The Hindu Business Line : MoU not worth the paper written on: Reliance

New Delhi, Oct. 22 Stating that the private MoU between Mr Mukesh Ambani and Mr Anil Ambani was not legally binding on it, Reliance Industries Ltd (RIL) told the Supreme Court - hearing the gas supply dispute involving the Ambani brothers – that for the company the MoU was “not worth the piece of paper on which it was written.”

The Anil Ambani-promoted Reliance Natural Resources Ltd (RNRL) is suing the Mukesh Ambani-led RIL for not honouring the commitment made in the MoU for supplying 28 mscmd of natural gas from the Krishna-Godavari Basin D6 block at $2.34/mBtu.

Senior counsel for RIL, Mr Harish Salve told a Bench headed by the Chief Justice Mr K G Balakrishnan on Thursday that secret agreements between promoters - which could have a vital bearing on the companies - cannot have a legally binding effect on the companies, their shareholders and creditors.

The shareholders and creditors of RIL had no knowledge about the MoU between the Ambani brothers, he said.

“Secret agreement between promoters which affect the companies’ shareholders is not binding on the company, especially that has three million shareholders,” he said.

The board of directors also had not given their approval to the MoU, Mr Salve said.

To this, the court asked how the demerger could have taken place without the MoU? Mr Salve responded that only certain extracts of the MoU found a place in the demerger scheme. “Even now, the whole MoU is not before the Court (the Supreme Court), only certain extracts are before the Court,” Mr Salve said. When the Court sought to see the entire MoU, Mr Salve said he could produce it.

However, he said that it would be “a dangerous trend if promoters are allowed to have side-deals.”

Mr Salve said according to the Companies Act, contracts impacting a company must have the approval of the board and shareholders as well as the Government’s approval if there is anything of public interest. But the Ambani brothers’ MoU does not have these approvals, he said.

RIL also informed the Court that the Gas Utilisation Policy was not a policy that is notified like the Industrial Policy of the Government. RIL is maintaining that it neither has the marketing freedom nor the authority to supply gas to RNRL at subsidised rate, as the Government has determined a price of $4.2/mBtu and also allocated the gas according to the gas utilisation policy.

Mr Salve said RIL also objected to its lack of marketing freedom on gas.

He said while the Samalkot power plant (in Andhra Pradesh) of the Anil Ambani Group firm was purchasing gas from KG-D6 at government-determined price of $4.2 per mBtu, it was objecting to the same rate for its other plants. Mr Salve said RIL itself was being forced to source liquified natural gas (LNG) at over $9 per mBtu since the Government is yet to allocate any gas from KG basin D6 block for its own captive use.

Thursday was the third consecutive day that the apex court is hearing the case. The arguments will resume on October 27.

Related Stories:
Gas row: Sue Mukesh, don’t involve shareholders, says RIL

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