3-judge Bench to be set up by Sept 1, decision unlikely before year-end
No early solution to the high-pressure dispute over gas supplies between the two Ambani brothers, Anil and Mukesh, is likely. The Supreme Court today sent the cross appeals against a Bombay High Court judgment to a three-judge Bench to be constituted by September 1.
The two-judge Bench headed by Chief Justice K G Balakrishnan issued a notice on the special leave petition moved by the central government, though lawyers for Anil Ambani-owned Reliance Natural Resources Ltd (RNRL) bitterly opposed it. They argued the government was only an intervener in the high court and it withdrew midway during the hearing there, when an official was sought to be cross-examined.
The crux of the two-year-old dispute is the price at which Mukesh Ambani-controlled Reliance Industries Ltd (RIL) will supply gas to Anil Ambani-led RNRL.
RNRL is laying claim, through a 2005 family agreement that split Reliance group assets, to 28 million metric standard cubic metre a day (mmscmd) of gas from RIL at a price of $2.34 per mBtu for 17 years from the Krishna-Godavari basin on the east coast. RIL on its part has stated that it can only supply the gas at the government-mandated price of $4.2 an mBtu.
The Bombay High Court on June 15 told the two parties to sign a deal based on the family agreement. RIL, however, made an appeal at the Supreme Court against the High Court order and RNRL sought some modifications to the order.
The government joined the issue by filing a special leave petition on Saturday asking the court to declare the family memorandum of understanding (MoU) null and void. The government’s stand upholding the gas utilisation policy and its price $4.2 a mmBtu is likely to play a crucial role in this legal battle.
Appearing on the behalf of RNRL, lawyer-politician Ram Jethmalani accused the oil ministry of being “in the pocket” of the respondent (RIL). This led to some repartee on what was in whose pocket.
Petroleum secretary R S Pandey later dismissed allegations of siding with RIL and said, “We have so far not taken any action against RIL as it has so far not done anything in contravention to the gas pricing and utilisation policy as derived from the production-sharing contract.”
Pandey said that it was only through the Bombay High Court order that the government first learnt that all volumes beyond 28 mmscmd committed to RNRL and 12 mmscmd to NTPC were to be divided between RIL and RNRL in 60:40 ratio.
He added that the MoU also states that RIL is free to price the volume beyond those locked in litigation. So, practically, RIL could transfer KG-D6 gas for use in its refineries and petrochemical plants at $1 per mmBtu, Pandey told reporters.
Therefore, Pandey reasoned, other industries will be dependent on the mercy of RIL and RNRL to get the scarce fuel, adding that the government filed a petition in Supreme Court to get the MoU declared null and void to prevent such appropriation of natural resource through private agreements. “I cannot today say that no action will be taken,” he said.
The production sharing contract clearly says that the government will frame a gas utilisation policy and approve pricing, Pandey said. “If such a private MoU comes into effect, other contractors may also frame such MoUs and appropriate the national assets among themselves,” he said. “The government’s role is not restricted to collecting royalty and profit petroleum. Our role is also to see equitable industrial development.” Additional Solicitor General Mohan Parasaran justified the government’s appeal on the ground that it was “deeply aggrieved” by the high court order. The Chief Justice remarked at the start of the hearing that the petitions should be heard by a larger bench in view of the issues raised. After consulting the lawyers representing the parties September 1 was selected.
Mukul Rohtagi, counsel for RNRL, submitted that though the high court had given a judgment in its favour on all points, like the price, the quantity and the 17-year-period, it could not enjoy the fruit of the judgment because of the appeals. He also opposed the intervention of several consumers like power and fertiliser companies. The power companies pleaded that their business would be affected if they are caught between the warring brothers. The court allowed their intervention and asked all the parties to file their statements.
Harish Salve, counsel for RIL, asked the court to make it clear that the present arrangement on the gas supply would continue. The Chief Justice only replied that “we are not making any order.” Salve provided a list of all parties before the court for its assistance.
The Chief Justice now has to constitute a new bench to hear the numerous parties before the court. Since there are several high profile companies involved, all of them will have to be heard from September 1 and a reasoned judgment has to be written. The final decision, therefore, is unlikely before the year-end.
RIL’s stock rose 5 per cent on the Bombay Stock Exchange but RNRL closed almost 3 per cent down on a day the Sensex rose sharply.
