GSMA not in consonance with family MoU: RNRL

Anil Ambani-led Reliance Natural Resources (RNRL) today accused Reliance Industries (RIL) in the Supreme Court of unilaterally inserting provisions in the agreement for gas supply, saying it went against the family MoU of 2005 providing for fixed quantity of gas from the KG Basin for 17 years.

RNRL contended that the provisions of Gas Supply Master Agreement (GSMA) was unilaterally formulated and signed at the controversial board meeting of RIL on January 12, 2006 undermining the interests of the Anil Dhirubhai Ambani Group (ADAG).

Raising six objections to the GSMA, RNRL's counsel Mukul Rohatgi said its provisions reduces the tenure of gas supply to one to four years from 17 years as envisaged in the 2005 MoU.

He said the complex formula for determining the price of gas would render the contract completely unbankable.

He submitted that GSMA was against the interest of ADAG as it provided for gas supply directly to the affiliate of RNRL which owns the power plant.

"In such a case, RNRL will not be the buyer but its affiliate Reliance Power (RPL) will be the buyer and RIL will be the seller. This renders RNRL a shell company with no business," Rohatgi submitted before a Bench comprising Chief Justice K G Balakrishnan and Justices B Sudershan Reddy and P Sathasivam.

Rohatgi said the MoU and the arrangement between the Ambani brothers clearly provides that the gas has to be supplied by the RIL to RNRL which will have the right to supply it to power plants of ADAG.

"The Gas Supply Purchase Agreement (GSPA) should be executed between RIL and RNRL in line with the MoU," he said.

He said the definition of affiliate in the GSPA has been made restrictive so as to include only those entities wherein RNRL holds share of 51 per cent or more.

While arguing that MoU clearly provides for 28 mmscmd of gas per year and additional 12 mmscmd in case the contract between RIL and NTPC did not materialise, RNRL contended that the GSMA linked to complex formula did not stipulate any firm and uniform quantity which renders the agreement completely unbankable and unsuitable.

"The GSPA should clearly provide for a firm and uniform Annual Contract Quantity (ACQ) of gas in line with the NTPC contract. The ACQ should be kept at 28 MMSCMD as agreed in the MoU," Rohatgi said.

RNRL, which has claimed that NTPC contract is a template for the supply of gas from the KG basin, said the provision that the price has to be approved by the government has to be deleted as "the price agreed for sale of gas by RIL to RNRL under the MoU cannot be subject to government approval".

"The MoU provides that the gas will be supplied at the same price as the NTPC contract. This was at a fixed sum of $2.34 mmBtu. The NTPC price was considered as the price under the MoU since it was discovered by NTPC in an international competitive bidding process," RNRL said and opposed the demand of RIL asking $4.20 mmBtu.

Hearing in the high voltage court battle resumed after a week's gap. It could not be taken up last week since the Chief Justice was indisposed.

While RNRL is seeking gas at a committed price of $2.34 per unit, RIL says it cannot honour the commitment made in the family agreement reached four years back due to government's pricing and gas policy.