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| SC seeks 'suitable arrangement' in Ambani dispute |
| BS Reporter / New Delhi Oct 28, 2009, 00:36 IST |
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Resuming arguments on the fourth day of the gas dispute case between Reliance Industries Ltd (RIL) and Reliance Natural Resources Ltd (RNRL), the Supreme Court once again enquired about the possibility of both the Ambani brothers going in for arbitration.
The brothers are facing each other in the Supreme Court with five cross-appeals against the judgement of the Bombay High Court asking RIL to supply gas from the K-G basin at a reduced rate to RNRL. The central government has also joined in, claiming that neither brother can claim ownership of the gas, as it was the owner of the natural resources in the country.
On Tuesday, there was a vague suggestion once again with regard to arbitration from the Bench headed by Chief Justice K G Balakrishnan and consisting of Justice R V Raveendran and Justice P Sathasivam.
“If you are not able to reach a suitable arrangement ... we can direct you to arrive at a suitable arrangement or direct you to go for arbitration,” the Bench observed.
During the arguments, RIL counsel Harish Salve told the Bench it was the Anil Ambani-led RNRL which campaigned with the central government for the gas utilisation policy. Now the parties should follow the policy.
Quickly responding to this contention, RNRL counsel Ram Jethmalani said the policy had to work for the future. It was not meant to cover existing agreements.
The RIL counsel reiterated that the Memorandum of Understanding (MoU) between the family members and the understanding between the promoters and shareholders were not binding on the companies. An arrangement between the promoters and shareholders, though commonplace, must be validated in the manner laid down by company laws. Otherwise, it had no validity and was not enforceable against the company, Salve said. This is further reinforced by the rules laid down in Sections 391-394 of the Companies Act.
The MoU under the auspices of the mother of the warring brothers also understood it that way. It stated that the scheme of arrangement will prevail after the necessary approvals and the examination of the regulatory authorities. The MoU was subservient to several such conditions, Salve said.
“The MoU which was not put before the RIL board was not binding. RIL board of directors had no knowledge of the private agreement,” he said.
Govt approval is the issue: RIL counsel
RIL counsel Salve stressed that the crucial factor was whether the approval of the government for the scheme was necessary or not. The rest were all peripheral issues. The government’s declaration of the gas utilisation policy has changed the original perspective, the counsel said.
About pricing, Salve submitted there were several imponderables in this area, like the quantity excavated, the number of years for extraction and the formula for sharing the gas. Therefore, there cannot be a cap on liability of RIL.
The government’s policy was one factor that drastically changed the scenario. Therefore, the Bombay high court was wrong in ordering RIL to supply gas at a particular price. The counsel said that if the price was not properly fixed, and the court asks it to supply below the government fixed price, the company will have to pay “out of pocket”.
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