SC to RIL: Why MoU not in line with output sharing pact

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New Delhi: The Supreme Court on Thursday asked Reliance Industries Ltd (RIL) why the memorandum of understanding (MoU) between the two Ambani brothers—Anil and Mukesh—was not made in consonance with the production sharing contract (PSC), as it was already in existence when the MoU was signed.

The three-judge bench headed by Chief Justice KG Balakrishnan raised this question on the consistent stand of Mukesh Ambani led-RIL that it is bound by its contract with the government to sell gas at government-approved prices.

Meanwhile, continuing his argument on the ‘suitable arrangement’ between the two companies, RIL’s counsel Harish Salve argued that a gas supply agreement suitable to RIL should be based on the decision of the empowered group of ministers on utilisation and pricing of gas as well as the government’s approval for prices of gas as per the PSC.

On the third day of hearing of the gas supply dispute between RIL and RNRL, the bench told RIL that the articles of the PSC that contain the pricing and marketing provisions agreed between RIL and the government were not relevant at this stage, as the PSC had been signed prior to the MoU. “You need to prove how the MoU is not binding and how the Bombay High Court judgment is not correct,” the bench said.

RIL reiterated its earlier stand that the MoU was not binding on it because neither it nor its board members were aware of the contents of the MoU. In response, Ram Jethmalani, the counsel appearing for Reliance Natural Resources Ltd (RNRL), requested RIL to place on record the minutes of its board meeting that had taken place after the execution of the MoU on June 18, 2005.

Significantly, the bench also said that if the scheme of de-merger that followed the MoU was between the two companies, why does a specific clause of the scheme mentions the names of two individuals—Anil D Ambani and Mukesh D Ambani. The next hearing will be on October 27.