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Ambanis in last lap

On Monday, the SC begins hearings on India’s biggest corporate battle — ever. But it’s not just the fortunes of the Ambani brothers that are at stake. Anupama Airy explains. See graphics

business Updated: Oct 18, 2009 21:20 IST

What is the dispute about?

Mukesh Ambani managed Reliance Industries Ltd (RIL) and Anil Ambani’s Reliance Natural Resources Ltd (RNRL) are fighting over the price and quantity of gas produced by RIL from its D6 gas block in the Krishna Godavari basin. While Anil wants the gas to be sold to him at $2.34 (Rs 108) per unit, Mukesh wants to stick to the government-approved price of $4.20 (Rs 200) per unit.

When did the fight begin?

The brothers have been fighting since the family business was split in 2005 following the death of their father Dhirubhai Ambani, India’s best-known entrepreneur who built Reliance from scratch.

Where does the fight stand now?

The legal battle has reached the Supreme Court and the first hearing on the dispute will begin on Tuesday, October 20.

What is the root of the dispute?

In September 2003, when state-owned power utility NTPC floated a global tender seeking 12 million standard cubic meters per day (mmscmd) of gas for 17 years, RIL emerged the lowest bidder and quoted a price of $2.34 per unit. RIL made the bid without obtaining approvals from the government. However, during in the subsequent negotiations with NTPC, the deal got stuck over the terms and conditions of sale of gas by RIL. In December 2005, NTPC approached Bombay High Court to direct RIL to honour its contract. This matter is currently being heard in Bombay High Court.

Where does Anil fit into this dispute?

Before the division of family assets, RIL in January 2004, announced the setting of a power plant at Dadri. Thereafter, a June 2005 family MoU (which divided businesses between Mukesh and Anil) provided for supply of gas by RIL to Anil’s companies at the same price that it was offering to NTPC. That is, $2.34 per unit.

So, where’s the problem?

The government in 2006 rejected $2.34 per unit as the price of gas. It later also rejected the Ambani family MoU on sharing gas and maintained that gas is a national resource and family pacts cannot determine how, where and at what price it should be distributed.

What else does the MoU say?

The MOU was never made public. Only its gas supply portion was made public in the June 15, 2009 Bombay High Court order. This MoU said

The first right for 12 mmscmd gas would be to NTPC. But if it got cancelled, NTPC’s entitlement would go to Anil.

The next 28 mmscmd would go to Anil’s Reliance Energy Ltd (now Reliance Infrastructure). This would be at a price no greater than NTPC’s.

Thereafter, the quantity of gas would be split in the ratio of 60:40 with 60 per cent going to Mukesh and 40 per cent to Anil.

Is there a possibility of an out-of-court settlement?

In an October 11 media statement, Anil offered a peace treaty to Mukesh, saying all disagreements could be sorted out in a “cordial and conciliatory manner” and that there could be “no better gift to my mother in her 75th year”.

While welcoming the overture, Mukesh questioned Anil’s intent behind the offer. “Sadly, the conduct of ADAG so far makes it difficult for RIL to believe that Shri Anil Ambani has had a real change of heart,” an RIL statement said.