New Delhi: The Supreme Court on Wednesday wondered why the Mukesh Ambani-led Reliance Industries did not opt for arbitration to arrive at a suitable arrangement to supply natural gas to younger sibling Anil Ambani's Reliance Natural Resources.
"Why didn't you go for arbitration, mediation or third party intervention to arrive at a suitable arrangement," asked the three-judge bench of Chief Justice K G Balakrishnan, Justice R V Raveendran and Justice P Sathasivam.
Hearing the high-profile case for the second day, the court observed that the demerger of Reliance Industries was on the assumption that natural gas from the Krishna-Godavari basin will be supplied by Reliance Industries to Reliance Natural.
"Is it not fundamental to have a suitable gas supply agreement," the bench then queried referring to terms of the split in the Reliance group in 2005. "You cannot say that if there is no suitable arrangement, let there be no suitable agreement," the bench said.
"What will happen if there is no suitable agreement? Will the de-merger not fail if the agreement is not suitable," the bench queried further.
The bench also said that Reliance Industries can't be the sole decider of what qualified as "suitability" of the gas supply agreement and suggested third party mediation on the dispute, or an outside intervention.
The bench made these observations when counsel Harish Salve, who appeared for Reliance Industries, opposed Reliance Natural's lawsuit, saying it was neither its shareholder nor a creditor.
He also said his client considered the government's gas utilisation and pricing policy as the suitable arrangement.
But the bench said Reliance Natural "is not a third party", adding: "It was part of you before demerger." The bench then continued hearing the arguments by Salve, who earlier told the court that his argument would last as long as Wednesday or Thursday next week.
Salve also hoped the submissions by various parties, including Reliance Natural and the government would take till the middle of November and pleaded for the allocation of as much time to resolve the dispute.
At the crux of the battle is the supply of natural gas from the Krishna-Godavari basin, awarded for exploration and harnessing to Reliance Industries, before a split in 2005 in the group founded by legendary industrialist, the late Dhirubhai Ambani.
Based on a family reorganisation pact, the Anil Ambani Group wants 28 million units of gas per day for 17 years at $2.34 per unit. But Reliance Industries says it can only sell it for $4.20 per unit, claiming this was the price approved by the government.
The Bombay High Court had upheld the claim by the younger brother Anil Ambani's group in a verdict delivered in June, which was challenged by Reliance Industries in the apex court.
The government, too, has sought to joined the dispute as an interested party, saying gas was the property of the state and cannot be fought over by two rival corporate houses.
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