New Delhi / Mumbai: The Reliance-Anil Dhirubhai Ambani Group received a setback on Friday when the Allahabad high court struck down a February 2004 notification of the Uttar Pradesh government led by Mulayam Singh Yadav that used special powers to acquire 2,500 acres from farmers for the proposed 7,480MW Dadri power project in Ghaziabad district.
The court’s ruling likely weakens Anil Ambani’s hand in his bitter legal battle with estranged brother Mukesh Ambani and also raises fundamental questions about the right of state governments to use special powers to take over land for industrial projects.
The Dadri power project needs natural gas as feedstock and the two Ambani brothers are locked in a dispute over the price at which the Mukesh Ambani-controlled Reliance Industries Ltd (RIL) is to sell gas from its fields in the Krishna-Godavari basin to the Anil Ambani-controlled company Reliance Natural Resources Ltd (RNRL), which in turn is to supply gas to the Dadri project being built by group company Reliance Power Ltd (RPL). Anil Ambani has used the provisions of a secret family agreement to argue that his companies have the right to buy this gas from RIL at a 40% discount to the price most other gas buyers will pay.
The Allahabad court judgement undermines the basis of the legal challenge in the Supreme Court, said a Mumbai-based sector analyst with a domestic brokerage, who did not want to be identified.
An Allahabad high court division bench of justices Ashok Bhushan and Sudhir Agarwal on Friday quashed the Uttar Pradesh government notification of 11 February 2004 made by the Samajwadi Party government, which had inserted a special clause according to which RNRL could acquire the 2,500 acres without any public enquiry. As per the special clause contained in section 17 of the Land Acquisition Act, the state government can do so.
The court has now directed the district collector of Ghaziabad to make a detailed enquiry into farmers’ grievances. Samajwadi Party leader Amar Singh is considered close to Anil Ambani.
Hearing the petition filed in 2008 on behalf of the aggrieved farmers, the court has allowed farmers to file their objections and recover the land taken away through the notification.
K.T.S. Tulsi, counsel for the farmers, hailed the high court judgement and said, “The high court has avoided a Singur-type situation and reaffirmed the legal stand that fertile agricultural land cannot be used for industrial purposes until a proper enquiry has been done by the collector that no other alternate land is available for setting up the industry.”
Tata Motors Ltd took a decision last year to shelve its small car project in Singur because of protests by local farmers led by the Trinamool Congress, West Bengal’s main Opposition party, denting the image of the Communist-ruled state.
“Those farmers who had taken compensation can give it back and reclaim their land. The court ruling has also quashed the ‘urgency’ clause that the state government had been wrongly invoked,” said Rajiv Tyagi, convenor for Sahyog Society, a Ghaziabad-based protest group that opposed the land acquisition.
While an email to an RIL external spokesperson seeking comments on whether they see any impact of this verdict on the company’s ongoing case in the Supreme Court remained unanswered at the time of filing the story, RPL’s chief executive J.P. Chalasani told reporters in a conference call late on Friday afternoon that while the company was “still reviewing the judgment, it is clear that land acquisition for the Dadri project has not been set aside and notification under section 4 in relation to acquisition of land has, in fact, been upheld”.
Chalasani did not say if the company was considering appealing against the verdict, but added that he found it “surprising and shocking that our corporate rivals are, as usual, distorting the scope and effect” of the high court judgment, spreading “malicious and false information”.
However, Tyagi in an emailed statement said that the court “has not only clearly quashed this action pertaining to section 17, but also extended their decisions onto all the other notifications which proceeded thereafter, which can only be interpreted as setting aside of the entire illegal land acquisition process, which was done in the past”.
Some lawyers heralded the Allahabad court judgement as “a trendsetting judgement”.
“...it would deter the state government to acquire land for public purpose when there exists none. There is a difference between public interest and interest of public companies as public companies may not always serve public interest. By virtue of this judgement, the state governments would be compelled to make a judicious use of special clause (section 17) of Land Acquisition Act,” said Hitendra Mehta, partner at law firm Vaish Associates Advocates.
While Chalasani maintained that RPL, which is building the world’s largest gas-based power plant at a single location and spending over Rs25,000 crore, had “in place all approvals and clearances required for the project” and was committed to implementing it, the same Mumbai-based sector analyst with a domestic brokerage stated the Friday ruling was “a clear negative for RNRL” since it puts the land entitlement of Dadri under a cloud.
RPL’s shares fell 2.94% to close at Rs150.15 apiece on Friday on the Bombay Stock Exchange while RNRL’s shares closed nearly flat, increasing 0.41% to Rs72.85. The exchange’s benchmark stock index, the Sensex, closed 0.49% lower at 17,101.54 points.