MoU between Ambanis takes centre stage in court hearing

The memorandum of understanding (MoU) signed between the warring Ambani brothers during their split in June 2005 took centre stage in the Bombay High Court once again on Thursday, with Harish Salve, senior counsel for Mukesh Ambani-promoted Reliance Industries, asking for the MoU to be produced in the court.


Salve, who had dubbed the agreement as trash during the case hearing in April 2008, however, told the court that the MoU cannot be taken as the basis for allocation of gas to Anil Ambani-promoted Reliance Natural Resources (RNRL).

"The MoU between the brothers is in the private domain and has never been produced in the court. Agreements between the brothers were entered into on the basis of negotiations and no decision can be taken on this basis," Salve told the division bench of Justice J N Patel and K K Tated.

According to Salve, the board of directors of the company does not know the details of the MoU. Salve will take a few more hearings to complete his argument.

Ram Jethmalani, the RNRL counsel, said that the MoU is not limited to gas arrangement but various other aspects of the scheme.

The MoU was the basis for the demerger of the Reliance Group. After the split, Mukesh Ambani got RIL and Anil Ambani got Reliance Capital, Reliance Communications and Reliance Energy.

According to the agreement, gas from RIL's KG basin fields would be allocated to Reliance Energy for its upcoming power plants, including the 4,000 megawatt Dadri project.

As per the agreement, Reliance Energy would have the right to 28 million cubic metres of gas per day from KG basin at a price of $3.18 per mmbtu.

It would also be allotted another 12 million cubic metres of gas if an earlier agreement between RIL and power major NTPC falls through. Besides, ADAG will have the first right over 40 per cent of all future gas discoveries made by RIL.

In 2006, the central government had said the gas sale price as per the June MoU does not hold as it has not been arrived at by the arm's length formula and the government would lose a lot of revenue if that price were to receive official sanction.

Based on the government directive, RIL refused to enter into a gas contract with RNRL. The ADAG company sued RIL in late 2006 and the matter is still pending before the courts.

RIL has so far invested Rs 30,000 crore in the KG Basin in finding gas since 2002 when the company first struck gas there, said Salve. The company plans to produce gas between 80 million standard cubic metres per day (mmscmd) and 120 mmscmd.