Ril vs rnrl

Class ppt on captioned title

1. Reliance Natural resources ltd. Vs. Reliance Industries ltd.

2. facts Dispute has its origin in events where Indian Government allowed private sector to participate in gas exploration through NELP, 1999 In 1999, Government awarded Krishna- Godavari basin (KG-D6) to RIL through execution of Production Supply Contract (PSC) Reliance industries found gas in KG basin 2002

3. In 2003, RIL through bidding process won the contract to supply gas to NTPC at a specified quantity of $2.34mm/ btu On 18 June, 2005 RIL was divided into two parts amongst Mukesh Ambani and Anil Ambani . Similarly, RNRL and RIL was also divided , thereby Anil Ambani became Chairman of RNRL In order to settle the difference between the two brothers with regards to revenue earning, through intervention of Kokilaben Ambani , a Memorandum of Understanding ( MoU ) was being executed .

4. In the MOU, it was agreed by Mukesh Ambani’s RIL to sell Anil Ambani’s RNRL 80 mmscmd of gas from the Krishna-Godavari basin for 17 years at $2.34 per mmbtu - for its Dadari Power Project. With RIL not Supplying the gas at $2.34/ mmbtu , RNRL went to court against it for not implementing part of MoU when the empire was being carved between two brothers, the dispute was taken to High Court of Bombay.

5. ROLE OF OTHER PARTIES KOKILABEN AMBANI: She recognized that a long-term, stable source of gas from RIL, which has the largest find of gas, was absolutely essential for growth plans of Anil Ambani group, so that RNRL could reach to newer heights. She , therefore specially stressed upon, Mukesh shall personally ensure that at the time of execution gas agreements will provide comfort and stability to both the brothers.

6. ISSUE RELATED TO PRICING RNRL wants to buy at $2.34/ mmbtu but RIL wants to sell it at 4.2/ mmbtu subject to revision after five years. The difference is just under two dollars in the respective prices can result in profit or losses that run into billion of dollars. 2.34/ mmbtu figure came from NTPC contract which was signed between NTPC and RIL.

7. RIL won NTPC contract due lowest bidding of 2.34/ mmbtu and because of this quoted figure, RNRL wants to procure the gas on same rate, as agreement between RIL-RNRL was signed during same period. Further in 2007, RIL invited the bid of buyers to purchase gas and average bid was being made 4.22/ mmbtu which was approved by the government, as more rate means more profit for government.

8. PETROLEUM MINISTRY RIL got the right to look for in the KG basin after signing a PSC with Government , where it gets a share of RIL’s KG basin profit. Since, profit related to the price, the Government said it has the right to look after each contract RIL signs to sell gas, thereby acquiring the right to reject the contract on the basis of no fair pricing.

9. CONTENTIONS BY PARTIES RNRL: It argues that Ministry role is limited under PSC ,ensuring that it gets fair share of profit or not. RIL has the right to give away gas for free as long as Government is getting its share of profit. Further, the cost of production of gas is $1.28/ mmbtu and at $4.20/ mmbtu ,RIL will make huge profit and RNRL will lose around $1 billion (Rs. 4,200 crore ) over 17 years.

10. RIL : They argued that, never committed to a price to s ince it is subject to government approval and government has rejected price of $2.34/ mmbtu in January 2006 and approved 4.22/ mmbtu . If Government values gas at $4.2 for its profit share and RIL has to sell it at $2.34 , it could suffer a loss of $5 billon.

11. Government: Petroleum Ministry argued, that the brother are fighting over something that does not belong to them. Article 297 of Constitution of India lists petroleum and gas a resource which Union of India has an authority over and RIL cannot sell it unilaterally Further, Price of $4.20 was approved and RIL cannot sell it at $2.34/ mmbtu

12. RULINGS High Court of Bombay: Ruled in favour of RNRL, saying that MoU does not violate the PSC and therefor ministry cannot to cancel the agreement between RIL-RNRL Supreme Court: After the appeal by RIL, supreme court gave ruling in favour of applicant, saying that RIL has the right to sell government specified price and MoU is not binding with this regards.

13. THANK YOU!