Sucheta Dalal :Government wants Ambani pact declared 'null' & 'void'
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » What's New » Government wants Ambani pact declared 'null' & 'void'
                       Previous           Next

Government wants Ambani pact declared 'null' & 'void'  

July 18, 2009

The Indian government Saturday filed a petition before the Supreme Court seeking a direction to declare as "null and void" the private family agreement of the Ambanis that provides for gas supply by Reliance Industries Ltd (RIL) to Reliance Natural Resource Ltd (RNRL), reports PTI.

The government petition has named as respondents RIL led by Mukesh Ambani and RNRL headed by Anil Ambani which have separately filed cross-petitions against the Bombay High Court's 15th June judgement.

The Special Leave Petition (SLP) was filed by the Petroleum Ministry, a day after it filed an affidavit in response to Mukesh-led RIL's petition in the Supreme Court challenging the High Court order.

Just before the government moved its petition, RNRL filed its second affidavit saying the Petroleum Ministry's affidavit yesterday was aimed at expanding its role and file pleadings that was not permissible to an intervener.

The Petroleum Ministry's SLP today comes in the backdrop of a debate about the role the government could play as intervener or a respondent in the ongoing RIL-RNRL case and the latest move would enable the government to take up issues that have not been touched in the High Court ruling.

Petroleum Ministry also sought a stay on the High Court judgement that asked RIL to supply gas to RNRL after mutually working out the modalities.

Besides asking for setting aside the High Court order, the petition sought quashing of the interpretation of the 15th June ruling that relates to gas utilisation policy and production sharing contract (PSC).

The government application sought a direction to the effect that its gas utilisation policy and PSC would prevail over any private arrangement or memorandum of understanding (MoU).

The Ministry submitted that gas under the PSC was "the property of the government of India. "The contractor (in this case RIL) has certain rights and obligations under the PSC.

The rights do not include utilising the gas at the discretion of the contractor. "The gas has to be utilised in terms of the gas utilisation policy formulated by the government... sold at a price obtained from the pricing formula... approved by the government.

The government had valued the gas at $4.20 per mmBtu and has stipulated that fertiliser units were to get the gas first followed by power sector.

On Friday, RIL filed an affidavit saying it had "no unfettered rights" in the quantity and price of gas and hence cannot give the same to RNRL without official nod.

RNRL had earlier said that RIL was trying to make the dispute seem one between it and the government, which it argued had no role in the issue.

Already, some of the 35 companies, including GMR, GVK and Gautami Power that have been allocated gas by government from RIL as per the utilisation policy have approached the Supreme Court seeking to be made an intervener.

The government submitted today that the interim arrangement as approved by the High Court in its 20th January  2009 order be permitted to continue.

The interim arrangement relates to allowing RIL to enter into contracts for sale of gas to parties other than RNRL.

The Petroleum Ministry said that the gas produced and expected to be produced from KG basin and other fields under the various PSEs is substantial.

"It is expected to nearly double the availability of gas in India in about one year's time. If properly used, it will promote the industrialisation of India. In terms of the MoU, however, all the gas will be owned by the respondents (RIL and RNRL) and utilised at their discretion.

"Obviously, the pressing needs of the priority sectors... cannot be allowed to be held hostage to the benevolence and mercy of these two respondents," the government submitted.

Already, 15 mmscmd from KG-D6 is being supplied to fertiliser sector. Besides, it had earmarked up to 18 mmscmd of gas from KG-D6 to power plants, 3 mmscmd for LPG plants and five mmscmd for household and transport sector.

Earlier today, RNRL filed a rejoinder to government's affidavit of yesterday, saying the government was "blatantly and openly" supporting RIL's "unlawful design to wriggle out of its firm and binding commitments".

The cross-appeals of RIL and RNRL are coming up for hearing on Monday before a bench headed by Chief Justice K G Balakrishnan.

-- Sucheta Dalal