The Memorandum of Understanding (MoU) signed by the elder brother Mukesh D. Ambani is binding on Reliance Industries Ltd. (RIL), notwithstanding the fact that the RIL board had not approved the MoU, argued senior counsel for Reliance Natural Resources Ltd. (RNRL) Ram Jethmalani in the Supreme Court on Wednesday.
Continuing his submissions before a three-Judge Bench of Chief Justice K. G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam, counsel said “Mr. Mukesh Ambani, as the Managing Director and Chairman of the company is the ‘alter ego’ and “directing mind and will of RIL since he held controlling stakes in RIL; he is the Promoter Director - Lifetime Director and not liable to retirement; does not require the resolution of shareholders.”
Mr. Jethmalani said the July 27, 2004, resolution gave all powers to Mr. Mukesh Ambani and in this case after this humiliating resolution “he had more powers than what is conferred by the Companies Act itself.” Countering the arguments of RIL that MoU was not binding, he said the company and Mr. Mukesh Ambani could not be treated as a separate identity. He said the fact that Mr. Mukesh Ambani was acting for RIL was clear from the resolution by which all powers of the RIL board were delegated to him.
He said “The MoU was binding on all. We have concurrent findings of the single judge and a Division Bench of the Bombay High Court.” He said “the scheme has taken the form of a contract between all the stakeholders and this includes the government which approved it. Here the government was the one to protect public interest as its responsibility. The scheme was fair, reasonable; neither held as illegal or unconscionable and was wholly protective of the public good.”
Explaining the scope of the various provisions of the Companies Act, Mr. Jethmalani said that the court should ensure that the scheme was implemented with or without modifications and alterations of subordinate nature. Further, he said the Court had the power to supervise the scheme which definitely included ensuring that all hurdles were removed in proper implementation of the scheme, particularly those arising from dishonest conduct.
He said “under Sec. 392 of the Companies Act, if a scheme is not implemented as envisaged: RIL has to be wound up which is not in the interest of millions of RIL shareholders and Mr. Anil Ambani is entitled to be reinstated in the RIL board with full powers as existed before the July 27, 2004, board resolution.”
Mr. Jethmalani referred to the scheme of the demerger document adopted by the shareholders on October 21, 2005, which despite explaining the demerged entities under Mr. Mukesh Ambani and Mr. Anil Ambani says that “… the board of directors of the applicant company considered that a scheme of demerger would be the most appropriate methodology, as it is transparent and no shareholder suffers any detriment. Besides such a structure, unlocks value for the shareholders.”
On the RIL’s contract with others, he said “RIL could not enter into any contract without the consent of beneficiaries, that is, the Anil Ambani Group.”
Arguments will continue on Thursday.