Try arbitration to resolve row, SC tells Ambanis

Apex court says somebody should decide what is a suitable arrangement

A bench of Chief Justice K G Balakrishna, Justices R V Raveendran and P Sathasivam said: Why can’t both the parties go for arbitration, mediation or third party intervention to arrive at a suitable arrangement.’’

While hearing the dispute over supply of gas by RIL to RNRL at $2.34 per mmBtu for 17 years in accordance with a family agreement in 2005, the bench observed: Somebody should decide (what is) the suitable arrangement.

Senior Advocate Harish Salve appearing for RIL said after the demerger of the companies, RNRL is a third party company and it can not enforce an agreement on RIL for its execution.

Salve also brushed aside the suggestion of the court for arbitration and said: Section 392 of the Company Act (dealing with demerger of parent Reliance Industries) will apply if it is an arrangement vis-a-vis my (RIL) shareholders. He explained had it been the agreement with the shareholders or a sister company, RIL would have honoured it under the company law.

Takeover of rights

After the Union government brought out the production sharing contract (PSC), the Centre is not concerned with the agreement. “These are natural resources. Public interest has a major role to play,’’ he said. Because of this litigation, the government has taken over the rights of RIL to allocate gas, said Salve.

RIL, which continued its arguments for the second day on Wednesday, told the court that it considered the government’s gas utilisation and pricing policy as a ‘suitable arrangement.’

Salve said RNRL was a third party and hence, cannot seek dismissal of RIL’s plea. RNRL has also separately challenged the government’s petition in the dispute.
RIL said that it cannot do so in view of the government policy, which in 2007 approved $4.20 per mmBtu as price for gas from the KG-D6 fields.

In its arguments on Tuesday, RIL told the Supreme Court that the 2005 family agreement to divide the Reliance empire was a pact between the Ambani brothers and Anil should sue Mukesh if he feels aggrieved but the company.

Will RIL earn profit selling gas at $2.34?

The Supreme Court asked RIL if it would make profit from selling gas at a price committed to NTPC, although it is substantially lower than government-approved price. There was no clear reply from Mukesh Ambani-led firm.

The apex court raised the question: “You had bid US$2.34 per mmBtu (for NTPC), you would have still made profits. Now when government is asking you to sell gas at US$4.20 per mmBtu, then you will get huge profits.” In response, RIL said the price of the gas would not impact them as they are only recovering the cost and government gets the lion’s share.