Breather for RIL, Victory for Government, Window of hope for Anil Ambani

After 7 months of reaching the SC, it has finally delivered a judgment that may favour the elder brother, Mukesh Ambani. Bar & Bench had covered in detail the entire Reliance dispute as it unfolded, estimated to be between $17 billion (Rs. 81,600 crore) to $75 billion (Rs. 3,60,000 crore)..After 7 months of reaching the Supreme Court, it has finally delivered a judgment that may favour Reliance Industries Limited (RIL), the elder brother, Mukesh Ambani’s company. A copy of the judgment is available here. Bar & Bench had covered in detail the entire RIL dispute with Anil Ambani’s Reliance Natural Resources Limited (RNRL) as it unfolded, estimated to be between $17 billion (Rs. 81,600 crore) to $75 billion (Rs. 3,60,000 crore)..Chief Justice K.G. Balakrishnan, concurring with Justice Sathasivam, who wrote the majority judgment said, “The private Ambani family MoU cannot over-ride the Government’s right to fix price and approve utilisation of gas and asked the two firms to renegotiate fuel supply”. The Judgement starts with Justice Sathasivam quoting Association of Natural Gas and Others vs. Union of India and Others, “The people of the entire country have a stake in natural gas and its benefit has to be shared by the whole country.”.Counsel Parikshet Sirohi, assisting Additional Solicitor General Vivek Tankha, who represented the Ministry of Petroleum was present before the Bench summarized the events of the day in the Supreme Court. He told Bar & Bench, “This is a victory for the Government. Government could not become a party at the Bombay High Court. The Supreme Court however has allowed Government’s plea that Gas Supply Master Agreement overwrites all other contractual obligations. All oil prices that they renegotiate now will be subject to government approval.”.However, there is a small window available for Anil Ambani as the Apex Court realized the effect of the judgement on shareholders of both companies. The Court has said, “The [Gas Supply Master Agreement] GSMA/GSPA (Gas Sale and Purchase Agreement) deeply affects the interests of the shareholders of both the companies. These interests must be balanced. This balance cannot be struck by the court as the court does not have the power under Sections 391-394 [of the Companies Act], to create new conditions under the scheme. In view of the same, RIL is directed to initiate renegotiation with RNRL within six weeks the terms of the GSMA so that their interests are safeguarded and finalize the same within eight weeks thereafter and the resultant decision be placed before the Company Court for necessary orders.”.J. Sagar’s Mumbai based partner, Somashekar Sundaresan speaking to ET on this issue said “We will have to see the judgement for what it actually says. I cannot understand what background there could be to saying that party should renegotiate within six months. Ultimately it is a question of a verdict and if one is right, the other has to be wrong and if there is a question of further negotiations to be done, perhaps what the court has said and this is all against speculative, which is why it is too awkward to comment even while a judgement is being delivered. Perhaps the basic principles have been laid down, subject to those parameters, new commercial terms may have to be negotiated. So one really will have to wait and see the order before speculating further on this”..Anil Ambani, has already indicated that RNRL would not seek a review of the Supreme Court judgment. ”We respect the judgement of the Supreme Court. The Supreme Court has safeguarded interest of over 25 lakh RNRL shareholders by giving guidelines for gas supply agreement,” said the younger Ambani..Timeline.November 2004 – Mukesh Ambani claims that there are certain ownership issues within Reliance in a press conference in New York. Brothers feud in public..June 18, 2005 – Mother, Kokilaben, along with K.V. Kamath of ICICI help the brothers arrive a settlement. Atul Dayal, who reportedly does exclusive work for RIL along with Zia Mody of AZB & Partners are said to have represented Mukesh Ambani in the family settlement. Cyrill Shroff, Managing Partner of Amarchand’s Mumbai office, advised the younger brother Anil Ambani. A detailed family MoU was drawn up between Mukesh Ambani and Anil Ambani along with a gas sharing agreement between RIL and RNRL at USD 2.34 per MMBTU..2006 – Senior Counsel Iqbal Chagla and the Amarchand team complete the demerger process for RIL. Under the agreement, Mukesh Ambani controls petrochemicals, oil and gas exploration, refining and textiles and Anil Ambani controls Reliance Communications, Reliance Infrastructure, Reliance Capital, Reliance Natural Resources and Reliance Power..June 15, 2009 – The Bombay High Court directs RIL and RNRL to sign a new agreement for supply of gas within a month at a price of $2.34 per MMBTU. Senior Counsels, Ram Jethmalani, Mukul Rohtagi and Mahesh Jethmalani secure the first victory for RNRL. Law firms briefing the RNRL Senior Counsels include Mulla & Mulla,Mahesh Agarwal and Doijode & Associates. D.J. Kakalia, Senior Partner at Mulla & Mulla, with his team Manali Singhal, Saurabh Kripal, Bhavna Singh and Janki Thakkar lead the pack with V.R. Dhond at Doijode & Associates..Senior Counsels Harish Salve and Milind Sathe appear for RIL. Atul Dayal & Co is one of the advisors for RIL in this matter. Junnarkkar & Associates, with a team comprising Firdosh Pooniwala, Minakshi Grover and Kamaldeep Dayal, are drafting the appeal filed in the High Court..July 2009 – RIL appeals against the Bombay High Court order before the Supreme Court. Parekh & Co and KJ John & Co are the Advocates on Record for RIL, while Agarwal Law Associates represent RNRL..July 19, 2009 – Government of India intervenes filing a petition in the Supreme Court claiming that the gas is the property of the State and cannot be fought over by two rival corporate houses. Additional Solicitor General, Mohan Parasaran leads the team of Government Counsels. The Petroleum Ministry, in a letter written to the Law Ministry, suggests that the government should also have a team of lawyers fighting its case, instead of a single lawyer handling a highly complex matter..The Fertilizer Association of India also moves the Supreme Court seeking permission to intervene as a contesting party in the RIL-RNRL gas dispute. The Fertilizer Association has filed this application as the gas is also intended for fertilizer companies. Kavita Wadia represent the Fertilizer Association and files an impleading application before the Supreme Court to seek an intervention in this matter..August 28, 2009 – A three Judge bench headed by Chief Justice K.G. Balakrishnan, with Justices R.V. Raveendran and Justice P. Sathasivam scheduled to hear the matter on October 20..October 20,2009 – Bench beings to hear the matter. Justice R.V. Raveendran disclosing that he holds equal number of shares in RIL and RNRL and said if anyone had objections to his hearing the matter, he would like to recuse himself. Senior counsel Ram Jethmalani, appearing for RNRL, said that Justice Raveendran was most suited to hear the matter. Senior Counsels Harish Salve and Ram Jethmalani appear on behalf of RIL and RNRL respectively..October 23, 2009– Lawyers defend the family settlement as a secret document between the brothers. Justice Raveendran also brings in the issue of recusal. Both Salve and Jethmalani jointly request the Bench to ignore a Times of India article stating that any judge having any financial interest in any party should automatically recuse himself according to prevailing international norms. Jethmalani accused of Government siding with Reliance.November 4, 2009 – Justice R.V. Raveendran recuses himself, stating that his daughter works with AZB advising RIL on global acquisitions and consequently, a possible conflict of interest. Arguments to commence afresh on November 5 with Justice Sudershan B. Reddy replacing Justice Raveendran. Sunita Rajesh, Justice Raveendran’s daughter, who was previously a Partner at Bangalore-based Anup S. Shah Law Firm, became a Partner at AZB when the two firms merged in July this year. Justice Sudershan B. Reddy replaces Justice Raveendran on the Bench hearing the Reliance dispute..November 6, 2009 – Media reports indicate that officials of the Ministry of Petroleum and Natural Gas briefed Senior Counsel P.P. Rao. When Additional Solicitor General Mohan Parasaran, who is representing the Ministry, threatened to quit, officials dropped the idea..December 9, 2009 – CJI Balakrishna is hospitalized and results in the delay of proceedings.December 2009 – All arguments conclude in December