Renegotiate K-G deal: HC to Ambanis

The Bombay High Court has directed the Mukesh Ambani-owned Reliance Industries (RIL) and Anil Ambani-owned Reliance Natural Resources (RNRL) to go back to the negotiating table and sign a fresh gas supply contract within 120 days, giving a new twist to the two-year-long dispute between RIL and RNRL over supply of gas from the Krishna-Godavari (K-G) basin off the Andhra Pradesh coast.

RNRL approached the court last year asking it to direct RIL to honour the agreement to supply gas to it at $2.34 per million British thermal unit.

The single bench of Justice Anup Mohta also said the memorandum of understanding (MoU) between Mukesh Ambani and Anil Ambani as part of the family settlement were binding on the individuals and the respective group companies.

Asking the parties to work out a fresh "bankable and commercially acceptable" Gas Supply Master Agreement (GSMA) in accordance with the family arrangement between the Ambani brothers the court ruled that the GSMA of January 2006 was in breach of the Scheme of Demerger.

During the hearing, RNRL counsel Mukul Rohtagi argued that the GSMA deviated from the family settlement understanding and was signed by RIL on behalf of both parties since the management control of RNRL had not been transferred to the Anil Ambani group when it was signed. Harish Salve appeared on RIL's behalf.

The single bench also maintained the status quo on its earlier interim order that locks all 80 million standard cubic metres per day of gas (mscmd) to be produced from RIL's fields in the KG-basin with RNRL, NTPC and with RIL itself for captive use.

The judgement is expected to pave the way for both the parties to discuss and settle issues like the liability provision, quantity and tenure of gas supply. It was not immediately clear which party will initiate the discussions.

Both have the option of approaching the division bench or moving the Supreme Court.

RIL's share price was up by 3.79 per cent at Rs 2,664.15 at the close of trading while RNRL closed up 4.01 per cent at Rs 96.05 on the BSE today.