Holding that gas is a national asset and the Centre's pricing policy will prevail over any private agreement, the Supreme Court has directed Reliance Industries Ltd (RIL) of the Mukesh Ambani group to initiate renegotiations with Reliance Natural Resources Ltd. (RNRL) of the Anil Ambani group for fixing the price of gas to be supplied to RNRL.

Disposing of a batch of appeals, a Bench of Chief Justice K.G. Balakrishnan and Justices B. Sudershan Reddy and P. Sathasivam on Friday rejected RNRL's claim that it was entitled to get 28 mscmd of gas from the KG Basin at $2.34 mBtu in terms of a 2005 Memorandum of Understanding between Anil and Mukesh without any price approval by the government..

In a separate judgment written by Justice Sathasivam and agreed to by the CJI, the Bench said that while initiating renegotiations “the parties should take into account the MoU [which], even though not legally binding, is a commitment which reflects the good interests of both parties.” This Bench expressed its dissent on some of the points dealt with by Justice Reddy in his separate judgment.

Justice Reddy, while directing the parties to renegotiate, said the exercise should be dehors the MoU. Such renegotiations should be within the framework of governmental policy and approvals on price, quantity and tenure of supply of gas.

Justice Sathasivam's judgment said: “It is not permissible for RIL to enter into a contract with RNRL to supply a fixed quantity as the gas continues to be the property of the government till the time it reaches the delivery point, and thus RIL has no right to dispose of the same without the express approval of the Union government.”

On RNRL's contention that gas should be supplied without any governmental approval, the Bench said that having insisted on a Gas Sale and Purchase Agreement (GSPA) in conformity with the NTPC draft GSPA dated May 12, 2005 which contained an unequivocal stipulation of government approval for quantity, tenure and price, it was not open to the Anil group to argue that government approval for supply was not required.