NTPC MOVES SUPREME COURT ON RIL GAS ROW

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NTPC has moved the Supreme Court seeking quashing of a Bombay High Court order giving permission to Mukesh Ambani’s Reliance Industries Ltd (RIL) to amend its plea in its on-going dispute with the country’s largest utility on the supply of gas from the Krishna-Godavari basin.

   The High Court has allowed RIL to change its written submissions by including references to a Central government decision fixing the price of natural gas from the KG basin at $4.20 per million British thermal unit (mBtu). RIL says the price of $2.34 per mBTU which it had quoted in an international tender for supply of natural gas to NTPC in 2004 is subject to government approval, as the Centre has subsequently fixed the price of gas at $4.20 per unit.

   This interpretation is strongly contested by NTPC which says RIL has introduced these points at a late stage of the legal proceedings before the High Court. Also the price of $2.34 per mBtu was arrived at through a bidding process. The SLP argues that all decisions by the union government had explicitly excluded the NTPCRIL contract from their purview because of the ongoing court case.

   “It is submitted that the amendment in effect seeks to portray the Central government as the chief architect of the inability of RIL in being able to perform GSPA and having impliedly taken away the foundational basis of a very carefully structured bid and suggests that on this basis that the GSPA is one which is incapable of performance. This, it is submitted, is an entirely new case and ought not to have been permitted to be urged for the first time by way of a written statement,” said NTPC in its special leave petition (SLP).

Changing the submission

THE dispute, which has gone on for four years, is over the price at which RIL will sell 12 MMSCMD (a unit of measurement) of natural gas to NTPC. RIL had quoted the lowest price of $2.34 per unit. However a dispute broke out between the two over certain other clauses in the contract. RIL’s stand has been that a final contract was never signed because no agreement was reached on it’s liability in case of non-supply of gas. NTPC denies this and says RIL has a binding contractual obligation to supply gas at $2.34 per unit.

   While this remains the main bone of contention before the High Court, the present dispute relates to the Central government’s decision on gas pricing which RIL has sought to introduce into the legal proceedings by changing its submission to the high court. RIL has also argued that the contract with NTPC ran counter to the centre’s gas utilisation policy and would thus need to be approved by the Union government.

   The apex court will now decide whether RIL can amend its plea in the Bombay High Court against NTPC by bringing in these points. The High Court has not said that RIL’s submissions are correct, only that it can introduce these points. A spokesperson for RIL said he would not be able to comment as the case was sub-judice.

   The NTPC SLP essentially argues that policy decisions of the Union government do not affect its contractual right to receive gas from RIL. The centre recently changed its SLP in a separate case (RIL versus the Anil Ambani controlled RNRL) to support NTPC’s case.

   NTPC in its SLP said: “the subject matter of disputes between petitioner (NTPC) and the respondent (RIL) was under a global tender invited by the petitioner for supply of gas and was not as per any directive of the Central government. RIL had arrived at an agreement with the NTPC to supply 12 million standard cubic metres per day (mmscmd) gas at US$ 2.34(mBtu) pursuant to the global competitive bidding.”

   The SLP alleges that RIL had “sought to wriggle out and avoid the GSPA on one pretext or the other and had compelled NTPC to move the Bombay High Court for enforcement of its agreement with the contractor (RIL).” The Chairman of RIL Mukesh Ambani in his letter dated June 22, 2004 thanked the then chairman of NTPC for selecting RIL, said the SLP.

   RIL had filed its written statement on October 31, 2007 before the high court in the case. The issues on which the case was to be decided were framed on October 6, 2008 and the recording of evidence have commenced. But the order of the Division bench of the high court passed on July 30, 2009 upholding the order of the single judge bench of the high court allowing the application of RIL to amend its written statement in the case is illegal, said NTPC.

   RIL had amended its written statement taking advantage of an affidavit filed by the oil ministry in the high court for a separate case, the famous legal battle between it and RNRL. The government affidavit, filed on January 13, 2009 before the Bombay HC but later withdrawn had stated that price of KG basin gas was fixed at $4.20 mBtu by an empowered group of ministers (EGoM).

   In its SLP NTPC said the EGoM in its first meeting held on Sep 12, 2007 had expressly stated that the decision taken in by it will be without prejudice to the cases NTPC and RIL and between RNRL and RIL. The second EGoM decision dated May 28, 2008 was about the commercial utilisation of natural gas under NELP and the third EGoM decision dated October 23, 2008 reiterated the decision taken in the first EGoM regarding that the verdict of the court (Bombay high court) should be awaited to decide the price at which RIL will sell gas to NTPC. NTPC further said, “as regards the fourth EGoM dated Jan 8, 2009 though referred to in the proposed amendment by RIL, the same is not on record. This apart the GSPA relates to supply of gas by the Respondent (RIL) which it would be getting under the Production Sharing Contract dated Feb 14, 2000 between the Union of India and RIL and had the PSC disabled RIL from marketing gas there was no way RIL would have even offered to supply the gas and submitted its bid.”

   “The petitioner being desirous of expanding the current capacity of its existing gas based power generating plants at Kawas and Jhanor, Gandhar in the state of Gujarat by approximately 2600 MW to meet the power requirements of the state of Gujarat and Maharashtra and the Union Territories of Western India through a global competitive tendering process invited bids for supply of natural gas to its proposed plant expansions,” said NTPC to the apex court.

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