Public Trust Doctrine and Natural Resources: Unilateral Deduction of Government Share Justifies Rejection of PSC Extension

1. Case Snapshot

• Case Name: Vedanta Limited vs Union of India & Ors.

• Citation: 2026:DHC:5803

• High Court: High Court of Delhi

• Bench: Hon'ble Mr. Justice Purushaindra Kumar Kaurav

• Date of Judgment: July 22, 2026

• Area of Law: Constitutional Law – Article 14, Article 297; Public Trust Doctrine; Petroleum Production Sharing Contracts; Extension Policy; Judicial Review of State Action

2. Judgment in Brief

The Delhi High Court dismissed a writ petition filed by Vedanta Limited challenging the rejection of its application for extension of a Production Sharing Contract (PSC) for an offshore oil and gas block. The petitioner had unilaterally deducted approximately Rs. 88 crores from the Government of India's share of Profit Petroleum to offset Special Additional Excise Duty, despite the Government's explicit rejection of such adjustment. The Court held that the Public Trust Doctrine under Article 297 requires the State to act as trustee of natural resources. The petitioner's unilateral action—acting as "judge, jury, and executioner"—was a serious breach of trust justifying rejection of the extension application. The Court also held that the Extension Policy's Clause 5 is not the exclusive ground for rejection; Clause 9(b) reserves residuary powers. Further, no automatic extension occurs upon expiry of timelines, and events subsequent to the application can be considered.

3. Relevant Facts

• Vedanta was a contractor under a PSC for CB/OS-2 Block offshore Gujarat, signed in 1998, valid till June 29, 2023, with a provision for extension.

• On June 28, 2021, the petitioner applied for a 10-year extension under the Extension Policy (April 7, 2017). The application remained pending beyond the stipulated timelines.

• On June 30, 2022, the Government imposed Special Additional Excise Duty on petroleum crude. The petitioner claimed it could adjust this liability from the Government's share of Profit Petroleum under Article 16.7 of the PSC.

• The Ministry of Petroleum and Natural Gas explicitly rejected this proposal on September 28, 2022, stating the reliance on Article 16.7 was "misconceived" and "untenable."

• Despite this, the petitioner unilaterally deducted USD 9.33 million (approx. Rs. 88 crores) from the Government's share of Profit Petroleum from Q2 FY 2022-23 to Q2 FY 2024-25.

• On September 12, 2025 (7 days before the Impugned Order), the petitioner paid the deducted amount (without interest) "under protest."

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