In what could be a severe blow to Anil Ambani group seeking cheap gas from elder brother Mukesh- led RIL, the Supreme Court today ruled that government has the last word on pricing and utilisation of national asset.
Giving its verdict on the four-year-old Ambani battle that was intertwined with a bitter public wrangling, a three-judge bench of the court headed by Chief Justice K G Balakrishnan said the Ambani family MoU dividing the gas was not binding, both legally as well as technically.
Immediately after the judgement, RNRL Chairman Anil Ambani, who was present at the courtroom, left without taking any questions from the throng of reporters and cameramen.
Stock market responded swiftly to the judgement, with RIL shares shooting up by about five per cent to nearly Rs 1050 and that of RNRL tanked close to 20 per cent close to Rs 55.
"RIL does not have absolute right over gas and price is subject to government approval... Since MoU (of the Ambani family) has not been made public, it does not fall in the corporate domain... Under the Production Sharing Contract, it is for the government to evaluate the price of fuel," Justice P Sathasivam said, reading out the verdict.
Within minutes, the government welcomed the verdict upholding its sovereign right on pricing and utilisation of gas.
"No matter what campaign one ran against the government, the nation is supreme" Oil Minister Murli Deora said without naming Anil Ambani group which had cast aspersions on his ministry for allegedly siding with Mukesh-led RIL.
The court also directed RIL to initiate negotiations with RNRL within six weeks to arrive at a sale agreement within the framework of government policy.
RNRL had contended that it was entitled to 28 mmscmd of gas a day from RIL's eastern offshore KG-D6 fields, at $2.34 per mmBtu, a price 44 per cent lower than government approved rate of $4.20 per mmBtu.
Concurring with the judgement, Justice B Sudershan Reddy, who replaced Justice P Raveendran after he recused in November 2009 citing conflict of interest, said that the family MoU cannot be taken into consideration at all.
After a bitter public battle over division of Reliance empire, less than two years of Ambani family patriarch Dhirubhai's death, Mukesh and Anil reached a family settlement spelt out by mother Kokilaben in June 2005.
As per the settlement, the energy and petrochemicals business went to Mukesh and the power, financial services and telecom business to Anil.
Accordingly, the scheme of de-merger approved by the Bombay High Court in December 2005, paving the way for creation of a new entity -- Anil Dhirubhai Ambani group.
However, the bitterness between the two brothers did not cease and the two sides were constantly engaged in public and courtroom battles, with gas dispute reaching the flash point.
ADAG firm RNRL had sought gas from RIL to power its proposed 7,800 MW electricity plant at Dadri in Uttar Pradesh.
The Bombay High Court had last year directed RIL to reach an amicable agreement with RNRL for gas supply as per the family MoU.
Although the apex court said that the petition filed by RNRL was maintainable, as the company court had sanctioned the original demerger scheme, it held that the "gas is government asset till it reaches consumer."
The court, however, also made it clear that RIL did not have absolute marketing right over gas and in the face of the bench's observation, the Anil Ambani group's claim to over 28 mmscmd of gas for 17 years is likely to go back to the negotiating table.
"The court has asked us to renegotiate... That is what we are going to do. The court has given us some time," Reliance Industries Executive Director P M S Prasad told reporters.
The court earlier said that a suitable arrangement must not be suitable only for RIL, but also for shareholders of RNRL and it's RIL's obligation to look after it.
