
transpired after passing of the impugned rejection order. Attention of this
Court has been drawn towards a letter dated 19.09.2025, addressed to
Chairman and Managing Director of ONGC/respondent No.4 by respondent
no.1 for immediate takeover of assets and petroleum operations in subject
block and it is contended that since then, ONGC has not been allowed to take
over the position of the subject oilfield by the petitioner.

ii) With respect to the contention of petitioner that it is a lessee under
Transfer of Property Act, it is the submission of learned ASG that the
petitioner is a “tenant-at-sufferance” and has no right to remain in the subject
premises. It is further submitted that the contract in the present case is
determinable in nature and it relates to infrastructure project as specified in
23
the Schedule of Specific Relief Act, 1963 . It is therefore contended that this
Court cannot grant any injunction with respect to such contract as the same is
expressly prohibited under Section 20A of the SRA. Further, it is contented
that the contract in the present case is not specifically enforceable in terms of
Section 14 of the SRA as the same is determinable in nature.

iii) It is thus, prayed that the present petition is not maintainable and the
same be dismissed and the petitioner be directed to handover the possession
of the subject oil field to respondent No.4/ONGC in terms of the direction
given in the impugned rejection order/letter.

23
For short, ‘SRA’
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REJOINDER SUBMISSIONS ON BEHALF OF THE PETITIONER

6. Learned Senior Counsel for the petitioner have made the following
rejoinder submissions: -

i) It is submitted that the petition is maintainable in the present form
inasmuch as there is no disputed question of facts to be determined or
adjudicated by this Court. It is further submitted, without prejudice to other
contentions, that even if the PSC is contractual in nature, the action of
relevant authorities is amenable to writ jurisdiction of this Court under Article
226 of the Constitution. It is the case of the petitioner that the mining in the
present case is not conventional as the subject oil field is situated in ocean and
in the middle of the sea where the pillars have been rigged into sea bed.
Attention of this Court has been drawn towards Sections 4, 5, 6, 12 of Oil
Fields (Regulation and Development) Act, 1948, and it is contended that the
PSC emanates from these provisions, and therefore, it has statutory force. It is
further submitted that initially the subject oil field was leased out to
respondent No.4/ONGC, and PSC had four parties with their respective
Participating Interests (PI) and it is respondent No.4/ONGC which has
defaulted in payment of profit petroleum and royalty to the Government of
India during the period of interim extensions provided to the petitioner from
2023 till September 2025. As per petitioner, it was only a co-lessee with
respondent No.4/ONGC during the said period. Attention of this Court has
also been drawn towards Articles 77, 166, 297, 298, 299 of the Constitution
of India and it is contended that origin of PSC and power of Government to
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enter into contract for exploration of natural resources of the country
emanates from these provisions and thus, the same is in nature of a statute and
has statutory force and amenable to writ jurisdiction under Article 226 of the
Constitution of India.

ii) Learned Senior Counsel, while placing reliance on a judgment of
learned Division Bench of this Court in Union of India v. Vedanta Ltd. and
24
Ors. ( supra ) , has submitted that in the said case, it has been held that the
Extension Policy of 2017 enacted by respondent No.1 is in the nature of
statute and has statutory force. Reliance has been placed on following
paragraphs of the said judgment: -

“56. The Central Government has formulated a Pan India extension
policy for grant of extension to the existing PSCs in respect of all the
“Pre-NELP Exploration Blocks” stipulating therein that during the
extended period it shall have 10% higher share of Profit Petroleum. The
policy has been issued under Rule 5(3) of the PNG Rules and thus, by
virtue of Article 32.1 of the PSC would fall under the term “applicable
laws”.

57. The executive power of the Government to regulate and distribute
the manner of sale of Natural Resources has been upheld by the Hon'ble
Supreme Court in several decisions. Under Entry No. 53 of List-I of
Schedule VII read with Article 39(b) of the Constitution of India, the
Union has the power, jurisdiction and authority to take a policy decision
as has been done in the present case by issuing the policy decision dated
th
7 April, 2017, to subserve the common good. Article 39(b) of the
Constitution of India is extracted hereinunder for ready reference:—
“ 39. Certain principles of policy to be followed by the State. -
The State shall, in particular, direct its policy towards securing -
(a) xxx xxx xxx

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2021 SCC OnLine Del 1336
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(b) That the ownership and control of the material resources of the
community are so distributed as best to subserve the common
good;”

58. It has been held by Hon'ble Supreme Court in Reliance Natural
Resources Ltd. v. Reliance Industries Ltd. (supra) in paragraphs 77 and
78 as under:—

“77. In the light of the above, the executive of the Union of
India enjoys its constitutional powers under Article 73 and Article
77(3) in order to fulfil the objectives of the Directive Principles of
State Policy relating to distribution of natural gas. This natural gas
is a material resource under Article 39(b). In view of this, along
with the contemplation of the Government's policy for the
utilisation of natural gas under Article 21.1 and the decision of this
Court referred to above, the executive decided that distribution
would include within its ambit acquisition, including acquisition of
privately owned material resources. The framing of the “gas
utilisation policy” in identifying the priority sectors, and
allocating the requisite quantities in accordance with the needs of
the said sectors and subjecting marketing freedom to the order of
priority and guidelines framed is very much in accordance with
law. Consequently, Article 21.1 and Article 21.3 should be read in
consonance with the gas utilisation policy and the latter is neither
inconsistent with the provisions of the Constitution, nor the
Oilfields (Regulation and Development) Act, 1948; the Petroleum
and Natural Gas Rules, 1959 and the articles of the Production
Sharing Contract referred to above.
78. To put it clearly, both in terms of the gas utilisation policy
and the Production Sharing Contract, the Government in the
capacity as the executive of the Union can regulate and distribute
the manner of sale of natural gas through allotments and
allocation which would subserve the best interests of the country. ”
( Emphasis supplied)
59. Further, in Energy Watchdog v. CERC , reported as (2017) 14
SCC 80, in paragraphs 48 and 57, Supreme Court held as under:—
“ Change in law
48. It has been submitted on behalf of the counsel for the
respondents, that the guidelines of 19-1-2005, as amended by the
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18-8-2006 Amendment, make it clear that any change in law, either
abroad or in India, would result in the consequential rise in price
of coal being given to the power generators. Since various
provisions of the guidelines as well as the power purchase
agreements are referred to, we set them out herein:
xxx xxx xxx
57. Both the letter dated 31-7-2013 and the revised Tariff
Policy are statutory documents being issued under Section 3 of the
Act and have the force of law . This being so, it is clear that so far
as the procurement of Indian coal is concerned, to the extent that
the supply from Coal India and other Indian sources is cut down,
the PPA read with these documents provides in Clause 13.2 that
while determining the consequences of change in law, parties shall
have due regard to the principle that the purpose of compensating
the party affected by such change in law is to restore, through
monthly tariff payments, the affected party to the economic position
as if such change in law has not occurred. Further, for the
operation period of the PPA, compensation for any
increase/decrease in cost to the seller shall be determined and be
effective from such date as decided by the Central Electricity
Regulation Commission. This being the case, we are of the view
that though change in Indonesian law would not qualify as a
change in law under the guidelines read with the PPA, change in
Indian law certainly would .”
( emphasis supplied)
60. We were informed by the Solicitor General that the policy which
is applicable uniformly to all the PSCs entered into by the Government
was framed after due consideration with the stakeholders, including the
respondents herein. The policy has been framed under the Rules of
Business under Article 166 of the Constitution of India and under the
aegis of the Cabinet Committee of Economic Affairs. Thus, in view of
the source of power to issue the policy and the aforesaid judgments,
we find force in the contention of the appellants that the policy
decision of the Union of India dated 7 April, 2017 has statutory
force.”

In view of the aforesaid, learned Senior Counsel for the petitioner has
submitted that the aforesaid case had arisen out of dispute between the same
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parties regarding similar PSC. In the aforesaid circumstances, wherein dispute
was with respect to the entitlement of UOI to 10% increase in the share in
profit petroleum under PSC on account of extension of its tenure, it has been
held by learned Division Bench that the Extension Policy of 2017 has
statutory force. It is thus, the case of the petitioner that respondent Nos.1 and
2 cannot lay emphasis on the fact that the dispute(s) arising out of the said
Extension Policy are not amenable to writ jurisdiction.

iii) It is, therefore, the case of the petitioner that the extension policy has
statutory force and the source of PSC is in Constitution and the same is not an
ordinary contract. It is submitted that non-extension of PSC in favour of the
petitioner will have huge economic impact as the business involved in more
than Rs.1 Lakh Crore and a large number of workers/persons employed by the
petitioner would then be rendered unemployed. It is further the case of the
petitioner that even in purely contractual relationship, it is to be seen that how
Government has entered into contract and any arbitrariness in taking decision
under such contracts, which has statutory force, can be subject to judicial
review under Article 226 of the Constitution. Reliance has been placed
following portion of judgment of learned Coordinate Bench of this Court in
W.P. (C) No. 11599/2015 in Vedanta Limited & Ors. v. Union of India &
25
Ors. : -

“ Issues
I. Did the order dated 14.12.2015, passed by this Court, foreclose a final
examination by the Court as to whether a remedy by way of a writ is
maintainable in the facts and circumstances of this case?

25
2018:DHC:3625
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II. If the answer to issue No. I is in the affirmative, did a remedy by way
of writ petition lie in the instant case?
III. If the answers to issues No. I & II are in the affirmative, can the
petitioners seek extension of the existing tenure of the PSC beyond
14.05.2020 i.e. till 14.05.2030 unimpeded by the fact that a New Policy
has come into play?
IV. What is the scope and effect of Article 2.1, which obtains in the PSC
in issue?
V. If Article 2.1 entitles the petitioners to extension of tenure of the PSC,
is the refusal to extend the tenure by the respondents arbitrary and
unfair?

Issue No. I
62. A careful perusal of the order dated 14.12.2015 would show that the
Court had not foreclosed the issue with regard to whether or not in the
instant case, a remedy by way of writ would be available to the
petitioners. The observations made were tentative in nature. The Court,
at that juncture, was of the view that notwithstanding the objections
taken qua the maintainability of a writ, the procrastination displayed by
the respondents qua the issue of extension of tenure of the PSC,
necessitated its intercession in the matter. The idea was to nudge the
respondents to take a call in the matter in terms of its obligation under
PSC. At that stage, clearly, the legal tenability of a wrong call could not
have been tested.

62.1 Therefore, the argument advanced on behalf of the respondents, in
particular, respondent No.1/GOI, that since a decision had been taken,
the writ petition had worked itself out and consequently, rendered
infructuous, to my mind, is a submission which is completely
unsustainable. In any event, in my view, the order dated 14.12.2015 was
only an interim order which could not have precluded further arguments
that the petitioners would have wanted to advance in the matter. In fact,
right from inception, the stand of the petitioners has been, (given the
construct of Article 2.1 of the PSC) that the respondents have no choice
but to extend the tenure for the PSC for another 10 years, once, the stage
of commercial production of gas is reached. Further, there are no such
observations in the order which would prevent examination of the issue,
that is, whether or not a writ petition would lie in matter of like nature.



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67.4. Therefore, as indicated above, given the facts and circumstances of
the case, there would be no bar in entertaining a writ petition, even
though the dispute arising between the parties falls within the realm of a
contract.

It is further submitted that learned Coordinate Bench in the aforesaid
case in similar circumstances had entertained the writ petition and the same
was also upheld by learned Division Bench.

iv) On facts, learned Senior Counsel has submitted that the decision of
respondent Nos.1 and 2 in rejecting the application of the petitioner seeking
extension of PSC was arbitrary as no dispute was ever raised by said
respondents during the 25 years of their relationship with the petitioner. It is
further submitted that respondent Nos.1 and 2 had not adhered to the timeline
provided in Clause 1 of the extension policy with respect to submission,
consideration and approval of request for extension of contract. As per said
Clause, after submission of the application respondent No.2/DGH had to
make recommendation to respondent No.1/MoPNG within six months of such
submission. It is pointed out that it was not done so in the present case. It is
further the case of the petitioner that as per Clause 2 which provides for
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‘Fiscal Parameters for Extension’, and particularly in Clause 2.1 thereof, the
petitioner has been paying the Government share of profit petroleum during
the period of interim extension of PSC after 2023 at 10% higher rate what was
existing under PSC before 2023. It has been argued that the same would have
been a relevant consideration for extension of PSC in favour of the petitioner;
however, respondent Nos.1 and 2 have not taken into account the same in the
rejection letter/order. It is further submitted that the petitioner was granted
five interim extensions after expiry of PSC on 29.06.2023 till the rejection of
it’s application seeking extension and the performance of the petitioner,
during the said period and even 25 years of relationship was not taken into
account. It is further submitted that the letters relied upon by learned AGI to
show that the petitioner was in default for payment of profit petroleum to the
share of Government is an afterthought as no issues were ever raised with
respect to such payments prior to the petitioner’s filing of application seeking
extension of PSC. It is further submitted that if the situation was such that
there were issues of payment of profit petroleum or for that matter royalty
(this as per petitioner was to be paid by ONGC) to the Government, then
question which arises is that why five extensions were granted to the
petitioner and if same was the case, then no interim extension should have
been granted to the petitioner. It is further submitted that it is only after the
application for extension was moved by the petitioner, issues with respect to
payment of profit petroleum and outstanding dues were raised by the
aforesaid respondents and the same has been done in an arbitrary manner as it
was merely an afterthought. Without prejudice to the aforesaid contentions, it
has been submitted that the petitioner has, in fact, paid all its dues as referred
to in the impugned rejection letter corresponding to its participating interest
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under PSC. It is pointed out that respondent No.2/DGH, in complete
disobedience of its own policy, had not followed the timeline within which it
had to submit its recommendation to respondent No.1/MoPNG and the said
recommendation by respondent No.2 which was to be submitted within six
months of submission of application by the petitioner/contractor was
submitted on 29.12.2021. It is further pointed out that the application for grant
of extension of PSC was not only submitted by the petitioner; however, same
was submitted by all the parties to the existing PSC. Attention of this Court
has been drawn towards the note of contentions filed on behalf of respondent
no.4/ONGC wherein, it has been stated that, “There were no default lapses on
part of Respondent-ONGC and the dues and outstanding amount referred to in
the impugned rejection letter were attributable to the petitioner alone”, and it
is submitted that the aforesaid stand of respondent no.4 is incorrect and
contrary to the arrangement as provided under PSC as the royalty under PSC
was to be paid by the lessee/ONGC and the petitioner’s liability was only to
pay profit petroleum corresponding to its participating interest. It is further
submitted that, in case, there is any shortfall in payment of royalty to the
Government, then the same will be attributable to respondent No.4/ONGC as
after expiry of PSC in 2023, ONGC had not paid the same. It is further
submitted that if only hurdle in allowing the application of the petitioner for
extension of PSC was default in payment of royalty and profit petroleum,
then, the same was not attributable to the petitioner as there were no dues on
behalf of the petitioner when application for extension of PSC was made.
Attention of this Court has been drawn towards the following averments made
in additional affidavit dated 19.12.2025 filed on behalf of the petitioner: -

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“4. It is thus clear that as late as end of the year 2021, there was no
case of any real shortfall of payments on behalf of the Petitioner. Even
otherwise, the Rejection Letter refers to alleged non-payments as
follows:

(i) Short payment of Profit Petroleum due to recovery of excess
Drilling cost and Geostatistical Inversion Study - USD 14.54
million.

(ii) Deduction of Special Additional Excise Duty (SAED) from
Government's share of Profit Petroleum for Q2 FY 2022-23 to Q2
FY 2024-25 - USD 10.13 million.
(iii) Audit Exceptions - Dues relating to settlement of audit
exceptions for the period up to FY 2020-21 - USD 1.54 million.

(iv) The Rejection Letter alleges that the required SRF was USD
43 .2 million and that there was a shortfall of USD 4.9 million

5. All these payments stand made by the Petitioner whether
warranted or unwarranted. To resolve the dispute regarding extension of
the PSC, the Petitioner made an offer on 24.11.2025 and pursuant thereto
made payment of an amount of INR 695 .49 crores (including INR 66.98
crores mentioned in the Rejection Letter) to the Government on
02.12.2025 with an understanding that it will consider the PSC
extension.”

It is further submitted that as per impugned rejection letter, the dues
were of royalty and not of profit petroleum and even otherwise, the petitioner
in order to resolve all the disputes as pointed out hereinabove, has, during the
pendency of the present petition, paid all the outstanding dues as stated in the
impugned rejection letter. It is the case of the petitioner that the reasons stated
in the impugned rejection letter/order were merely an afterthought inasmuch
as the recommendations of respondent no.2/DGH were absent with respect to
the issues with management of mineral oil operations, continuation of
petroleum operations without PSC, lease or interim permission, and, creation
of encumbrance on assets of the block as mentioned in sub-clauses a, b , c, of
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paragraph (iv) of the impugned rejection letter/order. It is further pointed out
that the aforesaid dues were not brought to the notice of the petitioner, prior to
the filing of extension application. It is further the case of the petitioner that
respondent Nos.1 and 2, while acting in arbitrary manner, had directed the
petitioner to handover the possession to ONGC and cease from carrying out
any further petroleum operation operations at the subject oil block; however,
it has not taken into account that respondent No.4/ONGC had not paid Rs.455
Crores in 2021 and was itself in default of payment of royalty. Attention of
this Court has been drawn towards a letter dated 13.09.2021 addressed to
ONGC by respondent No.2/DGH with respect to payment of requisite royalty
under the provisions of Oil Fields (Regulation and Development) Act, 1948,
and it is contended that respondent No.4/ONGC was in default of payment of
royalty to the Government and this non-payment of royalty along with penalty
royalty was the only consideration in rejection of petitioner’s application for
extension. In view of the same, it is submitted by learned Senior Counsel for
the petitioner that the non-payment of royalty along with penalty royalty was
attributable to respondent No.4/ONGC and not the petitioner.

v) Learned Senior Counsel for the petitioner has also drawn attention of
this Court towards DGH’s recommendation dated 29.12.2021 regarding the
petitioner’s application seeking extension of PSC and it is submitted that in
the said letter/recommendation, respondent No.2/DGH had recommended that
the petitioner/contractor may be directed to forthwith clear the pending
statutory dues and fulfil the prescribed conditions under the Extension Policy
as pointed out hereinbefore, for consideration of application for extension of
PSC submitted by the petitioner. It is pointed out that the petitioner has during
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the pendency of the present petition paid all the dues as mentioned in the
impugned rejection letter/order corresponding to its PI.

vi) Attention of this Court has also been drawn towards the recently
enacted Petroleum and Natural Gas Rules, 2025, particularly on Rules 5 and
10 which provides for application for grant of petroleum lease and extension
of term of petroleum lease respectively. Rule 10(8) provides that, on the
expiry of period of 180 days, if the application for extension has not been
decided by Central Government or the State Government the same shall be
deemed to have been approved. Thus, it is contended that necessity of prompt
decision on such application has been now given statutory force, and
therefore, the unnecessary delay on part of respondent No.2/DGH in deciding
the petitioner’s application of extension suffers from vice of arbitrariness.

vii) It is further submitted that the case of the respondent no.2 that they are
well within their right to invite fresh bids for development of area and award
the field to most competitive bid is contrary to the extension policy as a
respondent Nos.1 and 2 had not taken into account Clauses 3.2 (e) & (f) and
4.1 of the extension policy and has arbitrarily rejected the petitioner’s
application for extension. It is submitted by learned Senior Counsel for the
petitioner that Clause 5 of the policy is attracted in the event of failure to
comply with conditions mentioned in Clauses 3 and 4; however, in the present
case, the past performance of the petitioner, the technical expertise report
submitted along with the application seeking extension, and the cumulative a
achievement of drilled wells in production since inception, have not been
taken into account by respondent Nos.1 and 2.
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viii) Learned Senior Counsel for the petitioner has responded to the
judgments relied on by learned AGI during the course of arguments by way of
following submissions: -

a) With respect to Himalayan Flora & Aromas ( supra ) , it is
submitted that the petitioner is seeking extension under extension
policy enacted in 2017 which has statutory force. As per Clause 4 of
said policy, past performance of the applicant/contractor has to be
favourably considered. It is submitted that respondent no.2/DGH’s
recommendation dated 29.12.2021 reflects that the petitioner
satisfied all the criteria mentioned in Clauses 3 and 4 of the
extension policy and same was the reason for granting five interim
extensions. It is further submitted that the petitioner has legitimate
expectation that its application would be decided in accordance with
the extension policy of 2017.

b) With respect to Joshi Technologies International Inc. ( supra ) , it is
submitted that promissory estoppel can be invoked in cases of
contracts under Article 299 of the Constitution and the present
petition is maintainable as public law element is involved. It is
further submitted that State in its executive capacity, even in
contractual field is obligated to act fairly and cannot discriminate
arbitrarily.


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c) With respect to Natural Resources Allocation, In re, Special
Reference No.1 of 2012 , it is submitted that revenue maximisation
is not the sole way of serving public good and same is not the object
of policy of distribution of petroleum resources and the oil blocks
must be exploited with utmost expedition in the overall interest of
the country.

d) With respect to K.D. Sharma v. SAIL ( supra ) , it is submitted that
the petitioner has not made any concealment or misrepresentation,
and thus, this judgement is irrelevant.

e) With respect to Sharwan Kumar Kumawat ( supra ), it is submitted
that the said case is irrelevant and not applicable to the facts in the
present case. It is submitted that in the present case application for
extension was made under extension policy of 2017 which was
enacted by the Government itself. It is further submitted that the
legitimate expectation also arises from the past conduct of the
Government as in the present case the petitioner was granted five
extensions without any mention of any default.

f) With respect to Army Welfare Education Society ( supra ), it is
submitted that legitimate expectation is in the realm of public law
and the petitioner’s legitimate expectation arises not only from the
past conduct in granting five interim extensions but also from the
extension policy which has a statutory force.

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g) With respect to Reliance Natural Resources Ltd. ( supra ), it is
submitted that the said judgement holds that government policy
would be applicable to the pricing and the same would be binding
on respondent Nos.1 and 2. It is further submitted that reliance
placed on Article 297 of the Constitution by respondent No.2 is
misconceived as petitioner’s case is not that grant of petroleum
excavation lease is not vested with the Union. It is further submitted
that the petitioner is not claiming any right over the subject oil field
and is only seeking enforcement of Government’s extension policy
in its favour.

h) With respect to Sugati Beach Resort Pvt. Ltd. ( supra ) , it is
submitted that the extension policy of the Government itself take
care of revenue maximisation by requiring 10% additional profit
during the extended period. It is pointed out that the Government is
receiving this additional revenue after the expiry of PSC on
29.06.2023 and the same continued during the period of extensions
till 2025.

i) With respect to Silppi Constructions Contactors ( supra ) , it is
submitted that even in contractual relations, the State is obligated to
act fairly and reasonably. It is submitted that the petitioner has
complied with all the requirements of extension policy of 2017 and
the default is on the part of ONGC in respect of its liability to pay
royalty.

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ix) In view of the aforesaid submissions, it is submitted on behalf of the
petitioner that the petition is maintainable in the present form and it is prayed
that if this Court finds that the writ is maintainable then, a status quo order
may be granted and respondent Nos.1 and 2 be directed to reconsider the
application of the petitioner seeking extension of PSC by giving a proper
hearing in accordance with the extension policy before respondent No.2/DGH
and notice may be issued in the present petition and respondents be given an
opportunity to file reply.

7. Learned AGI for respondent No.2/DGH, while rebutting the aforesaid
arguments raised by learned Senior Counsel on behalf of the petitioner, has
submitted that the present case is not with respect to termination or grant of
contract and the impugned rejection letter/order is purely an administrative
decision on the basis of the parameters laid down in policy for grant of
extension of PSC and the principles of reasonableness, fairness, and justness
are not applicable to the present case. It is further submitted that the
parameters provided in the extension policy have not been fulfilled in the
present case and therefore the application of the petitioner seeking extension
of PSC was rejected. It is further the case of respondent no.2 that the present
petition has been filed by the petitioner by suppressing material facts and non-
disclosure of material which had bearing on the outcome of the decision of
the case. Reliance has been placed on letter dated 21.09.2021 with respect to
Government Audit for 2018-19 of subject oil block whereby, attention of the
petitioner was drawn towards the fact that all statutory dues and payment due
to the Government should have been cleared and the contractor/petitioner
should not be defaulter to the Government or any account. It is, therefore,
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submitted that non-payment of royalty was not the only consideration in
rejecting the application of the petitioner for extension of PSC. It is further
submitted that after recommendations were made by respondent no.2/DGH on
29.12.2021, several letters with respect to short payment of profit petroleum
and royalty dues to Government of India were addressed to the petitioner
along with audit reports. However, said dues were not cleared by the
petitioner. It is further the case of respondent no.2 that the petitioner could
have invoked arbitration in terms of Clause 6 of the extension policy, if it felt
that the decision of rejection was not in accordance with the policy. Thus, it is
submitted that the present petition is not maintainable and the same may be
dismissed.

8. Learned ASG for respondent no.4/ONGC has submitted that the letter
dated 13.09.2021 issued by respondent No.2/DGH with regard to non-
payment of royalty by ONGC was subsequently withdrawn and the test for
the maintainability of the present petition is that whether the reliefs sought by
the petitioner can be granted. It is further submitted that the interim
extensions had given no right to the petitioner to continue with PSC and the
same was purely an internal measure of facilitation to continue petroleum
operations, pending the decision on contract extension.

9. Per contra , learned Senior Counsel for the petitioner have submitted
that the present petition is maintainable as the extension policy was
transparent mechanism for inviting public investment and as held by learned
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26
Coordinate Bench in Vedanta ( supra ) , the extension policy had statutory
force. It is further submitted that the arbitration could not have been invoked
as the PSC had expired in 2023, and further, in terms of the policy, the
arbitration could have been involved during the period of extensions only. It
is pointed out that the interim extensions granted to the petitioner have also
expired. Thus, it is submitted that the present petition is maintainable and the
reliefs sought by way of the present petition can also be granted.

ANALYSIS AND FINDINGS


10. Heard learned Senior Counsel for the petitioner, learned AGI for
respondent No.2/DGH and learned ASG for respondent No.4/ONGC and
perused the records.

11. It has been vehemently argued that on behalf of respondent Nos. 2 and
4 that the present writ petition is not maintainable and the same should be
dismissed in limine.

12. It is a matter of record that the PSC signed between the petitioner and
the Government of India had a covenant with respect to the extension of the
same, which reads as under: -

“ARTICLE 2
DURATION

2.1 The term of this Contract shall be for a period of twenty five (25)
years from the Effective Date, unless the Contract is terminated

26
2018:DHC:3625
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earlier in accordance with its terms, but may be extended by the
Government for a further Period not exceeding five (5) years;
provided that in the event of Commercial Production of Non
Associated Natural Gas, the Contract may be extended by the
Government for a period up to but not exceeding thirty five (35)
years ·from the Effective Date.”

13. During the tenure of the PSC, the Government of India came out with
the aforesaid Extension Policy titled as “ Policy for the Grant of Extension
to the Production Sharing Contracts signed by Government of India
awarding Pre-New Exploration Licensing Policy (PreNELP) Exploration
Blocks. ”. Object of the said extension policy at the sake of repetition and for
completeness is reproduced as under: -

“No. O-19025/07/2014-ONG-D-V - The Government of India has
approved a policy for granting extension to the Production Sharing
Contracts (PSCs) signed by Government of India awarding Pre-New
Exploration Licensing Policy (Pre-NELP) Exploration Blocks, to
have a transparent and defined framework for granting extension.
This will help the operators in planning their investments and
operations in these fields which will help in optimal exploitation of
the reserves.”

14. A perusal of the same would demonstrate that the said policy was
brought in with its main objective as optimal exploitation of the reserves. The
policy was thus introduced to enable a contractor, whose tenure of PSC is
ending, to seek extension for the same by making necessary arrangements for
investment/planning, which would be evaluated as per the criteria provided
for in the policy. This being the objective, Clause (1) provides that the
contractor should submit the application duly approved by the Operating
Committee for extension to the Ministry of Petroleum and Natural Gas
(MoPNG) at least two years in advance to the expiry date of the contract but
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not more than six years in advance. It also provides that a copy of the said
application is to be sent to DGH (respondent No. 2), who would make a
recommendation to the Ministry within six months of submission of the
application by the contractor and the decision by the Government will be
taken within three months of the receipt of the proposal from respondent
No.2/DGH. This Clause signifies the importance of timeline for such
extensions. The said timeline, admittedly, was not adhered to by the
respondent No.1. Further, as per Clause 1 of the policy, the application for
extension has to be sent with the approval of the Operating Committee. The
Operating Committee as per Article 1.63 of the PSC means, the committee
established by that name in the Operating Agreement pursuant to Article 7,
which provides for Operatorship, Operating Agreement and Operating
Committee. The Operating Committee included a member representative of
respondent No.4/ONGC.

15. The Extension policy, thereafter, in Clause 2 provides for Fiscal
Parameters for Extension, Prerequisites for Evaluation (Clause 3) and Criteria
for Evaluation of Request (Clause 4). Clause – 5 of the said policy reads as
under: -

“5. In the event of failure to comply with any of the above
conditions, mentioned in clauses 3 and 4 above, Government shall
have the option to invite fresh bids for further development of the
area and to award the field to the most competitive bid. Government
would also take into account pending arbitration while considering
extension requests.”

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16. The case of respondent No. 2 is that the petitioner could not satisfy the
conditions mentioned in Clauses-3 and 4, and therefore, the extension was not
granted to it.

17. It is pertinent to note that Clause 9 of the Extension Policy provides as
under: -

“ 9. Other conditions:

a) Government shall have the right to stipulate any further conditions
specific to any particular Production Sharing Contract.

b) Government shall reserve the right not to extend PSC without
assigning any reason thereof.

c) The condition stipulated in this policy will override the existing
provision of the PSC.

d) In case any contractor is not agreeable to this policy then the field
will be considered for rebidding, on as is where is basis.
Government would also have the right to assign the same to National
Oil Companies (NOCs) i.e. ONGC or OIL.”
(emphasis supplied)

18. As per the aforesaid sub-clause “b”, the Government has reserved its
right not to extend the PSC without assigning any reasons. However, in the
present case, the respondent No.1 has not exercised this right and has chosen
to give reasons for non-extension. In this background, the
communication/letter dated 29.12.2021 by respondent No.2/DGH to
MoPNG/respondent No.1 with respect to the consideration of application for
extension of PSC submitted by the petitioner/contractor is significant which
has been reproduced as under: -
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“Ministry of Petroleum & Natural Gas
Government of India

Ref: DGH/PF/PSC EXTENSION/CB-OS/2/2021 29.12.2021

Additional Secretary (Exploration) Government of India
Ministry of Petroleum and Natural Gas,
Shastri Bhawan, New Delhi -110001

Subject: Application for grant of extension of PSC in CBIOS-2 Block.

Sir,
Production Sharing Contract (PSC) for CB/OS-2 Block was
signed on 30th June 1998 and the same is due to expire on 29th June 2023.
Contractor, vide letter dated 29.06.2021(Annexure-1), has applied for
extension of the term of PSC under the PSC Extension Policy for Pre-
NELP blocks dated 07.04.2017 for a period of 10 years beyond the
existing PSC period (i.e. till 29 June 2033).
2. The extension application has been duly examined at DGH in
line with the PSC Extension Policy dated 07.04.2021 (Annexure-II)
including Para 1, Para 3.2 and other relevant provisions under the
Policy. In this context, it may be noted that Para 3.2 of the Policy
stipulates that certain conditions are required to be fulfilled for
consideration of PSC extension application. One of these conditions is as
under.
Quote 3.2 (g)
All the statutory dues and payment due to Government should have been
cleared and the contractor should not be a defaulter to the Government
on any account.
Unquote
3 . It is observed that the extension application submitted by the
contractor does not conform to Para 3.2 (g) of the Policy as there are
statutory dues on account of short paid royalty and penal royalty to
the tune of INR 4,55,24,27,628 (provisional as of 30.06.2021), which
has been duly notified to the Contractor from time to time by DGH.
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The latest notifications have been issued on 13.09.2021 and 21.09.2021
(Annexure- III). However, the Contractor is yet to pay pending dues
to GoI.
4. Therefore, it is recommended that the Contractor may be directed
to forthwith clear the pending statutory dues and fulfill the prescribed
conditions under the said Policy for consideration of application for
extension of PSC submitted by the Contractor.
This has approval of DG, DGH.”
(emphasis supplied)

It is pertinent to note that this communication was sent to
respondent No.1/MoPNG as per Clause 1 of the Extension Policy
with respect to recommendation by respondent No.2/DGH.
19. The aforesaid letter refers to notification issued on 13.09.2021 to
respondent No.4/ONGC which reads as under: -

“Ministry of Petroleum & Natural Gas
Government of India
DGH/CF/Royalty/21-22/004 Date: 13.09.2021

To Mr Sandeep Gupta
ED-Chief JVOG
Oil & Natural Gas Corporation Ltd
5, Nelson Mandela Marg
Vasant Kunj
New Delhi 110070

Subject: Payment of requisite Royalty under the provisions of
the Oilfields (Regulation and Development) Act 1948 for the Block
CB-OS-2 for the period up to FY 2020-21.

Ref: DGH letters dated 23.08.2021, 25.03.2021 & 16.01.2021 and ONGC
letter dated 27.08.2021 and earlier correspondences on the subject.
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Sir,

Reference may kindly be made to the above correspondences on the
subject matter.

It is hereby reiterated that the lessee, as holder of a Petroleum Mining
Lease (PML) is under statutory obligation to pay Royalty under the
provisions of The Oilfields (Regulation and Development) Act 1948 and
Petroleum and Natural Gas Rules 2003 and amendments therein, at the
rates for the time being specified in the Schedule in respect of that mineral
oil, and within the prescribed time.

Accordingly, as has been notified earlier, the requisite Royalty in
respect of Block CB-OS/2 has not been paid to Government of India.
The total amount of shortfall of Royalty up to FY 2020-21 is INR
1,20,94,79,889 (provisional) along with penal Royalty of INR
3,34,29,47,739 (provisional) thereupon up to 30th June 2021 which
may please be remitted at the earliest along with penal royalty up to
the date of payment failing which the same may be treated as violation
of ORD Act and Rules.

However, as requested by you vide your letter dated 27th August 2021,
you may fix a meeting with MoPNG on this issue. The same can be
attended by the concerned DGH officials.

This is issued with the approval of the competent authority.”

(emphasis supplied)

20. During the course of arguments, these communications were placed on
record by learned Senior Counsel for the petitioner, and the submission on
behalf of learned ASG for ONGC/respondent No. 4, in response to aforesaid
letter, was that the same was subsequently withdrawn by respondent No.
2/DGH.

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21. During the course of the proceedings, learned AGI has also placed on
record communications by way of an affidavit between petitioner and
respondent No. 2/DGH whereby, it was emphasised that the issues of
statutory dues as well as short payment of profit petroleum and other issues of
audit exceptions for the subject oil block had been raised. It is also a matter of
record that during the pendency of the application seeking extension of PSC,
the petitioner was given 5 interim extensions from 30.06.2023 to 29.09.2024.

22. It is pertinent to note that in one of the communications dated
22.03.2022 relied upon by learned AGI, addressed to the contracting parties
including respondent No.4/ONGC, in paragraph 5, it was recorded as under: -

“5. The Licensee/Lessee of the Block has already been requested
to remit the short-paid Royalty (reference is invited to DGH letter
dated 14.09.2021, wherein the short-paid amount of INR
12,94,79,889 (provisional) upto the Financial year 2020-21
calculated upto 31.03.2021 along with applicable penal Royalty as
per PNG rules was already communicated). The Licensee/Lessee is
again requested to remit the short-paid Royalty along with penal
royalty.”

23. In another letter dated 28.01.2025 which has been placed on record, it
is recorded as under: -

“ Your attention is invited to the above captioned subject,
whereby DGH/Gol has directed you to pay the Short paid GOI share of
PP on account of adjustment of Special Additional Excise Duty (SAED)
while remitting the GOI share of PP. However, till date the said amount
has not been deposited.

This conduct of Vedanta is serious breach of the agreed terms
and conditions of the PSC causing huge financial losses to Central
Exchequer.
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Vedanta / CEHL is once again called upon to deposit the short
paid GOI share of PP amounting to USD 10.13MM along with
applicable interest on account of SAED adjustment made while
remitting the GOI share of PP till 30.09.2024 within 7 days of the
receipt of this letter. In case the amount is not paid within 7 days, GOL
may initiate actions under Article 30 of the PSC.

The forgoing is without prejudice to the GOI's right under the
PSC and applicable law. ”

24. The perusal of the impugned rejection letter would reflect that the
primary issues which were raised by respondent No. 2 was with regard to
Clauses 3.2 (g) and 4.1 (b) of the Extension Policy which read as under: -

“ 3. Prerequisites for Evaluation

3.2 ….



(g) All the statutory dues and payment due to Government should
have been cleared and the contractor should not be a defaulter to the
Government on any account.



4. Criteria for Evaluation of Request

4.1 ….


(b) Contractor should have complied with the provisions of
creation of Site Restoration Fund (SRF) and Site Restoration Plan
(SRP) as per PSC. Wherever PSC does not provide for SRF and
SRP, the Contractor should propose SRF and SRP as a part of
extended Contract.”

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25. The aforesaid issues have been vehemently disputed by the petitioner.
It has been contended that they were an afterthought as initially the primary
issue was with respect to non-payment of royalty by ONGC/respondent No.4,
which is one of the contracting parties being the lessee. On the other hand, it
has been contended by learned AGI that the petitioner had not performed its
obligations under the contract/PSC which had been duly noted and informed
to the petitioner through various communications.

26. Thus, in these circumstances, what remedy can the petitioner avail of
with respect to impugned rejection letter/order dated 19.09.2025?

26.1. The arbitration clause in the PSC is provided under Article 33, relevant
recitals/covenants of which reads as under: -“
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”

The aforesaid arbitration clause is with respect to the dispute arising out
of the performance of the PSC in respect of various terms of the same.
Admittedly, no claim or dispute was raised by the Government of India
seeking arbitration with respect to non-payment of royalty and penal royalty
or shortfall in share of profit petroleum to the Government. The dispute here
is with respect to denial of request of extension on the grounds mentioned
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hereinbefore, and, for such redressal there is no alternate mechanism provided
for in the PSC or in the Extension Policy.

26.2. The arbitration clause provided in Clause 6 the Extension Policy reads
as under: -

“ 6. Seat of Arbitration:

The seat of arbitration will be at Delhi, India, for Production
Sharing Contracts during extension period, notwithstanding any
other provision in the existing PSC and will be subject to the Indian
Arbitration & Conciliation Act, 1996, as amended from time to
time.”

The aforesaid clause is in continuation to the Article 33 of the PSC and
only provides that the seat of arbitration would be in Delhi, for Production
Sharing Contracts, during extension period. The aforesaid clause will not be
applicable in the present circumstances as the dispute is with respect to non
grant of extension by respondent No.1. Thus, in the considered opinion of this
Court the petitioner has no alternate efficacious remedy available qua the
impugned rejection letter/order dated 19.09.2025.

27. There is no dispute with regard to the contention raised on behalf of
respondent No.2 by learned AGI that the contracts of the nature like in the
present case, which may be in the realm of private contracts, is with respect to
natural resources, and therefore, the constitutional mandate and public interest
will outweigh the right of the contractor as there is no absolute right for
extension of PSC. It is also not in dispute that the PSC by its very nature
cannot be considered as a mere regular commercial contract and “public trust
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doctrine”, in cases, like the present one, pertaining to exploitation of natural
resources has to be read into. It is also not in dispute that the aforesaid policy
which is applicable to all petroleum blocks across the country has to be
uniformly applied and that the Government will always have the right not to
extend the same in larger national interest and as a trustee of natural resources
which are held by the Government of India as interpreted by the Hon’ble
Supreme Court in Natural Resources Ltd. v. Reliance Industries Ltd.
( supra ).

28. The issue raised in the present petition is whether the impugned
rejection letter/order by respondent No.1/MoPNG was in consonance with the
Extension Policy of 2017 framed by itself. It cannot be disputed that the
policy has a statutory force and is binding on both the parties. Any decision in
pursuance of that policy, as per settled law, has to be fair and reasonable. It is
also not in dispute that any decision taken by the Government of India in
pursuance of a statute or a policy framed thereunder can be judicially
reviewed, albeit , in limited circumstances, and if, the such decision suffers
from the vice of arbitrariness, then, the Constitutional Courts in exercise of
Articles 226 of the Constitution can interfere with such decision.

29. This Court in exercise of Article 226 of the Constitution will be
circumspect in interfering with the commercial wisdom of the Government
with regard to extension and non-extension of the contract or for that matter
whether the contract ought to be extended or not but it can surely for a limited
purpose examine the process by which such a decision has been arrived at in
case where there is an allegation of unfairness. As pointed out hereinbefore, in
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terms of Clause-9 the Government has reserved its right in the policy not to
extend the contract without assigning any reason. However, the same has not
been invoked in the present case.

30. Learned Senior Counsel on behalf of the petitioner has vehemently
argued that all the reasons assigned in the final impugned decision are an
afterthought inasmuch as from the very inception, the issue raised by
respondent no. 2 was non-payment of statutory dues on account of short
payment of royalty and penalty royalty, which as per respondent no. 2 was
due from the lessee who is respondent No.4/ONGC. Various communications
indeed have been placed on record by learned AGI to show that the similar
issues with respect to petitioner were also raised by respondent no. 2
regarding short payment of share in profit petroleum to the Government;
however, the same has been disputed by the petitioner. It is on this ground, it
is contended that there was no opportunity given for the petitioner to explain
its stand with regard to payment of said dues, which, during the course of
present proceedings, without prejudice, has been paid.

31. At this stage, useful reference can be made to the judgment of Hon’ble
Supreme Court in Manohar Lal Sharma v. Narendra Damodardas Modi
27
and Ors. , wherein, the Hon’ble Supreme Court was dealing with four writ
petitions filed as public interest litigations, challenging the procurement of 36
Rafale fighter jets (Medium Multi-Role Combat Aircrafts-MMCR) by Inter-
Governmental Agreement (IGA) of 2016, on ground that certain newspapers

27
(2019) 3 SCC 25: 2018 SCC OnLine SC 2807

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reported a statement claimed to be made by former President of France,
Francois Hollande, to the effect that the French Government were left with no
choice in the matter of selection of Indian Offset Partners. While disposing of
the aforesaid group of writ petitions, the Hon’ble Supreme Court set out the
parameters of judicial scrutiny of governmental decisions and observed and
held as under : -

“5. Adequate military strength and capability to discourage and
withstand external aggression and to protect the sovereignty and
integrity of India, undoubtedly, is a matter of utmost concern for the
nation. The empowerment of defence forces with adequate
technology and material support is, therefore, a matter of vital
importance.

6. Keeping in view the above, it would be appropriate, at the outset,
to set out the parameters of judicial scrutiny of governmental
decisions relating to defence procurement and to indicate whether
such parameters are more constricted than what the jurisprudence of
judicial scrutiny of award of tenders and contracts, that has emerged
till date, would legitimately permit.

7. Parameters of judicial review of administrative decisions with
regard to award of tenders and contracts has really developed from
the increased participation of the State in commercial and economic
activity. In Jagdish Mandal v. State of Orissa [ Jagdish Mandal v.
State of Orissa , (2007) 14 SCC 517] this Court, conscious of the
limitations in commercial transactions, confined its scrutiny to the
decision-making process and on the parameters of unreasonableness
and mala fides. In fact, the Court held that it was not to exercise the
power of judicial review even if a procedural error is committed to
the prejudice of the tenderer since private interests cannot be
protected while exercising such judicial review. The award of
contract, being essentially a commercial transaction, has to be
determined on the basis of considerations that are relevant to such
commercial decisions, and this implies that terms subject to which
tenders are invited are not open to judicial scrutiny unless it is found
that the same have been tailor-made to benefit any particular
tenderer or a class of tenderers. (See Maa Binda Express Carrier v.
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prerogative powers are in fact concerned with
sensitive, non-justiciable areas, for example, foreign
affairs, but some are reviewable in principle, including
the prerogatives relating to the civil service where
national security is not involved . Another non-
justiciable power is the Attorney General's prerogative
to decide whether to institute legal proceedings on
behalf of the public interest.”
(emphasis supplied)

11. It is our considered opinion/view that the extent of permissible
judicial review in matters of contracts, procurement, etc. would vary
with the subject-matter of the contract and there cannot be any
uniform standard or depth of judicial review which could be
understood as an across the board principle to apply to all cases of
award of work or procurement of goods/material. The scrutiny of the
challenges before us, therefore, will have to be made keeping in
mind the confines of national security, the subject of the
procurement being crucial to the nation's sovereignty.



15. It is in the backdrop of the above facts and the somewhat
constricted power of judicial review that, we have held, would be
available in the present matter that we now proceed to scrutinise the
controversy raised in the writ petitions which raise three broad areas
of concern, namely, ( i ) the decision-making process; ( ii ) difference
in pricing; and ( iii ) the choice of IOP. ”

32. Following the aforesaid judgment of Hon’ble Supreme Court in
Manohar Lal Sharma ( supra ) , the learned Division Bench of Hon’ble
Bombay High Court in BVG India Ltd. Through its Authorised
representative Sangram Sawaant v. State of Maharashtra, through its
28
Chief Secretary and Others , had observed as under: -


28
2021 SCC OnLine Bom 412
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“ 24. We may thus observe that the terms and conditions of a tender can
undoubtedly be fixed and arrived at by the tendering authority depending
upon the need, expectations, exigencies and other surrounding
circumstances in relation to a work being tendered. Such a freedom to
arrive at legitimate terms and conditions in inviting public offers cannot
in any manner be taken away. The cherished principles of free play in the
joints and the liberty to choose a contractor, on terms and conditions
fixed by the tendering authority in public interest, cannot be taken away.
Hence, for a given work, as to what would be the ideal terms and
conditions for a contract to be entered into, is completely within the
domain of the tendering authority. The Court would not have any
expertise to sit in appeal over the tender conditions, the role of the Court
is triggered only qua the decision making process. The decision making
process would be tested on the touchstone of Wednesbury
unreasonableness, malafides and apparent arbitrariness. In the event there
is material before the Court indicating that any tender condition is
inserted malafide or to suit the needs of a particular bidder and which
violates the principles of fairness, non-discrimination and non
arbitrariness as enshrined in Article 14 of the Constitution, the Court
would certainly exercise powers of judicial review to test the decision
making process.”

33. Assuming, arguendo , if the decision in pursuance of the aforesaid
Extension Policy was taken by the Government of India for awarding
extension of PSC to a contractor, the same would be, undoubtedly, within the
realms of commercial wisdom of the Government of India. However, if a
third party in public interest points out to certain anomalies or terms which
would not be in national interest, then the same could be examined by the
Constitutional Court in exercise of its power of judicial review. In these
circumstances, it cannot be argued that the power of judicial review of the
Constitutional Court, in examining such a decision, is completely excluded.
Fairness in all executive decisions is the essence of the Right to Equality as
provided for under Article 14 of the Constitution of India. If any dispute is
raised with respect to fairness of such an action, then, the same can be
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examined, albeit , for limited purposes by the Constitutional Court especially
when there is no other alternative remedy.


34. In the present case, the petitioner has raised certain issues, as noted
hereinabove leading upto the impugned rejection letter/order, which require
consideration and the same cannot be properly adjudicated without an
appropriate response/counter affidavit on behalf of concerned respondents.


35. In view of the aforesaid, submissions on behalf of respondent Nos.2
and 4 raising preliminary objection with respect to maintainability of the
present petition and its dismissal in limine cannot be accepted.


36. Issue notice.

37. Let response/counter affidavit on behalf of the respondents be filed
within a period of 4 weeks with an advance copy to the learned counsel
appearing on behalf of the petitioner. Rejoinder thereto, if any, be filed within
2 weeks thereafter.


38. In the meantime, the parties shall maintain status quo .


39. List before Roster Bench on 27.02.2026.


40. Judgment be uploaded on the website of this Court, forthwith .



AMIT SHARMA
(JUDGE)
JANUARY 06, 2026 /bsr/ns
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