MUMBAI: The legal dispute between Reliance Industries (RIL) and Reliance Natural Resources (RNRL) reached a crucial stage with the government saying clearly that RIL had flouted its contract terms by entering into a sale agreement with RNRL in 2006.
It pointed out that RIL had not followed certain procedural and legal processes prior to entering into a gas-supply agreement with RNRL and it had, therefore, rejected the deal.
S M Sundaram, under secretary at the ministry of petroleum and natural gas, told the Bombay High Court that the contractor (RIL) was prohibited from selling the gas “motivated in whole or in part by considerations other than normal commercial practices” under its exploration and production licence.
In a written affidavit before the court, he pointed out that the contractor (RIL) was obliged to sell the gas only to parties with whom it had no “contractual relationship… or any common or joint interest” that may affect the prices.
Sundaram pointed out that RIL’s agreement with the government also prevented it from sales “involving barter arrangements”.
In early 2006, RIL had entered into an agreement with RNRL, promoted by Anil Ambani, the brother of RIL promoter Mukesh Ambani to sell the gas, allegedly as part of the de-merger of the Reliance group founded by their late father Dhirubhai Ambani.
The government, however, sought to put some of the blame for RIL violating its agreement with the government on RNRL by observing that it expects RNRL too to have been aware of the terms and conditions under which RIL was supposed to be operating.
The court had also asked the government to state whether the relatively higher price decided by the empowered group of ministers (eGoM) also applied to the current case.
The eGoM, announcing its decision to set a price of $4.2 per unit of gas, had mentioned that the price would not “prejudice” the outcome of the current dispute or that between RIL and the National Thermal Power Corporation.
Sundaram’s filing, however, failed to mention that exception. Instead it only said that the eGoM had reached a decision to apply a price of $4.2 per unit of gas for the first five years of gas production.
The confusion could not be cleared as Ram Jethmalani, the counsel for RNRL was unable to cross-examine the affidavit or Sundaram after the government counsel objected to the cross-examination.
He pointed out that a formal request for doing so had not been put in, prompting the court to remark: “If you are insisting on technicalities, this court will go by the technicalities.”
The court had, in the last hearing on Tuesday, verbally approved Jethmalani’s request for cross-examining the affidavit.
The court also pulled up the government for failing to supply a copy of its affidavit to both parties in advance.
“There is no co-operation at all… why are you intervening in this matter?” the bench asked the government counsel, pointing out that they themselves had pleaded to be made party to the case.
The case will again come up for hearing on November 27 when under secretary S M Sundaram is expected to be cross-examined on the basis of his affidavit.
