Mukesh and Anil Ambani: Deep divide

Mumbai, July 17: Mukesh Ambani-owned Reliance Industries Ltd (RIL) today appointed former Supreme Court judge B.P. Jeevan Reddy as its arbitrator in the festering dispute with Reliance Communications Ltd (R-Com).

R-Com opened talks with MTN of South Africa on May 26 to create a telecom behemoth that will rank among the 10 largest telecom players in the world.

RIL is challenging the alliance since it could involve a stake sale to MTN.

Under a non-compete agreement linked to the process of the demerger of the Reliance group in January 2006, RIL is claiming a right of first refusal to any stake sale.

R-Com, however, has refused to participate in the arbitration process and has questioned RIL’s locus standi on an internal matter pertaining to an ADAG (Anil Dhirubhai Ambani Group) company.

R-Com has also argued in the past that the non-compete agreement and two other pacts linked to the demerger process were flawed because they were signed when all the companies were still under the control of Mukesh Ambani and his cohorts.

“R-Com has refused to participate in the conciliation meetings under the alternate dispute resolution provisions contained in the non-compete agreement. RIL has commenced arbitration proceedings by nominating Justice B. P. Jeevan Reddy, a former Judge of the Supreme Court of India, as an arbitrator for resolution of the disputes,” said an RIL spokesperson this evening.

The RIL move comes just a few days ahead of the July 21 expiry of the “exclusive talks” agreement between R-Com and MTN for a potential deal, which could create an estimated $70 billion entity spanning 22 countries.

However, the legal wrangling between the two Ambani brothers threatens to cloud the deal, with MTN reportedly being wary of the “right of first refusal” claimed by RIL.

The Anil Ambani camp reasoned that the arbitration process is possible only by mutual consent and cannot be initiated against someone.

“Since we’re not participating in the process, how can they arbitrate unilaterally,” asked an R-Com spokesperson.

For their part, RIL officials said they would move court if R-Com refused to participate in the arbitration process.

Earlier, RIL had threatened legal action against R-Com and MTN in case they went ahead with a business alliance. It then went on to invite Anil Ambani's company for conciliation talks to resolve the dispute in stake sale. The Anil camp rebuffed this overture.

Since the beginning of the dispute with RIL on the MTN stake sale, Anil Ambani’s camp has maintained that there is neither any “dispute” nor any occasion for a “conciliation process”.

R-Com today said, “RIL’s mala fide design to derail discussions with MTN has been clearly exposed. RIL has threatened legal action in its fourth letter. Its notice for arbitration proceedings is legally and factually unwarranted. RIL has successfully destroyed India’s image in foreign eyes.”

The spokesperson further said that R-Com had stated on July 7 that RIL was not “interested in understanding factual position or clarifying its doubts and its sole objective was to derail talks with MTN and frustrate a possible combination”.