SC seeks explanation on Reliance gas deal

SC seeks explanation on Reliance gas deal
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First Published: Mon, Jul 20 2009. 06 16 PM IST
Updated: Mon, Jul 20 2009. 06 16 PM IST
New Delhi: The Supreme Court on Monday asked Reliance Industries and Reliance Natural Resources to explain why a gas supply deal between the two should not be cancelled and cleared the way for the government to be a party in the court battle, lawyers for both sides said.
Shares in Reliance Industries, which challenged a lower court ruling to supply gas to Reliance Natural at below-market price, were 4.3% higher amid a broad market rally on Monday, while Reliance Natural shares were down by 3%.
The court set a 1 September date for the next hearing in the nearly three-year battle, which has raised questions over the role of powerful business families in India’s economy.
Top Indian conglomerate Reliance Industries (RIL), headed by Mukesh Ambani, and Reliance Natural (RNRL), led by estranged brother Anil, have been fighting over terms of a gas-supply agreement struck when the Reliance empire was split in 2005.
The Indian government made a petition over the weekend to intervene in the case, arguing that the gas is its property and that the private pact between the Ambanis over the gas is not valid.
The court on Monday set the stage for the government to participate in the court proceeding, which is what Reliance Industries had sought.
“That’s water under the bridge. The government is already there. We have been asking for that,” said Harish Salve, a lawyer for Reliance Industries.
The Bombay High Court ruled last month that Reliance Industries should supply gas to Reliance Natural at $2.34 per million metric British thermal unit (mmBtu) — nearly half the $4.20 price in an interim court order in January.
Maulik Patel, head of research at K.R. Choksey Shares & Securities, said nothing fundamental in the dispute had changed.
If the court voids the agreement between the parties, which had been approved by the high court, it will be good for Reliance Industries but quite negative for Reliance Natural.
“The likely scenario could be the government may fix $4.2 per mBtu as the price for supply, and then allow Reliance Natural to further sell it to fertiliser and power companies,” he said.
Next hearng on 1 September
The Supreme Court on Monday said it would club all petitions and applications in the case together, according to Ram Jethmalani, a lawyer for Reliance Natural.
“The court said it wants to hear the case with three judges so it set 1 September as the next date. There were no observations, no directions,” Jethmalani said after the hearing.
The gas in dispute comes from the vast Krishna Godavari basin, and the feud had led to calls for the government to intervene given the importance of the resource to India’s energy-starved economy.
Mukesh Ambani, 52, was ranked 7th by Forbes in its list of global billionaires in March, with a net worth of $19.5 billion. Anil, 50, was at No. 34 on the list, with a net worth of $10.1 billion.
The two brothers have battled before. Reliance Industries last year cited a first right of refusal clause to sink a bid by Anil Ambani’s Reliance Communications for a merger with South Africa’s MTN.
The details of the family settlement, which was brokered by the Ambanis’ mother, Kokilaben, have not been made public, and at least a dozen issues still need resolution, analysts say, ranging from properties to shares in companies.
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First Published: Mon, Jul 20 2009. 06 16 PM IST
More Topics: Supreme Court | Reliance | RIL | RNRL | Mukesh Ambani |