The price, tenure and quantity which are fundamental to any contract have been kept completely uncertain in the Gas Sale and Purchase Agreement (GSPA) entered by Reliance Industries Ltd (RIL) with Reliance Natural Resources Ltd (RNRL), argued senior counsel Mukul Rohatgi in the Supreme Court on Tuesday.

Making his submissions before a three-Judge Bench of chief Justice K. G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam, RNRL counsel Mr. Rohatgi said “This makes the contract absolutely un-bankable and unsuitable.” He said such a contract was a complete breach of scheme and “this is nothing but absolute greed.”

He pointed out that RIL developed a complex formula for determining the term of gas supply that restricted the duration for one to four years from the original 17 years as envisaged in the 2005 MoU. He asserted that no such formula existed in any international gas supply contract. “This formula makes the Gas Supply Master Agreement (GSMA) / GSPA unsuitable and un-bankable and no one will invest even one rupee in a power plant.”

He said the complex formula for determining the price of gas would render the contract completely unbankable. He submitted that GSMA was against the interest of Anil Dhirubai Ambani Group (ADAG) as it provided for gas supply directly to the affiliate of RNRL which owned the power plant.

“In such a case, RNRL will not be the buyer but its affiliate Reliance Power Ltd (RPL) will be the buyer and RIL will be the seller. This renders RNRL a shell company with no business,” he said.

Mr. Rohatgi also pointed out that the MoU “clearly provides for 28 mscmd of gas annually and an additional 12 mscmd in case the contract between RIL and NTPC did not materialise.” The counsel maintained that the NTPC contract for the supply of gas from the KG basin could not be subject to government approval and RIL should supply gas at the same price at which it would supply gas to NTPC.

Mr. Rohatgi quoted the MoU and the scheme of arrangement and said that the MoU says “a gas supply agreement will be signed between RIL and 100 per cent subsidiary of RIL which will be demerged with the ADAG Group.” Mr. Rohatgi said that according to the scheme “there will be an appropriate gas supply agreement between RIL as seller and Global Fuel Management Service” as purchaser.

Mr. Rohatgi said that Global Fuel Management Service was later renamed RNRL.

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