Govt can't cancel Jindal contract: Ex-SG

The government cannot terminate oil and gas field contract of a company that has defaulted on its obligations like furnishing of bank guarantees, former Solicitor General Gopal Subramanium has said.

The Directorate General of Hydrocarbon (DGH) has sought his views on Jindal Petroleum Ltd's (JPL) failure to fulfil its legal requirements like submission of bank guarantee for block RJ-ONN-2005/1 in Rajasthan.

Jindal, Hindustan Oil Exploration Company (HOEC), Bharat PetroResources Ltd and IMC Ltd held 25 per cent apeice in the block for which a Production Sharing Contract was signed on December 22, 2008.

While other companies fulfilled their legal obligations,

Jindal defaulted by not submitting the bank guarantee, a financial and performance guarantee and legal opinion within 30 days to become the contractor.

DGH's legal head Simran Dhir on September 21 wrote to Joint Secretary (Exploration) in Oil Ministry that DGH as had been instructed by the ministry, had taken a legal opinion from Subramanium.

Subramanium has opined that Jindal Petroleum has become a contractor despite failing to fulfil its requirements of the PSC, Dhir wrote.

On query if Government can terminate the PSC qua the defaulting contractor and auction the share of the defaulting contractor to any other party, the former solicitor general has opined in negative, the letter said.

On the issue of the share of defaulting contractor (JPL) vesting in the government, Subramanium opined in negative. "However, if all the contracting parties default, the

Government can terminate the PSC," Dhir wrote citing the legal opinion.

Subramanium in his opinion stated that failure to meet legal obligations "does not mean that JPL is not a party to the PSC or a contractor company... The PSC expressly recognises every signatory to that contract as a contractor company."

He went on to state that his "opinion is being rendered on the supposition that only one contracting party has defaulted. Needless to say, if all the contracting parties

... contd.

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