Nov. 5 (Bloomberg) -- The fight between India’s billionaire Ambani brothers over natural gas supplies from a field with $38.3 billion of reserves started anew in the Supreme Court after a judge joined the panel hearing the lawsuit.

Arguments started afresh by Harish Salve, lawyer for Reliance Industries Ltd., after Justice B. Sudershan Reddy replaced R.V. Raveendran on the three-judge panel today. Raveendran stepped down, citing a potential conflict of interest, after six days of arguments.

The dispute is over a 2005 agreement requiring Mukesh Ambani’s Reliance Industries to sell discounted gas to Reliance Natural Resources Ltd., owned by estranged younger brother, Anil, from the nation’s largest field, which at its peak could double the current domestic gas output. In India, 400 million people lack electricity and shortages threaten to impede growth in Asia’s third-largest economy.

Raveendran recused himself yesterday, saying his daughter works at a law firm that advises Reliance Industries.

“It’s very, very unusual,” said Homi Phiroze Ranina, an independent lawyer based in Mumbai. “He could’ve made his position clear, and if all the lawyers had no objections, he could’ve continued.”

The decision may delay the completion of arguments by a week, said Mahesh Agrawal, a lawyer for Anil’s company.

Offer to Withdraw

Raveendran earlier dropped an offer to withdraw after lawyers of both companies said they don’t object to his participation even though he owns shares in the companies run by the siblings. Raveendran holds 772 shares of Reliance Industries and 783 shares of Reliance Natural, according to a list of assets owned by judges on the Web site of the Supreme Court.

“I do not want to be a party to this case,” Raveendran said yesterday. “I spoke to my daughter who is in Bangalore and she works with AZB & Partners, which is advising Reliance Industries on other projects for global acquisitions.”

Reliance Industries wasn’t aware of the association and hadn’t been informed about it by AZB, the company said in an e- mailed statement yesterday, expressing regret for the loss of six working days of the court. Reliance Industries should have disclosed the information before the hearing, the Anil Dhirubhai Ambani Group said in a separate statement yesterday.

Reliance Industries shares gained 1.1 percent to 1,941.15 rupees in Mumbai trading, compared with a 1 percent increase in the benchmark Sensitive Index. Anil Ambani’s Reliance Natural shares rose 3.7 percent to 70.65 rupees.

Fast Track

The bench, headed by Chief Justice K.G. Balakrishnan, started hearings on Oct. 20 after agreeing to skip preliminary hearings in order to fast track the case through India’s overburdened judicial system.

Reliance Industries, India’s most valuable company, is seeking to overturn a lower-court order to supply gas to Reliance Natural Resources at 44 percent below the state-set price. The company told the court last month it would lose money selling the gas at such a discount.

The KG-D6 gas field at its peak will produce an estimated 80 million cubic meters a day of gas. Reliance Industries is fighting lawsuits over the supply of half that. Reliance Natural says it has the rights to 28 million cubic meters a day of the gas. NTPC Ltd., India’s biggest power producer, is fighting a case for the supply of 12 million cubic meters in the Bombay High Court.

Reliance Industries and its partner, Calgary, Canada-based Niko Resources Ltd., may earn $10.63 billion in sales from the nation’s largest natural gas field, according to the Directorate General of Hydrocarbons.

The government may earn $16.57 billion from the KG-D6 field off India’s east coast, the oil and gas regulator said in the advertisement in the Hindustan Times newspaper on Oct. 7.

The case is SLP(C) No. 14997/2009 between Reliance Natural Resources and Reliance Industries in India’s Supreme Court.

To contact the reporters on this story: P.S. Patnaik in New Delhi at ppatnaik2@bloomberg.net; Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net.

Last Updated: November 5, 2009 07:13 EST