[INDIA] Reliance Industries, must supply gas or fork out $17 b in cash, ADAG tells court
Mukesh Ambani’s Reliance Industries (RIL) should fork out $17 billion in cash if it fails to honour its commitment to supply gas to Reliance Natural Resources (RNRL), according to RNRL counsel Mukul Rohatgi.
Mr Rohatgi, while arguing his case at the Bombay High Court on Tuesday, said, Reliance Industries is committed to supply 28 million metric standard cubic metres per day (mmscmd) of gas at $2.34 per million metric British thermal unit (mmBtu) for 17 years to RNRL. If Reliance Industries fails to do so, it will have to compensate with money, he said. The bone of contention between the Ambani brothers lies in the price and quantity of gas to be supplied from RIL’s KG basin gas fields to RNRL, which requires the gas to feed its power plant at Dadri. The case has been adjourned till August 21.
Along with Mr Rohatgi, Ram Jethmalani and Mahesh Jethmalani represented RNRL, while Milind Sathe and Suresh Gupte appeared for Reliance Industries on Tuesday. RIL’s counsel Mr Sathe informed the court that Reliance Industries did not have enough proven reserves to supply 28 mmscmd of gas to RNRL.
Mr Jethmalani said RIL chairman Mukesh Ambani should be “criminally prosecuted for breach of trust and forgery.” He said: “Anil Ambani resigned from the Reliance Industries board on July 18, 2005, and the demerged companies including RNRL were handed over to ADAG on February 7, 2006.
Prior to this, Reliance Industries had signed an agreement on January 12, 2006, with demerged companies when they were under its control. This is breach of trust as RIL was acting as trustee for the demerged companies. A trustee cannot sign an agreement to his benefit.”
On the enforceability of the family agreement, Mr Jethmalani said: “There is no dispute on the existence of an MoU or the family agreement. In fact their mother Kokilaben had issued a media statement and it was published by RIL on June 18, 2005.
The RIL board took Kokilaben’s statement on record and decided to reorganise Reliance Industries’s businesses based upon Kokilaben’s directions. So, Reliance Industries’s claim that MoU is in the private domain and RIL has no knowledge of the contents of MoU and hence MoU not being binding on RIL is not correct.”
Reliance Industries counsel Harish Salve had previously argued that the MoU is among the Ambani brothers and that it was “a piece of trash as far as Reliance Industries is concerned”.
Mr Jethmalani said: “Reliance Industries has submitted wrong affidavit in court saying Mukesh Ambani did not participate in the June 18 board meeting. The minutes of the board meeting showed his presence. In fact, he was the chairman of the meeting. He (Mukesh Ambani) cannot claim that he is not aware of the MoU.
If Mukesh Ambani knows, the entire company knows about it. As per the doctrine of identification, which is well recognised by Indian courts, Mukesh Ambani’s knowledge of the MoU shall be deemed to be the knowledge of Reliance Industries.”
Earlier, Mr Jethmalani sought the court to intervene for an expeditious implementation of the demerger scheme which laid down the details of the gas supply agreement.
“The demerger scheme, which was sanctioned under Section 391 of the Companies Act, is a statutory contract and no court can refuse to implement it. The Act confers very wide and unrestricted powers on the court to supervise and ensure proper implementation of the scheme,” argued Mr Jethmalani.
This was quite contrary to Reliance Industries counsel Mr Salve’s submission in court, citing that any directions by the court with respect to the scheme will mean corporate democracy going to the dogs as the court has no jurisdiction in altering the demerger scheme.