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Was demerger possible without family MoU?

business Updated: Oct 22, 2009 21:42 IST
HT Correspondent
HT Correspondent
Hindustan Times
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The Supreme Court Thursday sought to know from Reliance Industries Ltd (RIL) if the division of the Reliance business empire was possible had there been no family agreement between brothers Mukesh and Anil Ambani.

RIL has been consistently saying that the 2005 family agreement between the two brothers was not binding, as the undivided company’s board of directors, which approved the demerger scheme, did not okay it.

“A secret agreement between promoters (of RIL) can’t be binding on 3 million shareholders of the company,” said RIL Senior Counsel Harish Salve while responding to SC’s queries on the third day of the hearing on the gas dispute. “The MoU is not worth the paper it is written on.”

A three-judge bench headed by Chief Justice of India K.G. Balakrishnan asked if the promoters had some “secret understanding, which was not placed before the shareholders”, were they not guilty.

Salve said possibly the division of the business was on the basis of the agreement between the brothers “but some parts of the MoU (agreement) were not put in the scheme of demerger.”

The bench shot back: “Some part came in the scheme of demerger and some not. What is this?”

The court also asked if the government’s gas utilisation policy was notified in the official gazette and if it was in the
nature of an industrial policy.

Salve said no, adding that it was in the form of an “instruction” given by the government and formed a part of the minutes of the meeting of the Empowered Group of Ministers. The government had also issued a press note in this regard, he said.

To the court’s query if there was any gas regulator, Salve said no and the Petroleum Ministry was acting as a regulator till such a mechanism was put in place. The Director General of Hydrocarbons was only a “nodal agency,” he said.

The court said “the core issue is the supply of a certain quantity of gas at a certain price for a certain period (by RIL to Anil’s Reliance Natural Resources Ltd or RNRL).”

In its June 15 verdict, Bombay High Court had upheld the Ambanis’ 2005 family agreement and had directed RIL and RNRL to enter into a gas supply pact within a month.

The arguments would resume on Tuesday.