RIL-RNRL case: SC rules in favour of RIL

The Supreme Court on Friday rejected division of gas under the Ambani family MoU and said that it was government's right to decide the price and utilisation of the fuel, which is a national asset. 

Delivering the majority verdict of the bench headed by Chief Justice K G Balakrishnan on the four-year gas dispute between RIL and RNRL, Justice P Sathasivam said the Production Sharing Contract over-rides all other agreements. 

The family agreement -- signed among brothers Mukesh and Anil Ambani and their mother Kokilaben -- was not legally and technically binding. 

The court held that all the parties are bound by government policy and RIL does not become owner of the gas. 

This implies that RNRL, which was seeking 28 mmscmd of gas from RIL's KG-D6 fields at a price agreed in the family MoU, would not get the fuel. 

The family MoU provided for a price of $2.34 per mmBtu, while the government had set a price of $4.20 per mmBtu. 

RIL does not have absolute marketing right over gas and that price was subject to government approval, the Bench said, adding that the family MoU was not legally binding. 

It said the terms of production sharing contract will have over-riding effect, and directed RIL to start renegotiation with RNRL in six weeks to safeguard the interests of the Anil Ambani group firm's shareholders. 

Shares of Reliance Industries surged while shares of Anil Ambani owned ADAG group tanked after the Supreme Court announced its verdict in the favour of Reliance Industries. 

The dispute was over the supply of 28 million units of natural gas for 17 years at $2.34 per unit to Reliance Natural Resources from the Krishna-Godavari natural gas fields, off the Andhra Pradesh coast, awarded for exploration and harnessing to Reliance Industries. 

The price, tenure and quantity were all based on a family re-organisation pact in 2005 but Reliance Industries subsequently said it could only sell the gas for $4.20 per unit, as this was the price, the company claimed, that was fixed by the government. 

The dispute was first heard in the Bombay High Court that gave its verdict in favour of Reliance Natural Resources. But this was subsequently challenged in the apex court by the Mukesh Ambani-led firm.

Source: Economic Times

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