Withdraws affidavit, but says it will 'assist' the court.
The government today withdrew its affidavit that had made it a party to a natural gas sale dispute being fought by the warring Ambani brothers in the Bombay High Court, saying it would expedite the two-year old case.
Government officials said withdrawing from the case gives it the freedom to appeal against any decision by the court. They added that a verdict in the case is likely to be reached quicker without the government’s involvement.
“The case is back on track now,” said Additional Solicitor General Mohan Parasaran, who is arguing on the government’s behalf.
The case between Mukesh Ambani-promoted Reliance Industries Ltd (RIL) and Anil Ambani group company Reliance Natural Resources Ltd (RNRL) concerns the pricing of gas from the Krishna-Godavari (K-G) basin, off India’s eastern coast, at a price ($ 2.34 a unit) lower than that approved by the government ($4.2 a unit).
Under an earlier contract signed in January 2006, RNRL was to have received gas for its power plant in Uttar Pradesh at $2.34 a unit. In May 2006, RIL decided against supplying gas at this price saying prices would increase between the signing of the contract and the start of gas production scheduled for January 2009. RIL, however, cannot sell any gas till the court verdict.
When the agreement went to the government for approval in the same month, the petroleum ministry said the price agreement between RIL and RNRL was not valid because it did not follow the “arm’s-length principle” — that is, it was signed before the two brothers legally split the Reliance Group assets, after which Anil Ambani took control of RNRL.
The affidavit, which the government submitted to the court on November 14, explained why the government wanted consumers to pay RIL $4.2 per unit of gas from the K-G basin.
It added that the government had the right to reject the RIL-RNRL contract and that the higher gas price, decided by a ministerial group in August last year, was binding.
RNRL had argued that both contentions in the affidavit were incorrect.
The withdrawal of the affidavit means that the case can now be decided on the merits of the gas sale contract between RIL and RNRL rather than binding the court to the government’s price.
The government is, however, still likely to assist the court and will give a legal submission on interpreting the pricing according to the production-sharing contract signed by the oil and gas explorers and the government.
The government’s withdrawal follows the insistence of RNRL counsel Ram Jethmalani to cross-examine the government on the issue. Last week, the court had summoned a representative of the petroleum ministry for cross-examination.
“The Union government has withdrawn the affidavit as it wanted to avoid an embarrassing situation for itself in the court. Had we got a chance to cross-examine the official from the petroleum ministry, the government’s contradictory stand in the case would have been brought in the limelight,” said Mukul Rohatgi, senior counsel for RNRL.
The contradiction refers to the fact that the government’s affidavit referred to the gas price as a “selling price”. In the last session of Parliament, however, the petroleum minister had referred to it as a valuation price.
“The withdrawal of the affidavit has been primarily to do away with the cross-examination of the government official. However, in the next hearing, the court has allowed the government counsel to make legal submission on interpretation of the production-sharing contract,” said a senior RIL lawyer.
The case has been adjourned and continuous hearings resume from January 12 to January 17.
