New Delhi: The government and Reliance Industries Ltd (RIL) continue to disagree on initiating arbitration proceedings in their dispute over pricing gas from the KG-D6 basin.

A bench comprising justices Dipak Mishra and Shiva Kirti Singh on Monday heard the issue on the ‘appropriate forum to appoint a third arbitrator’. In November, justice Ranjan Gogoi had put on hold the appointment of arbitrators until there is clarity on what the appropriate forum to hear the case is.

The Arbitration and Conciliation (Amendment) Ordinance 2015, approved on 23 October, changed the manner in which disputes over appointment of arbitrators between parties are to be settled by courts. The ordinance is silent about whether it applies retrospectively, especially since RIL’s application for appointment of the third arbitrator was filed before the same.

The court hearing came a day after Mint reported that RIL and its partner BP Plc. have initiated discussions with the government to drop the arbitration proceedings. RIL-BP have also signalled their intention to invest $10 billion over the next few years to recover about 2.5 trillion cubic feet (tcf) of gas from deep sea fields that the combine expects to be allowed to sell at free market prices under the new gas-pricing rules, according to an oil ministry official familiar with the developments but did not wish to be identified.

The government has argued that gas pricing is a policy issue and cannot be the subject matter of an arbitration proceeding. To this, RIL has consistently held the stand that the issue of dispute was interpretation of the contractual clause between the government and RIL regarding the pricing of gas and not the government’s gas pricing formula.

Under the production sharing contract, the pricing clause says the formula on which the price of gas is decided will be approved by the government but guarantees free market pricing to RIL. While RIL contends that this is an issue arising out of contract and thus needs to be arbitrated, the government says that pricing in itself is a policy matter.

Separately, a three-judge bench of the top court is hearing a public interest litigation filed by non-profit Centre for Public Interest Litigation challenging the validity of the 2014 pricing guidelines.

RIL had moved the apex court over selection of the third neutral arbitrator to head the three-member arbitral panel to decide the gas pricing issue that arose in relation to production-sharing contracts the company entered into with the government in 1994.

The court will hear the case next in July.

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