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THE high stakes and increasingly Byzantine legal battle between the estranged Ambani brothers over the supply of natural gas from Reliance Industries’ Krishna-Godavari (KG) basin to Reliance Natural Resources (RNRL) reached the Supreme Court when the latter filed a special leave petition (SLP) in the apex court. The case is expected to come up for hearing when the court reopens after the summer vacation.

   The government, which has claimed ownership of the natural gas assets, is also likely to become a party to the case to protect its interest. Its stand is likely to be crucial to the eventual outcome. The petroleum ministry has signalled that it is closer to the RIL position.

   RNRL, owned by Anil Ambani, was first off the block by filing an SLP in the Supreme Court, requesting speedy implementation of the Bombay High Court order issued on June 15. RIL, owned by elder brother Mukesh, immediately responded by filing a caveat in the apex court to preclude the chances of an ex-parte order (an order passed after hearing one side).

   RNRL counsel Mukul Rohatgi said, “RIL is reluctant to sign the gas deal with us despite the Bombay High Court order asking it to do so. We have moved the apex court to protect the interests of over two million shareholders of RNRL.”  

   The RNRL move came as something of a surprise because it was RIL, which had come off second-best in the proceedings before the Bombay HC that was expected to approach the apex court. RIL had, earlier said it would move the Supreme Court against the HC ruling, which essentially upheld the main contentions of RNRL.

   The turn of events means that both parties are moving the Supreme Court in appeal against the high court order though the grounds are entirely different. RNRL is seeking an amendment to the HC order to ensure that RIL signs an agreement with it. The high court has asked both companies to enter into negotiations and sign a final agreement but RNRL says RIL is refusing to talk. It wants the SC to direct RIL to reach a bankable agreement. RIL, on the other hand, will surely challenge the substance of the order. It claims that it has “been left with little freedom to either sell or price its gas”.

Exchange of letters:

   THE high court had asked both the Ambani group firms, RIL and RNRL, to reach a ‘suitable arrangement’ in a month’s time in line with the June 18, 2005, family agreement between the brothers. The family pact requires RIL to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years at a price of $2.34 per mBtu to fuel the proposed 7,400 mw Dadri power project in Uttar Pradesh, enough to light the cities of Delhi and Mumbai.

   While RIL hasn’t yet filed an SLP, it is likely to argue that it cannot be compelled to sign an agreement with RNRL in line with the family agreement in the absence of permission from the government. Sources close to RIL said the scheme of demerger arising out of the family settlement was always subject to government approval. Since the Bombay High Court judgement, the two companies have been embroiled in a bizarre exchange of letters and emails. RNRL wrote several letters to RIL requesting a meeting to conclude the long-pending gas deal. However, RIL has stuck to its stand that it cannot sign unless the government approves. It also expressed it’s intention to move the Supreme Court against the Bombay High Court order. “RIL continued to adopt a completely obstructionist position and conveyed its reluctance to sign an agreement as per the court order. The HC order fully protects the economic interests of the government. The judgement of the high court does not impinge, in any manner, upon the rights and entitlement of the government under the production sharing contract (PSC),” said the RNRL media statement.

   This is the second time both the Ambani camps have failed to reach an agreement in the gas deal. Earlier, the single judge bench of justice Anoop Mohta had upheld the ‘family agreement’ in October 2007 and had asked both the firms to renegotiate the terms of the agreement as per the family memorandum of understanding (MoU). Not able to do so, both parties moved the division bench of the Bombay High Court comprising justice JN Patel and Justice KK Tated. The division bench also upheld the family agreement and asked both the groups to sign the gas deal in a month in line with the MoU. The Supreme Court will now have to decide whether RNRL has a valid contract that RIL is obliged to implement. According to senior petroleum ministry officials, the KG basin gas reserve is a ‘national asset’ and cannot be part of a ‘family arrangement’ or business demerger. The dispute started after the death of Reliance founder Dhirubhai Ambani in 2002. The Reliance empire was divided among the Ambani brothers in 2005 by Kokilaben Ambani, the mother of Mukesh and Anil.

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