The memorandum of understanding arrived at in the Ambani family in 2005 to divide the industrial assets between brothers Mukesh and Anil was only a “guiding tool” and could not be treated as binding on the demerged companies, Reliance Industries’ counsel Harish Salve told the Supreme Court today.
He was resuming RIL’s arguments in the five appeals against the Bombay high court judgment of July 15 in the dispute with Anil Ambani’s Reliance Natural Resources Ltd (RNRL) over Krishna-Godavari basin gas. His arguments are likely to conclude on Thursday, when the central government, the new entrant in the legal fray, will present its contentions.
The government has also filed an appeal against the HC order that directed RIL to supply 28 mscmd of gas to RNRL for 17 years at $2.34 per mBtu, the price agreed in the family MoU of 2005. The government petition states that gas is national property and RIL as the KG basin contractor could only sell at a price and quantity approved by the government.
The Ambani brothers took their legal fight to the SC two months earlier. While RNRL is seeking gas from RIL at the committed price of $2.34 per unit, RIL says it cannot honour this commitment made in the family agreement due to the government’s later pricing and gas policies. RNRL disputes this and also complains there was no independent verification, audit or approval of the costs charged by RIL.
RNRL is expected to start its innings next Tuesday. The court, in an apparent hurry to finish the hearing, has given an additional day for arguments.
Reiterating his arguments before the new bench, Salve said the 2005 MoU had no binding force unless approved by the shareholders and the board of directors of both companies. Promoters cannot decide the crucial issues regarding pricing and sharing of gas by themselves, he said, continuing RIL’s defence for abandoning the MoU.
In this case, the MoU, a confidential document, was not disclosed to the directors, shareholders or even the Bombay HC. And, the family arrangement required various approvals which were not obtained. In this situation, RNRL could not ask any court to pass directions to RIL to do things like fixing the price.
The Bombay HC, which did issue an order on price fixation of the gas, has put forward a “dangerous proposition”, that just because two persons — Mukesh and Anil Ambani — had agreed to certain ideas, these should be enforced, even without their boards’ approval, said Salve.
He mentioned a “new trend” had developed in business families by which a detailed arrangement is put in place for eventualities such as did take place in Reliance after its founder died. If the latter had done this, all these complications could have been avoided, he told the court.
