Ambani MoU alien to Companies Act: RIL

After a brief exchange between Harish Salve, the counsel for Mukesh Ambani’s Reliance Industries Ltd (RIL), and Ram Jethmalani, the counsel for Anil Ambani-led Reliance Natural Resources Ltd (RNRL), on fresh affidavits filed by directors of the gas-producing firm. Another RIL lawyer Rohington Nariman argued that the memorandum of understanding (MoU) signed by three members of the family, who are also a part of the 3 million shareholders, was alien to the Companies Act.

They are only three shareholders, Nariman, who is the son of noted lawyer Fali Sam Nariman, said in his opening argument after Salve concluded his pleading on Friday.
A supreme court bench, headed by chief justice KG Balakrishnan, has been hearing the Ambani versus Ambani lawsuit over natural gas supplies since October 20 last year. While RNRL’s plea is to get gas at the committed price of $2.34 million metric standard cubic metre per day (mmscmd), RIL says it cannot honour that commitment due to the government’s pricing and gas policies.

“The scheme approved by 99% equity shareholders of RIL could not be modified by the promoter’s family as it would be contrary to corporate democracy,” Nariman said.
Earlier Salve, who gave a picture of the investment, cost and profit from the gas-generating business, said RIL’s seven directors filed the affidavits to counter RNRL’s contention that the family MoU was approved by the RIL board.

These affidavits negate this allegation, Salve said, adding that the MoU was never approved in any board meeting.

“You withdraw that para from the special leave petition and we  will withdraw the affidavits,” Salve told Jethmalani.

Jethmalani argued that the affidavits were filed without seeking the court’s permission, as was required by the law and the directors would have to submit themselves for a cross examination.

“Everything I argue will be justified by the records of the Bombay High Court,” Jethmalani added.

“You (RIL and the Centre) help each other. And when I ask for a cross-examination of the directors, you develop cold feet,” Jethmalani challenged.

Meanwhile, Salve  gave a detailed chart on how RIL’s profits and revenues of the government would be hit if the gas was supplied to RNRL and NTPC at lesser price.
If the entire production of 80 mmscmd is sold at the government approved price of $4.2 per mmscmd, the government’s share over a period of 13 years would be around $8.44 billion against RIL’s net surplus of $16.28 billion after the cost recovery.

RIL invested $9.41 billion in developing the KG Basin and would earn a net cash flow of $7.95 billion, after deducting interest and income tax, from selling gas at $4.2 per mmscmd for over 16 years.

If the government approves the gas price at $2.34 per million British thermal units (mmBtu) for the entire produce, the government’s share would be reduced to $1.08 billion, a reduction of $7.36 billion, and RIL’s profits would fall to $2.43 billion over this period.

“Gas being a national resource cannot be traded purely for private profit and if sold at a lesser price than the government-approved price, then not only the government’s share would be reduced, but power consumers would also be at a disadvantage,” Salve added.
The hearing will continue on Tuesday.