If the fallout of the Ambani brothers? dispute was restricted to only the combatants and their companies, then despite the fact that how large these companies are, the fight could have been classified as one of those corporate battles where profits and personalities become hopelessly intermixed?fascinating, but not far-reaching enough, except for shareholders (about whom more later). If the dispute extended only to claims and counterclaims on the politics/business interface, as it has, it could still be considered far less than vitally important nationally?such claims and counterclaims are not a first, and other corporate rivalries have engendered them. What makes the Ambani brothers? fight nationally important is this: what they are fighting over?gas?has crucial implications for this country?s economic future. The KG basin gas is expected, by 2010-11, to go a long way in meeting the big demand-supply gap. Gas meets less than 8% of India?s energy needs now, a ridiculously low figure that highlights India?s coal-dependency for power generation. Plus, there?s gas as input for fertiliser?a key input for farming. KG basin gas is expected to help produce half of the fertiliser output. Clearly, therefore, a dispute that has such a national economic impact needs to be solved quickly. Hopefully, the current legal proceedings will do the job. However, the government?s thesis that as a sovereign, it has the final say over natural resource usage must be carefully considered even after the case is?hopefully quickly?over. The logic looks attractive as a potentially quick dispute-settler in this case. But can this eminent domain argument for natural resources go too far in principle in terms of threatening the sanctity of private contracts? Just as it is being attempted in the case of land acquisition, it would be a good idea to draw some redlines beyond which this argument won?t apply. Imagine, for example, a high-value dispute involving some natural resource between a PSU and a private party. The sovereign right to have the final word can become a potential blunt weapon in that kind of a contractual fight.
About shareholders, this point needs to be made. To the extent any corporate dispute is about substantive points, a battle in courts or in front of the government/regulator is often unavoidable. Shareholders can hardly grumble. But to the extent a fight is long, is informed by passion?not just profits?and that attribute makes resolution difficult, shareholders may have something to grumble about. Here, the lack of shareholder activism in India, in part explained by high promoter shareholdings, is relevant. Plus, institutional shareholders, even when significant, don?t do their job. The company that was broken up to produce the two Ambani brothers? corporate structures was a pioneer in creating an equity culture in India. The dispute between these two reinforces the need for another transformation in the equity culture.