M A I N   N E W S

Mukesh wins gas battle against Anil in SC
Court tells Ambanis to renegotiate price
R Sedhuraman
Legal Correspondent

New Delhi, May 7
In a verdict that clearly went in favour of Mukesh Ambani-led Reliance Industries Ltd (RIL), the Supreme Court today ruled that the family agreement between Mukesh and his brother Anil on gas supply and price had no legal value and directed their companies to renegotiate and finalise the price within three months.

A Bench headed by Chief Justice KG Balakrishnan delivered the judgment on petitions filed by the feuding brothers, with Mukesh refusing to sell gas from RIL’s Krishna-Godavari basin (KG-D6) fields off the Andhra coast to Anil’s Reliance Natural Resources Ltd (RNRL) at $2.34 a unit, as agreed under the family MoU, and insisting on the government set rate of $4.20 a unit.

The Bench asked RIL to renegotiate with RNRL within six weeks and finalise the Gas Sales and Master Agreement (GSMA) within eight weeks thereafter. The GSMA would have to be placed before the Company Court for necessary orders.

While renegotiating GSMA terms, both companies were directed to keep in mind that the terms of Production Sharing Contract (PSC) between the government and the RIL had “an over-riding effect”. “The parties cannot violate the government policy in the form of Gas Utilisation Policy (GUP) and national interests. The parties should take into account the MoU. Even though it is not legally binding, it is a commitment that reflects the good interests of both parties.”

Both companies “must restrict negotiations within the conditions of the government policy”.

The apex court made it clear that in a constitutional democracy like that of India, national assets belong to the people. “The government holds such natural resources in trust. Legally, therefore, the government owns such assets for the purposes of developing them in the interests of the people. In the present case, the government owns the gas till it reaches its ultimate consumer.”

Setting aside the Bombay High Court verdict directing RIL to honour the family agreement for the sale of gas to RNRL at $2.34 a unit for 17 years, the apex court said the MoU was signed as a private family arrangement or understanding between the two brothers and their mother Kokilaben.

Nevertheless, cognizance can be taken of the fact the MoU formed the backdrop of the demerger scheme under which the brothers shared the business following the death of their father, Dhirubhai Ambani, and “therefore, contents of the scheme have to be interpreted in the light of the MoU,” the SC ruled. Anil, who was present in the jam-packed court when the verdict was delivered, left the SC premises without responding to reporters’ queries.