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Sibling rivalry in climax mode

As the battle between the world’s wealthiest brothers, Mukesh Ambani, 52 (worth about Rs 100,000 crore, according to Forbes), and Anil Ambani, 50 (about Rs 50,000 crore), reaches Supreme Court, Anupama Airy dissects the issue.

business Updated: Jul 19, 2009 21:45 IST
Anupama Airy

As the battle between the world’s wealthiest brothers, Mukesh Ambani, 52 (worth about Rs 100,000 crore, according to Forbes), and Anil Ambani, 50 (about Rs 50,000 crore), reaches Supreme Court, Anupama Airy dissects the issue.

What is the source of this dispute?
It’s all to do with gas — a fuel for power companies and feedstock for fertiliser firms — that was discovered by Reliance Industries in the Krishna Godavari (KG) basin in October 2002. This is Asia’s largest discovery and among the world’s biggest, which has put India on the global energy map.

What are the brothers fighting for?
Mukesh’s RIL and Anil’s RNRL are fighting over the terms of a gas-supply agreement inked after the Reliance group was split in August 2005. A year later, RNRL moved court against RIL in November 2006, alleging that RIL has reneged on its commitments.

What is the family agreement?
The complete details of the family settlement — brokered by their mother Kokilaben have not been made public — and only the portion which deals with the gas supply was made available to the Bombay High Court.
As part of the agreement, an MoU was signed where Mukesh promised to give gas to Anil’s forthcoming power project at Dadri in Uttar Pradesh.
It was decided between the two brothers that the distribution of gas produced by RIL from its KG basin D6 gas fields will be such that the first 12 mmscmd (million standard cubic meters of gas per day) of gas will be given to NTPC and the next 28 mmscmd would go to RNRL.
The balance, it was agreed, will be supplied in the ratio of 60:40, with 60 per cent to Mukesh Ambani group and 40 per cent to Anil Ambani group. A gas sales agreement was executed between the two on January 12, 2006.

So, what went wrong?
On April 14, 2006, RIL sought the government’s approval to sell gas at a price of $2.34 per unit to compute the government share of gas. This would also be the price at which gas would be sold to RNRL. However, on July 26, 2006 the government declined. Following this, on November 8, 2006, RNRL moved court.

What is the government stand?
The turning point came in the June 15, 2009 judgement of the Bombay High Court, which directed Mukesh to sell the gas to Anil at $2.34 per unit — against the government directed price of $4.21 per unit for all other customers — within a month. RIL said it couldn’t sell the gas until the court-directed price is approved by the government.
On July 11, 2009, RIL moved the Supreme Court, making the government as one of the parties along with RNRL in this dispute. To which, on July 17, 2009, the government — waking up rather late in this case — lashed out at the two brothers for behaving as if the gas was their “private property” and clarified that Union of India is the owner of the gas and any MoU between the two brothers is not binding on the government. It further added to its argument the next day, saying the MoU should be made “null and void”. And while it also sought to stay the June 15 verdict of the Bombay High Court, RNRL on the same day, filed an affidavit in Supreme Court, saying that the government does not have any role to file pleadings in ongoing gas dispute between RIL and RNRL.

So, what is the status today?
What was being seen as a private fight for gas between two brothers is becoming a three-party contest — the government saying it’s the owner of the gas, and Mukesh and Anil laying stakes on parts of that gas.
The first hearing on the case in the apex court begins today.