SC rules in favour of RIL in gas dispute
07 May 2010
Ending four years of bitter wrangling between the Ambani brothers over the price of natural gas to be supplied by Mukesh's Reliance Industries Ltd to Anil's Reliance Natural Resources Ltd, the Supreme Court today ruled that the government is the legal owner of gas and gets to decide its prices.
The family agreement reached in 2005 is not binding legally or technically, the court said.
The dispute between the estranged brothers was over the price at which RIL is obliged to sell gas from the Krishna Godavari basin, which it operates, to RNRL for its power plants, with the petroleum ministry stepping in to say that gas is a national resource and its price cannot be decided without reference to the government.
"RIL does not have absolute right over the gas and price is subject to government approval. Since the memorandum of understanding (of the Ambani family) has not been made public, it does not fall in the corporate domain. Under the production sharing contract, it is for the government to evaluate the price of fuel," Justice P Sathasivam said, reading out the verdict.
Dissenting verdict
The verdict was not unanimous, however. Justice B Sudershan Reddy gave a verdict in dissention with Sathasivam and in favour of Anil Ambani. But the casting vote of Chief Justice of India K G Balakrsihnan, heading the three-judge bench, was in favour of Mukesh Ambani.
In a family understanding mediated by their mother Kokilaben when the brothers split their business empire in 2005, it was decided that Anil would get gas at $2.34 per unit. But later, the government insisted on a price of $4.2 per unit, which is closer to the international prices of natural gas. Now, the court has declared that the government alone can fix gas prices. It said that the MoU between the brothers cannot supersede the government's decisions or contracts.
