Ambani vs Ambani All eyes and ears on the Supreme Court as legal heavyweights begin the battle

The Reliance matter was heard by the Supreme Court on Tuesday and is scheduled to be heard again today. Justice R.V. Raveendran first disclosed 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. When no objections were raised, Harish Salve commenced arguments, stating that he is appearing on behalf of RIL and not Mukesh Ambani. The crux of his argument yesterday was that “The Memorandum of Understanding (MoU) signed between the members of the Ambani family on June 18, 2005, is not binding on RIL, as it had never been approved by its Board of Directors.”.News reports indicate that the value of the dispute is between $17 Billion (Rs. 81,600 Crores) to $75 Billion (Rs. 3,60,000 Crores). Numerically, the value of the dispute would look like this: Rs. 36,00,00,00,00,000. This is by far one of the biggest corporate disputes in the world, not just in India. The matter was heard by the Supreme Court on Tuesday and is scheduled to be heard again today..The Dispute: The Anil Ambani-controlled Reliance Natural Resources Limited (RNRL) is seeking a supply of gas from the D6 block in the Krishna-Godavari eastern offshore fields of the Mukesh Ambani-controlled Reliance Industries Limited (RIL) at price of $2.34 (Rs. 112) per MMBTU (Million Metric British Thermal Units). RIL has rejected the demand on the ground that the Government approved rate is $4.2 (Rs. 201) per MMBTU..Why is the National Thermal Power Company (NTPC) Interested?.The NTPC is fighting a separate case against RIL before the Bombay High Court. In November 2005, the NTPC filed a petition against RIL when it refused to sign a Gas Sales Purchase Agreement (GSPA) after winning the supply contract through an international competitive bidding. RIL was to supply 12 MMSCMD (Million Metric Standard Cubic Meter Per Day) of gas at $2.34 per MMBTU. RIL claims that no valid contract was executed since the NTPC insisted on inserting a clause stating, “RIL would bear unlimited liability in case it failed to supply gas”, which in its opinion, was unreasonable. RIL is keen for the NTPC to buy gas at $4.2 per MMBTU, the price set by an empowered group of ministers for RIL to supply gas to fertilizer and power plants from its D6 block in the Krishna-Godavari basin..This matter has been moving at a snail’s pace before the Bombay High Court. A PIL has been filed by Arvind Gupta, a lawyer, who is alleging that the NTPC has been “sluggish” in pursuing its case against RIL. If RIL succeeds in its attempt to commit breach of its obligation to supply gas to NTPC at a price of $2.34 MMBTU, NTPC would incur a loss of Rs 25,000 crore ($5.2 Billion),” he claims. According to Bombay High Court records, the last available order (January 13, 2009) in the original suit reads as follows:.“Today the matter could not be taken for recording of evidence as the Court was busy in attending to some other matter. Some discussion took place about the day on which the suit should be adjourned for recording of evidence.”.Why is RNRL interested in the RIL vs. NTPC matter?.During the partition between the Ambani brothers, a family MoU was drawn up whereby the price of gas to be supplied to RNRL was fixed at $2.34 per MMBTU, the same as the price fixed between RIL and NTPC when the former landed the contract. At the time of winning the contract, since both brothers were together and no partition MoU had been signed, the Anil Ambani-controlled RNRL is insisting on the same price. The price between RIL and NTPC acts as the guidance price for RNRL..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 represents the Fertilizer Association and files an impleading application before the Supreme Court to seek an intervention in this matter..Aug 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 (DAY 1) –.The matter started with 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. However, RIL’s counsel Harish Salve wanted the disclosure to be recorded..Harish Salve commenced arguments stating that he is appearing on behalf of RIL and not Mukesh Ambani. The crux of his argument was that “The Memorandum of Understanding (MoU) signed between the members of the Ambani family on June 18, 2005, is not binding on RIL, as it had never been approved by its Board of Directors. The MoU was never placed before the board and its contents were not known to them. But even if it was, RIL would be unable to supply 28 million standard cubic metres per day (MMSCMD) of gas to RNRL at $2.34 per MMBTU as it contradicted the government’s gas pricing and utilization policy.”.In essence, RIL claims that it was not party to the MoU signed by Mukesh Ambani and it was binding only on Mukesh Ambani and not the company. In identical affidavits, seven full-time members of the RIL Board claim that they were not aware of the full terms of the MoU and have not “accepted and approved the contents of the MoU dated June 18, 2005.”.“The promoters should not escalate private disputes to the shareholder level and the promoters of both the companies should slug it out on their own,” argued Salve. He went on to add, “[If] Mr. Anil Ambani has any grievances regarding the family agreement that he had with his elder brother as part of de-merger pact of the business, then he should sue Mukesh Ambani as an individual rather than indulge in ‘shadowboxing’ using RNRL.”.The Bench .Yesterday, the Bench questioned, “Why is there shadowboxing between the two brothers over the issue when the shareholders of one company held shares of another under the demerger scheme?” Further, comparing the dispute with a war between two nations, they noted, “There is no fight among the shareholders of RIL and RNRL.” Bar & Bench will keep you updated on the matter on a day-to-day basis. Watch this space for more on the Ambani dispute.