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SC explores compromise in gas spat

SC explores compromise in gas spat
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First Published: Wed, Oct 21 2009. 11 30 PM IST

Updated: Wed, Oct 21 2009. 11 30 PM IST
New Delhi: The Supreme Court introduced a new dimension in the ongoing gas dispute between the estranged Ambani brothers by exploring the option of a compromise.
“Why don’t the two companies go in for arbitration, mediation or a third-party intervention?” justice R.V. Raveendran asked the lawyers of the two companies involved, referring to a similar course suggested by the Bombay high court when the case was before it. “Somebody has to decide what is a suitable arrangement.”
If indeed this happens, then the settlement would be pursued by more informal means, which could give both sides flexibility as well as hasten the end of the four-year-old dispute. However, neither side responded to the court’s query, which was posed on the second day of the hearing of the dispute.
On Tuesday, the three-member bench headed by Chief Justice K.G. Balakrishnan started hearing the case between Mukesh Ambani’s Reliance Industries Ltd (RIL) and Anil Ambani’s Reliance Natural Resources Ltd (RNRL) over the supply of gas from former’s D6 block in the Krishna-Godavari (KG) basin.
RIL and RNRL had approached the Supreme Court against the verdict of the Bombay high court on 15 June, which had asked RIL and RNRL to sign a “suitable arrangement” for the supply of gas. RIL is appealing the judgement while RNRL wants it expedited.
In a related development, finance minister Pranab Mukherjee in a response to a question regarding whether he saw the dispute being resolved out of court told PTI: “I do not know what would happen because they (the business empires of the two Ambanis) are too big. They have substantial influence over the Indian market, therefore, it is better that they sort out among themselves amicably. But, after all, it is for them to decide.”
This is the second time that the judiciary has suggested an alternative recourse to settle the dispute.
As part of its judgement, the Bombay high court had also asked the two warring brothers to turn to their mother for arbitration. Kokilaben Ambani had played a significant role in hammering out a family settlement dividing assets between the two brothers in 2005.
Harish Salve, RIL’s counsel, skirted the issue and said, “We consider the government gas utilization policy and the government pricing policy to be the suitable arrangement. We do not accept the MoU.” The memorandum of understanding (MoU) refers to the family settlement.
RNRL’s counsel did not reply to Raveendran’s query.
RIL has introduced fresh evidence that seeks to widen the scope of the legal battle by striking at the very basis of RNRL’s claims that it needs an assured supply of gas for its proposed power projects and also questions, citing minutes of two board meetings of RIL that were not considered in the Bombay high court order, the validity of the MoU between the two brothers ahead of the demerger.
Salve reiterated that the MoU is a family settlement between the two promoters—Mukesh and Anil Ambani—and does not involve the creditors or the shareholders of the companies involved.
While RNRL has sought the apex court’s intervention in a special leave petition for immediate supply of 28 million standard cu. m a day of gas from KG D6 at $2.34 (Rs108.58) per million British thermal unit for a period of 17 years, RIL, in its affidavit, has opposed this, saying the price is 44% lower than that mandated by the government and that it cannot supply gas at a price not approved by the government and to a user not listed in its gas utilization policy.
A spokesperson of the Reliance-Anil Dhirubhai Ambani Group, of which RNRL is a part, and an external spokesperson of RIL had not responded to Mint’s request for comment till late Wednesday evening.
The apex court’s judgement is eagerly awaited as it will affect the fortunes of several fertilizer and power companies that have been allotted gas from KG D6 in keeping with the gas utilization policy. And it could set a precedent on the interpretation of production-sharing contracts between the government, the owner of all natural resources in the country, and the operator, the company or consortium given permission to tap that resource.
Analysts weren’t impressed by the court’s idea.
Maulik Patel, head (research) at Mumbai-based brokerage KR Choksey Shares and Securities Pvt. Ltd, said, “This (arbitration) will only lead to delays in the court case. Several rounds of negotiations and efforts to reach an out-of-court settlement have already been made that led to nothing.”
Shares of RIL and RNRL fell by 0.06% and 1.37%, respectively, on the Bombay Stock Exchange on Wednesday to close at Rs2,182.45 and Rs86.70, respectively. The bourse’s benchmark index fell by 1.24% to close at 17,009.17.
manish.r@livemint.com
Bhuma Shrivastava in Mumbai and PTI contributed to this story.
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First Published: Wed, Oct 21 2009. 11 30 PM IST