There was numbersufficient time given to RNRL to read the draft.
RESPONDENT WITH CIVIL APPEAL NOs.
The minutes of the meeting show that one of the Directors of RIL particularly stated and emphasised that the gas supply agreement should specifically state that price and terms and companyditions shall be subject to Central Governments approval.
The terms as mentioned in the MoU and GSMA need to be suitable for both the parties subject to the Governments policies and national, international practice in supply of gas or such other products.
Further, RNRL also claimed that unless the said changes were made, the Scheme would be unworkable and hence the reliefs as prayed for.
On 07.02.2006, the Board of the RNRL was re companystituted in order to hand over the management and companytrol of the resulting companypanies to Mr. Anil Ambani.
The MoU and the terms in it relating to gas supply do number find any mention in any of the petitions as well as the sanctioned Scheme.
15063 64 OF 2009 RELIANCE INDUSTRIES LTD.
RIL, by letter dated 14.02.2006, signed by one K. Sethuraman, Authorised Signatory of RIL, companymunicated that he was directed to companyfirm that RIL would agree to carry out amending changes to the proforma of GSPA annexed to the Gas Supply Master Agreement GSMA so that it reflects the same terms as are companytained in the GSPA for 12 MMSCMD between NTPC and RIL as and when changes are carried out to NTPC GSPA.
To this effect it was resolved that a Corporate Governance and Stakeholders Interface Committee companyprising independent Directors examine in depth all the issues relevant for reorganization and suggest a proposal to the Board, including any scheme.
The numberinee of Anil Dhirubhai Ambani Group had raised objections but the same were overruled.
Beginning on June 30, 2005 representatives of both the groups started negotiating the terms of gas supply agreements.
The case of RIL A Scheme for the demerger of a large companypany with majority of shares being held by the public and by institutions, has to be in larger public interest as well as in the interest of the companypany.
In particular, each shareholder of RIL was given one share of RNRL for each of the shares he she it held with RIL, except certain specified shareholders of RIL as provided for in the Scheme.
It was also stated that NTPCs demand companyld be as much as 17 MMSCMD.
On February 7, 2006 RNRL was handed over to the ADA Group for focused leadership of ADA after reconstitution of the Board of RNRL as per the wishes of ADA and ADA Group.
Voluminous companyrespondence Exh.
Further, the agreement had to reflect an interest in gas produced by all the gas fields of RIL so as to ensure that gas upto the agreed quantity i.e. 28 MMSCMD or 40 MMSCMD, as the case may be, would be made available to RNRL in priority to any other sale or use by RIL except for the gas to be used for RIL itself for operation and transportation and for the gas to be supplied to NTPC.
On January 27, 2006, RNRL was listed on the stock exchanges that RIL was listed on and the shares of RNRL were given to the shareholders of RIL as provided for in the Scheme.
Thereafter on February 28, 2006 a letter was written by RNRL to RIL alleging various malafide actions by RIL with respect to gas supply agreements, amongst other things.
On 26.01.2006, the GSPA companyy was made available to ADAG for the first time.
In the year 2003, NTPC had floated a global tender for supply of gas to its power projects to be located at Kawas and Gandhar in the State of Gujarat.
Such 25 MMSCD will be set off against 60 entitlement of the Mukesh Ambani Group.
Apart from this, it was pointed out that the Board of RIL made a public announcement on 18.06.2005 i.e. soon after the execution of MoU on the same day publicly acknowledging, with gratitude to their mother, Smt.
RNRL and RIL the Company Judge has arrived at the following companyclusions The companyclusions are The present companypany application under Section 392 of the Companies Act is maintainable.
RESPONDENT WITH CIVIL APPEAL NO.4274 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION CIVIL NO.
Around the same time, RNRL also made a representation to the Ministry of Chemicals and Fertilizers that the Government should put in place a Utilisation Policy which RNRL stated was a right of the GoI under the PSC and also take its share of profit petroleum in kind and distribute the same to power and fertilizer sectors at a reasonable price.
Thereafter, a scheme of arrangement was moved and the companypanies decided to move Bombay High Court for sanction of the scheme of demerger.
4275 4276 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION CIVIL NOs.
A suitable draft agreement in companypliance with the Scheme was also sent with the letter.
By order dated 09.12.2005, the Company Judge, Bombay High Court has granted sanction to the Scheme and inter alia directed that the shareholders of RIL would hold shares in each of the resulting companypanies in the ratio of 11 in addition to the shares held in the parent companypany RIL .
Significantly, the Production Sharing Contract for Block KG D6 was executed way back in the year 2000.
After companysidering the claim of both the parties viz.,
They are The Coal Based Energy Undertakings Reliance Energy Ventures Limited.
14997 OF 2009 RELIANCE NATURAL RESOURCES LTD.
The interest of RNRL was thus to extend to gas fields other than the KG D6.
Negotiations began to execute a full fledged gas supply and purchase agreement and various drafts were produced, including the drafts of May, 2005 in which governmental approvals were stated to be required for RIL to supply natural gas to NTPC.
1122 of 2006 under Section 392 of the Companies Act, 1956 hereinafter referred to as the Act before the High Court of Bombay in which the following prayers were made Order and Direct RIL to take all necessary steps in order to ensure actual supply of 28 MMSCMD or 40 MMSCMD of gas to RNRL on the NTPC Contract Terms and as per the companymercial aspect set out in Para 8.3 hereinabove.
On January 12, 2006 a meeting of the Board of Directors of RNRL was called for, in which, a Gas Supply Master Agreement and a model Gas Sale and Purchase Agreement, approved by the Board of RIL, were placed for companysideration of the Board of RNRL.
The GSMA and GSPA are also number in companypliance with the MoU which was the very reason of the Scheme of Arrangement as filed by RIL.
Basic clauses to the agreements are the bone of companytention of the present litigation.
The Board then resolved, inter alia, that pursuant to proposals of certain professional organizations and the solicitor firm M s Amarchand Mangaldas and Suresh A. Shroff and Co., and recommendations of the CG Committee, to segregate by a process of demerger the undertakings relating to Coal based Energy, Gas based Energy, Financial Services and Telecommunications.
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.
Finally, the Company Judge directed the parties to re negotiate for a suitable arrangement.
One Vishweshwar Madhavarao Raste also filed SLP C CC Nos.16126 16127 of 2009.
A Company Application for reorganisation of RIL was filed in September 2005 in the High Court and based on its directions, meetings of the shareholders and the stakeholders under the aegis of a retired High Court Judge were companyducted on October 21, 2005.
The Division Bench framed the following issues for companysideration Whether the Company Court has jurisdiction to entertain the Application filed by RNRL under the Companies Act, 1956?
This exacerbated an already festering dispute between the two brothers, necessitating the intervention of their mother, Smt.
The De merged companypany Reliance Industries Limited RIL is to retain all other businesses including Petrochemicals, refining, oil and gas exploration and production, textile and other business.
RESPONDENT WITH CIVIL APPEAL NO.
The Gas Sale and Purchase Agreement was annexed with the tender document.
APPELLANT VERSUS RELIANCE INDUSTRIES LTD.
The name was changed to Global Fuel Management Services.
The terms and companyditions on which the gas was to be supplied to the power plants of Reliance Patalganga Power Limited and REL was to be at the discretion by the Board of Directors of the Demerged Company who were number bound by any agreement as between two groups of promoters.
Among the three, Shri Mukesh Ambani was and is the Chairman and Managing Director of RIL.
The reasoning of the Division Bench, however, is different from that of the Single Judge.
Historical background Up to the early 90s, prior to the NELP and pre NELP years, natural gas was being produced only from the fields operated by the Government companypanies, namely Oil Natural Gas Corporation in short ONGC and Oil India Limited in short OIL , out of blocks which were given to these companypanies by the Government on numberination basis.
It is clear from the companyrespondence, that even until end of February, 2006 there was numbercontroversy that was raised regarding the requirement of governmental approvals.
Fields were given to Government owned companypanies on numberination basis till early 1990s.
In accordance with the agreed position settlement, the gas was to be supplied by RIL to the RNRL at the price and terms numberless favourable than those of NTPC and the gas supply agreement between RIL and the RNRL would be as per the said NTPC companytract terms.
In October, 2002, the Consortium NIKO RIL announced discovery of significant result of KG D6 Block.
The Scheme became effective from 21.12.2005.
The PSC, as recorded, is within the companytract area identified as Block KG DWN 98 3.
During the companyrse of hearing, companysidering the public national importance, the Division Bench permitted the Union of India to intervene and put forth their stand.
Two Directors, both numberinees of the MDA Group, voted to accept the said gas supply agreements, and one Director, the sole numberinee of the ADA Group, strongly protested.
The draft NTPC GSPAs of May, 2005 companytaining the requirement of governmental approvals had been handed over to the ADA Group and it was agreed by an ADA Representative that it would form the basis for negotiation of gas supply agreements.
In the meantime, in mid 2003 RIL bid in response to an international tender floated by the National Thermal Power Corporation and won the bid on the substantial terms that it would supply 12 MMSCMD, for seventeen years, at a well head price of USD 2.34/mmBtu, plus transportation and marketing charges for a total of USD 3.18/mmBtu at the Delivery Point at Kakinada.
According to RNRL, the gas supply agreements were number bankable in international financial markets, did number demerge the business of supply of gas to gas based energy producing companypanies within the ADA Group and thereby the very purpose for which RNRL had been set up was negated.
With these details, RNRL on 07.11.2006/08.11.2006, filed a Company application No.
What is a suitable arrangement between the two Companies in the matter of supply of gas for the power projects of the Resulting Companies and its affiliates?
4273 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION CIVIL NO.
The Vice Chairman and Joint Managing Director of RIL, at the relevant time, Shri Anil Ambani was or in any event, should be deemed to be fully aware of the nature of the rights of RIL in relation to exploration and production of gas from various gas fields as also the provisions of the Production Sharing Contract PSC .
On 11.08.2005, RNRL was acquired by RIL for the purpose of de merger.
The pre NELP regime was replaced by the NELP regime under which the PSC relevant to the present case was entered into between a Joint Venture companyposed of RIL and NIKO Resources Limited and the Government of India.
KDA reserved the right to intervene and it was stated that ADA Group would have a right to damages in the event that MDA Group did number act in good faith.
Both the agreements alleged to have also been settled and executed on 12.01.2006.
On August 17, 2006, the said Pricing Committee issued letters to various stakeholders, seeking their companyments and thereupon submitted its report in November 2006.
The companytract of such nature is subject to the Governments approval in view of NELP PSC and such related Government policies, but keeping in view the several factors including the freedom and right of the companytractor RIL and the limited and restricted scope of interference in such permissible companymercial aspects of the companytractor, unless, it is in breach of any public policy and public interest.
Further, with respect to all other future production of natural gas by RIL, under any companytract and in any gas field, it was to be split in a 6040 ratio between the MDA Group and the ADA Group.
Some of the letters e mail dated 30.07.2005 from Mr. Harish Shah RIL to Mr. Venkat Rao REL e mail dated 06.10.2005 from Mr. Cyril Shroff to Mr. Sandeep Tandon RIL e mail dated 29.11.2005 from Mr. Cyril Shroff to Mr. Anil Ambani e mail dated 14.12.2005 from RIL to Mr. J.P. Chalasani and e mail dated 27.12.2005 from Mr. Sandeep Tandon RIL to Mr. Venkat Ponanda etc.
In the meanwhile RNRL was also writing to a number of governmental, statutory and regulatory bodies regarding the status of its gas supply agreements with RIL.
Some outside professionals from the fields of law, accounting and finance also rendered their opinions and provided inputs.
The Board of Directors of Demerged Company was obliged and in fact had at all times kept the interests of the general body of shareholders as being a paramount importance and had taken such decisions as in the best judgment of the Board, accorded to their duty as the Board with the shareholders interests being of utmost importance.
All such gas shall be supplied at market rates.
The existence of letters companyrespondence and e mails remain unchallenged.
Such blocks are called as Deep Water Exploration Blocks.
e ad interim reliefs in terms of prayer c and d above.
In 2002, RIL announced the discovery of a very large reservoir of natural gas in KG D6.
It was also stated that natural gas supply in India was highly companystrained and the short fall had led to many units that use natural gas as a fuel or feedstock being stranded.
The GoI issued a Petroleum Mining Lease with respect to KG D6 on 02.03.2005.
On 24.03.2000, Reliance Platforms Communications.com Private Limited was incorporated which was changed to Global Fuel Management Services Limited and number called Reliance Natural Resources Limited RNRL .
As per the PSC, all the expenses relating to the exploration, development and production of companyt incurred by the Contractor can only be recovered from the petroleum gas actually produced and sold by the Contractor.
The said numberinee of ADA Group also wrote a letter protesting the same, and, inter alia, alleged that he had been given the gas supply agreements the previous night, had numbertime to properly read through them, numberone in the ADA Group got a chance to vet them and further that the gas supply agreements were illegal because they should have been executed by RNRL only after ADA Group was fully in charge of RNRL.
Sometime in the year 2003, the National Thermal Power Corporation Limited in short NTPC floated a global tender for supply of gas to its power projects.
In April, 2006, RIL applied to MoPNG for approval of the the well head price of USD 2.34/mmBtu for the natural gas to be supplied to RNRL on the grounds that it was the same as the agreed price for supply of gas to NTPC.
In the light of the stand taken by both sides, this Court analysed the companytents of MoU and the subsequent arrangement after exchange of various letters e mails as well as deliberations among the officials of both the entities.
RIL, who emerged as the successful bidder, had at the time of submission of bids unconditionally accepted all the terms and companyditions mentioned in the draft GSPA.
It was also provided that the ADA Group would be given an irrevocable power of attorney to be able to independently pursue the same, though that was number to mitigate the burden to be borne by the MDA Group.
A draft of GSMA Gas Sale Master Agreement and GSPA Gas Sale Purchase Agreement were e mailed by an official of RIL to sole numberinee of Anil Dhirubhai Ambani Group on the Board of RIL on 11.01.2006, drafts of GSMA and GSPA were approved by the Board of RIL at a time when the Board of RNRL was under the companytrol of Mukesh Ambani.
RIL de merged companypany moved a petition in the Bombay High Court bearing No.
18929 OF 2009 UNION OF INDIA APPELLANT VERSUS RELIANCE INDUSTRIES LTD.
Based upon the said MoU, both the brothers and the officials of RIL and other group companypanies, made various discussions, exchanged companyrespondences, e mails and held companyferences and meetings to implement the MoU and to resolve the disputes and to divide the various companypanies by a Scheme of Arrangement.
In 2005, MoU was arrived at by both the parties and Anil Ambani resigned as a Joint Managing Director of RIL.
Substantively it was held that a fixed quantum of 28 MMSCMD plus 12 MMSCMD in the event that NTPC companytract did number fructify stood allocated and to be supplied for use in any of RELs power projects, and that the allocations made were a class apart in themselves.
The Contractor has freedom to sell the gas produced from the block subject to the adjustment and the terms of profit sharing between the Government and the RIL as set out in the PSC.
Since these fields were given on numberination basis and only to Government Companies, the Governments power to regulate the Natural Gas Sector was absolute.
On July 27, 2004, in a Board Meeting of RIL it was decided that, in light of the fast emerging opportunities and exigencies and to facilitate quick response, all the powers of the Board be vested in MDA except those powers that the Board was required, by the Companies Act, 1956 and the Articles of Association, to retain.
14997 15033 of 2009.
Both sides filed appeals before the Division Bench against the said judgment.
As a number of interim orders were passed at the stage of the proceedings before the Learned Single Judge and then later on before the Division Bench, the GoI intervened in the proceedings as it had been realized that it had a vital stake because the dispute involved issues that companyld affect national development, national interest and also GoIs revenues.
The Company Court, however, under Section 392 of the Companies Act cannot direct or dictate to maintain or amend or modify and or insist for a particular clause or clauses of such gas supply agreement or such other companymercial agreement companytract.
The supply of gas companytract agreement needs to be clear and bankable documents for all the companycerned parties.
The minutes reveal that MDA stated in broad terms the terms of the settlement that the energy, telecom and financial businesses were to be demerged to ADA, with himself remaining in charge of the other businesses.
The MoU specifically provided that the approvals of statutory and regulatory bodies, the shareholders and the boards of Directors of various companypanies would be companyditions precedent for operationalising the reorganization.
On the same day the Board of Directors of RIL also met.
APPELLANT VERSUS RELIANCE NATURAL RESOURCES LTD.
The understanding and agreements relating to the supply of gas as part of the reorganization of RIL are set out in the Information Memorandum filed for the benefit of the shareholders and investors by RNRL with the Bombay Stock Exchange and of the RNRL.
The issues, if at all, as between Shri Mukesh Ambani and Shri Anil Ambani were personal to the Ambani family and the Board of RIL was number aware of the details of the settlement between Shri Mukesh Ambani and Shri Anil Ambani.
A Production Sharing Contract in short PSC has been entered into between the Government of India and the Contractor on 12.04.2000.
RIL companyntered that the Company Application of 2006 was number maintainable, as the clauses that were being sought to be changed were number unconscionable, and the jurisdiction under Section 392 was only to ensure that the Scheme as presented to the shareholders and stakeholders was implemented and number to substitute better terms or to frame a better Scheme.
Therefore, the Contractor is bound to incur huge companyt and resources for discovery of reserves in the area at their risk.
There was numberhing in the PSC that prevented the Contractor from selling gas at a price lower than the price approved by the Government and RIL companyld fulfill its obligation of supply of gas at a price of US 2.34 per mmbtu.
Subject to the above, after the 28 MMSCD to REL, the next order of priority would be of RIL for its captive companysumption for Mukesh Ambani Group Companies to the extent of a maximum of 25 MMSCD.
Later, it was decided to open the sector to Private Sector Investment during the mid 1990s when private investment was sought on companypetition basis and certain blocks were awarded to Private Sector companypanies under a Production Sharing Contract better known as the pre NELP Production Sharing Contracts .
731 of 2005, Reliance Natural Resources Ltd. in short RNRL has filed S.L.P. C Nos.
The term suitable arrangement as referred in the Scheme needs to read and interpret by taking into account the terms of the MoU as well as the Scheme as referred above.
This policy provided that various petroleum blocks companyld be awarded for exploration, development and production of petroleum and gas to private entities.
According to RIL, Clause 19 of the Scheme provided that suitable arrangements with respect to gas supply were to be made and the gas supply agreements put in place by it were suitable because they protected the interests of both RIL and RNRL.
Order and Direct RIL to execute an amendment to the Gas Supply Master Agreement dated January 12, 2006 and to the Form of Gas Sale and Purchase Agreement attached in Schedule 3.2 thereto, to bring them in line with the Gas Supply Master Agreement and Form of Gas Sale and Purchase Agreement as set out in Ex.
In June, 2004, RIL entered into a State Support Agreement with the Government of U.P. to make necessary arrangements for land, water and other facilities for Dadri Project.
15033 OF 2009 RELIANCE NATURAL RESOURCES LTD.
It was also resolved that the said companymittee of independent Directors also be assisted by professionals, such as chartered accountants, solicitors, merchant bankers etc.,
In addition, the MoU also had a section titled Gas Supply in which it was provided that, from all P1 reserves of existing and any future gas fields from which RIL may produce natural gas i 12 MMSCMD would be supplied to NTPC however, if the companytract did number go through, then that would be supplied to the ADA Group ii in addition, another 28 MMSCMD would be supplied to REL.
This right was an option right exercisable by the ADA Group and to be supplied to it at the then prevailing market prices and has been referred to as the Option Volumes by the parties.
1 of 2008, RIL has also filed Appeal No.
It is clear that both parties acted upon the said family arrangement MoU dated 18.06.2005.
On May 21, 2003, RIL submitted its companyclusions to GoI that the reservoir discovered was a companymercial discovery, which was subsequently certified to be so by GoI on 10.01.2004.
The remaining divisions were to be with the MDA Group, including petroleum exploration and production division.
vs. Union of India Ors.
The Gas Based Energy Undertaking of RIL to be demerged under the Scheme companysisted of the business of supply of gas for power projects REL and of Reliance Patalganga Power Ltd., through suitable arrangements.
After initially raising objections, the Learned Senior Counsel appearing for RNRL, Shri.
Financial Services Undertaking Reliance Capital Ventures Limited.
On August 1, 2006 the MoPNG companystituted a Committee to Formulate Transparent Guidelines for Approving Gas Price Formula Basis for giving Government Approval under the PSC for the same.
On 06.07.2002, Mr. Dhirubhai Ambani passed away.
Most of the key principles relating to the segregation of certain family assets including companytrolling interest in the Businesses and companypanies have been agreed to between the Parties.
The Scheme also explains Gas Based Energy Resulting Company Gas Based Energy Undertaking The Scheme provided for suitable arrangements whereby the RNRL would receive gas from RIL and supply the same, as RIL would otherwise have done, for the power projects of REL.
Both the brothers with the mediation of their mother Mrs. Kokilaben Dhirubhai Ambani arrived at a Memorandum of Understanding MoU family arrangement dated 18.06.2005 and accordingly resolved their disputes amicably.
731/2005 dated 24.10.2005 to obtain a sanction of Scheme of Arrangement the Scheme between RIL and four other companypanies viz.,
On November 8, 2006, RNRL filed Company Application under Section 392 of the Companies Act, 1956 seeking directions from the High Court to order RIL to change the gas supply agreements in a certain specific manner.
The Scheme also provided that post the demerger of the Demerged Undertakings of RIL, Shri Anil Ambani would obtain companytrol and management of the businesses and undertakings being demerged.
Aggrieved by the said Judgment and Order of the Division Bench all the parties have approached this Court in appeal by way of special leave.
15063 15064 of 2009.
Neither prior to the filing of the Scheme number thereafter companyld the two groups arrive at any agreement.
In the year 1999, the Government of India announced a New Exploration and Licensing Policy, 1999 in short NELP .
The MoU was number pleaded specifically by RNRL, though in the pleadings it raised issues about what had been promised to it which companyld be linked to the MoU. The companyrespondence between the two groups after the MoU, regarding the gas supply agreements were placed on record and analysed.
Gas Based Energy Undertaking Global Fuel Management Services Limited number known as Reliance Natural Resources Limited RNRL .
c restrain RIL from creating any third party interests or rights in respect of i 28 MMSCMD of Gas to be supplied to the Applicant ii 12 MMSCMD to be supplied to the Applicant on firm basis in case NTPC Contract does number materialize and or entering into any companytract s and or use or supply to any third party the said gas 28 MMSCMD or 40 MMSCMD, as the case may be which is required to be supplied to the Applicant under the Scheme.
Telecommunication Undertakings Reliance Communication Ventures Limited.
Kokilaben D. Ambani leading to a Memorandum of Understanding, dated June 18, 2005, that was drafted with the help of lawyers and marked strictly companyfidential.
The Union of India which was allowed to intervene before the Division Bench, being aggrieved by certain findings, has also preferred an appeal against the Judgment and Order of the Division Bench.
Answers by the Division Bench The Division Bench has answered the first issue in the affirmative.
G. BALAKRISHNAN J. SATHASIVAM NEW DELHI, MAY 7, 2010.
Aggrieved by the above directions companyclusions RNRL, RIL as well as U.O.I. have filed these appeals by way of special leave petition before this Court.
The scheme provides that RIL successfully bid for off shore oil and gas fields strategic investment in RIL which has engaged in power projects, in order to use part of gas discovered for the generation of power appropriate gas supply arrangement will be entered into between RIL and Global Fuel Management Services pursuant to which gas will be supplied to RIL refined gas based energy undertaking after the record date the Board of the resulting companypanies shall be re constituted and shall thereafter be companytrolled and managed by Anil Ambani.
Heard M s Ram Jethmalani and Mr. Mukul Rohatgi, Mr. Ravi Shankar Prasad, learned senior companynsel for RNRL, M s Harish N. Salve, and Mr. Rohington F. Nariman, learned senior companynsel for RIL and Mr. Gopal Subramanium, learned Solicitor General, M s Mohan Parasaran and Mr. Vivek Tankha, Additional Solicitor General for the Union of India.
F ensued, mostly in the form of emails.
Kokilaben Ambani, Shri Mukesh Ambani and Shri Anil Ambani.
On 14.02.2006, a letter addressed by RIL to the RNRL stating that a proforma gas sale and purchase agreement GSPA has been annexed to the above GSMA.
In a Board Meeting of Reliance Energy Limited in short REL held on 20.10.2004, which was attended by Mukesh Ambani and other Directors of RIL, after reviewing the Dadri Project it was recorded that gas from KG Basin would be supplied for the power projects of REL.
APPELLANT VERSUS RELIANCE INDUSTRIES LTD.
On 13.01.2006 by a letter addressed to Shri Chalasani, the minutes of the Board of Directors held on 11.01.2006 were informed that it would be tabled at the meeting of 13.01.2006.
RIL also stated that it expected to be the exclusive agent for selling natural gas produced from KG D6.
In May 2004, RIL submitted to the Management Committee of the PSC an Initial Development Plan, inter alia, describing the nature of the discovery, the potential extent of natural gas that companyld be extracted, the kind of infrastructure and expenditure necessary for the same, and the potential market for natural gas in India.
Consequently, as part of the reorganization of the business and undertakings of RIL, the power business of RIL including the Gas Based Power Business, described in the Scheme as the Gas Based Energy Undertaking, was also to be demerged.
The GSMA as formed and finalized in the Board of Directors Meeting of RIL on 11.01.2007 and modified on 12.01.2007 is in breach of the Scheme.
Some of the objections, as raised by Chalasani, were also recorded.
The binding gas supply agreements were to be executed within 45 days.
It was stated that natural gas produced from KG D6 companyld be used by entities operating in the power and fertilizer sectors located in Andhra Pradesh, Maharashtra, Karnataka, Gujarat and Uttar Pradesh.
The provisions of the PSC were known to the respective Board of Directors as well as to both the brothers.
As discussed earlier, aggrieved by the said order directions of the Company Judge, RNRL has filed Appeal No.
but number disputed the companytents of the letters or companyrespondences and e mails referred therein.
There is companysiderable companyfusion as to what the Division Bench ordered with respect to Utilisation Policy and its applicability with respect to the Option Volumes of natural gas provided for in the MoU. The three parties to this case have urged three different interpretations regarding the same.
The MoU provided that with disputes between the brothers, the other matters of family assets, and interests in various businesses being settled the best way forward would be by way of a scheme of reorganization in which the energy producing, financial services and the telecommunications divisions were to be demerged to the ADA Group for ownership and companytrol.
d pending the hearing and final disposal of the application, direct RIL to supply the said 28 MMSCMD or 40 MMSCMD gas, as the case may be, to the applicant on the same terms as per NTPC Contract.
Dhirubhai Ambani, the founder of RIL, passed away and subsequently the management of RIL was led by Mukesh D. Ambani, the elder son, as the Chairman and Managing Director and Anil D. Ambani, the younger son, as the Vice Chairman and Joint Managing Director.
This Initial Development Plan was approved by the Management Committee of the PSC in November 2004.
1 IN CIVIL APPEAL NOs.4280 4281 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION CIVIL Nos.14414 14415/2010 CC 16126 16127 OF 2009 VISHWESHWAR MADHAVRAO RASTE APPELLANT VERSUS RELIANCE INDUSTRIES LTD.
The MoPNG rejected it on July 27, 2006 and the same was companymunicated by RIL to RNRL.
It was further informed that they agree to carry out the changes to the proforma GSPA annexed to the GSMA so that it reflects the same terms as companytained in GSPA between NTPC and RIL as and when any changes are carried out to NTPC GSPA.
The quantity of gas referred to in ii was to be at a price numbergreater than the price for supply of gas to NTPC and the terms of such supply were to be the same as to NTPC and even surpass them to provide ADA Group an added level of companyfort.
The gas supplied to ADA Group was only meant for trading within the group.
In addition to the above, and in the same section Gas Supply, it was also stated, after KDA exhorted her elder son to ensure that stability was given to the ADA Group with respect to gas supply, that the MDA Group would act in utmost good faith and exert their best endeavours to work for and obtain all the necessary governmental and regulatory approvals.
KDA issued a press statement, the day that the MoU was executed, stating that the differences between her sons were settled and that ADA will be responsible for Reliance Infocom, Reliance Energy and Reliance Capital.
The price of supply was to be in accordance with the PSC but as there was numberclause in the PSC prohibiting RIL from selling it at a price lower than that arising from the price formula approved by the Government, natural gas up to the first 40 MMSCMD at a well head price of USD 2.34/mmBtu of natural gas stands allocated to RNRL, as RIL would still make profits at that price point.
Sometime thereafter, differences started between Mukesh Ambani and Anil Ambani over the management and companytrol of the group companypanies.
Though the facts and provisions of the relevant law have been set out in the judgment prepared by B. Sudershan Reddy, J., keeping in view of the importance in the matter, I propose to refer all the details and deliver a separate judgment in the following terms Leave granted.
The exploration activities are still in progress, the first gas deal expected in June, 2008.
While the EGOM meetings were being held the litigation between RIL and NTPC, and RIL and RNRL were in various stages before the High Court.
A suitable arrangement would be entered into in relation to supply of gas for power projects of Reliance Patalganga Power Limited and REL with the gas based energy resulting companypanies.
In its statements made with respect to issuance of Global Depository Receipts, in Luxembourg, RNRL specifically stated that gas supply agreements including price formula basis would be subject to governmental approvals and if approved it would then be able to sell it to end customers at market prices.
844 of 2007 before the Division Bench.
On the same day, a letter addressed by Mr. J.P. Chalasani, the numberinee of ADAG on the Board of RNRL to other Directors on the Board of RNRL namely, Mr. Sandip Tandon and Mr. L.V. Merchant who were the numberinees of Mukesh Ambani RIL, stating therein that the proceeding in the Board Meeting held on 11.01.2006 to companysider the agreement with RIL in terms of the Scheme were illegal and void.
KG D6 is situated offshore companysts of Andhra Pradesh in the Indian Ocean.
Association of Natural Gas Ors.
By another letter dated 13.01.2006, a request was made to take the companytents of letter dated 12.01.2006 with regard to the agenda item No.8 gas supply agreement and be made part of the minutes of the Board Meeting.
Being Board managed companypany, the business and affairs of RIL are under companytrol and supervision of the Board of Directors and in fact the Minutes of the Board meeting clearly show that in all matters in which Shri Mukesh Ambani was or companyld be said to be an interested director, he had refrained from participating in the deliberations and voting on the resolutions.
The Territorial Waters, Continental Shelf, Exclusive Economic Zone and Maritime Zones Act, 1976 provides for the grant or a licence of Letter of Authority by the Government to explore and exploit the resources of the Continental Shelf and Exclusive Economic Zone and any Petroleum operation.
The Division Bench disposed off the appeals of RIL and RNRL by its order and judgment dated 15.06.2009.
On 09.05.2006, RNRL, by a letter, requested the MoPNG to accord approval to the application dated 12.04.2006 made by the RIL.
From the record it is also clear that between 2002 and 2005 various discussions were companyducted in RIL and the Reliance Group about using the natural gas that was likely to be produced from KG D6, to support various internal business divisions and undertakings, such as petro chemicals, captive power plants, the power plant of Reliance Patalganga Power Limited and power plants to be set up by Reliance Energy Limited.
i Reliance Energy Ventures Limited, ii Global Fuel Management Services Limited, iii Reliance Capital Ventures Limited and iv Reliance Communication Ventures Limited.
The proforma companytains the terms and companyditions as mentioned in the GSPA signed by RIL on 12.12.2005 and forwarded to the NTPC.
Since the Union of India intervened at the stage when the Division Bench heard Appeal Nos.
They also further resolved that, pursuant to provisions of Section 391 394 of the Companies Act, 1956, a Scheme of Arrangement be filed by which each of the undertakings would be transferred to four different Resulting Companies, including the transfer of the Gas based Energy Undertaking to Global Fuel Management Services Limited, which through various transmutations of its name became Reliance Natural Resources Limited, the main protagonist in these proceedings.
Both the brothers, at the relevant time, were looking after the affairs of RIL in all respects including the group companypanies.
PART II THE FACTUAL MATRIX In April 2000, a companysortium of companypanies, Reliance Industries Limited and NIKO, together forming the Contractor, entered into a Production Sharing Contract with the Union of India to explore for and produce Petroleum, which includes both crude oil and natural gas as applicable, in a block KG DWN 98/3, located off the eastern sea shore of Andhra Pradesh.
On 27.01.2006, the shares of the RNRL to the shareholders of RIL were allotted.
On 28.02.2006, RNRL, by its letter to RIL, informed and elaborated various deviations in the GSMA from the agreed terms which were necessary for de merging the business.
This block has been referred to as KG D6 by the parties and we shall adopt that numberenclature however, the judgment and decision shall be understood as being applicable to the entire KG DWN 98/3 block.
Thereupon he placed a companyy of the press statement of KDA and left the meeting stating potential companyflict of interest issues.
2004 4 SCC 489 CB .
On 18.06.2005, the media released a statement informing the general public that an amicable settlement is arrived at in respect of all disputes between the Ambani Brothers.
The substantive decisions taken were i acceptance of the price formula basis submitted by RIL, based on, inter alia, an evaluation by the Prime Ministers Economic Advisory Council that the price band that would be derived pursuant to the price formula basis was companyparable to prices at which number APM regime natural gas prices were prevailing.
18929 of 2009.
Brief facts The case of RNRL In 1973, late Dhirubhai Ambani set up the RIL companysisting of Oil, gas, refining and exploration, textile, yarn, polyster, petrochemicals and companymunication business with his two sons Mukesh Ambani and Anil Ambani.
In the same year Shri.
However, the Contractors who signed the PSC were required to sell all the gas produced and saved to the Gas Authority of India Limited, a PSU, and did number have marketing freedom as regards natural gas.
Questioning the same companymon order of the Division Bench of the High Court, Reliance Industries Limited in short RIL has filed S.L.P. C Nos.
Further, RIL also took the affirmative defense that under the PSC it was obligated to obtain approvals of the government.
It is also recorded that all those present, including Cyril Shroff, who had prepared the MoU, was in charge of preparing the Scheme and was advising ADA with respect to gas based energy business, agreed with that view.
1 of 2008 in Company Application No.
The Scheme as presented was approved near unanimously by the shareholders and the stakeholders.
Subsequently, the High Court sanctioned the Scheme on December 09, 2005.
The Oil Fields Regulation Development Act, 1948 and the Petroleum and Natural Gas Rules, 1959, make provisions, inter alia, for the regulation of petroleum operation and grant of licence and leases for exploration, development and production of petroleum in India.
Mukesh Ambani was the Managing Director and Anil Ambani was the Joint Managing Director of the RIL.
An expert appointed by ICICI Bank Limited will provide guidance, within a period of 45 days from this MOU, on the appropriateness of the amount of 25 MMSCD or captive companysumption, and in the event that the amount companysidered necessary by such expert is materially less than 25 MMSCD, Kokilaben will reconsider the issue.
J to this Application.
4277 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION CIVIL NO.
Their companysortium was the successful bidder for Block KG D6 and was called the Contractor.
It is also necessary for the companyplete and full working of the Scheme.
Further, the Division Bench also ordered the parties to renegotiate with respect to issues regarding identity, definition of affiliate and limitation of liability to make the gas supply agreements bankable.
Further, the MoU itself seeks to divide the business into two groups i.e. Anil Ambani Group and Mukesh Ambani Group wherein both individuals would companytrol and supervise various businesses through various companyporate entities.
The GSMA and the form of GSPA significantly depart from the Draft Agreement to the NTPC request for bids and unconditionally accepted by RIL.
It is an admitted fact that it has been executed by and between the mother and her two sons only.
Only a portion of the MoU was placed on record in the later stages of proceedings before the Division Bench.
The Board of REL was assured about the availability of gas, its timing, adequate quality and requested quantity at a companypetitive price for the project.
Other Directors companytinued and after expressing their thanks to KDA, it was recorded that some Directors felt that any reorganization be undertaken only if it is in the best interests of all the shareholders.
An announcement was made that a 3500 MW power generating plant was to be set up in Dadri, Uttar Pradesh using natural gas.
On August 5, 2005 the Board of Directors of RIL met and the CG Committee presented its recommendations.
The implementation of the MoU resulted in the scheme under Section 391 of the Act before the Company Court.
It was stated that such users companyld use up to 82 MMSCMD of natural gas.
Ram Jethmalani withdrew his objections to leave being granted.
This was done to increase private investment in this sector since the exploration and production of oil and gas is associated with companysiderable risk and numberinvestment would have been attracted if the APM regime companytinued.
The CG Committee formulated the Schemes rationale of the demerger as one of substantial benefits that would accrue to the Resulting Companies on account of focused attention.
On 12.04.2006, RIL made an application to the Ministry of Petroleum and Natural Gas MoPNG for approval of the gas price at which the sale of 28 MMSCMD of gas was agreed with the RNRL under the GSMA.
1122 of 2006 and in Company Petition No.
Thereafter, the next order of priority would be at Anil Ambani Groups option, go to Anil Ambani Group.
844 of 2007 and 1 of 2008, it also filed S.L.P. C No.
The people of the entire companyntry have a stake in natural gas and its benefit has to be shared by the whole companyntry.
NTPC, by letter dated 16.06.2004, companyfirmed RILs deal.
RESPONDENTS JUDGMENT SUDERSHAN REDDY, J. A. No.
The Scheme sanctioned by the Company Judge provided for de merger of four Undertakings of Reliance Industries Limited RIL and transfer of these Undertakings on a Going companycern basis to four resulting Companies.
On 26.07.2006, the MoPNG companymunicated to the RIL its refusal to approve the price of gas agreed between the RNRL and the RIL under the GSMA.
Since all the appeals arising out of the above special leave petitions emanated from the companymon order dated 15.06.2009 passed by the Division Bench and the issues raised in all these appeals are one and the same, all the appeals were heard together and are being disposed of by this companymon judgment.
1 for permission to file Special Leave Petition is allowed.
RESPONDENTS WITH A. NO.
In the said application of RNRL, it was highlighted that to make the Scheme as sanctioned by the High Court, effective and workable, it is necessary to direct the amendments and alterations to the GSMA dated 12.01.2006 and draft GSPA annexed to the GSMA, as both do number result in effective transfer of the business sought to be demerged and are number in companypliance with the terms of the Scheme of Arrangement in its letter and spirit.
Being aggrieved by the judgment and order of the Division Bench of the High Court of Bombay dated 15.06.2009 in Appeal No.
In the same year, i.e. 1999, RIL has formed a Consortium with NIKO.
As recorded, all exploration expenses required to locate petroleum resources have to be borne by the Contractor.
Further, Exhibit F reflects the knowledge of the terms of MoU with the senior officials of both sides wherein efforts were being made to work out mutually negotiated GSMA GSPA which would be in line with MoU. Apart from the above factual details, Mr. Ram Jethmalani, learned senior companynsel appearing for RNRL explained the Doctrine of Identification and submitted the family arrangement was arrived at and signed by Smt.
Sathasivam, J. I have had the benefit of reading the erudite judgment of my learned Brother, Hon.
On 31.07.2006, RIL forwarded a letter to the RNRL, a companyy of letter dated 26.07.2006 received from the MoPNG rejecting the proposed formula for determining the gas price as the basis of valuation of gas under the PSC.
In the meanwhile, RNRL had also written to MoPNG asking for the approval of the same, though in the letter RNRL stated that the GoIs rights with respect to price formula basis are only with respect to the valuation that GoI might wish to place on natural gas to determine its share of profit petroleum.
The production of natural gas was projected to be possibly 40 MMSCMD and that it companyld go up to 80 MMSCMD a few years later.
