RIL – RNRL GAS DISPUTE

By | August 22, 2008

By SP Tulsian

Reliance Industries Ltd. (RIL) K. G. Basin gas supply dispute with Reliance Natural Resources Ltd. (RNRL) being heard by a Division Bench in Bombay High Court, took a new turn, when one of the judge on the Bench, Justice Mr. J. N. Patel, asked, why the brothers in dispute could not approach their mother Mrs. Kokilaben Ambani to settle dispute, as the dispute over gas supply between the two corporate entities is one that might affect the economy.

In reply to this, Mr. Ram Jethamalani, counsel for RNRL said, Mr. Anil Ambani was ready to meet his elder brother “any time any place” in reply to which counsel for Mukesh Ambani controlled RIL, Mr. Milind Sathe, said the request would be conveyed to his client and that he would have to revert on the matter.

In a similar effort, Justice A V Mohta, while passing its 151 page order on 15th October 07, had asked RIL and RNRL to renegotiate the gas supply pact, as earlier agreement of 12th January 2006, which is being disputed now by RNRL in the court, being prejudicial to its interest and referred as Gas Supply Master Agreement (GSMA), was against the Ambani Family Settlement. Justice Mohta gave both parties, four months to renegotiate the deal and restrained RIL to enter into gas supply deal with a third party, till the period is over. Justice Mohta, also upheld the validity of the Ambani Family Settlement, that divided the Reliance Group between both the brothers.

However, both the brothers were unable to reach on any settlement and the matter came again to Bombay High Court in the middle of February 2008, for hearing and final settlement.

In last 15 days, lawyers of both the sides have argued the matter and RIL counsel has referred the family settlement of 18th June 2005 as a “ghost agreement” which is not binding on RIL. However, RNRL counsel has relied on “Doctrine of Identification” and said that if Mukesh Ambani knows the agreement, the entire company knows about it and this principle is well recognized by the Indian Courts as well. He even said that Mukesh Ambani should be criminally prosecuted for breach of trust and forgery and RIL should be asked to fork out $ 17 billion in cash, if it fails to honour its commitment to supply gas to RNRL. He has also agreed that RNRL would not be trading in gas, if it is received from RIL, inspite of their Dadri Power Plant is not ready for operations. Trading in gas was otherwise also prohibited in the settlement.

Strangely, the stand of RNRL seems to have softened on 21st August, in Bombay High Court where they have seen taking varying and contradictory stands in the matter. Firstly, RNRL asked that they should be permitted to trade in gas for three years and after that it can be used for its own power plants. Secondly, they said, Anil Ambani is prepared to sit alone with Mukesh Ambani and with Kokilaben Ambani alongwith Industry Experts or Judiciary to settle the matter. Thirdly, they have also stated that they are prepared to share the cost of gas exploration with RIL. Fourthly, they said that they could not get ready with its plants for lack of bankable gas sales purchase agreement with RIL. Lastly, the counsel of RNRL also objected strongly to the stand of government counsel that RIL – NTPC is not having a concluded agreement and said that government is taking side of RIL, instead of PSU NTPC. This is inspite of the fact that, RNRL is supposed to get 12 mmscmd of additional gas from RIL, if RIL – NTPC contract falls.

In the recent political development, it was felt that ADAG would be having an advantage in getting various matters settled in its favour. However, failure to join with MTN by R-Com has been seen as a big defeat of ADAG and now it is said that Samajwadi Party, which was perceived to be close to ADAG is not showing much eagerness to favour ADAG by displeasing the RIL group. This has probably lead to a change in stance of RNRL in the court, inspite of the fact that single judge bench has upheld the family settlement and has also restrained RIL from entering into third party gas supply agreements.

One may also conclude that the judgement of the Ambani’s mother seems to carry more weight than the judiciary and even the judiciary has to knock the door of motherhood to get a judgement in the matter for which they are unable to decide.

With the gas production expected from K G Basin by October 08, it has become utmost essential to settle the matter in the larger interests of the country including fertiliser and power plants and millions of households those who would be using the K G Basin Gas. Even, this would bring down our dependency on imported crude and gas and would improve our self-reliance on gas production. To remind, K G Basin is capable to produce equivalent quantity of gas now being produced in the entire country, which is about 90 mmscmd.

Matter has now been adjourned to 1st September by Bombay High Court but it looks difficult that by that time, both the brothers would have been to amicably settle this dispute. Maybe, intervention of mother and miracle of spiritual guru, who had earlier helped in settling matters, may help yet again this time.

But one may say that RNRL seems to be losing its legal grip on the matter, which is now going more in favour of RIL.

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