New Delhi, The Gujarat High Court has barred Hindustan Oil Exploration Company (HOEC), its directors, employees, officers, agents from assigning, selling and transferring all the movable and immovable assets owned by HOEC including the HOEC House.

The case pertains to an international arbitration where the arbitration panel has asked HOEC and government-owned oil and gas explorer and producer ONGC to pay the dues to Hardy Oil - the operator of offshore oil field PY-3 in Tamil Nadu.

The ONGC has agreed to comply with the arbitration panel award and make the requisite payments to Hardy Oil.

However, as per Hardy Oil's petition, the defaulter HOEC owes more than Rs 27 crore to the operator. The petitioner approached the high court and informed that the HOEC has liabilities aggregating to more than Rs 700cr (to government and service providers) and that gives rise to "reasonable apprehension that HOEC will certainly fail to honour the foreign award".

The Gujarat High Court took cognizance of the matter and took urgent interim measure under section 9 of the Arbitration and Conciliation Act and barred the company and the directors, agents, employees from any transactions related to movable and immovable assets of the company.

In the PY-3 oil field, Hardy is the operator with 18 per cent stake and while HOEC and Tata Petrodyne (now Invenire Energy) each have 21 per cent stake, along with ONGC (40 per cent stake).

Production in the field was shut down in July 2011 as one of the contractors (Aban Offshore) stopped work owing to non-payment. On similar grounds, in March 2014 another service provider (Samson) initiated arbitration process against the field operators (HOEC, Hardy, Tata Petrodyne, and ONGC).

As per the Joint Operating Agreement (JOA), ONGC, HOEC and Hardy were under obligation to pay the contractors. However, the non-payment by ONGC and HOEC led to the second round of arbitration in which Hardy moved an international arbitration against the joint operators.

In February 2021, Hardy won the arbitration and ONGC agreed to comply with the arbitration panel award and make the requisite payment.

After HOEC non-payment, Hardy approached the Gujarat High Court. Meanwhile, HOEC had a very good run in the stock markets with the share prices of the company going up by about three times despite no trigger of better oil or gas price or any other positive indicators.

The HOEC had not informed the stock market about the Gujarat High Court order till Wednesday -- a delay of more than 10 days, probably confirming petitioner's apprehension about HOEC's transparency and intent to pay up.