RNRL wins legal battle over gas supply

RIL told to supply gas at $2.34 million metric British thermal unit to RNRL.

The Bombay High Court on Monday, 15 June 2009, ordered Mukesh Ambani's Reliance Industries (RIL) to assure gas supply of 28 million metric standard cubic metre per day (mmscmd) from Krishna-Godavari (K-G) basin D6 block to Anil Ambani promoted Reliance Natural Resources (RNRL) for 17 years at $2.34 million metric British thermal unit (mmbtu).

The court has directed RIL to arrive at an arrangement along these lines within a month. It has also said the Ambani brothers may consult their mother if there is any difficulty at arriving at a conclusion.

However, it is unclear whether RIL intends to appeal against the current verdict in the Supreme court or go through with the stipulated process of arriving at a viable gas supply agreement.

RNRL had approached the court against RIL that had refused to give gas at $2.34 per mmbtu from the Krishna-Godavari basin.

RNRL had approached the court against RIL that had refused to give gas at $2.34 per mmbtu from the Krishna-Godavari basin.

Anil Dhirbhai Ambani Group (ADAG) claims right over 70% of KG-D6's initial output of 40 million standard cubic meters per day after the family split in in June 2005.

After the split Mukesh Ambani took control of RIL and Anil got financial services, communications and power business of the group through a series of demerger of firms.

As per the Memorandum of Understanding (MoU), RIL was to supply gas from its KG basin to RNRL for its upcoming 7400 megawatts (MW) power project at Dadri in Uttar Pradesh.

In December 2006, RNRL moved the Bombay High Court asking it to compel RIL to honour the gas agreement. Justice Anup Mohta, who heard the case, asked the companies to settle the matter internally under the June 2005 family agreement. The judge also restrained RIL from selling gas to third parties till the final order.

Unable to agree on the price, terms and quantity of gas, both firms approached the division bench of the Bombay High Court against the order of the single bench in early 2008. The hearing of the matter continued till February 2009. Thereafter, the division bench came out with an interim order allowing RIL to sell gas to third parties.

The interim verdict also mentioned that RIL's gas agreement, however, was subject to the court's final order.

The basic argument in the RIL-RNRL case pertained to the pricing and quantum of gas. During the course of hearing, RNRL made it clear that it wanted 28 million metric standard cubic meters per day of gas for 17 years for $2.34 per million metric British thermal unit (mmBtu), while RIL argued that it could not sell gas below the government-approved price of $4.2 per mmBtu.