Bombay HC orders to renegotiate agreement

The Bombay high court on Monday directed the Mukesh Ambani-promoted Reliance Industries Limited (RIL) and Anil Ambanicontrolled Reliance Natural Gas Resource Limited (RNRL) to renegotiate their agreement on the allocation of natural gas resources from the Krishna Godavari Basin. The judgment delivered by justice A.V. Mohta has directed both the companies to renegotiate the gas supply contract as per the memorandum of understanding signed by the Ambani brothers at the time of the demerger of Reliance Industries Limited.

The court has given them four months to execute a fresh gas supply master agreement that can be considered as commercially acceptable and bankable by the court. Monday’s ruling is considered to be a major respite for the Reliance Natural Gas Resource Limited since the court seems to have considered the existing gas supply contract between the two companies as biased and favouring RIL.

However, RIL has an option to exercise an appeal against the court’s judgment within the next 60 days. The Bombay high court also restrained RIL from selling the gas to third parties during the interim period of four months. The court’s earlier June 20, 2007 order had restrained RIL from creating any third party interest by selling its Krishna Godavari basin D6 block gas as its optimum 80 mmscmd production is locked up with NTPC, RNRL and the captive use of RIL.

The earlier order mentioned that NTPC would get the first right to use 12 mmscmd gas from the block and RNRL is entitled to get the next right to use 28 mmscmd gas production. RNRL approached the Bombay high court to seek certain amendments to the gas supply master agreement that the company earlier signed with the RIL to ensure various assurances and the transparency regarding quantity, quality and the tenure of the gas procurement from RIL’s Krishna Godavari Basin.