The most significant aspect of the recent Bombay High Court ruling on the sharing of gas from the KG basin between RIL and Reliance Natural Resources Ltd (RNRL) is that the judges completely refrained from making any value judgement on the government’s formal claim before the court that “the Appellant and Respondent cannot settle between themselves how gas, which is a national asset, to be utilised for the welfare of the nation, is to be distributed...”
The high court merely examined the legal validity of the memorandum of understanding (MoU) between Mukesh Ambani and Anil Ambani on how gas from the KG basin is to be shared between RIL and RNRL as per the family settlement. It could be argued that the court’s mandate was limited to examining the MoU arising from the family settlement after the group assets were allocated to the two brothers under their mother’s guidance.
However, common sense would tell anyone that the bigger question which perhaps the court deliberately did not go into was one of whether a national and sovereign resource can be a subject of a commercial agreement between two private parties.
If one were to resort to some exaggeration, it is a bit like two men deciding to share the ownership of Taj Mahal in Agra and then they go to court to determine the validity of the price at which parts of the Taj will be sold by one to another!
Now, even if the high court did not go into the paramount question of whether the Ambani brothers have the unmitigated right, through a private agreement, to share a substantial portion of gas from the Krishna-Godavari basin, the government will soon have to publicly take a call on this aspect of the controversy. This has serious implications for the credibility of the UPA government. The President’s address to Parliament has clearly outlined strong governance as a major plank on which the UPA promises to run this country for the next five years.
How the government, through a strong and credible policy and regulatory framework, deals with national resources such as gas, spectrum, iron ore, coal, etc., is something the people of this country will watch carefully.
Coming back to the KG basin gas controversy, it is useful to recall what the government has formally stated before the Bombay High Court. The court order records all the claims made by the government.
In respect of the gas from the KG basin, the government has said: “It is not the property of the Appellant or Respondent and any understanding arrived at between them is not binding on the government of India. The gas has to be distributed in terms of the EgoM approved gas utilisation policy.”
Summing up the government’s stand in the court, the additional solicitor general stated in no uncertain terms that:
a) The government of India continues to be the owner of the gas till the delivery point;
b) The gas is to be produced and utilised in terms of the gas utilisation policy;
c) The government has a dominant role in the matter of approval of gas prices; and
d) By private negotiations, no party can decide how the natural resources which are national assets are to be dealt with.
Since none of these strong assertions by the government was treated by the Bombay High Court as relevant to the dispute between RIL and RNRL, the UPA government will be left with no choice but to assert its sovereign claim over the gas resources in the KG basin. Clearly, the high court chose not to go into the more difficult question of whether the RIL and RNRL had the unmitigated right, through a private agreement, to share gas from the KG basin in a 60:40 ratio at all.
Getting into the nitty-gritty of various agreements and their contestation in the court of law would be missing the wood for the trees. The real issue, and a legal-constitutional one at that, is — Can the government afford to compromise its publicly declared stand that private parties cannot settle among themselves the basic rights over a sovereign asset?
The whole commercial dispute over the sharing of Krishna Godavari gas is clearly assuming a new dimension. In his own typically muted manner, Union petroleum minister Murli Deora has said the government will fully defend its rights over national assets. The government is currently watching how the one-month period given by the courts to RIL and RNRL to arrive at a compromise over the pricing of gas unfolds. As one said earlier, the issue has now gone beyond pricing and other legal-technical issues.
The state may have to challenge the very basis of an MoU which cosily divides up large portions of national property among two entities. The government has already made its stand very clear in the high court. This stand will have to be reiterated even more strongly in the Supreme Court, as and when an appeal is made there. An ordinance can always be the last resort.
Source:ET
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The high court merely examined the legal validity of the memorandum of understanding (MoU) between Mukesh Ambani and Anil Ambani on how gas from the KG basin is to be shared between RIL and RNRL as per the family settlement. It could be argued that the court’s mandate was limited to examining the MoU arising from the family settlement after the group assets were allocated to the two brothers under their mother’s guidance.
However, common sense would tell anyone that the bigger question which perhaps the court deliberately did not go into was one of whether a national and sovereign resource can be a subject of a commercial agreement between two private parties.
If one were to resort to some exaggeration, it is a bit like two men deciding to share the ownership of Taj Mahal in Agra and then they go to court to determine the validity of the price at which parts of the Taj will be sold by one to another!
Now, even if the high court did not go into the paramount question of whether the Ambani brothers have the unmitigated right, through a private agreement, to share a substantial portion of gas from the Krishna-Godavari basin, the government will soon have to publicly take a call on this aspect of the controversy. This has serious implications for the credibility of the UPA government. The President’s address to Parliament has clearly outlined strong governance as a major plank on which the UPA promises to run this country for the next five years.
How the government, through a strong and credible policy and regulatory framework, deals with national resources such as gas, spectrum, iron ore, coal, etc., is something the people of this country will watch carefully.
Coming back to the KG basin gas controversy, it is useful to recall what the government has formally stated before the Bombay High Court. The court order records all the claims made by the government.
In respect of the gas from the KG basin, the government has said: “It is not the property of the Appellant or Respondent and any understanding arrived at between them is not binding on the government of India. The gas has to be distributed in terms of the EgoM approved gas utilisation policy.”
Summing up the government’s stand in the court, the additional solicitor general stated in no uncertain terms that:
a) The government of India continues to be the owner of the gas till the delivery point;
b) The gas is to be produced and utilised in terms of the gas utilisation policy;
c) The government has a dominant role in the matter of approval of gas prices; and
d) By private negotiations, no party can decide how the natural resources which are national assets are to be dealt with.
Since none of these strong assertions by the government was treated by the Bombay High Court as relevant to the dispute between RIL and RNRL, the UPA government will be left with no choice but to assert its sovereign claim over the gas resources in the KG basin. Clearly, the high court chose not to go into the more difficult question of whether the RIL and RNRL had the unmitigated right, through a private agreement, to share gas from the KG basin in a 60:40 ratio at all.
Getting into the nitty-gritty of various agreements and their contestation in the court of law would be missing the wood for the trees. The real issue, and a legal-constitutional one at that, is — Can the government afford to compromise its publicly declared stand that private parties cannot settle among themselves the basic rights over a sovereign asset?
The whole commercial dispute over the sharing of Krishna Godavari gas is clearly assuming a new dimension. In his own typically muted manner, Union petroleum minister Murli Deora has said the government will fully defend its rights over national assets. The government is currently watching how the one-month period given by the courts to RIL and RNRL to arrive at a compromise over the pricing of gas unfolds. As one said earlier, the issue has now gone beyond pricing and other legal-technical issues.
The state may have to challenge the very basis of an MoU which cosily divides up large portions of national property among two entities. The government has already made its stand very clear in the high court. This stand will have to be reiterated even more strongly in the Supreme Court, as and when an appeal is made there. An ordinance can always be the last resort.
Source:ET
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