The Telegraph
Since 1st March, 1999
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Ambani duo in fresh standoff

Mumbai, June 23: Brothers Ambani are sparring again: this time it is over a 2000-mw power plant and a cargo airport that Reliance Ventures, Mukesh’s group company, wants to establish as part of its proposed special economic zone (SEZ) in Haryana.

The Reliance Anil Dhirubhai Ambani group (R-ADAG) has sent out letters to both Reliance Industries Ltd (RIL) and Haryana chief minister Bhupinder Singh Hooda, claiming that the plant and the airport amount to a violation of the non-compete agreement between the two groups.

In a letter dated June 20, Gautam Doshi, a director of the R-ADAG, said neither RIL nor its affiliates could promote power projects.

Doshi cited the terms of agreement reached between the two brothers on June 18 last year, which said the power sector, which includes generation, transmission, distribution and trading were the sole domain of the Anil Ambani group.

Pointing out that this project would hurt the interest of millions of shareholders of the Anil Ambani group, Doshi said though a venture into the infrastructure sector would not tantamount to breaching the non-compete clause, setting up a cargo airport does as that has also been earmarked for the younger brother.

Reacting to the latest allegations from the Anil camp, Reliance Industries, in a late night statement, said, “it has fulfilled all its commitments and obligations. It will follow the same principle in future as well.”

While Doshi has cited such specific instances of Mukesh Ambani violating the non-compete clause, the other side too feels that the younger brother is venturing into territories that are not marked for him.

Sources close to RIL said the Anil Ambani group has indicated its intentions of spending close to Rs 16,000 crore in setting up a pipeline that will carry gas from the Krishna-Godavari basin to its power plant in Dadri. Further Reliance Natural Resources Ltd (RNRL) is also understood to be firming up plans to bid for oil and gas blocks under the NELP VI.

“The company has not yet raised these issues with R-ADAG. But aren’t these violations as well,” sources asked.

A close reading of the non-compete agreement indicates that Mukesh may be scrupulously adhering to the letter of the agreement if not its spirit. The agreement reserves power generation to the Anil Ambani group companies, but it carries a rider that reads: “The demerged group (Mukesh Ambani group) may produce power for the captive generation in relation to other demerged group entities or as an activity which is incidental, necessary or required for any demerged group business.”

The agreement says if there is any surplus power generated by the captive power unit, it must be first offered to the Anil Ambani group. It will be entitled to sell the surplus power to a third party or to long-term suppliers only if the Anil camp refuses to buy it.

The non-compete agreement was signed between RIL and the entities that were spun off into the ADAG group back in January when executives owing allegiance to Mukesh Ambani still controlled them.

The Anil camp has steadfastly challenged several provisions in these agreements since Anil and his cohorts were not signatories to them. Till date, they haven’t been able to overturn these provisions.

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