Big win for Big Brother, Anil eyes new deal
The look on Anil Ambani’s face told the story, as he left Supreme Court, and rushed past an army of journalists waiting outside for a comment. He had just lost corporate India’s biggest legal dispute to his brother Mukesh, reports Satya Prakash.Raging row over price of gas| See Special |Listen to podcast | No gassing around | One empire, one brother, three wise menbusiness Updated: May 08, 2010 02:45 IST
The look on Anil Ambani’s face told the story, as he left Court No. 1 of the Supreme Court, and rushed past an army of journalists waiting outside for a comment. He had just lost corporate India’s biggest legal dispute to his brother Mukesh, who chose to watch the proceedings from his Maker Chambers office in Mumbai.
Minutes earlier, a three-judge bench headed by Chief Justice of India K.G. Balakrishnan rejected his plea for cheap gas from Krishna-Godavari-D6 fields where Mukesh’s RIL has the contract to extract gas.
By conferring ownership of the gas to the government, the court effectively fixed the price of gas in favour of Mukesh at $4.20 (Rs 190) per unit, 80 per cent higher than Anil’s demand of $2.34 (Rs 106) per unit.
“In a constitutional democracy like ours, national assets belong to the people,” the judgment noted. “The government holds such natural resources in trust. Legally, therefore, the government owns such assets for the purposes of developing them in the interests of the people. In the present case, the government owns the gas till it reaches its ultimate consumer.”
It also said the Ambani family memorandum of understanding (MoU) — the cornerstone of Anil’s arguments — that seeks to divide gas between group firms of the two brothers was not binding. “The MoU was signed as a private family arrangement between two brothers, Mukesh and Anil, and their mother (Kokilaben),” Justice Sathasivam said. “MoU does not fall under the corporate domain. It was neither approved by shareholders nor it was attached to the scheme (of demerger of Reliance). Therefore, technically, the MoU is not legally binding.”
It asked RIL and Anil’s RNRL (Reliance Natural Resources Ltd) to sit together within six weeks and renegotiate a gas supply agreement in conformity with the government policy and go to the company court in the Bombay High Court within eight weeks.
In separate statements, Anil and RIL said they were ready for the renegotiations.
Gracious in his defeat, Anil, who lost about Rs 6,000 crore of wealth on the stockmarkets on Friday, walked across to Mukesh’s lawyer Harish Salve and shook his hand soon after the order was read — two orders actually, read by two judges — in a courtroom packed with furiously-writing journalists and black-robed lawyers, and drove away in a champagne-coloured Volkswagen Passat.
“RNRL looks forward to an expeditious and successful renegotiations with RIL within the stipulated period of six weeks to secure gas supply for the Group’s power plants in line with the SC order,” Anil told reporters at 2.50 pm in a conference call.
“RIL would renegotiate the gas supply master agreement (GSMA) in line with the government policy,” RIL Executive Director P.M.S. Prasad said. “The price will have to be $4.20 (Rs 190) per unit.”
He also said the company would not be able to give gas for 17 years as demanded because the life of the field was 11 years. “I welcome the SC’s judgement upholding the government’s stand,” petroleum minister Murli Deora told reporters.
The judgement had legislative advice embedded in it.
“We consider it appropriate to observe and remind the GoI that it is high time it frames a comprehensive policy/suitable legislation with regard to energy security of India and supply of natural gas under production sharing contracts,” Justice Reddy said.
Anil Ambani eyes all-new deal
Anil Ambani plans to talk across the table, not get into another courtroom wrangle.
The younger Ambani said on Friday that he has no plans to seek a review of the Supreme Court verdict that rejected his call for cheap gas to his group firm Reliance Natural Resources Limited (RNRL) from Reliance Industries Ltd (RIL) led by his estranged brother Mukesh Ambani.
He maintained that he was looking forward to successful re-negotiation with RIL over the next six weeks as directed by the court.
In the dispute in which RNRL had sought gas at a discounted price of $2.34 per unit for gas from RIL’s Krishna-Godavari fields as against the government approved price of $4.20 per unit, the Supreme Court said the government has the last word on pricing and usage.
Anil, who had accused his brother of corporate greed and the petroleum ministry of playing favourites with brother Mukesh, said,” We respect the judgment of the Supreme Court and note that the court has safeguarded the interests of over 2.5 million RNRL shareholders by giving the guidelines for an expeditious finalisation of the gas supply agreement between RIL and RNRL.”
While most interpreted the judgment as the one favouring Mukesh Ambani, Anil maintained that the Supreme Court, by a majority judgment, had upheld RNRL’s position.
“The Supreme Court has upheld the petition filed by RNRL as maintainable and has upheld the powers of the court to modify the scheme and to make it workable.”
Ambani said that the apex court has also acknowledged that the June 18, 2005 MoU (within the Ambani family) was the basis for the business reorganisation of RIL.
"The court has also directed that suitable arrangements for gas supply should not only be suitable to RIL but also the shareholders of RNRL, whose interests have to be fully protected," he said.
RNRL is seeking 28 mmscmd of gas from RIL's KG-D6 fields for group firm Reliance Power's proposed power plant at Dadri in Uttar Pradesh.