Sunday, July 19, 2009

A Twist In The Tale :-
All know about the ongoing legal battle between Ambani brothers about the KG Gas dispute and now it has gone to Supreme Court for hearing on 20 July, 2009. We had covered this in our previous post (, but government has started playing its cards and now the case has become even more interesting. 

The government filed a petition before the Supreme Court seeking a direction to declare as "null and void" the private family agreement of the Ambanis that provides for gas supply by RIL to RNRL. The Special Leave Petition (SLP) was filed by the Petroleum Ministry, a day after it filed an affidavit in response to Mukesh-led RIL's petition in the Supreme Court challenging the High Court order. The points put forward in the SLP by Petroleum Ministry:-
  • The gas under the PSC (Production Sharing Agreement) was "the property of the government of India".
  • "The contractor (in this case RIL) has certain rights and obligations under the PSC. The rights do not include utilising the gas at the discretion of the contractor.
  • The goverment had valued the gas at $4.20 per mmBtu and has stipulated that fertiliser units were to get the gas first followed by power sector. But RIL-RNRL family agreement clauses violate this stipulation.

Why has Government suddenly awaken?
All the blocks provided under NELP (New Exploration Licensing Policy) are on lease basis and private companies use them for a particular time period. In any lease, there is only a transfer of possession and no transfer of ownership. KG basin block is also on the same lines. Government says all the blocks are national property and NELP is on profit-sharing basis. Government share of profits is dependent on selling price so one can not sell below the price set by the Government. The Petroleum Ministry said that the gas produced and expected to be produced from KG basin and other fields under the various PSEs is substantial. "It is expected to nearly double the availability of gas in India in about one year's time. If properly used, it will promote the industrialisation of India. In terms of the MoU, however, all the gas will be owned by the respondents (RIL and RNRL) and utilised at their discretion. Obviously, the pressing needs of the priority sectors cannot be allowed to be held hostage to the benevolence and mercy of these two respondents," the government submitted.

Sub-lease- A lessee can transfer the whole or any part of his interest in the property by sub-lease. However, this right is subject to the contract to the contrary and he can be restrained by the contract from transferring his lease by sub-letting. The lessee can create sub-leases for different parts of the demised premises. The sub-lessee gets the rights, subject to the covenants, terms and conditions in the lease deed.

Original NELP clauses (1999 document):-
It is Government who fixes the Gas prices (refer clause 19 in this page):-

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