The Memorandum of Understanding (MoU) between the two Ambani brothers, including the terms on gas supply, was a sacrosanct document and Reliance Industries Ltd. (RIL) was bound to implement the MoU, argued senior counsel for RNRL (Reliance Natural Resources Ltd.) Ram Jethmalani in the Supreme Court on Tuesday.
Continuing his submissions in the Reliance gas dispute gas before a three Judge Bench of Chief Justice K. G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam, Mr. Jethmalani completely differed from RIL’s senior counsel Harish Salve’s arguments that the MoU was not even worth the paper on which it was written as it had not been approved by the board of directors of RIL.
Industrialist Anil Ambani made a surprise presence in the court hall throughout the day’s hearing. Asked the reason for coming to the court and watching the proceedings, he said “my presence in the Supreme Court today reflects my deepest regard and respect for our judiciary. I have come here today not just on my own behalf but on behalf of the nearly 11 million shareholders of the Reliance Anil Dhirubhai Ambani Group — the largest shareholding family in the world — whose interests will be directly affected by the outcome of this case.”
In the beginning, Mr. Jethmalani told the court that since his client was present he was slightly deviating his line of argument. He said there was nothing private about the MoU as it was a corporate document and it was hard to believe that the directors were not aware of the contents of the MoU. Though characterised as a private arrangement, the MoU was a controlling document, partitioning the parent company, its businesses, its assets and the holy corporate arrangement, he said and asked “how can you say that the directors were not aware of the MoU.”
‘Board aware of MoU’
Mr. Jethmalani said the MoU was always known to the board of directors and was also reflective in the board meeting they had attended and thereafter they thanked the mother, Kokilaben Ambani for having successfully transitioned through the partition.
When Mr. Jethmalani was reading the correspondence between the two companies, Justice Reddy asked whether approval of the MoU by RIL was not necessary as there was a reference to that effect, counsel said “that {reference} does not mean the MoU was not binding. The scheme itself was based on the MoU hence approval of the companies was implicit if the promoters have already agreed on the terms.”
Referring to the affidavits filed by RIL directors that they were not aware of the contents of the MoU, counsel said they should be subjected to cross examination. He also wanted to know whether Mr. Mukesh Ambani would file a similar affidavit.
‘No dispute on the price’
He said “till the negotiations were going on for arriving at the bankable contract, RIL never raised the issues of Production Sharing Agreement (PSA) or the approval of price for the supply of gas by the government. RIL later came out with bogus arguments of PSA and price approval by the government. There was no dispute on the price, duration and the quantum of gas to be supplied. Besides implementation of the MoU, RNRL wants to strictly comply with the NTPC document which envisaged the supply of gas at $2.34 per million British thermal unit (mBtu) by RIL.”
He said RIL’s refusal to supply gas at $2.34 was a criminal breach of trust. Reference to PSA and government approval was an impertinent imposition on contractual terms, he said.
He said before the partition of RIL, the brothers had equal amount of power. Both were managing directors of the company and Mr. Mukesh Ambani was Chairman and Mr. Anil was Vice-Chairman. He said that personal differences arose in the relationship after the death of the father and ultimate humiliation was on July 27, 2004, when a board resolution was passed virtually stripping Mr. Anil Ambani of all powers, status, honour and dignity. “This was a watershed moment in their life and relationship,” he said.
Mukesh’s game plan
Mr. Jethmalani blamed elder brother Mr. Mukesh Ambani saying that his game plan was to ask the government to demolish the younger brother. He said that when a scheme was enforced it was not only the power of the court, but also its duty to express it. The court had the power to add to the scheme. He said as per the June 18, 2005, board resolution Mr. Anil Ambani was to be reinstated on the RIL board in case the scheme of arrangement “does not go through in 18 months”, Mr. Anil Ambani would have to be reinstated as Vice-Chairman and one seat on the RIL board was kept vacant for this purpose. Arguments will continue on Wednesday.
