Court asks Ambanis to frame new gas accord

Mumbai, June 16: The Bombay High Court ordered that Reliance Industries honour a 2005 family agreement to supply 28 million cubic meters per day of gas from its Krishna-Godavari basin fields at USD 2.34 per mmBtu for 17 years to Reliance Natural Resources Ltd.

The final price would reduce the outgo for Anil’s group firm by about 11.8 billion dollars during the period of the contract. As per USD 2.34 mBtu, the outgo for 17 years would work out to 14.79 billion dollars compared to 26.55 billion dollars on the basis of government-approved USD 4.2 mmBtu.

RNRL counsel Mahesh Jethmalani claimed victory. “Prima facie it looks like we have won.” By this order, RNRL will have to pay USD 870.26 million for 28 mmcmd gas a year against USD 1.56 billion claimed by RIL.

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The supply of gas has become a bone of contention between the brothers who had signed a family settlement agreemnet in June 2005 over the division of Reliance empire. But the fight continued inside and outside the court on various issues.

RIL counsel Milind Sathe said he could not comment till full judgement was available, but he added that filing appeal in Supreme Court was one of the options.

Delivering the judgement in the long-pending and fiercely fought dispute between the two brothers, the division bench asked the two parties to arrive at the new agreement within a month on the basis of memorandum of understanding between them prior to their split in 2005.

The court has said that “parties should enter into a suitable arrangement on the basis of quantity, tenure and price as specified under the MoU either by renegotiating the terms…or reverting back to Smt Kokilaben Dhirubhai Ambani who has reserved her ability to intervene again if parties fail to act upon the MoU”.

If new agreement could not be worked out, aggrieved party can move the Company Court “for modification of the scheme of (Reliance) demerger”, the court has said.

As per the MoU, RIL is to supply 28 MMSCMD of gas to RNRL for power generation for 17 years at USD 2.34 per MMBtu.

RNRL had moved the court alleging that the master gas supply agreement was signed when the concerned companies were under the ownership of Mukesh Ambani group and was contrary to the family settlement that was mediated by mother Kokilaben.

The court also specified that until new agreement was in place, interim order which allowed RIL to sell gas as per government’s priority list would continue.

RIL sells about 15 mmcmd gas to power plants and 13 mmcmd to fertilizer plants identified by the government at USD 4.20 per mmBtu.

Price of the gas was the most contentious issue between RIL and RNRL. RIL’s lawyer Harish Salve had argued that his client cannot sell gas for less than USD 4.20 per MMBtu, which was government-approved price.