Reliance Industries Ltd (RIL), on Thursday, told the Supreme Court that the MoU signed by its Chairman Mukesh Ambani with his brother Anil is “not a proper and sensible agreement.”
During the arguments on the third day before a bench of Chief Justice K G Balakrishnan, Justices R. V. Raveendran and P Sathasivam, RIL Advocate Harish Salve said: “The MOU is not worth the piece of paper on which it is written.’’
When the bench asked RIL to answer whether the MoU was placed before the shareholders of the company, he said the MoU was not placed before shareholders, board or creditors and it was more of a private family arrangement rather than a company arrangement.
The Apex Court asked RIL whether the demerger of the companies between the two brothers was based on the MoU as stated in the Bombay High Court ruling? Salve said the demerger was not wholly based on the MoU and it was part of the whole process.
“Had there no MoU, would there have been demerger?’’ asked the court. Salve said it was a family document signed by the two brothers. Later he explained that the MOU might be part of premises on which the demerger was held. To this Salve replied “Some part of the MOU was incorporated in the demerger scheme, some was not.”
Secret agreement
“Some part came in the scheme, some part not,” the bench retorted. At this salve asserted “Secret agreement between promoters cannot be binding upon its 3 million shareholders.” The Supreme Court wanted to know whether the production sharing contract (PSC) was a notified policy of the government or a part of the industrial policy to weigh the legal sanctity of the document. Salve answered that it was a press note in which the price of gas. RIL said that the price of gas depends on price of crude oil in international market and higher the price of gas would mean higher share of profit to the government. The more funds to government would lead to faster development of the country.
He said that RIL would have to recover 250 per cent of the cost and investment on the project in the initial years. In the first year, 90 per cent would go towards investment and only 10 per cent towards share of the government.
However, after about 5 years and realisation of the whole costs, the government would receive 85 per cent of the price of the production. So higher the price of the gas would lead to faster recovery of the cost and investments, said Salve. Salve said that Anil Ambani’s RNRL did not have any problem when it signed an agreement to purchase gas for its plant at Samalkot in Andhra Pradesh at $ 4.2 per unit.
To a conservative estimate, the arguments would continue till the end of the third week of November. RIL would take another two days to complete his submissions.
Both RIL and RNRL are fighting legal battle over supply of natural gas from the Krishna-Godavari basin, awarded for exploration and harnessing to Reliance Industries, before a split in 2005 in the group.
Based on a family demerger pact, the Anil Ambani Group wants 28 million units of gas per day for 17 years at $2.34 per unit. But Reliance Industries says it can only sell it for $4.20 per unit, claiming this was the price approved by the government.
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