SC verdict on Ambani gas war: Advantage Mukesh, RNRL stocks crash

Mangalore Today News Network

May 7: The Supreme Court has ruled that the government is the legal owner of gas and has the authority to allocate this gas and decide its prices. In the Ambani vs Ambani gas war, this amounts to Advantage Mukesh.

 

 

In the stock market, Anil’s RNRL shares have plunged, Mukesh’ s RIL shares are trading up. The three-judge apex court bench ruled 2:1 in favour of Mukesh’s RIL, saying the Ambani family memorandum of understanding (MoU) dividing the gas was not binding, legally or technically. And that a government contract overrides a private one.

The dispute between the estranged billionaire brothers is over the price at which Mukesh’s RIL is obliged to sell gas from the Krishna Godavari basin to Anil’s RNRL for its power plants based on a family contract. Mukesh has been arguing that it cannot sell gas at a rate below the government-set rate. The court said that the Ambani family MoU is one of the means of the suitable arrangement but not the sole mean and Reliance ADAG’s Dadri power plant should be set up first for gas allocation.

The court said on Friday that the contract would have to be renegotiated within six weeks to be within the framework of government policy and asked the Ambani brothers to go to company court with the renegotiated deal.

Reading out the verdict in court, Justice P Sathasivam said, "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."

Mohan Parasaran, the additional solicitor general, said, “The court has upheld the right of the government. The family MoU is subject to government policy. Renegotiate within the ambit government policy.

Parasaran said that judgement means that the Dadri power project should come into existence first before its gets gas allocation and RNRL also has to convince the government that the Dadri plant falls under the priority sector.

Within minutes of the verdict, the stocks of Anil’s RNRL crashed and tumbled around 26 per cent at its day’s low. RNRL Chairman Anil Ambani left the court without taking any questions from reporters. RIL shares gained about 5 per cent at its day’s high.

Within minutes too, 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 the Anil Ambani group, which had cast aspersions on his ministry for allegedly siding with the Mukesh-led RIL.

In a family understanding mediated by their mother, Kokila Ben, the brothers, in 2005, decided that Anil would get gas at $2.34 per unit. The court has said that the government alone can fix gas prices. Mukesh had been arguing that the rate had to be raised to $4.2 per unit after the government said that the price reached in the family agreement was too low.
Ndtv