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 USD 2.34 per mmBtu, a price 44 per cent lower than government approved rate of USD 4.20 per mmBtu.

The bench, headed by CJI Balakrishnan who will be demitting office on May 11, also said that the Ambani family MoU can only be a means of arriving at suitable arrangement but cannot be the sole means for a suitable arrangement.

Contrary to speculation that the judgement could be split, the bench held that since the MoU had not been made public, it doesn't fall in the corporate domain.

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.

Highlights

RIL does not have absolute marketing right over gas; price subject to government approval: SC.

Family MoU not legally binding. SC in RIL-RNRL case.

Terms of production sharing contract will have over-riding effect: SC in RIL-RNRL gas dispute.

RIL directed to initiate in six weeks, re-negotiation with RNRL in terms of Gas Sale Master Agreement so that right of RNRL is safeguarded.

Judgement in RIL-RNRL gas dispute case majority verdict delivered by Chief Justice K G Balakrishnan; Justice P Sathasivam reads out verdict.

Gas is government asset till it reaches consumer: SC.

Supreme Court holds petition filed by RNRL before company court as maintainable, as court had sanctioned the original demerger scheme.

Ambani family MoU technically not binding, as it's between two brothers - Anil and Mukesh and mother Kokilaben, and three million shareholders of RIL-RNRL did not know its contents.

Ambani family MoU can be a means of arriving at suitable arrangement but cannot be the sole means for a suitable arrangement: SC.

Since MoU not made public, it doesn't fall in corporate domain: SC in RIL-RNRL gas dispute case.

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.

Production Sharing Contract meant for regulating supply of gas and under PSC it's for government to evaluate price of fuel.

On Govt role, SC says since gas is national asset public interest has to be looked into first.

Justice B Sudershan Reddy, however, says family MoU cannot be taken into consideration at all.

Anil Ambani leaves court without offering any comments on the verdict.
 

Chronology of corporate war

(PTI) Following is the chronology of events surrounding the dispute over supply and pricing of gas from Reliance Industries' eastern offshore KG-D6 fields to Reliance Natural Resources Ltd (RNRL):

* February 1999: Reliance Industries (undivided) and Niko Resources of Canada win Krishna Godavari (KG) basin deepsea block KG-DWN-98/3 (KG-D6) in India's first licensing round (NELP-I).

* April 2000: RIL-Niko sign Production Sharing Contract (PSC) for KG-D6 with the Government

* October 2002: RIL makes huge gas finds in the block KG-D6; names them Dhirubhai-1 and 3

* September 2003: State power utility NTPC Ltd floats global tender for sourcing 12 million standard cubic meters a day of natural gas/LNG to fuel expansion projects at Kawas and Gandhar in Gujarat

* June 2004: Reliance Energy signs pact with Uttar Pradesh for world's largest gas-based power plant with a capacity of 3,500 MW at Dadri near Delhi

* June/July 2004: RIL wins NTPC tender quoting USD 2.34 per million British thermal unit price for KG-D6 gas

* June 18, 2005: Memorandum of Understanding to reorganise RIL signed between brothers Mukesh and Anil Ambani. Anil resigns as joint managing director. While Mukesh gets energy and petrochemical business, Anil gets power, financial services and telecom business

* August 2005: Ambani brothers sign non-compete pact.

* July 26, 2006: Petroleum Ministry rejects RIL's proposal to sell Reliance Natural Resources Ltd a minimum of 28 million standard cubic meters per day (mmscmd) of gas from D6 field for USD 2.34 per million British thermal unit (mBtu)

* November 7, 2006: RNRL files a case against RIL in the Bombay high court

* May 3, 2007: Ad-interim relief granted to RNRL. RIL restrained from creating any third party interest for 40 mmscmd (28 mmscmd claimed by RNRL and 12 mmscmd offered in NTPC tender)

* September 13, 2007: Empowered group of ministers (EGoM) approves RIL's gas pricing formula with minor changes. The price for first five years fixed at USD 4.20/MMBtu

* October 2007: EGoM sets gas distribution priorities with first preference to existing fertilizer, cooking gas, power and steel unit

* January 30, 2009: Bombay high court lifts stay on sale of gas produced from KG-D6 block, allowing it to be sold to buyers as per Govt's Gas utilization policy at USD 4.20/MMBtu

* March 2009: Government finalizes gas allocation to fertilizer and power sectors

* June 15, 2009: Bombay High Court instructs RIL and RNRL to draft an agreement that gives gas to RNRL as agreed upon in the MoU

* July 4, 2009: RNRL moves Supreme Court

* July 5, 2009: RIL moves SC

* July 17, 2009: Government files writ petition seeking to declare that part of the Ambani family pact that deals with gas supplies as null and void

* October 20, 2009: Supreme Court begins hearing the cross appeals

* November 4, 2009: Justice Raveendran recuses himself from hearing

* December 18, 2009: Three-judge bench headed by Chief Justice K G Balakrishnan reserves judgement on the case

* May 8, 2010: Supreme Court delivers its verdict.