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Why not out of court, SC asks...

business Updated: Oct 21, 2009 21:38 IST
HT Correspondent
HT Correspondent
Hindustan Times
Supreme Court

The Supreme Court on Wednesday sought to know from the warring Ambani brothers — Mukesh and Anil — as to why they cannot resort to an out-of-court settlement and reach a suitable arrangement regarding their gas dispute.

“Why don’t you go for arbitration, mediation or a third party intervention to arrive at a suitable arrangement,” asked a bench headed by Chief Justice of India K.G. Balakrishnan during the second day of the hearing of appeals filed by Mukesh-led Reliance Industries Ltd (RIL) and Anil’s Reliance Natural Resources Ltd (RNRL) against the June 15 order of the Bombay High Court.

Upholding the Ambanis’ 2005 family agreement, the High Court had directed RIL and RNRL to enter into a gas supply pact within a month.

The dispute pertains to RNRL’s demand that it be supplied 28 mmscmd (million metric standard cubic metre per day) of gas from RIL’s KG-D6 gas fields at a price of $2.34 (Rs 109) per unit agreed in the family agreement. RIL, however, contends that it cannot do so in view of the government policy, which has fixed the price at $4.20 (Rs 195) per unit.

Observing that the demerger of RIL was on the presumption that there will be supply of gas to RNRL by the RIL, the court said a suitable arrangement had to be reached between the feuding parties, as the Bombay High Court that approved the undivided RIL’s demerger scheme cannot spell out what was an ideal arrangement for them.

Observing that “RIL cannot be itself the decider of suitability” of the gas supply agreement, the bench suggested a third party intervention.

On behalf of RIL, senior counsel Harish Salve said his client considered the government’s gas utilisation and pricing policy as the “suitable arrangement”. He maintained that the 2005 family agreement between the two brothers cannot override the demerger scheme approved by the board of undivided RIL.

Salve also opposed RNRL’s plea for dismissing RIL’s petition, saying only his client’s creditors or members of the board can challenge maintainability of the petition.

“RNRL is not a third party,” the court said. “It was a part of you before demerger.”

“If a contract is entered to sell a bag of grain at Rs 100 and later the government fixes the price at Rs 200, can you
avoid the contract,” the bench observed. “A contract is a contract and has to be honoured. If the government says you (RIL) can sell gas at $2.34 are you ready to sell?”

On behalf of RNRL, senior counsel Ram Jethmalani questioned the maintainability of the Centre’s petition saying it was not a party to the dispute in the high court. He said there was collusion between the RIL and the petroleum ministry.

The allegation was denied by Additional Solicitor General Mohan Parasaran, who said, “we are only concerned with government policy and not the private parties”.