New Delhi, Oct. 21: The Supreme Court today suggested that Mukesh Ambani’s Reliance Industries Limited and brother Anil’s Reliance Natural Resources Limited should consider arbitration to settle their gas dispute — a proposal that was promptly rejected by RIL.

RIL’s counsel Harish N. Salve, instead, said the company considered the government’s gas utilisation policy a more suitable alternative.

In 2007, the government had ruled that gas from Reliance’s fields in the Krishna-Godavari basin should be priced at $4.20 per million British thermal unit (mBtu), much higher than the price of $2.34 that Reliance had agreed for gas to RNRL, which was part of a family arrangement between the Ambani brothers to carve up the business empire of the late Dhirubhai Ambani.

A bench, comprising Chief Justice K.G. Balakrishnan, Justice R.V. Raveendran and Justice P. Sathasivam, said there were several grey areas in the 2005 family agreement, which had provisions on gas sharing, and these could be ironed out either mutually or through third-party intervention.

“Someone has to decide a suitable arrangement? What could be a suitable arrangement? Why don’t you go in for arbitration or mediation?” Justice Raveendran suggested.

But Salve was quick to reject the suggestion. “Any scheme that is in public interest should prevail,” he said.

The government might even terminate its production sharing contract with Reliance Industries, if the company sold gas at a price below the one mandated by the government.

The RIL counsel also said that Bombay High Court — whose verdict favouring RNRL over RIL had led to the latter moving the apex court — should not have entertained the case in the first place as the issue was beyond the scope of the companies act.

Sections 391, 392, 394 of the act come into play only when the interests of the company, its creditors and shareholders are affected.

The act cannot be invoked to enforce an MoU which deals with merger or demerger of companies, Salve argued.

The bench, however, did not agree with his line of reasoning. Salve would continue with further arguments tomorrow. He’s expected to finish his presentation by next Wednesday.

The hearing will spill over to November and most possibly end on November 10, in line with the schedule agreed to by both the sides.

The Supreme Court had specially constituted the bench for the hearing, which had to undergo a last-minute change with Justice Raveendran coming in the place of Justice B.S. Chauhan.

The court will first hear the two main parties — RIL and RNRL — before it begins hearing the government.

The government after refusing to take sides in Bombay High Court has now filed an appeal in the Supreme Court against the high court verdict saying that the high court’s decision “prejudiced” its gas utilisation and pricing policy.

RNRL today again objected to the government’s participation, saying it had no “locus standi” on the issue. However, Salve was quick to differ. “If the government has a perception, it has to be heard,” he said.