Those who control a company are considered its “alter ego” and since Mukesh Ambani was controlling Reliance Industries and knew of the contents of the memorandum of understanding (MoU) in the Ambani family agreement, the latter was binding on all parties, senior counsel Ram Jethamalani told the Supreme Court today.
He was arguing for Anil Ambani-controlled RNRL in the appeals against the Bombay High Court judgment in the dispute between the two brothers. Mukesh Ambani’s Reliance Industries (RIL) had earlier argued that the MoU was not binding, as its contents were not known to the shareholders or the directors and they had not voted on it.
Jethmalani said it was not necessary for the shareholders or directors to know the contents of the memorandum, as Mukesh Ambani was privy to it, with his younger brother and their mother.
The Ambani brothers are locked in a bitter battle over the supply and price of gas from the Krishna Godavari basin. While RNRL is seeking gas at the price of $2.34 per unit committed in the family agreement, RIL says it cannot honour this as the government later notified a different price and policy.
Counsel argued that according to precedents in English law and judgments of the Supreme Court, the doctrine of alter ego is now part of corporate liability. Therefore, the MoU must be taken as binding.
Jethmalani further said that Sections 391, 392 and 394 of the Companies Act bestowed wide powers on company courts to supervise and modify a scheme of arrangement regarding amalgamations or de-mergers. He read out the provisions to stress that the court grants sanction for the arrangement assuming it had been fair, reasonable and for public good and not against public policy. And noted that public policy was not the same as the policy of the government of the day.
Under Section 392, the company court had the power to supervise and modify a scheme to make it workable.
Moreover, the court had a duty to make efforts to make the scheme fully workable and and to ensure this is carried out effectively.
Thus, he defended the HC orders on this aspect.
The expression ‘suitable arrangement’ used in the memorandum was vague and therefore circumstantial evidence must be brought in to understand the mind of the architects of the MoU. For this, the correspondence between them and their oral promises and the like should be taken into account. The MoU was embedded in the scheme, counsel stressed. He will continue his arguments on Thursday.
