Govt attacks Ambani family settlement

The division of the Reliance empire by the late Dhirubhai Ambani between his two sons has run into a new stumbling block, four years after it was thrashed out after a protracted power struggle between the brothers. The division has already seen multiple companies spin out of the undivided Reliance Industries, with millions of shareholders in each.

The latest challenge has come from none other than the Government of India, which on Saturday filed a petition before the Supreme Court urging it to quash the secret 2005 agreement underlying the division of assets between the Ambani brothers.

“It is respectfully prayed… that the memorandum of understanding [between the Ambani brothers] in so far as it deals with the rights of the government of India may be declared null and void,” the government, in a special leave petition filed in the SC, said.

In its petition on Saturday, the government went a step beyond what it had argued in its reply to RIL-RNRL dispute on the previous day, calling the gas-sharing move “surreptitious and unauthorised” and “patently illegal”. The government, however, has not initiated any action against its contractor, RIL.

The government’s main argument revolves around its claim that it ‘owns’ all the gas in the country by virtue of its sovereignty. The gas which it owned was merely handed over to RIL to explore and produce to the benefit of both RIL and the government, it added. In other words, RIL or its promoters had no right to promise to sell the gas to anyone without first consulting the real ‘owner’ of the gas — the government. Any such promise, the government said, is therefore null and void.

Interestingly, the government did not object to the division of gas when it was asked for its opinion on the demerger scheme of RIL. Even in Saturday’s petition, it has confined its objections to the gas-sharing deal of the MoU and not the demerger scheme. The demerger scheme is the ‘public face’ and the legal implementation of the secret MoU between the brothers. Though it envisages division of RIL’s gas between the Anil and Mukesh groups, the government of India had given it a ‘no objection certificate’ in 2005.

The Anil Ambani group has been relying on both the MoU and the demerger scheme to legally force the Mukesh Ambani group to supply it with natural gas from the latter’s gas fields in the Krishna-Godavari basin. The cancellation of the MoU will deprive the Anil group of one of the two weapons in its court case over gas rights being argued before the Supreme Court.

The group, however, dismissed Centre’s move, saying that objecting to a secret MoU while approving a demerger scheme which gave it a concrete shape was little more than a gimmick.

“How can they say sharing of gas is okay under the demerger scheme but not under the MoU? Both are implementing the same understanding between the brothers, after all,” said Mukul Rohatgi, counsel for the Anil Ambani group’s Reliance Natural Resources Limited (RNRL).

Rohatgi pointed out that the gas dispute was not between the brothers, but between two companies who were bound to implement a court-sanctioned demerger scheme. “The company [RNRL] is fighting to get its rights under the demerger scheme. We have been promised the gas under the scheme which was blessed by the government itself. Challenging the MoU doesn’t make any difference to our case,” Rohatgi said.

Besides RNRL gas supplies, the Centre’s position will also nullify the letter of intent (LoI) entered by RIL with the state-owned National Thermal Power Corp (NTPC) for supplying it with gas for 17 years.

“Gas under the production sharing contract is the property of the government. The contractor has certain rights and obligations under the PSC. The rights do not include utilising the gas at the discretion of the contractor. Knowing that the gas does not belong to them [Mukesh and Anil Ambani], the respondents have appropriated through the MoU, in a surreptitious and unauthorised manner, the entire gas treating the same as their personal and family property. The MoU, therefore, is blatantly illegal and in disregard to the provisions of the production sharing contract,” it said.

This is the second time that the government has come up with such an argument. Earlier, during the hearing of the case at the Bombay High Court, the government had raised similar objections. The High Court, however, disregarded them, saying that it did not see anything in the contract between the government and RIL that gave the former such rights.