SC asks Ambani brothers to renegotiate  

May 7, 2010

 The Supreme Court has asked both Mukesh and Anil Ambani to renegotiate the terms of their gas sale master agreement within six weeks. Although the apex court did not give any specific verdict, the share price of Reliance Industries Ltd (RIL) rose while that of Reliance Natural Resources Ltd (RNRL) shares tanked.

The three-judge bench headed by Chief Justice KG Balakrishnan, while delivering its verdict on the gas-pricing dispute between the Ambani brothers, said that RIL does not have absolute marketing rights over gas and its prices are subject to approval from the government.

Terming the Ambani family memorandum of understanding (MoU) as not legally binding, the SC said the MoU is between two brothers and their mother and its content is unknown to thirty lakh shareholders of RIL-RNRL. In addition, since the MoU has not been made public, it does not fall in the corporate domain, the apex court said.

Justice P Sathasivam said, "Ambani family MoU can be a means of arriving at (a) suitable arrangement but cannot be the sole means for a suitable arrangement.”

Delivering the majority verdict (2:1) of the bench on the four-year gas dispute between RIL and RNRL, Justice Sathasivam said that the production-sharing contract (PSC) overrides all other agreements.

The Supreme Court also held that the petition filed by RNRL before the company court as maintainable, as that court had sanctioned the original demerger scheme.

Last year in July, the Bombay High Court had asked RIL to supply 28 million standard cubic metres a day of gas to RNRL at $2.34 per million British thermal unit for 17 years. RIL then moved the Supreme Court alleging that the High Court had erred in deciding quantity, tenure and price of gas supply to the power plants owned by RNRL or its units.

At 11.46 am, RIL was trading 3.2% up at Rs1,043 while RNRL was down 17.7% to Rs56 on the Bombay Stock Exchange where the benchmark Sensex was down 1.37% to 16,755 points.— Moneylife Digital Team