I have been reading in the papers about this story since quite a while now but i had lost track about the exact span of events in this family feud. So i did my bit of reasearch to find out the order in which the events have unfolded and summarised it in this blog
THE DISPUTE
When the Ambani brothers parted ways there was a demerger agreement known as the Gas Supply Master Agreement between Mukesh Ambani's RIL and Anil Ambani's RNRL in June
2005. The memorandum of understanding (MoU) clearly stated that Reliance Industries would sell gas at $2.34 per mmBtu (million metric British thermal unit) to RNRL for 17 years and 28 mmscd (standard cubic metres per day) of gas. By the gas supply master agreement ,RIL was supposed to supply natural gas from the Krishna-Godavari basin to RNRL, to be used for the Anil Ambani group's power generation plant at Dadri in UttarPradesh. The GSMA came into existence in January 2006, following the demerger of the Reliance group. But both the sides differed on its terms related to the quantity of gas to be supplied, price and quantity of supply.
In December 2006, RNRL moved the Bombay High Court asking it to compel RIL to honour the gas agreement. Justice Anup Mohta, who heard the case, asked the companies to settle the matter internally under the June 2005 family agreement. The judge also restrained RIL from selling gas to third parties till the final order. Unable to agree on the price, terms and quantity of gas, both firms approached the division bench of the Bombay High Court against the order of the single bench in early 2008. The hearing of the matter continued till February 2009.
RNRL's claim (owned by Anil Ambani) - It wants RIL to honour the agreement and supply gas at the predecided price.
RIL's counter argument (owned by Mukesh Ambani)-
RNRL, according to the family settlement, is not entitled to trade the gas that it gets from the KG Basin and has to use it for power generation by its own group companies. But the massive 7,000 MW Dadri project is still on the drawing board and there is no way in which it can consume its entitlement of gas through other projects. RIL has therefore taken the position that it will supply the gas only when RNRL can consume it at its own power stations.
INFERENCE-
RIL has already contracted to sell 15 mmscmd of gas to various fertiliser companies and a further 12 mmscmd to power producers. These have been contracted at $4.2 per million British thermal units (mbtu) - government approved. Its current output is known to be around 25 mmscmd only, but this is expected to be ramped up to 80 mmscmd by the end of this fiscal. However , according to the judgement, RIL has to part with 28 mmscmd for 17 years to RNRL at $2.34/mbtu. The loss of revenue to RIL due to this is estimated at $1 billion.
CURRENT STATUS-
Round one of the legal battle was won by RNRL when the Bombay High Court upheld it's plea and asked RIL to honour the family MoU. RIL sent a letter to RNRL stating that it will not honour the verdict until the approval of the government over the pricing issue is received. RNRL replied saying that "The unjust conjuction that the government approval is required for price, quantity or tenure has been unequivocally rejected by the honourbale court and hence your stand in the letter is in violation of the orders of the court". In response RIL is ready to move to the Supreme Court next week and RNRL states that it is prepared for the fight.
MY VERDICT-
There is also the ongoing case between RIL and NTPC on the MoU to supply 12 mmscmd for 17 years, again at $2.34/mbtu. Assuming that the NTPC case goes against RIL and the probability that it will is high because the RNRL price was based on the NTPC deal which was forged before the family settlement - RIL will have to part with, in all, 40 mmscmd of the output from KG Basin at $2.34/mbtu as against the discovered price of $4.2/mbtu at which it is now selling to fertiliser and power producers.
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