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IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4273 OF 2010 (Arising out of S.L.P. (C) Nos. 14997 of 2009) Reliance Natural Resources Ltd. !ersus Reliance "ndustries Ltd. #"$% CIVIL APPEAL NO. 4274 OF 2010 (Arising out of S.L.P. (C) No. 1&0'' of 2009) CIVIL APPEAL NO. 4275-4276 OF 2010 (Arising out of S.L.P. (C) No. 1&0(')1&0(4 of 2009) CIVIL APPEAL NO. 4277 OF 2010 (Arising out of S.L.P. (C) No. 1*929 of 2009) I.A. NO. 1 "N C.A.No .42!-42!1"2010 # S. L. P. $C% .1441414415"2010 # CC NO. 16126-16127 o& 200' .... Res ondent(s) .... A ellant (s)
JUD(MENT
P. S)*+) ,-)./ J.
1) " +a,e +ad t+e -enefit of reading t+e erudite .udg/ent of " a/
una-le to s+are t+e ,ie4 e5 ressed -0 +i/ on so/e oints and /ust res ectfull0 dissent. 2) $+oug+ t+e facts and ro,isions of t+e rele,ant la4 +a,e re ared -0 1. Suders+an
Redd02 3.2 6ee ing in ,ie4 of t+e i/ ortance in t+e /atter2 " ro ose to refer all t+e details and deli,er a se arate .udg/ent in t+e follo4ing ter/s7) ') Lea,e granted.
4)
The people of the entire country have a stake in natural gas and its benefit has to be shared by the whole country.
) Association of Natural Gas & Ors. vs. Union of India & Ors. (2004) 4 SCC 48 (C!).
&)
8i,ision 1enc+ of t+e %ig+ Court of 1o/-a0 dated 1&.0(.2009 in A eal No. 1 of 200* in Co/ an0 A lication No. 1122 of
200( and in Co/ an0 Petition No. 7'1 of 200&2 Reliance Natural Resources Ltd. (in s+ort 9RNRL:) +as filed S.L.P.(C) Nos. 14997 ; 1&0'' of 2009. <uestioning t+e sa/e co//on order of t+e 8i,ision 1enc+ of t+e %ig+ Court2 Reliance "ndustries Li/ited (in s+ort 9R"L:) +as filed S.L.P. (C) Nos. 1&0(')1&0(4 of 2009. Since t+e =nion of "ndia inter,ened at t+e stage 4+en t+e 8i,ision 1enc+ +eard A eal Nos. *44 of
2007 and 1 of 200*2 it also filed S.L.P.(C) No. 1*929 of 2009. >ne !is+4es+4ar ?ad+a,arao Raste also filed SLP(C)@.CC Nos.1(12()1(127 of 2009. Since all t+e a t+e a-o,e s ecial lea,e eals arising out of
order dated 1&.0(.2009 assed -0 t+e 8i,ision 1enc+ and t+e issues raised in all t+ese a a eals are one and t+e sa/e2 all t+e
eals 4ere +eard toget+er and are -eing dis osed of -0 t+is
co//on .udg/ent.
()
1rief facts7
T+0 1) 0 o& RNRL2 (a) "n 197'2 late 8+iru-+ai A/-ani set u t+e R"L consisting ol0ster2
etroc+e/icals and co//unication -usiness 4it+ +is t4o sons ?u6es+ A/-ani and Anil A/-ani. "n t+e 0ear 19992 t+e Ao,ern/ent of "ndia announced a Ne4 B5 loration and Licensing Polic02 1999 (in s+ort 9NBLP:). $+is t+at ,arious etroleu/ -loc6s could -e olic0 ro,ided for
a4arded
e5 loration2 de,elo /ent and roduction of etroleu/ and gas to ri,ate entities. (-) "t is t+e olic0 of t+e Ao,ern/ent t+at Petroleu/
Resources 4+ic+ /a0 e5ist in t+e territorial 4aters2 t+e continental s+elf and t+e e5clusi,e econo/ic Cone of "ndia -e disco,ered and e5 loited 4it+ ut/ost e5 edition in t+e o,erall interest of "ndia and in accordance 4it+ good "nternational Petroleu/ "ndustr0 Practice. (c) "n t+e sa/e 0ear2 i.e. 19992 R"L +as for/ed a Consortiu/ $+eir consortiu/ 4as t+e successful -idder for
4it+ N"D>.
(d)
Pri,ate Li/ited 4as incor orated 4+ic+ 4as c+anged to Alo-al Euel ?anage/ent Ser,ices Li/ited and no4 called 9Reliance Natural Resources Li/ited (RNRL). (e) A Production S+aring Contract (in s+ort 9PSC:) +as -een
entered into -et4een t+e Ao,ern/ent of "ndia and t+e Contractor on 12.04.2000. $+e PSC2 as recorded2 is 4it+in
t+e contract area identified as 1loc6 DA 8#N)9*)'. DA)8( is situated offs+ore coasts of And+ra Prades+ in t+e "ndian >cean. Suc+ -loc6s are called as 98ee #ater B5 loration
1loc6s:. $+e e5 loration in suc+ areas reFuire e/ lo0/ent of +ig+l0 s6illed and e5 erienced tec+nical e5tre/el0 e5 ensi,e and ersonnel and an e5ercise. As
ti/e)consu/ing
recorded2 all e5 loration e5 enses reFuired to locate etroleu/ resources +a,e to -e -orne -0 t+e Contractor. $+erefore2 t+e Contractor is -ound to incur +uge cost and resources for disco,er0 of reser,es in t+e area at t+eir ris6. $+e e5 loration acti,ities are still in 3une2 200*. As rogress2 t+e first gas deal e5 ected in
er t+e PSC2 all t+e e5 enses relating to t+e roduction of cost incurred -0
5
etroleu/Ggas
actuall0 roduced and sold -0 t+e Contractor. $+e Contractor +as freedo/ to sell t+e gas roduced fro/ t+e -loc6 su-.ect to t+e ad.ust/ent and t+e ter/s of rofit s+aring -et4een t+e
Ao,ern/ent and t+e R"L as set out in t+e PSC. (f) >n 0(.07.20022 ?r. 8+iru-+ai A/-ani assed a4a0.
So/eti/e t+ereafter2 differences started -et4een ?u6es+ A/-ani and Anil A/-ani o,er t+e /anage/ent and control of t+e grou co/ anies. 1ot+ t+e -rot+ers2 at t+e rele,ant ti/e2 4ere loo6ing after t+e affairs of R"L in all res ects including t+e grou co/ anies. (g) $+e ro,isions of t+e PSC 4ere 6no4n to t+e res ecti,e
1oard of 8irectors as 4ell as to -ot+ t+e -rot+ers. ?u6es+ A/-ani 4as t+e ?anaging 8irector and Anil A/-ani 4as t+e 3oint ?anaging 8irector of t+e R"L. (+) "n >cto-er2 20022 t+e Consortiu/ (N"D> ; R"L)
announced disco,er0 of significant result of DA)8( 1loc6. So/eti/e in t+e 0ear 200'2 t+e National $+er/al Po4er Cor oration Li/ited (in s+ort 9N$PC:) floated a glo-al tender for su l0 of gas to its o4er ro.ects. $+e Aas Sale and
6
Purc+ase Agree/ent 4as anne5ed 4it+ t+e tender docu/ent. N$PC in,ited international co/ etiti,e -ids for su natural gas to its o4er l0 of
to /eet its fuel reFuire/ents. R"L succeeded in its -id to sell2 trans ort and deli,er 1'2 $1tu (/eans one trillion 1$= (1ritis+ $+er/al =nit) or 1000000 ??1$=). N$PC2 -0 letter dated 1(.0(.20042 confir/ed R"LHs deal. (i) "n 3une2 20042 R"L entered into a State Su ort
Agree/ent 4it+ t+e Ao,ern/ent of =.P. to /a6e necessar0 arrange/ents for land2 4ater and ot+er facilities for 8adri Pro.ect. (.) "n a 1oard ?eeting of Reliance Bnerg0 Li/ited (in s+ort
9RBL:) +eld on 20.10.20042 4+ic+ 4as attended -0 ?u6es+ A/-ani and ot+er 8irectors of R"L2 after re,ie4ing t+e 8adri Pro.ect it 4as recorded t+at gas fro/ DA 1asin 4ould -e su lied for t+e o4er ro.ects of RBL. $+e 1oard of RBL 4as
assured a-out t+e a,aila-ilit0 of gas2 its ti/ing2 adeFuate Fualit0 and reFuested Fuantit0 at a co/ etiti,e ro.ect. rice for t+e
(6)
>n
1*.0(.200&2
t+e
/edia
released
state/ent
arri,ed at in res ect of all dis utes -et4een t+e A/-ani 1rot+ers. "t 4as stated t+at ?u6es+ A/-ani 4ill ta6e o,er t+e res onsi-ilit0 for R"L and "PCL and Anil A/-ani 4ill ta6e o,er t+e res onsi-ilit0 for Reliance "nfoco// Ltd.2 Reliance Bnerg0 Ltd. and Reliance Ca ital Ltd. >n t+e sa/e da02 Anil A/-ani resigned as 3oint ?anaging 8irector of R"L. (l) 1ot+ t+e -rot+ers 4it+ t+e /ediation of t+eir /ot+er
?rs. Do6ila-en 8+iru-+ai A/-ani arri,ed at a ?e/orandu/ of =nderstanding (?o=)Gfa/il0 arrange/ent dated 1*.0(.200& and accordingl0 resol,ed t+eir dis utes a/ica-l0. 1ased
u on t+e said ?o=2 -ot+ t+e -rot+ers and t+e officials of R"L and ot+er grou co/ anies2 /ade ,arious discussions2
e5c+anged corres ondences2 e)/ails and +eld conferences and /eetings to i/ le/ent t+e ?o= and to resol,e t+e dis utes and to di,ide t+e ,arious co/ anies -0 a Sc+e/e of Arrange/ent. (/) >n 11.0*.200&2 RNRL 4as acFuired -0 R"L for t+e
?anage/ent Ser,ices.
etition in t+e 1o/-a0 %ig+ Court -earing No. 7'1G200& dated 24.10.200& to o-tain a sanction of Sc+e/e of
Arrange/ent (t+e Sc+e/e) -et4een R"L and four ot+er co/ anies ,iC.2 (i) Reliance Bnerg0 !entures Li/ited2 (ii) Alo-al Euel ?anage/ent Ser,ices Li/ited2 (iii) Reliance Ca ital !entures Li/ited and (i,) Reliance Co//unication !entures Li/ited. 10 order dated 09.12.200&2 t+e Co/ an0 3udge2 1o/-a0 %ig+ Court +as granted sanction to t+e Sc+e/e and inter alia directed t+at t+e s+are+olders of R"L 4ould +old s+ares in eac+ of t+e resulting co/ anies in t+e ratio of 171 in addition to t+e s+ares +eld in t+e arent
co/ an0 (R"L). $+e sc+e/e ro,ides t+at R"L successfull0 -id for off)s+ore oil and gas fieldsI strategic in,est/ent in R"L 4+ic+ +as engaged in o4er ro.ects2 in order to use o4erI a art of
ro riate gas
l0 arrange/ent 4ill -e entered into -et4een R"L and ursuant to 4+ic+ gas 4ill
t+e record date t+e 1oard of t+e resulting co/ anies s+all -e
9
re)constituted and s+all t+ereafter -e controlled and /anaged -0 Anil A/-ani. A suita-le arrange/ent 4ould -e entered l0 of gas for o4er ro.ects of Reliance
into in relation to su
Patalganga Po4er Li/ited and RBL 4it+ t+e gas -ased energ0 resulting co/ anies. (n) $+e Sc+e/e sanctioned -0 t+e Co/ an0 3udge ro,ided
for de)/erger of four =nderta6ings of Reliance "ndustries Li/ited (R"L) and transfer of t+ese =nderta6ings on a 9Aoing concern: -asis to four resulting Co/ anies. $+e0 are7 (i) $+e Coal 1ased Bnerg0 =nderta6ingsGReliance Bnerg0
Ser,ices Li/ited no4 6no4n as 9Reliance Natural Resources Li/ited (RNRL). (iii) Einancial Ser,ices =nderta6ingGReliance Ca ital
Co//unication !entures Li/ited. $+e 8e)/erged co/ an0)Reliance "ndustries Li/ited (R"L) is to retain all ot+er -usinesses including Petroc+e/icals2
10
refining2 oil and gas e5 loration and ot+er -usiness. $+e Sc+e/e
-eca/e
21.12.200&. (o) A draft of AS?A (Aas Sale ?aster Agree/ent) and ASPA
(Aas Sale Purc+ase Agree/ent) 4ere e)/ailed -0 an official of R"L to sole no/inee of Anil 8+iru-+ai A/-ani Arou on t+e
1oard of R"L on 11.01.200(2 drafts of AS?A and ASPA 4ere a ro,ed -0 t+e 1oard of R"L at a ti/e 4+en t+e 1oard of
RNRL 4as under t+e control of ?u6es+ A/-ani. $+e no/inee of Anil 8+iru-+ai A/-ani Arou +ad raised o-.ections -ut t+e sa/e 4ere o,erruled. $+ere 4as no sufficient ti/e gi,en to
RNRL to read t+e draft. No inde endent or legal ad,ise could -e ta6en on -e+alf of RNRL. 1asic clauses to t+e agree/ents are t+e -one of contention of t+e resent litigation. 1ot+ t+e
agree/ents alleged to +a,e also -een settled and e5ecuted on 12.01.200(. >n t+e sa/e da02 a letter addressed -0 ?r. 3.P. C+alasani2 t+e no/inee of A8AA on t+e 1oard of RNRL to ot+er 8irectors on t+e 1oard of RNRL na/el02 ?r. Sandi $andon and ?r. L.!. ?erc+ant 4+o 4ere t+e no/inees of ?u6es+ A/-aniGR"L2 stating t+erein t+at t+e roceeding in
11
t+e 1oard ?eeting +eld on 11.01.200( to consider t+e agree/ent 4it+ R"L in ter/s of t+e Sc+e/e 4ere illegal and ,oid. 10 anot+er letter dated 1'.01.200(2 a reFuest 4as /ade to ta6e t+e contents of letter dated 12.01.200( 4it+ regard to t+e agenda)ite/ No.* (gas su l0 agree/ent) and -e /ade
art of t+e /inutes of t+e 1oard ?eeting. ( ) >n 1'.01.200( -0 a letter addressed to S+ri C+alasani2
t+e /inutes of t+e 1oard of 8irectors +eld on 11.01.200( 4ere infor/ed t+at it 4ould -e ta-led at t+e /eeting of 1'.01.200(. So/e of t+e o-.ections2 as raised -0 C+alasani2 4ere also recorded. >n 2(.01.200(2 t+e ASPA co 0 4as /ade a,aila-le to A8AA for t+e first ti/e. >n 27.01.200(2 t+e s+ares of t+e RNRL to t+e s+are+olders of R"L 4ere allotted. (F) >n 07.02.200(2 t+e 1oard of t+e RNRL 4as re)
constituted in order to +and o,er t+e /anage/ent and control of t+e resulting co/ anies to ?r. Anil A/-ani. >n
14.02.200(2 a letter addressed -0 R"L to t+e RNRL stating t+at a rofor/a gas sale and urc+ase agree/ent (ASPA) +as -een anne5ed to t+e a-o,e AS?A. $+e rofor/a contains t+e ter/s and conditions as /entioned in t+e ASPA signed -0 R"L on
12
infor/ed t+at t+e0 agree to carr0 out t+e c+anges to t+e rofor/a ASPA anne5ed to t+e AS?A so t+at it reflects t+e sa/e ter/s as contained in ASPA -et4een N$PC and R"L as and 4+en an0 c+anges are carried out to N$PC ASPA. (r) >n 2*.02.200(2 RNRL2 -0 its letter to R"L2 infor/ed and
ela-orated ,arious de,iations in t+e AS?A fro/ t+e agreed ter/s 4+ic+ 4ere necessar0 for de)/erging t+e -usiness. A suita-le draft agree/ent in co/ liance 4it+ t+e Sc+e/e 4as also sent 4it+ t+e letter. a >n 12.04.200(2 R"L /ade an
lication to t+e ?inistr0 of Petroleu/ and Natural Aas ro,al of t+e gas rice at 4+ic+ t+e sale of 2*
(?oPNA) for a
??SC?8 of gas 4as agreed 4it+ t+e RNRL under t+e AS?A. (s) >n 09.0&.200(2 RNRL2 -0 a letter2 reFuested t+e ?oPNA ro,al to t+e a lication dated 12.04.200( /ade
to accord a
-0 t+e R"L. >n 2(.07.200(2 t+e ?oPNA co//unicated to t+e R"L its refusal to a ro,e t+e rice of gas agreed -et4een t+e >n '1.07.200(2 R"L
for4arded a letter to t+e RNRL2 a co 0 of letter dated 2(.07.200( recei,ed fro/ t+e ?oPNA re.ecting t+e ro osed
13
for/ula for deter/ining t+e gas rice as t+e -asis of ,aluation of gas under t+e PSC. (t) #it+ t+ese details2 RNRL on 07.11.200(G0*.11.200(2 lication No. 1122 of 200( under Section
'92 of t+e Co/ anies Act2 19&( (+ereinafter referred to as 9t+e Act:) -efore t+e %ig+ Court of 1o/-a0 in 4+ic+ t+e follo4ing ra0ers 4ere /ade7
9(a)>rder and 8irect R"L to ta6e all necessar0 ste s in order to ensure actual su l0 of 2* ??SC?8 or 40 ??SC?8 of gas to RNRL on t+e N$PC Contract $er/s and as er t+e co//ercial as ect set out in Para *.' +ereina-o,e. (-)>rder and 8irect R"L to e5ecute an a/end/ent to t+e Aas Su l0 ?aster Agree/ent dated 3anuar0 122 200( and to t+e Eor/ of Aas Sale and Purc+ase Agree/ent attac+ed in Sc+edule '.2 t+ereto2 to -ring t+e/ in line 4it+ t+e Aas Su l0 ?aster Agree/ent and Eor/ of Aas Sale and Purc+ase Agree/ent as set out in B5. 3 to t+is A lication. (c) restrain R"L fro/ creating an0 t+ird art0 interests or rig+ts in res ect of i) 2* ??SC?8 of Aas to -e su lied to t+e A licantI (ii) 12 ??SC?8 to -e su lied to t+e A licant on fir/ -asis in case N$PC Contract does not /aterialiCeI andGor entering into an0 contract(s) andGor use or su l0 to an0 t+ird art0 t+e said gas (2* ??SC?8 or 40 ??SC?82 as t+e case /a0 -e) 4+ic+ is reFuired to -e su lied to t+e A licant under t+e Sc+e/e. (d) ending t+e +earing and final dis osal of t+e a lication2 direct R"L to su l0 t+e said 2* ??SC?8 or 40 ??SC?8 gas2 as t+e case /a0 -e2 to t+e a licant on t+e sa/e ter/s as er N$PC Contract. (e) ad)interi/ reliefs in ter/s of ra0er (c) and (d) a-o,e. (f) Suc+ furt+er orders -e assed andGor directions -e gi,en as t+is %onH-le Court /a0 dee/s fit and ro er.:
14
7)
/a6e t+e Sc+e/e as sanctioned -0 t+e %ig+ Court2 effecti,e and 4or6a-le2 it is necessar0 to direct t+e a/end/ents and alterations to t+e AS?A dated 12.01.200( and draft ASPA anne5ed to t+e AS?A2 as -ot+ do not result in effecti,e transfer of t+e -usiness soug+t to -e de/erged and are not in co/ liance 4it+ t+e ter/s of t+e Sc+e/e of Arrange/ent in its letter and s irit. $+e AS?A and ASPA are also not in
co/ liance 4it+ t+e ?o= 4+ic+ 4as t+e ,er0 reason of t+e Sc+e/e of Arrange/ent as filed -0 R"L. $+erefore2 RNRL
ra0ed for Co/ an0 CourtsH inter,ention to ensure t+at t+e Sc+e/e is i/ le/ented effecti,el0. *) "n addition to t+e a-o,e articulars2 RNRL laced t+e
resolution of t+e issues -et4een S+ri ?u6es+ A/-ani and S+ri Anil A/-ani and in t+eir /eeting +eld on 3une 1*2 200& noted t+e settle/ent and a/ica-le resolution of t+e dis ute ro,iding for reorganiCation of t+e Reliance Arou including
t+an6ing t+e efforts /ade -0 S/t. Do6ila-en 8+iru-+ai A/-ani in 4or6ing to4ards t+e settle/ent. -) $+e agree/ent arri,ed at -et4een S+ri ?u6es+ A/-ani2
C+air/an and ?anaging 8irector of R"L and S+ri Anil A/-ani relating to t+e reorganiCation of t+e R"L Arou su en,isaged t+e
l0 of gas fro/ R"LHs current and future gas fields for ro.ects of Reliance)Anil 8+iru-+ai Arou . $+e said
,arious
(a)
<uantu/ of Su
l0 and Source of Su
l0
Su l0 of 2* ??SC?8 gas -0 R"L to Anil 8+iru-+ai A/-ani Arou (A8AA). $+is su l0 is su-.ect to su l0 of 12 ??SC?8 to N$PC. "n t+e e,ent t+at N$PC contract does not /aterialiCe or cancelled2 t+e entitle/ent of N$PC to t+e said e5tent s+ould go to t+e A8A Arou in addition to its entitle/ent of 2* ??SC?8 i.e. a total of 40 ??SC?8. A8A Arou to +a,e o tion to -u0 40J of all -alance and future gas fro/ t+e current or future gas fields of ?8A Arou . Su l0 to -e fro/ t+e ro,en P1 Reser,es of R"L 4+et+er fro/ t+e DA8)( 1asin or else4+ere. l0 eriod 17 (Se,enteen) Kears.
(-) Su
(c) A8A Arou Hs Purc+ase >-ligation. >n ta6e or a0 -asis. (d) Price and Co//ercial $er/s $+e fir/ Fuantit0 of 2* ??SC?8G 40 ??SC?8 at a rice no greater t+an N$PC rices. > tion gas at t+e /ar6et rate >t+er co//ercial ter/s)sa/e as t+ose of N$PC contract. 16
(e)
S+all -e in accordance 4it+ "nternational 1est Practices. S+all -e -an6a-le in "nternational Einancial ?ar6ets. >t+er ter/s go,erning t+e Arrange/ent. Reliance A8A Arou s+all +a,e t+e o tion to ta6e deli,er0 of gas at Da6inada on t+e Bast Coast and /a0 construct its o4n i eline. %o4e,er2 RBL 4ould still +a,e to a0 t+e trans ortation cost for su l0 to t+e #est Coast e,en if t+e facilit0 is not used2 -ut 4ill +a,e t+e rig+t to deal 4it+ t+e ca acit0 as it dee/s fit and to sell or assign t+e sa/e to anot+er art0. $+e gas su l0Go tion agree/ents 4ould -e -et4een R"L and a 100J su-sidiar0 of R"L2 4+ic+ 4ould -e de/erged to t+e RelianceLA8A Arou as art of t+e Sc+e/e and not 4it+ RBL. "n relation to a lica-le go,ern/ental and statutor0 a ro,als2 4it+out in an0 /anner /itigating R"LHs res onsi-ilit02 R"L and RelianceLA8A Arou 2 gi,e an irre,oca-le Po4er of Attorne0 to t+e RelianceLA8A Arou to a l0 for and o-tain all suc+ go,ern/ental and regulator0 a ro,als as are necessar0 on its -e+alf.
l0
art of t+e reorganiCation of R"L are set out in t+e ?e/orandu/ filed for t+e -enefit of t+e
"nfor/ation
s+are+olders and in,estors -0 RNRL 4it+ t+e 1o/-a0 Stoc6 B5c+ange and of t+e RNRL. ConseFuentl02 as art of t+e
reorganiCation of t+e -usiness and underta6ings of R"L2 t+e o4er -usiness of R"L including t+e Aas 1ased Po4er 1usiness2 descri-ed in t+e Sc+e/e as t+e Aas 1ased Bnerg0 =nderta6ing2 4as also to -e de/erged. $+e Aas 1ased Bnerg0 =nderta6ing of R"L to -e de/erged under t+e Sc+e/e
17
l0 of gas for
o4er
ro.ects
RBL and of Reliance Patalganga Po4er Ltd.2 t+roug+ suita-le arrange/ents. d) $+e Sc+e/e also e5 lains7 (i) Aas 1ased Bnerg0 Resulting Co/ an0 (ii) Aas 1ased Bnerg0 =nderta6ing e) $+e Sc+e/e ro,ided for suita-le arrange/ents 4+ere-0 t+e RNRL 4ould recei,e gas fro/ R"L and su l0 t+e sa/e2 as R"L
4ould ot+er4ise +a,e done2 for t+e o4er ro.ects of RBL. f) su "n t+e 0ear 200'2 N$PC +ad floated a glo-al tender for l0 of gas to its o4er ro.ects to -e located at Da4as and R"L2 4+o e/erged as t+e
successful -idder2 +ad at t+e ti/e of su-/ission of -ids unconditionall0 acce ted all t+e ter/s and conditions
/entioned in t+e draft ASPA. "n accordance 4it+ t+e agreed ositionGsettle/ent2 t+e gas 4as to -e su RNRL at t+e lied -0 R"L to t+e
rice and ter/s no less fa,oura-le t+an t+ose of l0 agree/ent -et4een R"L and t+e
letter dated 14.02.200(2 signed -0 one D. Set+ura/an2 Aut+orised Signator0 of R"L2 co//unicated t+at +e 4as
18
directed to confir/ t+at R"L 4ould agree to carr0 out a/ending c+anges to t+e Aas Su rofor/a of ASPA anne5ed to t+e
sa/e ter/s as are contained in t+e ASPA for 12 ??SC?8 -et4een N$PC and R"L as and 4+en c+anges are carried out to N$PC ASPA. g) $+e Sc+e/e also ro,ided t+at ost t+e de/erger of t+e
8e/erged =nderta6ings of R"L2 S+ri Anil A/-ani 4ould o-tain control and /anage/ent of t+e -usinesses and underta6ings -eing de/erged. +) Eurt+er2 t+e agree/ent +ad to reflect an interest in gas
roduced -0 all t+e gas fields of R"L so as to ensure t+at gas u to t+e agreed Fuantit0 i.e. 2* ??SC?8 or 40 ??SC?82 as t+e case /a0 -e2 4ould -e /ade a,aila-le to RNRL in riorit0
to an0 ot+er sale or use -0 R"L e5ce t for t+e gas to -e used for R"L itself for o eration and trans ortation and for t+e gas to -e su lied to N$PC. $+e interest of RNRL 4as t+us to
19
i) $+e AS?A and t+e for/ of ASPA significantl0 de art fro/ t+e 8raft Agree/ent to t+e N$PC reFuest for -ids and unconditionall0 acce ted -0 R"L. 9) a) T+0 1) 0 o& RIL7) A Sc+e/e for t+e de/erger of a large co/ an0 4it+
/a.orit0 of s+ares -eing +eld -0 t+e u-lic and -0 institutions2 +as to -e in larger t+e co/ an0. u-lic interest as 4ell as in t+e interest of
large -od0 of s+are+olders of t+e 8e/erged Co/ an0 as also t+e s+are+olders of t+e Resulting Co/ anies. An0 settle/ent of t+e dis utes stated to +a,e ta6en lace -et4een or a/ongst t+e ro/oters +as2 as a necessit02 to a-ide -0 t+e final
decision of t+e 1oard of t+e 8e/erged Co/ an0 and suc+ ada tations as /a0 -e necessar0 to rotect and furt+er t+e
interests of t+e large -od0 of s+are+olders or u-lic interest. (-) >nce t+e Sc+e/e as 4as laced -efore and dul0 a -0I t+e s+are+olders (99J s+are+olders a 4+ic+ suggests t+at t+e Sc+e/e +ad t+e su ro,ed
t+e Aeneral 1od0 of s+are+olders -ut also t+e /e/-ers of t+e ro/otersH fa/il0)all anterior or underl0ing agree/ents
20
-eco/e irrele,ant. $+e senior)/ost /e/-er of t+e fa/il0 4+o resol,ed all t+e dis utes +as2 at no oint2 contested t+e
Sc+e/e as -eing inconsistent 4it+ an0 arrange/ent t+at /a0 +a,e -een arri,ed at. $+e resent a lication is a t+inl0
disguised atte/ t to reo en t+e Sc+e/e after it +as -een full0 i/ le/ented in a /anner t+at is co/ letel0 inconsistent not onl0 4it+ t+e de/erger of t+e -usinesses -ut t+e ro,isions of Section '92 of t+e Co/ anies Act2 19&(. c) $+at none of t+e +eads of so)called Agree/ent are a art of t+e Sc+e/e as a ro osed -0 t+e 1oard of 8irectors of R"L and
ro,ed -0 t+e creditors and general -od0 of s+are+olders. lace in an a lication /ade for
i/ le/entation of t+e Sc+e/e as sanctioned -0 t+e %ig+ Court. $+e a,er/ents /ade t+erein are co/ letel0
t+e A/-ani fa/il0 and t+e 1oard of R"L 4as not a4are of t+e details of t+e settle/ent -et4een S+ri ?u6es+ A/-ani and S+ri Anil A/-ani.
21
d) $+e !ice C+air/an and 3oint ?anaging 8irector of R"L2 at t+e rele,ant ti/e2 S+ri Anil A/-ani 4as or in an0 e,ent2 s+ould -e dee/ed to -e full0 a4are of t+e nature of t+e rig+ts of R"L in relation to e5 loration and ,arious gas)fields as also t+e roduction of gas fro/
S+aring Contract (PSC). Significantl02 t+e Production S+aring Contract for 1loc6 DA)8( 4as e5ecuted 4a0 -ac6 in t+e 0ear 2000. 1eing 1oard /anaged co/ an02 t+e -usiness and affairs of R"L are under control and su er,ision of t+e 1oard of 8irectors and in fact t+e ?inutes of t+e 1oard /eeting clearl0 s+o4 t+at in all /atters in 4+ic+ S+ri ?u6es+ A/-ani 4as or could -e said to -e an interested director2 +e +ad refrained fro/ artici ating in t+e deli-erations and ,oting on t+e
resolutions. $+e ter/s and conditions on 4+ic+ t+e gas 4as to -e su lied to t+e o4er lants of Reliance Patalganga
Po4er Li/ited and RBL 4as to -e at t+e discretion -0 t+e 1oard of 8irectors of t+e 8e/erged Co/ an0 4+o 4ere not -ound -0 an0 9agree/ent: as -et4een t4o grou s of ro/oters. $+e 1oard of 8irectors of 8e/erged Co/ an0 4as o-liged and in fact +ad at all ti/es 6e t t+e interests of t+e
22
general
-od0
of
s+are+olders
as
-eing
ara/ount
i/ ortance and +ad ta6en suc+ decisions as in t+e -est .udg/ent of t+e 1oard2 accorded to t+eir dut0 as t+e 1oard 4it+ t+e s+are+olders interests -eing of ut/ost i/ ortance. 10) After considering t+e clai/ of -ot+ t+e arties ,iC.2 RNRL )::,-08 )* *+0 &o;;o<,59
(1) $+e resent co/ an0 a lication under Section '92 of t+e Co/ anies Act is /aintaina-le. (2) $+e Co/ an0 Court2 +o4e,er2 under Section '92 of t+e Co/ anies Act cannot direct or dictate to /aintain or a/end or /odif0 andGor insist for a articular clause or clauses of suc+ gas su l0 agree/ent or suc+ ot+er co//ercial agree/entGcontract. (') $+e AS?A as for/ed and finaliCed in t+e 1oard of 8irectorHs ?eeting of R"L on 11.01.2007 and /odified on 12.01.2007 is in -reac+ of t+e Sc+e/e. (4) $+e ?o= (?e/orandu/ of =nderstandingGEa/il0 Arrange/ent) and its content are -inding to -ot+ arties R"L and RNRL and all t+e concerned2 ?r. ?u6es+ A/-ani and +is grou of Co/ anies and ?r. Anil A/-ani and +is grou of Co/ anies +a,e alread0 acted u on at t+e re and ost stages of t+e ?o= and t+e re and ost stages of t+e Sc+e/e accordingl0. (&) $+e ter/ 9suita-le arrange/ent: as referred in t+e Sc+e/e needs to read and inter ret -0 ta6ing into account t+e ter/s of t+e ?o= as 4ell as t+e Sc+e/e as referred a-o,e. "t is also necessar0 for t+e co/ lete and full 4or6ing of t+e Sc+e/e. (() $+e ter/s as /entioned in t+e ?o= and AS?A need to -e suita-le for -ot+ t+e arties su-.ect to t+e Ao,ern/entHs 23
ractice in su
l0 of gas
(7) $+e contract of suc+ nature is su-.ect to t+e Ao,ern/entHs a ro,al in ,ie4 of NBLP ; PSC and suc+ related Ao,ern/ent olicies2 -ut 6ee ing in ,ie4 t+e se,eral factors including t+e freedo/ and rig+t of t+e contractorGR"L and t+e li/ited and restricted sco e of interference in suc+ er/issi-le co//ercial as ects of t+e contractor2 unless2 it is in -reac+ of an0 u-lic olic0 and u-lic interest. (*) $+e su l0 of gas contractGagree/ent needs to -e clear and -an6a-le docu/ents for all t+e concerned arties.:
Einall02 t+e Co/ an0 3udge directed t+e negotiate for a 9 7,*)>;0 )::)590.05*:. 11) As discussed earlier2 aggrie,ed
arties to re)
-0
t+e
said eal
orderGdirections of t+e Co/ an0 3udge2 RNRL +as filed A No. 1 of 200*2 R"L +as also filed A
t+e 8i,ision 1enc+. 8uring t+e course of +earing2 considering t+e u-licGnational i/ ortance2 t+e 8i,ision 1enc+ er/itted
t+e =nion of "ndia to inter,ene and ut fort+ t+eir stand. 12) $+e 8i,ision 1enc+ fra/ed t+e follo4ing 3, 70 &o:
1o5 ,80:)*,o5=7 (1) t+e A (2) #+et+er t+e Co/ an0 Court +as .urisdiction to entertain lication filed -0 RNRL under t+e Co/ anies Act2 19&(M #+at is a 9suita-le arrange/ent: -et4een t+e t4o l0 of gas for t+e o4er
1') (a)
A5 <0: >6 *+0 D,-, ,o5 B051+7 $+e 8i,ision 1enc+ +as ans4ered t+e first issue in t+e
affir/ati,e. $+e reasoning of t+e 8i,ision 1enc+2 +o4e,er2 is different fro/ t+at of t+e Single 3udge. $+e Co/ an0 3udge +ad +eld t+at t+e A lication 4as /aintaina-le under Section
'92 read 4it+ Section '94 of t+e Co/ anies Act. $+e 8i,ision 1enc+ +o4e,er found t+e Co/ an0 A lication to -e
/aintaina-le on t+e -asis of Clauses 172 1*2 20 to 24 of t+e Sc+e/e of 8e/erger itself. (-) (i) >n t+e second issue2 t+e 8i,ision 1enc+ +eld as follo4s7 $+e suita-le arrange/ent 4as reFuired to -e /ade -0
engrafting t+e ?o= on t+e AS?A2 (ii) As far as t+e fi5ation of rice is concerned2 t+e rice2 -ut onl0 for its
t+e gas a,aila-le for allocation after certain Fuantit0 of gas 4+ic+ according to t+e 8i,ision 1enc+2 9stood allocated: to
25
RNRL as
l0
onl0 to t+e -alance Fuantities. (i,) $+ere 4as not+ing in t+e PSC t+at re,ented t+e rice
ro,ed -0 t+e Ao,ern/ent and R"L could fulfill its o-ligation l0 of gas at a rice of =S N 2.'4 er //-tu.
of su
14) Aggrie,ed -0 t+e a-o,e directionsGconclusions RNRL2 R"L as 4ell as =.>.". +a,e filed t+ese a lea,e etition -efore t+is Court. 1&) %eard ?Gs Ra/ 3et+/alani and ?r. ?u6ul Ro+atgi2 ?r. Ra,i S+an6ar Prasad2 learned senior counsel for RNRL2 ?Gs %aris+ N. Sal,e2 and ?r. Ro+ington E. Nari/an2 learned senior counsel for R"L and ?r. Ao al Su-ra/aniu/2 learned Solicitor Aeneral2 ?Gs ?o+an Parasaran and ?r. !i,e6 $an6+a2 Additional Solicitor Aeneral for t+e =nion of "ndia. 1() H, *o:,1); >)1?9:o7582 = to t+e earl0 90Hs2 rior to t+e NBLP and re)NBLP eals -0 4a0 of s ecial
o erated -0 t+e Ao,ern/ent co/ anies2 na/el0 >il ; Natural Aas Cor oration (in s+ort O>NACH) and >il "ndia Li/ited (in
26
s+ort O>"L)2 out of -loc6s 4+ic+ 4ere gi,en to t+ese co/ anies -0 t+e Ao,ern/ent on no/ination -asis. Since t+ese fields
4ere gi,en on no/ination -asis and onl0 to Ao,ern/ent Co/ anies2 t+e Ao,ern/entHs Aas Sector 4as a-solute. Later2 it 4as decided to o en t+e sector to Pri,ate Sector "n,est/ent during t+e /id 1990s 4+en ri,ate in,est/ent o4er to regulate t+e Natural
4as soug+t on co/ etition -asis and certain -loc6s 4ere a4arded to Pri,ate Sector co/ anies under a Production S+aring Contract (-etter 6no4n as t+e S+aring Contracts). re)NBLP Production ri,ate
in,est/ent in t+is sector since t+e e5 loration and roduction of oil and gas is associated 4it+ considera-le ris6 and no in,est/ent 4ould +a,e -een attracted if t+e AP? regi/e continued. %o4e,er2 t+e Contractors 4+o signed t+e PSC
4ere reFuired to sell all t+e gas roduced and sa,ed to t+e Aas Aut+orit0 of "ndia Li/ited2 a PS=2 and did not +a,e /ar6eting freedo/ as regards natural gas. $+e re)NBLP regi/e 4as re laced -0 t+e NBLP regi/e
under 4+ic+ t+e PSC rele,ant to t+e resent case 4as entered
27
into -et4een a 3oint !enture co/ osed of R"L and N"D> Resources Li/ited and t+e Ao,ern/ent of "ndia. "n t+e NBLP) 1 PSC2 /ar6eting freedo/ +as -een gi,en to t+e contractor to a li/ited e5tent su-.ect to t+e o,erall regulation of t+e Ao,ern/ent. 17) Co5 *,*7*,o5); )58 o*+0: *)*7*o:6 P:o-, ,o5 2
9A:*,1;0 2'7. T+,59 o& -);70 <,*+,5 *0::,*o:,); <)*0: o: 1o5*,505*); +0;& )58 :0 o7:10 o& *+0 0@1;7 ,-0 01o5o.,1 Ao50 *o -0 * ,5 *+0 U5,o5 ) (1) All lands2 /inerals and ot+er t+ings of ,alue underl0ing t+e ocean 4it+in t+e territorial 4aters2 or t+e continental s+elf2 or t+e e5clusi,e econo/ic Cone2 of "ndia s+all ,est in t+e =nion and -e +eld for t+e ur oses of t+e =nion. (2) All ot+er resources of t+e e5clusi,e econo/ic Cone of "ndia s+all also ,est in t+e =nion and -e +eld for t+e ur oses of t+e =nion. (') $+e li/its of t+e territorial 4aters2 t+e continental s+elf2 t+e e5clusi,e econo/ic Cone2 and ot+er /ariti/e Cones2 of "ndia s+all -e suc+ as /a0 -e s ecified2 fro/ ti/e to ti/e2 -0 or under an0 la4 /ade -0 Parlia/ent.:
1*)
Article '9(-) of t+e Constitution en,isages t+at t+e State articular2 direct its olic0 to4ards securing t+e
s+all2 in
o4ners+i and control of /aterial resources of t+e co//unit0 as so distri-uted as -est to su-)ser,e t+e co//on good. 19) $+is Court2 in t+e case of Stat" of #a$il Nadu vs. %.
A&u 'avur !ai2 (19*4) 1 SCC &1& at &49 +eld t+at t+e
28
e5 ression Odistri-uteH under Article '9(-) cannot -ut -e gi,en full la0 as it fulfills t+e -asic ur ose of re)structuring t+e
econo/ic order. "t e/-races t+e entire /aterial resources of t+e co//unit0. "ts goal is so to underta6e distri-ution as
-est to su-)ser,e t+e co//on good. "t re)organiCes -0 suc+ distri-ution t+e o4ners+i and control. $o distri-ute2 4ould
/ean2 to allot2 to di,ide into classes or into grou s and e/-races arrange/ents2 classification2 lace/ent2 dis osition2 a ortion/ent2 t+e s0ste/ of dis-ursing goods t+roug+out t+e
co//unit0. 20) "n Salar (un) Su)ar *ills %td. "tc. vs. Stat" of age '( aragra + '*2
*+sor" & Ors.2 (1972) 1 SCC 2' at t+is Court +eld as under7
33!B@@@8eli/iting areas for transactions or arties or denoting rice for transactions are all 4it+in t+e area of indi,idual freedo/ of contract 4it+ li/ited c+oice -0 reason of ensuring t+e greatest good for t+e greatest nu/-er -0 ac+ie,ing ro er su l0 at standard or fair rice to eli/inate t+e e,ils of +oarding and scarcit0 on t+e one +and and a,aila-ilit0 on t+e ot+er.:
21)
of Assa$ & Ors.2 (19*9) ' SCC 7092 t+is Court affir/ed t+e ,ie4s e5 ressed in t+e a-o,e cases in t+e conte5t of electricit0 su l0 and also affir/ed t+e Ao,ern/entHs role in t+e securing
29
and distri-uting of t+e resources of t+e co//unit0 t+at -est su-)ser,es t+e co//on good. 22) $+is Court in nu/erous decisions +as laid do4n t+at in ro ert0
and State largesse2 t+e State is -ound to follo4 t+e dictate of Article 14. 2') "n 0a$ana 1a+ara$ S-"tt+ vs. Int"rnational Air/ort
Aut-orit+ of India & Ors2 (1979) ' SCC 4*92 t+is Court +as ointed out t+at 7
9@@..$+e o4er or discretion of t+e Ao,ern/ent in t+e /atter of grant of largess including a4ard of .o-s2 contracts2 Fuotas2 licences etc.2 /ust -e confined and structured -0 rational2 rele,ant and non)discri/inator0 standard or nor/ and if t+e Ao,ern/ent de arts fro/ suc+ standard or nor/ in an0 articular case or cases2 t+e action of t+e Ao,ern/ent 4ould -e lia-le to -e struc6 do4n2 unless it can -e s+o4n -0 t+e Ao,ern/ent t+at t+e de arture 4as not ar-itrar02 -ut 4as -ased on so/e ,alid rinci le 4+ic+ in itself 4as not irrational2 unreasona-le or discri/inator0 :
24)
Cattl" 3""d Industri"s2 (199') 1 SCC 712 t+is Court o-ser,ed as follo4s7
9"n contractual s +ere as in all ot+er State actions2 t+e State and all its instru/entalities +a,e to confor/ to Article 14 of t+e Constitution of 4+ic+ non)ar-itrariness is a significant facet. $+ere is no unfettered discretion in u-lic la4 7 A u-lic aut+orit0 ossesses o4ers onl0 to use t+e/ for 30
u-lic good. $+is i/ oses t+e dut0 to act fairl0 and to ado t a rocedure 4+ic+ is Pfair la0 in actionP. @@@:
2&)
t+e Petroleu/ and Natural Aas Rules2 19&92 /a6e ro,isions2 inter alia2 for t+e regulation of etroleu/ o eration and grant
of licence and leases for e5 loration2 de,elo /ent and roduction of etroleu/ in "ndia. $+e $erritorial #aters2
Continental S+elf2 B5clusi,e Bcono/ic Qone and ?ariti/e Qones Act2 197( ro,ides for t+e grant or a licence of Letter of Aut+orit0 -0 t+e Ao,ern/ent to e5 lore and e5 loit t+e resources of t+e Continental S+elf and B5clusi,e Bcono/ic Qone and an0 Petroleu/ o eration. 2() =nder t+e Co/ anies Act2 t+ere are no ro,isions e5ce t
Sections '91 to '94 4+ic+ deal 4it+ t+e rocedure and o4er of t+e Co/ an0 Court to sanction t+e Sc+e/e 4+ic+ falls 4it+in t+e a/-it of reFuire/ents as conte/ lated under t+ese sections. Since t+e Co/ an0 3udge as 4ell as t+e 8i,ision roceeded on t+e -asis t+at it +as
sanctioned under Sections '91 to '94 of t+e Co/ anies Act2 it is -ut ro er to refer t+ose sections 4+ic+ are as under7
31
33'1. Po<0: *o 1o.4:o., 0 o: .)?0 )::)590.05* <,*+ 1:08,*o: )58 .0.>0: (1) #+ere a co/ ro/ise or arrange/ent is ro osed) (a) -et4een a co/ an0 and its creditors or an0 class of t+e/I or (-) -et4een a co/ an0 and its /e/-ers or an0 class of t+e/2 t+e $ri-unal /a02 on t+e a lication of t+e co/ an0 or of an0 creditor or /e/-er of t+e co/ an0 or2 in t+e case of a co/ an0 4+ic+ is -eing 4ound u 2 of t+e liFuidator2 order a /eeting of t+e creditors or class of creditors2 or of t+e /e/-ers or class of /e/-ers2 as t+e case /a0 -e to -e called2 +eld and conducted in suc+ /anner as t+e $ri-unal directs. (2) "f a /a.orit0 in nu/-er re resenting t+ree)fourt+s in ,alue of t+e creditors2 or class of creditors2 or /e/-ers2 or class of /e/-ers as t+e case /a0 -e2 resent and ,oting eit+er in erson or2 4+ere ro5ies are allo4ed under t+e rules /ade under section (4'2 -0 ro502 at t+e /eeting2 agree to an0 co/ ro/ise or arrange/ent2 t+e co/ ro/ise or arrange/ent s+all2 if sanctioned -0 t+e $ri-unal -e -inding on all t+e creditors2 all t+e creditors of t+e class2 all t+e /e/-ers2 or all t+e /e/-ers of t+e class2 as t+e case /a0 -e2 and also on t+e co/ an02 or2 in t+e case of a co/ an0 4+ic+ is -eing 4ound u 2 on t+e liFuidator and contri-utories of t+e co/ an07 Pro,ided t+at no order sanctioning an0 co/ ro/ise or arrange/ent s+all -e /ade -0 t+e $ri-unal unless t+e $ri-unal is satisfied t+at t+e co/ an0 or an0 ot+er erson -0 4+o/ an a lication +as -een /ade under su-)section (1) +as disclosed to t+e $ri-unal2 -0 affida,it or ot+er4ise2 all /aterial facts relating to t+e co/ an02 suc+ as t+e latest financial osition of t+e co/ an02 t+e latest auditorPs re ort on t+e accounts of t+e co/ an02 t+e endenc0 of an0 in,estigation roceedings in relation to t+e co/ an0 under sections 2'& to '&12 and t+e li6e. (') An order /ade -0 t+e $ri-unal under su-)section (2) s+all +a,e no effect until a certified co 0 of t+e order +as -een filed 4it+ t+e Registrar. 32
(4) A co 0 of e,er0 suc+ order s+all -e anne5ed to e,er0 co 0 of t+e /e/orandu/ of t+e co/ an0 issued after t+e certified co 0 of t+e order +as -een filed as aforesaid2 or in t+e case of a co/ an0 not +a,ing a /e/orandu/2 to e,er0 co 0 so issued of t+e instru/ent constituting or defining t+e constitution of t+e co/ an0. (&) "f default is /ade in co/ l0ing 4it+ su-)section (4)2 t+e co/ an02 and e,er0 officer of t+e co/ an0 4+o is in default2 s+all -e unis+a-le 4it+ fine 4+ic+ /a0 e5tend to one +undred ru ees for eac+ co 0 in res ect of 4+ic+ default is /ade. (() $+e $ri-unal /a02 at an0 ti/e after an a lication +as -een /ade to it under t+is section sta0 t+e co//ence/ent or continuation of an0 suit or roceeding against t+e co/ an0 on suc+ ter/s as t+e $ri-unal t+in6s fit2 until t+e a lication is finall0 dis osed of. 3'2. Po<0: o& T:,>75); *o 05&o:10 1o.4:o., 0 )58 )::)590.05* 2 (1) #+ere t+e $ri-unal /a6es an order under section '91 sanctioning a co/ ro/ise or an arrange/ent in res ect of a co/ an02 it) (a) s+all +a,e o4er to su er,ise t+e carr0ing out of t+e co/ ro/ise or an arrange/entI and (-) /a02 at t+e ti/e of /a6ing suc+ order or at an0 ti/e t+ereafter2 gi,e suc+ directions in regard to an0 /atter or /a6e suc+ /odifications in t+e co/ ro/ise or arrange/ent as it /a0 consider necessar0 for t+e ro er 4or6ing of t+e co/ ro/ise or arrange/ent. (2) "f t+e $ri-unal aforesaid is satisfied t+at a co/ ro/ise or an arrange/ent sanctioned under section '91 cannot -e 4or6ed satisfactoril0 4it+ or 4it+out /odifications2 it /a02 eit+er on its o4n /otion or on t+e a lication of an0 erson interested in t+e affairs of t+e co/ an02 /a6e an order 4inding u t+e co/ an02 and suc+ an order s+all -e dee/ed to -e an order /ade under section 4'' of t+is Act. (') $+e ro,isions of t+is section s+all2 so far as /a0 -e2 also a l0 to a co/ an0 in res ect of 4+ic+ an order +as -een /ade -efore t+e co//ence/ent of t+e Co/ anies 33
(A/end/ent) Act2 2001 sanctioning a co/ ro/ise or an arrange/ent. 3'3. I5&o:.)*,o5 ) *o 1o.4:o., 0 o: )::)590.05* <,*+ 1:08,*o: )58 .0.>0: - (1) #+ere a /eeting of creditors or an0 class of creditors2 or of /e/-ers or an0 class of /e/-ers2 is called under section '912) (a) 4it+ e,er0 notice calling t+e /eeting 4+ic+ is sent to a creditor or /e/-er2 t+ere s+all -e sent also a state/ent setting fort+ t+e ter/s of t+e co/ ro/ise or arrange/ent and e5 laining its effectI and in articular2 stating an0 /aterial interests of t+e directors2 /anaging director or /anager of t+e co/ an02 4+et+er in t+eir ca acit0 as suc+ or as /e/-ers or creditors of t+e co/ an0 or ot+er4ise2 and t+e effect on t+ose interests of t+e co/ ro/ise or arrange/ent if2 and in so far as2 it is different fro/ t+e effect on t+e li6e interests of ot+er ersonsI and (-) in e,er0 notice calling t+e /eeting 4+ic+ is gi,en -0 ad,ertise/ent2 t+ere s+all -e included eit+er suc+ a state/ent as aforesaid or a notification of t+e lace at 4+ic+ and t+e /anner in 4+ic+ creditors or /e/-ers entitled to attend t+e /eeting /a0 o-tain co ies of suc+ a state/ent as aforesaid. (2) #+ere t+e co/ ro/ise or arrange/ent affects t+e rig+ts of de-enture)+olders of t+e co/ an02 t+e said state/ent s+all gi,e t+e li6e infor/ation and e5 lanation as res ects t+e trustees of an0 deed for securing t+e issue of t+e de-entures as it is reFuired to gi,e as res ects t+e co/ an0Ps directors. (') #+ere a notice gi,en -0 ad,ertise/ent includes a notification t+at co ies of a state/ent setting fort+ t+e ter/s of t+e co/ ro/ise or arrange/ent ro osed and e5 laining its effect can -e o-tained -0 creditors or /e/-ers entitled to attend t+e /eeting2 e,er0 creditor or /e/-er so entitled s+all2 on /a6ing an a lication in t+e /anner indicated -0 t+e notice2 -e furnis+ed -0 t+e co/ an02 free of c+arge2 4it+ a co 0 of t+e state/ent. (4) #+ere default is /ade in co/ l0ing 4it+ an0 of t+e reFuire/ents of t+is section2 t+e co/ an02 and e,er0 officer 34
of t+e co/ an0 4+o is in default2 s+all -e unis+a-le 4it+ fine 4+ic+ /a0 e5tend to fift0 t+ousand ru eesI and for t+e ur ose of t+is su-)section an0 liFuidator of t+e co/ an0 and an0 trustee of a deed for securing t+e issue of de-entures of t+e co/ an0 s+all -e dee/ed to -e an officer of t+e co/ an07 Pro,ided t+at a erson s+all not -e unis+a-le under t+is su-)section if +e s+o4s t+at t+e default 4as due to t+e refusal of an0 ot+er erson2 -eing a director2 /anaging director2 /anager or trustee for de-enture +olders2 to su l0 t+e necessar0 articulars as to +is /aterial interests. (&) B,er0 director2 /anaging director2 or /anager of t+e co/ an02 and e,er0 trustee for de-enture +olders of t+e co/ an02 s+all gi,e notice to t+e co/ an0 of suc+ /atters relating to +i/self as /a0 -e necessar0 for t+e ur oses of t+is sectionI and if +e fails to do so2 +e s+all -e unis+a-le 4it+ fine 4+ic+ /a0 e5tend to fi,e t+ousand ru ees. 3'4. P:o-, ,o5 &o: &)1,;,*)*,59 :01o5 *:71*,o5 )58 ).);9).)*,o5 o& 1o.4)5,0 (1) #+ere an a lication is /ade to t+e $ri-unal under section '91 for t+e sanctioning of a co/ ro/ise or arrange/ent ro osed -et4een a co/ an0 and an0 suc+ ersons as are /entioned in t+at section2 and it is s+o4n to t+e $ri-unal) (a) t+at t+e co/ ro/ise or arrange/ent +as -een ro osed for t+e ur oses of2 or in connection 4it+2 a sc+e/e for t+e reconstruction of an0 co/ an0 or co/ anies2 or t+e a/alga/ation of an0 t4o or /ore co/ aniesI and (-) t+at under t+e sc+e/e t+e 4+ole or an0 art of t+e underta6ing2 ro ert0 or lia-ilities of an0 co/ an0 concerned in t+e sc+e/e (in t+is section referred to as a Rtransferor co/ an0R) is to -e transferred to anot+er co/ an0 (in t+is section referred to as Rt+e transferee co/ an0R)I t+e $ri-unal /a02 eit+er -0 t+e order sanctioning t+e co/ ro/ise or arrange/ent or -0 a su-seFuent order2 /a6e ro,ision for all or an0 of t+e follo4ing /atters7) (i) t+e transfer to t+e transferee co/ an0 of t+e 4+ole or an0 art of t+e underta6ing2 ro ert0 or lia-ilities of an0 transferor co/ an0I 35
(ii)
t+e allot/ent or a ro riation -0 t+e transferee co/ an0 of an0 s+ares2 de-entures olicies2 or ot+er li6e interests in t+at co/ an0 4+ic+2 under t+e co/ ro/ise or arrange/ent2 are to -e allotted or a ro riated -0 t+at co/ an0 to or for an0 ersonI t+e continuation -0 or against t+e transferee co/ an0 of an0 legal roceedings ending -0 or against an0 transferor co/ an0I t+e dissolution2 4it+out 4inding u 2 of an0 transferor co/ an0I t+e ro,ision to -e /ade for an0 ersons 4+o2 4it+in suc+ ti/e and in suc+ /anner as t+e Court directs dissent fro/ t+e co/ ro/ise or arrange/entI and suc+ incidental2 conseFuential and su le/ental /atters as are necessar0 to secure t+at t+e reconstruction or a/alga/ation s+all -e full0 and effecti,el0 carried out7
(iii)
(i,) (,)
(,i)
Pro,ided t+at no co/ ro/ise or arrange/ent ro osed for t+e ur oses of2 or in connection 4it+2 a sc+e/e for t+e a/alga/ation of a co/ an02 4+ic+ is -eing 4ound u 2 4it+ an0 ot+er co/ an0 or co/ aniesI s+all -e sanctioned -0 t+e $ri-unal unless t+e Court +as recei,ed a re ort fro/ t+e Registrar t+at t+e affairs of t+e co/ an0 +a,e not -een conducted in a /anner re.udicial to t+e interests of its /e/-ers or to u-lic interest7 Pro,ided furt+er t+at no order for t+e dissolution of an0 transferor co/ an0 under clause (i,) s+all -e /ade -0 t+e $ri-unal unless t+e >fficial LiFuidator +as2 on scrutin0 of t+e -oo6s and a ers of t+e co/ an02 /ade a re ort to t+e $ri-unal t+at t+e affairs of t+e co/ an0 +a,e not -een conducted in a /anner re.udicial to t+e interests of its /e/-ers or to u-lic interest. (2) #+ere an order under t+is section ro,ides for t+e transfer of an0 ro ert0 or lia-ilities2 t+en2 -0 ,irtue of t+e orderI t+at ro ert0 s+all -e transferred to and ,est in and t+ose lia-ilities s+all -e transferred to and -eco/e t+e lia-ilities of t+e transferee co/ an0 and in t+e case of an0 ro ert02 if t+e order so directs2 freed fro/ an0 c+arge 4+ic+ is2 -0 ,irtue of t+e co/ ro/ise or arrange/ent2 to cease to +a,e effect. 36
(') #it+in t+irt0 da0s after t+e /a6ing of an order under t+is section2 e,er0 co/ an0 in relation to 4+ic+ t+e order is /ade s+all cause a certified co 0 t+ereof to -e filed 4it+ t+e Registrar for registration. "f default is /ade in co/ l0ing 4it+ t+is su-)section2 t+e co/ an02 and e,er0 officer of t+e co/ an0 4+o is in default2 s+all -e unis+a-le 4it+ fine 4+ic+ /a0 e5tend to fi,e +undred ru ees. (4) "n t+is section) (a) R ro ert0R includes ro ert0 rig+ts and o4ers of e,er0 descri tionI and Rlia-ilitiesR includes duties of e,er0 descri tionI and (-) R$ransferee co/ an0R does not include an0 co/ an0 ot+er t+an a co/ an0 4it+in t+e /eaning of t+is ActI -ut Rtransferor co/ an0R includes an0 -od0 cor orate2 4+et+er a co/ an0 4it+in t+e /eaning of t+is Act or not. 3'4A. No*,10 *o >0 9,-05 *o C05*:); (o-0:5.05* &o: )44;,1)*,o5 7580: 01*,o5 3'1 )58 3'4 $+e $ri-unal s+all gi,e notice of e,er0 a lication /ade to it under section '91 or '94 to t+e Central Ao,ern/ent2 and s+all ta6e into consideration t+e re resentations2 if an02 /ade to it -0 t+at Ao,ern/ent -efore assing an0 order under an0 of t+ese sections.:
27) ISSUES ARISIN( IN THE PRESENT APPEALS2 a) #+et+er t+e Co/ an0 Petition filed -0 RNRL under Section '92 of t+e Co/ anies Act2 4as /aintaina-leM
-) B,en if t+e Co/ an0 Petition 4as /aintaina-le2 4+et+er t+e c+allenge raised -0 RNRL to t+e AS?A2 t+at it is not a 9suita-le arrange/ent: 4as /aintaina-le articularl0
37
in ,ie4 of t+e fact t+at on /erits2 t+e Co/ an0 3udge +ad found2 t+ese o-.ections to -e unsustaina-leM c) #+et+er t+e ?o= entered into a/ongst t+e fa/il0 /e/-ers of t+e Pro/oter 4as -inding u on t+e cor orate entit0 S R"LM d) #+et+er t+e ter/s of t+e ?o= are reFuired to -e incor orated in t+e AS?A as +eld -0 t+e 8i,ision 1enc+M e) #+et+er t+e ro,isions in t+e AS?A reFuiring
Ao,ern/ent a
ro,al for su
l0 of gas to RNRL is
unreasona-le and t+at its inclusion renders t+e AS?A as not a 9suita-le arrange/ent: as contended -0 RNRLM f) %a,ing insisted u on a Aas Sale and Purc+ase
Agree/ent (ASPA) in confor/it0 4it+ t+e N$PC draft ASPA dated 12t+ ?a02 200& 4+ic+ contained an
ro,al for
Fuantit02 tenure and rice2 4+et+er it is o en to RNRL to no4 contend t+at t+e Ao,ern/ent a ro,al for su l0 of
gas is not reFuired and furt+er t+at t+e reFuiring Ao,ern/ent a t+e AS?AGASPAM
ro,ision
38
g)
#+et+er it is necessar0 for t+is Court to go into t+e inter retation of t+e ro,isions of t+e PSCM
+)
i.
under t+e PSCM ii. #+et+er t+e Ao,ern/ent +as t+e rig+t to regulate t+e distri-ution of gas e5ercised -0 utting in roduced 4+ic+ it +as lace t+e Aas =tiliCation
Polic0 under 4+ic+ sectoral and consu/er)4ise riorities (to t+e Fuantities s ecified) +a,e -een identified and notified to R"LM iii. #+et+er t+e Contractor +as a +0sical s+are in t+e
gas roduced and sa,ed 4+ic+ it can deal 4it+ at its o4n ,olitionM i) "n ,ie4 of t+e Aas =tiliCation Polic0 and t+e Pricing Polic0 of t+e Ao,ern/ent2 4+et+er t+e 9Suita-le Arrange/ent: for su l0 of gas to 8adri Po4er Plant of RBL can onl0 -e lica-le to ot+er allottees of
gas and t+at too to t+e e5tent of t+e Fuantit0 of gas t+at
39
/a0 -e allocated -0 t+e Ao,ern/ent as and 4+en t+e 8adri Po4er Plant is read0 to recei,e gasM 2*) All t+ese issues can -e ans4ered in t+e follo4ing -road +eadings7 $A% M),5*),5)>,;,*6 o& *+0 1o.4)56 40*,*,o52 i) "t +as -een argued -efore t+is Court t+at t+e original lication 4as not /aintaina-le as t+e Co/ an0
co/ an0 a
3udge (single 3udge) did not +a,e an0 .urisdiction. "t +as -een argued t+at t+e .urisdiction of t+e Court can onl0 -e found under Section '94 of t+e Act and Section '92 is co/ letel0 ina lica-le. R"L +as argued t+is -ecause t+e 4ording of -ot+
t+e ro,isions suggests t+at Section '92 ro,ides /uc+ 4ider o4er to t+e Court 4it+ res ect to /a6ing additions in t+e Sc+e/e. Section '92 (1)(-) states t+at t+e Court 9/a0 gi,e
suc+ directions in regard to an0 /atter or /a6ing suc+ /odifications in t+e co/ ro/ise or arrange/ent as it /a0 consider necessar0 for t+e or arrange/ent:. t+is su ro er 4or6ing of t+e co/ ro/ise
o4er essentiall0 to 9incidental2 conseFuential and le/ental /atters onl0:. ?r. R.E. Nari/an2 learned senior
40
counsel a
reference to Sections '91 to '94 of t+e Co/ anies Act. According to +i/2 Section '92 of t+e Act +ad no redecessors
eit+er in Bnglis+ La4 or in t+e Co/ anies Act of 191'. $+e reason 4+0 t+e Legislature a ears to +a,e felt t+e necessit0 ar 4it+
of enacting Section '92 is to -ring Section '91 on Section '94. Section '94 a
re)constructing and or a/alga/ating2 in,ol,ing t+e transfer of assets and lia-ilities to anot+er Co/ an0. a "t is t+us2
lica-le to a s ecies of t+e genus of Co/ an0 referred to Section '942 su-)section 1 s ecificall0
gi,es t+e Co/ an0 Court t+e o4er not /erel0 to sanction t+e co/ ro/ise or arrange/ent -ut also gi,es t+e Co/ an0 Court t+e o4er2 -0 a su-seFuent order2 to /a6e ro,isions for
a/alga/ation s+all -e full0 and effecti,el0 carried out: TSection '94(1)(,i)U. $+is o4er is a-sent in Section '912 so
t+at co/ anies falling 4it+in Section '912 -ut not 4it+in Section '942 4ould not -e a/ena-le to t+e Co/ an0 CourtHs
41
.urisdiction to enforce a co/ ro/ise or arrange/ent /ade under section '91 and to see t+at t+e0 are full0 carried out. %ence2 t+e o4er under Section '92 +as to -e understood in o4er
t+e a-o,e conte5t2 and is of t+e sa/e Fualit0 as t+e e5 ressl0 gi,en to t+e Co/ an0 Court Section '94. ii) "t is
ost)sanction under
ointed out -0 ?r. Nari/an t+at on t+e facts of t+e l0 at all2 for t+e reason2
t+at t+e sanctioned sc+e/e on record is a sc+e/e to 4+ic+ -ot+ Sections '91 and '94 a l0. $+at -eing t+e case2 in
order to full0 and effecti,el0 carr0 out an arrange/ent 4+ic+ +as -een sanctioned under Sections '91 to '942 t+e Co/ an0 Court en.o0s .urisdiction under Sections '94(1)(i) to (,i) itself. %e ointed out t+at t+is -eco/es clear -e0ond dou-t fro/ a ointed out
t+at Section 1&')A of t+e 191' Act is cons icuous -0 its a-sence in su-)section(') of Section '92. According to +i/2 t+is /a6es it clear t+at 4+ere a co/ ro/ise or arrange/ent +as -een sanctioned under Section 1&' A of t+e t+e re,ious Act2 l02
42
/a6ing it clear t+at 4+ere a sc+e/e is go,erned -0 t+e ro,isions of Section '942 Section '92 4ould +a,e no a iii) lication. $+e learned Single 3udge founded +is o4er to gi,e relief lication filed -0 RNRL in Section '92 on licants cannot -e rendered re/ediless. ointed out t+at t+e Co/ an0 3udge
4as not correct for t+e si/ le reason t+at t+e re/ed0 lies in Section '94(1) su-)clause (,i) 4+ic+ gi,es a/ le o4er to t+e
Co/ an0 Court to full0 and effecti,el0 carr0 out t+e sc+e/e go,erned -0 t+e ro,isions of Section '94. %e also ointed out t+at t+e /arginal note can -e loo6ed at to indicate t+e drift of t+e Section. i,) "t is t+e clai/ of t+e R"L t+at t+e o4er to enforce t+e o4er to /a6e suc+
/odifications in t+e co/ ro/ise or arrange/ent as t+e Court /a0 consider necessar0 for t+e co/ ro/ise or arrange/ent. ointed out t+at t+e e5tend o-,iousl0 to ro er 4or6ing of t+e
/odifications to t+e sc+e/e itself 4+ic+ +as -een assed -0 at least 7&J of t+e s+are+olders in e5ercise of t+eir rig+t of Cor orate 8e/ocrac0. "n t+e resent case2 t+e Sc+e/e 4as
assed -0 an o,er4+el/ing /a.orit0 of /ore t+an 99J of t+e eFuit0 s+are+olders of R"L. %e furt+er ointed out t+at a art
fro/ t+e language of Section '92 t+e o4er under Section '92 cannot ossi-l0 -e a greater o4er t+an t+e o4er under "n *i-""r 5.
*afatlal ,s. *afatlal Industri"s %i$it"d (1997) 1 SCC &792 t+is Court delineated t+e e5tent of o4er of t+e Co/ an0
e5tent is eri +eral and su er,isor0 and not a ellate. $+e Court acts li6e an u/ ire in a ga/e of cric6et 4+o +as to see t+at -ot+ t+e tea/s la0 t+eir ga/e according to t+e rules and do not o,erste t+e li/its. 1ut su-.ect to t+at +o4 -est t+e ga/e is to -e la0ed is left to t+e la0ers and not to t+e u/ ire. $+e su er,isor0 .urisdiction of t+e Co/ an0 Court can also -e culled out fro/ t+e ro,isions of Section '92 of t+e Act 4+ic+ reads as under@@.. @@.>f course t+is section deals 4it+ ost)sanction su er,ision. 1ut t+e said ro,ision itself clearl0 ear/ar6s t+e field in 4+ic+ t+e sanction of t+e Court o erates. "t is o-,ious t+at t+e su er,isor cannot e,er -e treated as t+e aut+or or a olic0)/a6er. ConseFuentl0 t+e ro riet0 and t+e /erits of t+e co/ ro/ise or arrange/ent +a,e to -e .udged -0 t+e arties 4+o as sui .uris 4it+ t+eir o en e0es and full0 infor/ed a-out t+e ros and cons of t+e sc+e/e arri,e at t+eir o4n reasoned .udg/ent and agree to -e -ound -0 suc+ co/ ro/ise or arrange/ent. $+e Court cannot2 t+erefore2 underta6e t+e e5ercise of scrutinising t+e sc+e/e laced for its sanction 4it+ a ,ie4 to finding out 4+et+er a -etter sc+e/e could +a,e -een ado ted -0 t+e arties. $+is e5ercise re/ains onl0 for t+e arties and is in t+e real/ of co//ercial de/ocrac0 er/eating t+e acti,ities of t+e concerned creditors and /e/-ers of t+e co/ an0 4+o in t+eir -est co//ercial and econo/ic interest -0 /a.orit0 agree to gi,e green signal to suc+ a co/ ro/ise or arrange/ent@@. 9
,)
Again in S.'. Gu/ta & Anr. !s. '.6. (ain & Anr. (1979)
' SCC &42 t+is Court dealt 4it+ t+e creditorsH sc+e/e ro ounded under Section '91 to get a out of 4inding u . >-ser,ations /ade in articular Co/ an0 aragra +s 1' and
1& of t+is .udg/ent2 if read out of conte5t2 4ould /a6e it clear t+at t+is Court +as e5tended t+e o4er under section '92 to
/a6e /odifications 4+ic+ 4ould include additions and o/issions to t+e sc+e/e at 4ill. $+is is not t+e correct
45
.udg/ent ,er0 clearl0 states t+at t+e li/it on t+e CourtHs o4er is al4a0s to see t+at t+e /odifications are done for t+e ro er 4or6ing of t+e sc+e/e and not for an0 ot+er A ,er0 i/ ortant aragra + of t+e .udg/ent is ur ose.
ara 27 4+ere
t+is Court ulti/atel0 o-ser,ed 9strictl0 s ea6ing2 o/ission of t+e original s onsor and su-stituting anot+er one 4ould not c+ange t+e O-asic fa-ricH of t+e sc+e/e:. $+is .udg/ent
t+erefore2 /ust -e understood as construing Section '92 in a /anner t+at 4ould not er/it t+e Co/ an0 Court to so
/odif0 a sc+e/e as to c+ange its -asic fa-ric. ,i) Anot+er .udg/ent of t+is Court is in *")-al -o$"s (6)
%td. ,s. S-r"" Ni7as Girni '.'. Sa$iti & Ors. (2007) 7 SCC 7&' 4+ic+ sFuarel0 raises t+e issue as to 4+et+er in t+e guise of /odif0ing a sc+e/e2 t+e Co/ an0 Court can su-stitute a ortion of t+e original sc+e/e. $+is Court said an e/ +atic no7)
9&'. 1ut -efore t+at2 4e t+in6 t+at anot+er ste +as to -e ta6en in t+is case. #+at +as no4 -een acce ted -0 t+e 8i,ision 1enc+2 is not t+e sc+e/e as /odified -0 t+e Aeneral ?eeting as conte/ lated -0 Section '91 of t+e Act. At least t4o of t+e /odifications +a,ing ra/ifications are -ased on underta6ings or state/ents /ade on -e+alf of L1PL and t+ere a ears to -e difference of o inion on t+at /odification e,en a/ong t+e So/anis. $+ere is also t+e Fuestion 4+et+er t+e ro osals of a erson 4+o is not one of 46
t+ose recognised -0 Section '91 of t+e Act2 could -e acce ted -0 t+e Co/ an0 Court 4+ile a ro,ing a sc+e/e. #e are of t+e ,ie4 t+at t+e sc+e/e 4it+ t+e /odifications as no4 ro osed or acce ted2 +as to go -ac6 to t+e Aeneral ?eeting of t+e /e/-ers of t+e Co/ an02 called in accordance 4it+ Section '91 of t+e Act and t+e reFuisite /a.orit0 o-tained. &4. "t 4as argued on -e+alf of t+e res ondents t+at under Section '92 of t+e Act2 t+e court +as t+e o4er to /a6e /odifications in t+e co/ ro/ise or arrange/ent as it /a0 consider necessar0 and t+is o4er 4ould include t+e o4er to a ro,e 4+at +as -een ut for4ard -0 L1PL 4+o +as co/e for4ard to disc+arge t+e lia-ilities of t+e Co/ an0 on t+e rig+ts in t+e ro erties of t+e Co/ an0 ot+er t+an in t+e office -uilding and in t+e godo4n2 -eing gi,en to it for de,elo /ent and sale. As 4e read Section '92 of t+e Act2 it onl0 gi,es o4er to t+e court to /a6e suc+ /odifications in t+e co/ ro/ise or arrange/ent as it /a0 consider necessar0 for t+e ro er 4or6ing of t+e co/ ro/ise or arrange/ent. $+is is onl0 a o4er t+at ena-les t+e court to ro,ide for ro er 4or6ing of co/ ro/ise or arrange/ent2 it cannot -e understood as a o4er to /a6e su-stantial /odifications in t+e sc+e/e a ro,ed -0 t+e /e/-ers in a /eeting called in ter/s of Section '91 of t+e Act. &&. A /odification in t+e arrange/ent t+at /a0 -e considered necessar0 for t+e ro er 4or6ing of t+e co/ ro/ise or arrange/ent cannot -e ta6en as t+e sa/e as a /odification in t+e co/ ro/ise or arrange/ent itself and an0 suc+ /odification in t+e sc+e/e or arrange/ent or an essential ter/ t+ereof /ust go -ac6 to t+e Aeneral ?eeting in ter/s of Section '91 of t+e Act and a fres+ a ro,al o-tained t+erefor. $+e fact t+at no /e/-er or creditor o osed it in court cannot -e considered as a su-stitute for follo4ing t+e reFuire/ents of Section '91 of t+e Co/ anies Act for a ro,al of t+e co/ ro/ise or arrange/ent as no4 /odified or ro osed to -e /odified. &(. "n Miheer H. Mafatlal ,. Mafatlal Industries Ltd.t+is Court +ad insisted t+at t+e rocedural reFuire/ents of Section '91 /ust -e satisfied -efore t+e court can consider t+e acce ta-ilit0 of a sc+e/e e,en in res ect of a co/ an0 not in liFuidation. $+erefore2 4e are not in a osition to acce t t+e argu/ent on -e+alf of t+e res ondents t+at t+e sc+e/e no4 as /odified -0 t+e decision of t+e 8i,ision 1enc+ need not go -ac6 to t+e Aeneral ?eeting of t+e /e/-ers in ter/s of Section '91 of t+e Act. #e /ust also re/e/-er t+at at least -efore us t+ere are serious o-.ections to t+e /odifications -0 one of t+e So/anis 4+o are t+e ro/oters of t+e Co/ an0 in liFuidation and t+e s onsors of t+e arrange/ent and t+at o-.ection cannot -e -rus+ed aside. &7. #e find t+at t+e /odifications ro osed alters t+e osition of t+e s+are+olders ,is)V),is t+e Co/ an0. "nstead of t+e Co/ an0 re,i,ing t+e s inning unit as reco//ended 47
-0 t+e State 1an6 of "ndia Ca ital ?ar6ets Li/ited2 as ado ted in t+e Aeneral ?eeting2 no4 t+e Co/ an0 4ill +a,e not+ing to do 4it+ t+e /ill lands and t+e 4+ole of t+e /ill lands 4ill ass on to L1PL on L1PL a0ing a ,alue of Rs 97.&0 crores to SC?L and L1PL 4ill start an industr0 of its o4n in t+at ro ert0. $+is cannot -e considered to -e a /odification in t+e sc+e/e necessar0 for t+e ro er 4or6ing of t+e co/ ro/ise or arrange/ent. $+is is a /odification of t+e sc+e/e itself. Sa/e is t+e osition regarding t+e ro,ision of re lacing t+e resolution assed t+at if an0 sur lus a/ounts are a,aila-le2 SC?L 4ould start a ,ia-le industr0 in an0 art of t+e State of ?a+aras+tra2 -0 a co//it/ent t+at SC?L 4ould esta-lis+ an industr0 in an0 art of t+e State of ?a+aras+tra on an in,est/ent of Rs 20 crores. $+is again is an o-ligation cast on t+e /e/-ers of SC?L and 4e are of t+e ,ie4 t+at t+is cannot also -e ta6en to -e a /odification 4+ic+ t+e court can -ring a-out on its o4n under Section '92 of t+e Act on t+e rete5t t+at it is a /odification necessar0 for t+e ro er 4or6ing of t+e co/ ro/ise or arrange/ent. #e +a,e no +esitation in +olding t+at in an0 e,ent2 t+e 8i,ision 1enc+ of t+e %ig+ Court oug+t to +a,e directed a recon,ening of t+e /eeting of t+e /e/-ers of t+e Co/ an0 in ter/s of Section '91 of t+e Act to consider t+e /odifications and ensured t+at t+e a ro,al t+ereof -0 t+e reFuisite /a.orit0 e5isted.:
,ii) t+e
?r. Nari/an +as su-/itted t+at t+e Co/ an0 3udge in resent case referred to S. '. Gu/ta8s (su/ra) case and
finall0 +eld t+at since Sections '91 to '94 are interconnected it 4ould -e a-le to grant relief as6ed for in a Co/ an0 A lication filed under Section '92. "t is t+e clai/ of t+e ?r.
Nari/an t+at it is not onl0 incorrect -ut it 4ould not -e ossi-le in e5ercise of o4er under Sections '92 or '94 to
/odif0 t+e ter/s of clause 19 of t+e Sc+e/e. "nsofar as t+e 8i,ision 1enc+2 according to +i/2 goes into ,arious clauses of t+e Sc+e/e to sa0 t+at t+e su-seFuent o4er of /odification
48
of t+e Sc+e/e itself is contained in t+ese Clauses2 /ore articularl02 clause 22. %e contended t+at e,en if it is to -e a lied2 no /odification can -e /ade under it 4it+out t+e arties to t+e Sc+e/e. According to +i/2 if t+e
consent of t+e
conclusion of t+e 8i,ision 1enc+ is acce ted2 t+e resultant order of t+e 8i,ision 1enc+ is contrar0 to Clause 22 in t+at it 4ould not -e ossi-le to read t+e ?o= dated 1*.0(.200& into
Clause 19 of t+e Sc+e/e 4it+out t+e consent of t+e S+are+olders and t+e 1oard of 8irectors of R"L. %e insisted t+at t+e 8i,ision 1enc+ of t+e %ig+ Court 4as -ound -0 t+e .udg/ent in *")-al 5o$"s 4+ere t+e .urisdiction of t+e Co/ an0 Court under Section '92 4as clearl0 s elt out. ,iii) Learned senior counsel for RNRL su-/itted t+at RNRL see6s to enforce t+e ter/s of t+e Sc+e/e of Arrange/ent as sanctioned -0 t+e 1o/-a0 %ig+ Court ,ide its order dated 09.12.200&. As er t+e said Sc+e/e2 R"L 4as reFuired to l0 of gas to RNRL.
%o4e,er2 R"L +as 4rongfull0 caused t+e e5ecution of a docu/ent t+e effect of 4+ic+ 4ould -e t+at t+e -usiness of su l0 of gas2 as conte/ lated in t+e Sc+e/e of Arrange/ent2
49
4ould not -e transferred to RNRL. %e furt+er argued t+at t+e ti/ing and /anner of t+e i/ ugned agree/ent as 4ell as se,eral clauses of t+e Sc+e/e render t+e sa/e ,irtuall0 un4or6a-le. RNRL +as a "n t+ese circu/stances2 it is ointed out t+at
reliefs under Section '92 of t+e Co/ anies Act. i5) "n t+e earlier art2 t+e .udg/ent of t+is Court in S.'.
Gu/ta (su/ra) +as -een discussed. "t is t+e dut0 of t+e Court to ensure t+at t+e Sc+e/e is full0 i/ le/ented. senior counsel for t+e RNRL Learned
4ould i/ l0 t+at t+is Court /ust ensure t+at t+e gas -ased energ0 underta6ing is2 in fact2 transferred to RNRL as conte/ lated under t+e Sc+e/e. Eor t+is +as t+e .urisdiction and ur ose2 t+e Court
19 of t+e Sc+e/e. Learned senior counsel furt+er contented t+at Section '92 s+o4s t+e 4idt+ of t+e o4er and t+e
ulti/ate conseFuence en,isaged under t+e Co/ anies Act for non i/ le/entation of t+e Sc+e/e. $+e onl0 li/itation on t+e o4er of t+e Court is t+at it cannot c+ange t+e -asic structure
50
or c+aracter or ur ose of t+e Sc+e/e. "t 4as furt+er ointed out t+at su-.ect to t+is2 t+e unli/ited. o4er is of 4idest a/ litude and
decision of t+is Court in *")-al 5o$"s (su/ra) is not a lica-le to t+e resent case2 firstl02 t+is .udg/ent acce ts
t+e rinci le t+at t+e Court +as 4ide o4er under Section '92 t+oug+ t+e sa/e are circu/scri-ed2 secondl02 t+e said .udg/ent does not refer to Gu/ta8s cas" 4+ic+ 4as a -inding decision of a t+ree)3udge 1enc+. Eurt+er2 in *")-al 5o$"s (su/ra) t+e c+allenge 4as t+e o4er of t+e Court to sanction
t+e Sc+e/e and not o4er to direct /odification to an alread0 sanctioned Sc+e/e. 5) "n t+e lig+t of t+e stand ta6en -0 -ot+ arties2 t+is Court lication and
anal0Ced t+e relief soug+t for in t+e Co/ an0 A t+e rele,ant /aterials
Section '92 creates a dut0 to su er,ise t+e carr0ing out of t+e co/ ro/ise or arrange/ent. $+is o4er and dut0 4as
created to ena-le t+e Court to ta6e ste s fro/ ti/e to ti/e to re/o,e all o-stacles in t+e 4a0 of enforce/ent of a sanctioned sc+e/e. #+ile sanctioning2 it s+all antici ate so/e +itc+es
51
and difficulties 4+ic+ it can re/o,e -0 t+e order of t+e sanction itself -ut clause 1(-) /a6es it clear t+at t+is o4er
can also -e e5ercised after t+e sc+e/e +as once -een sanctioned. So long as t+e -asic nature of t+e arrange/ent re/ains t+e sa/e t+e o4er of /odification is unli/ited2 t+e
onl0 li/it -eing t+at t+e /odification s+ould -e necessar0 for t+e 4or6ing arrange/ent. 5i) "n ,ie4 of t+e a-o,e discussion2 t+is Court +olds t+at lica-le to t+e Co/ an0 A lication filed -0
originall0 sanctioned t+e sc+e/e under -ot+ Sections '91 and '94. Eurt+er2 t+e osition deri,ed fro/ Gu/ta (su/ra) t+e
o4er of t+e Court under Section '92 is 4ide enoug+ to /a6e an0 c+anges necessar0 for t+e 4or6ing of t+e Sc+e/e. $+erefore2 Court does +a,e .urisdiction o,er t+e /atter. %o4e,er2 it is /ade clear t+at t+e resent
does not e5tend to re)4riting t+e Sc+e/e in an0 /anner. 5ii) Eurt+er/ore2 in t+e Co/ anies Act2 t+ere is no ro,ision
e5ce t Section '91 to Section '94 4+ic+ deal 4it+ t+e rocedure and o4er of t+e Co/ an0 Court to sanction t+e
52
Sc+e/e 4+ic+ fall 4it+in t+e a/-it of t+e reFuire/ents as conte/ lated under t+ese sections. "n t+e a-sence of an0
ot+er ro,isions e5ce t Section '922 it is difficult to acce t t+e contention as raised t+at t+e resent a lication under
Section '92 of t+e Co/ anies Act is 4it+out .urisdiction. >n t+e ot+er +and2 Section '91 to Section '94 +as a/ le o4er
and .urisdiction to su er,ise t+e sc+e/e as sanctioned under t+e Co/ anies Act. As rig+tl0 o-ser,ed -0 t+e Co/ an0 3udge2 t+e e5igencies2 facts and circu/stances2 la0 do/inant role in assing a ro riate order under Sections '91 to '94
after sanctioning of t+e Sc+e/e. $+e Co/ an0 Court is not o4erless and can ne,er -eco/e functus officio. Sections '91 to '94 are interconnected and it can ass a ro riate order
for sanctioning of an0 Sc+e/e including of arrange/ent2 de/erger2 a /erger and a/alga/ation. $+erefore2 t+e
lication filed -0 RNRL under Section '92 is /aintaina-le. o4er of t+e Court does
53
$B% M0.o:)587. o& U580: *)58,59 $MoU% i) "n order to understand t+e osition of RNRL and R"L as
4ell as 9suita-le arrange/ent: under t+e 9Sc+e/e:2 it is -ut ro er to refer t+e contents of ?o= ( laced -efore t+e 8i,ision 1enc+ of t+e %ig+ Court) 4+ic+ are as under7
9S$R"C$LK C>NE"8BN$"AL ?B?>RAN8=? >E =N8BRS$AN8"NA $+is ?e/orandu/ of =nderstanding (t+is 9?o=:) is /ade at ?u/-ai t+isWWW da0 of 3une2 200& a/ongst Do6ila-en 8. A/-ani (9Do6ila-en:)2 ?u6es+ 8. A/-ani (9?u6es+:) and Anil 8. A/-ani (9Anil:) (eac+ of Do6ila-en2 ?u6es+ and Anil +ereinafter referred to indi,iduall0 as a 9Part0: and collecti,el0 as t+e 9Parties.:) #%BRBAS A. After t+e de/ise of S+ri 8+iru-+ai % A/-ani (late 8+iru-+ai) on 3ul0 (2 20022 Do6ila-en is t+e +ead of t+e A/-ani fa/il0 and +as co/ lete /oral aut+orit0 o,er t+e fa/il0. %er four c+ildren2 ?u6es+2 Anil2 8i ti and Nina +a,e2 -0 8eed of Release dated >cto-er 172 20022 released t+eir entire interest in t+e estate of late 8+iru-+ai in +er fa,our. ?u6es+ and Anil +a,e -een /anaging t+e ,arious -usinesses of t+e fa/il0 co/ rised in t+e Reliance Arou (t+e 91usinesses:). 8ifferences +a,e arisen -et4een t+e/ in t+is -e+alf2 and +a,ing regard to recent e,ents and 4it+ t+e inter,ention of Do6ila-en2 t+e Parties +a,e no4 agreed t+at t+e -est 4a0 for4ard 4ould -e to +a,e a segregation of t+e o4ners+i and 1usinesses into t4o grou s2 4it+ one grou o4ned2 /anaged and controlled -0 ?u6es+ and t+e ot+er o4ned2 /anaged and controlled -0 Anil. ?ost of t+e 6e0 rinci les relating to t+e segregation of certain fa/il0 assets including controlling interest in t+e 1usinesses and co/ anies +a,e -een agreed to -et4een t+e Parties. 54
1.
C.
?u6es+ and Anil +a,e also e5 ressed t+eir unconditional trust in Do6ila-en and agreed t+at s+e s+all la0 a final and decisi,e role in resol,ing an0 o en issues in t+e rocess of settle/ent2 and t+at t+e0 s+all a-ide -0 all decisions /ade -0 +er to facilitate earl0 closure of t+e settle/ent. $+e Parties are no4 desirous of for/all0 recording t+eir agree/ent in t+is -e+alf.:
8.
ii)
"t +as -een t+e consistent osition of RNRL t+at t+e ?o=
signed -et4een ?u6es+ A/-ani and Anil A/-ani is -inding2 and t+erefore2 t+e 9suita-le arrange/ent: under t+e 9sc+e/e: s+ould -e not+ing -ut t+e ?>= itself. >n t+e ot+er +and2 R"L +as consistentl0 argued t+at t+e ?>= is not -inding for t+e/ since it is /erel0 a non)legal instru/ent -et4een certain fa/il0 /e/-ers. $+erefore2 it 4as argued t+at it 4ill not -ind t+e co/ anies and t+e s+are+olders 4+o +a,e a co/ letel0 different ersonalit0. iii) ?r. Ra/ 3et+/alani2 learned senior counsel a earing
for t+e RNRL strongl0 relied on t+e follo4ing decisions of t+is Court 4it+ reference to t+e i/ ortance of fa/il0 arrange/ent (?o=) and its effect and ,alue. 1. 'al" & Ors. ,s. 1"/ut+ 1ir"ctor of Consolidation &
Ors., (197() ' SCC 119 (Paragra +s 92 172 192 ; 42) 4+ic+ states as under7
55
9 9@@@@A fa/il0 arrange/ent -0 4+ic+ t+e ro ert0 is eFuita-l0 di,ided -et4een t+e ,arious contenders so as to ac+ie,e an eFual distri-ution of 4ealt+ instead of concentrating t+e sa/e in t+e +ands of a fe4 is undou-tedl0 a /ilestone in t+e ad/inistration of social .ustice. $+at is 4+0 t+e ter/ 9fa/il0: +as to -e understood in a 4ider sense so as to include 4it+in its fold not onl0 close relations or legal +eirs -ut e,en t+ose ersons 4+o /a0 +a,e so/e sort of antecedent title2 a se/-lance of a clai/ or e,en if t+e0 +a,e a s es successionis so t+at future dis utes are sealed for e,er and t+e fa/il0 instead of fig+ting clai/s inter se and 4asting ti/e2 /one0 and energ0 on suc+ fruitless or futile litigation is a-le to de,ote its attention to /ore constructi,e 4or6 in t+e larger interest of t+e countr0. $+e courts +a,e2 t+erefore2 leaned in fa,our of u +olding a fa/il0 arrange/ent instead of distur-ing t+e sa/e on tec+nical or tri,ial grounds. #+ere t+e courts find t+at t+e fa/il0 arrange/ent suffers fro/ a legal lacuna or a for/al defect t+e rule of esto el is ressed into ser,ice and is a lied to s+ut out lea of t+e erson 4+o -eing a art0 to fa/il0 arrange/ent see6s to unsettle a settled dis ute and clai/s to re,o6e t+e fa/il0 arrange/ent under 4+ic+ +e +as +i/self en.o0ed so/e /aterial -enefits@@.. 17. "n rishna !iharilal ,. "ulabchand,#$%# # &'' ()%, it 4as ointed out t+at t+e 4ord 9fa/il0: +ad a ,er0 4ide connotation and could not -e confined onl0 to a grou of ersons 4+o 4ere recognised -0 la4 as +a,ing a rig+t of succession or clai/ing to +a,e a s+are. 1'. $+us it 4ould a ear fro/ a re,ie4 of t+e decisions anal0sed a-o,e t+at t+e courts +a,e ta6en a ,er0 li-eral and -road ,ie4 of t+e ,alidit0 of t+e fa/il0 settle/ent and +a,e al4a0s tried to u +old it and /aintain it. $+e central idea in t+e a roac+ /ade -0 t+e courts is t+at if -0 consent of arties a /atter +as -een settled2 it s+ould not -e allo4ed to -e reo ened -0 t+e arties to t+e agree/ent on fri,olous or untena-le grounds. 42@@@.As o-ser,ed -0 t+is Court in T.*.+. &ubbu 'hetty,s -a.ily 'harities case2 t+at if a erson +a,ing full 6no4ledge of +is rig+t as a ossi-le re,ersioner enters into a transaction 4+ic+ settles +is clai/ as 4ell as t+e clai/ of t+e o onents at t+e rele,ant ti/e2 +e cannot -e er/itted to go -ac6 on t+at agree/ent 4+en re,ersion actuall0 falls o en.: 56
2.
'.'. *odi ,s. '.N. *odi & Ors.2 (199*) ' SCC &7'
su-/issions in t+is connection -efore t+e %ig+ Court. #e are sure t+at t+e0 4ill -e considered as and 4+en t+e %ig+ Court is reFuired to do so 4+et+er in interlocutor0 roceedings or at t+e final +earing.:
i,)
t+e R"L 4+ile dra4ing our attention to Section '( of t+e Co/ anies Act2 19&(2 su-/itted t+at t+e ?e/orandu/ and Articles s+all -ind t+e co/ an0 and its /e/-ers. According to +i/2 t+e Articles of Association are t+e regulations of a co/ an0 4+ic+ are -inding on t+e co/ an0 and its
t+e Articles can -ind a s+are+older ,is)V),is t+e co/ an0. "n su ort of t+e a-o,e stand2 +e +ea,il0 relied on aragra + 9 of
t+e .udg/ent of t+is Court in 9.!. 0an)ara: ,s. 9.!. Go/al,ris-nan & Ors. 2 A"R 1992 SC 4&' 4+ic+ reads as under7
99. @..t+e ri,ate agree/ent 4+ic+ is lied u on -0 t+e laitniffs 4+ereunder t+ere is a restriction on a li,ing /e/-er to transfer +is s+are+olding onl0 to t+e -ranc+ of fa/il0 to 4+ic+ +e -elongs in ter/s i/ oses t4o restrictions 4+ic+ are not sti ulated in t+e Article. Eirstl02 it i/ oses a restriction on a li,ing /e/-er to transfer t+e s+ares onl0 to t+e e5isting /e/-ers and secondl0 t+e transfer +as to -e onl0 to a /e/-er -elonging to t+e sa/e -ranc+ of fa/il0. $+e agree/ent o-,iousl02 t+erefore2 i/ oses additional restrictions on t+e /e/-erPs rig+t to transfer +is s+ares 4+ic+ are contrar0 to t+e ro,isions of t+e Art.1'. $+e0 are2 t+erefore2 not -inding eit+er on t+e s+are+olders or on t+e co/ an0@@: 58
29)
-et4een t+e t4o grou s of s+are+olders 4+ic+ i/ ose certain restrictions on t+e transfera-ilit0 of t+e s+ares +eld -0 t+e/ 4as not -inding eit+er on t+e co/ an0 or its s+are+olders -ecause t+e restrictions so i/ osed -0 t+e agree/ent 4ere contrar0 to t+e ro,isions of t+e Articles2 sale of s+ares +eld
-0 one of t+e t4o grou s in -reac+ of t+e agree/ent could not2 t+erefore2 -e +eld to -e ,alid. %e also ointed out t+at t+e
agree/ent -et4een t+e s+are+olders is not -inding on t+e co/ an0 unless t+e co/ an0 ado ts it and it is incor orated in t+e Articles of Association. 1ased on t+e a-o,e +e rinci les2
?o= and -e treated as guidance to t+e ter/ suita-le arrange/ent. %e also ointed out t+at a fa/il0 arrange/ent
or t+e ?o= +as not -een referred to at an0 stage in t+e Sc+e/e or in an0 re resentation /ade to t+e Stoc6 B5c+ange and t+e sa/e is contrar0 to t+e RNRLHs o4n leading and t+eir case. ?r. %aris+ Sal,e also relied on ,arious e5erts fro/
so/e of t+e lettersGe)/ails fro/ B5+i-it 9E: filed -0 RNRL. So/e of t+e lettersGe)/ail dated '0.07.200& fro/ ?r. %aris+
59
S+a+ (R"L) to ?r. !en6at Rao (RBL)I e)/ail dated 0(.10.200& fro/ ?r. C0ril S+roff to ?r. Sandee $andonGR"LI e)/ail
dated 29.11.200& fro/ ?r. C0ril S+roff to ?r. Anil A/-aniI e) /ail dated 14.12.200& fro/ R"L to ?r. 3.P. C+alasani and e) /ail dated 27.12.200& fro/ ?r. Sandee $andon (R"L) to ?r.
!en6at Ponanda etc. -ut not dis uted t+e contents of t+e letters or corres ondences and e)/ails referred t+erein. $+e e5istence of lettersGcorres ondence and e)/ails re/ain
unc+allenged. '0) "n t+e lig+t of t+e stand ta6en -0 -ot+ sides2 t+is Court t+e contents of ?o= and t+e su-seFuent
anal0sed
arrange/ent after e5c+ange of ,arious lettersGe)/ails as 4ell as deli-erations a/ong t+e officials of -ot+ t+e entities. "t is clear t+at -ot+ arties acted u on t+e said fa/il0
arrange/entG?o= dated 1*.0(.200&. $+e a-o,e referred letters and e)/ails2 furt+er confir/ed t+at t+ere is an arrange/ent /ade and agreed -et4een t+e R"L and A8AA (RNRL)2 it is also clear and s+o4 t+at t+e discussion -et4een t+e grou of officials 4as intended to e5 edite t+e
roducing a
9suita-le
60
art of t+e
record -efore t+e Co/ an0 3udge2 -0 consent2 t+e a-o,e e5tracted ortion 4as laced -efore t+e 8i,ision 1enc+ at t+e eal. "t cannot -e acce ted t+at
neit+er R"L nor its 1oard ?e/-ers 4ere a4are of t+e contents of t+e ?>=. "n fact2 t+e Co/ an0 3udge +as ointed out t+at a s ecific reference 4as /ade in t+e Co/ an0 A lication No.
1122 of 200( and t+ere is no s ecific denial -0 t+e R"L. $+e Press Release at t+e instance of t+eir /ot+er S/t. Do6ila-en A/-ani (B5+. 98:) a-out t+e fa/il0 arrange/entG?>= cannot -e o,er)loo6ed. "t is clear t+at -ecause of t+e efforts of S/t. Do6ila-en A/-ani2 t+e /ot+er of ?u6es+ A/-ani ; Anil A/-ani2 t+e fa/il0 settle/ent +as -een arri,ed at and follo4ed -0 t+e Sc+e/e of 8e)/erger. "t is also clear fro/ t+e /aterials i.e. e5c+ange of letters and e)/ails and t+e deli-erations -0 t+e officials of -ot+ entities and t+eir 1oard of 8irectors as 4ell as t+e s+are+olders +a,e agreed for t+e Sc+e/e. Eurt+er it 4as de/onstrated t+at after e5ecution of ?>=2 -ot+ t+e arties +a,e -een entering into contracts and As ointed out t+at
61
are 4or6ing and running t+eir affairs s/oot+l0. '1) 1efore t+e 8i,ision 1enc+2 it 4as su-/itted -0 R"L t+at ro/oters does not -ind t+e cor orate
entit0 R"L. "t 4as not o en to RNRL to roduce t+e docu/ents at t+e stage of a eal 4+ic+ 4ere not laced -efore t+e learned
Single 3udge. $+e ?o= 4as clearl0 in t+e ri,ate do/ain and 4as ne,er laced in t+e cor orate do/ain e,en t+oug+ suc+
course of action 4as suggested -0 ?r. C0ril S+roff2 t+e Solicitor a ointed to dra4 t+e Sc+e/e of 8e/erger. "t 4as
also t+e stand of t+e R"L t+at ?o= 4as ne,er laced -efore its 1oard of 8irectors and contents t+ereof 4ere not 6no4n to t+e 1oard. $+e corres ondence contained in B5+i-it E of t+e lication2 at -est2 goes to s+o4 t+at ?o= 4as t+e
Co/ an0 A
-road structure on 4+ic+ t+e de/erger 4as to -e 4or6ed out. '2) >n t+e ot+er +and2 learned senior counsel a earing for
t+e RNRL de/onstrated t+e e5istence2 effect2 sanctit0 and t+e -inding nature of ?o=. "t is t+eir definite case t+at t+e leaded in ara (.( of t+e
?o= e5isted and t+at t+e ter/s of ?o= +ad to -e i/ le/ented. "nas/uc+ as t+e rele,ant art of ?o= laced -efore arties
concerning t+e gas -usiness +a,e alread0 -een t+e 8i,ision 1enc+ in a
see6s to di,ide t+e -usiness into t4o grou s i.e. Anil A/-ani Arou and ?u6es+ A/-ani Arou 4+erein -ot+ indi,iduals
4ould control and su er,ise ,arious -usinesses t+roug+ ,arious cor orate entities. $+e i/ le/entation of t+e ?o=
resulted in t+e sc+e/e under Section '91 of t+e Act -efore t+e Co/ an0 Court. A art fro/ t+is2 it 4as 1oard of R"L /ade a ointed out t+at t+e
ac6no4ledging2 4it+ gratitude to t+eir /ot+er2 S/t. Do6ila-en t+at a settle/ent of dis utes +as -een reac+ed -et4een t+e /e/-ers of t+e fa/il0. Eurt+er2 B5+i-it E reflects t+e
6no4ledge of t+e ter/s of ?o= 4it+ t+e senior officials of -ot+ sides 4+erein efforts 4ere -eing /ade to 4or6 out /utuall0
63
negotiated AS?AGASPA 4+ic+ 4ould -e in line 4it+ ?o=. '') A art fro/ t+e a-o,e factual details2 ?r. Ra/
e5 lained t+e 8octrine of "dentification and su-/itted t+e fa/il0 arrange/ent 4as arri,ed at and signed -0 S/t. Do6ila-en A/-ani2 S+ri ?u6es+ A/-ani and S+ri Anil A/-ani. A/ong t+e t+ree2 S+ri ?u6es+ A/-ani 4as and is t+e C+air/an and ?anaging 8irector of R"L. As er t+e
8octrine of "dentification2 a co/ an0 is identified 4it+ suc+ of its 6e0 ersonnel t+roug+ 4+o/ it 4or6s. ?r. 3et+/alani
furt+er ointed out t+at +is actions are dee/ed to -e action of t+e co/ an0 itself2 +ence2 R"L is dee/ed to -e a4are of and -ound -0 t+e actions of t+e ?anaging 8irector. "n su ort of
t+e rinci le 98octrine of "dentification:2 +e relied on decisions of t+is Court2 na/el02 Union of India ,s. Unit"d India Insuranc" Co. %td.2 (1997) * SCC (*' at age (9&2 Assistant Co$$ission"r2 Ass"ss$"nt;II2 !an)alor" & Ors. ,s. *4s 9"llia//a #"<til"s %td. & Ors2 A"R 2004 SC *( vs. *c 1onn"ll2 (19(() 1 All. B.R. 19' at (.'. ara 1(2 0.
3actori"s and !oil"rs & Ors. (199() ( SCC ((& 44 ; 4&. '4)
aragra +s
"n t+e lig+t of t+e stand ta6en -0 R"L and RNRL2 t+e articularl0 4it+ regard to
distri-ution of gas and also t+e conclusion arri,ed -0 t+e Co/ an0 3udge and t+e 8i,ision 1enc+ of t+e %ig+ Court +a,e -een carefull0 ,erified. '&) Eirstl02 t+e ?o= is not tec+nicall0 -inding -et4een R"L "t is not in dis ute t+at ?o= is -et4een t+ree ersonalit0 of t+e co/ an0 /ust -e ersons. $+e rinci le
and RNRL.
e/ +asiCed -0 ?r. 3et+/alani i.e. 8octrine of "dentification /a0 -e a lica-le onl0 in res ect of s/all underta6ings -ut in
t+e case of R"L and RNRL2 t+e co/ anies +a,e /ore t+an t+ree /illion s+are+olders2 in suc+ a situation2 one cannot /a6e t+e co/ aniesH in,ol,ed. '() Secondl02 in t+e lig+t of t+e conduct of ?u6es+ A/-ani2 ersonalit0 t+e sa/e as t+at of ersons
C+air/an of R"L2 ?o= 4as definitel0 t+e instru/ent 4+ic+ 4as t+e -asis of t+e sc+e/e. $+erefore2 it can -e used as an
65
e5ternal aid for t+e inter retation of 9suita-le agree/ent: under t+e sc+e/e. $o ut it clear2 t+e ?o= is one of t+e 4a0s in 4+ic+ t+e intention of t+e arties can -e /ade clear 4it+
regard to 4+at 4as considered suita-le. Ne,ert+eless2 t+ere is no s ecific reFuire/ent t+at t+e AS?A /ust confir/
co/ letel0 4it+ t+e ?o=. '7) $+irdl02 it /ust -e ointed out t+at a art fro/ t+e ?o=2
9suita-le arrange/ent: /ust -e understood in t+e conte5t of go,ern/ent olicies2 roduction s+aring contract (PSC)
-et4een R"L and t+e Ao,ern/ent2 national interest and interest of t+e s+are+olders. $+erefore2 in our ,ie4 ?o= is one of t+e /eans of construing suita-ilit0 of t+e arrange/ent and not t+e sole /eans. $C% (SMA )58 (SPA2 <+0*+0: *+06 C7);,&6 ) )::)590.05*2 '*) Su-seFuent to t+e for/ation of t+e Sc+e/e2 t+e As 1oard er t+e 7,*)>;0
Sc+e/e clause !""" and su-)clause (5,ii)2 t+e 1oard of 8irectors of eac+ of t+e resulting co/ anies to -e re) constituted in suc+ /anner as is agreed -et4een eac+
66
resulting co/ anies and Anil A/-ani and t+ereu on eac+ of t+e resulting co/ anies s+all -e controlled and /anaged -0 Anil A/-ani. $+e de/erged co/ an0 constituting t+e
re/aining =nderta6ings s+all continue to -e controlled and /anaged -0 ?u6es+ 8. A/-ani. As er t+e rea/-le of t+e
Sc+e/e and e,en ot+er4ise t+e R"L -eing contractor in ursuance to t+e PSC2 re/ained under t+e control of ?u6es+ 8. A/-ani +a,ing o-.ect to co//ence t+e roduction and sale of gas and furt+er as RBL +as announced setting u 1ased Po4er Aeneration of "ndia. R"L ro osed to use of Aas art of
l0 arrange/ent agreed to -e
entered into -et4een R"L and Alo-al Euel ?anage/ent Ser,ices Li/ited (no4 RNRL) -e su lied to RBL for t+eir ursuant to 4+ic+ gas agreed to o4er ro.ects including Reliance o4er. $+is
Patalganga Po4er Li/ited2 for t+e generation of -usiness of su integrated l0 of gas to RBL for t+eir constitute t+e
andGor
Aas
=nderta6ing of R"L. $+e intention2 t+erefore2 t+roug+out 4as e,en under t+e Sc+e/e to reorganiCe and segregate t+e
67
"n t+is -ac6ground it 4as contended -0 learned earing for RNRL t+at it 4as necessar0 t+at ortunit0 to t+e RNRL
senior counsel a
clause 19 as recorded t+e suita-le arrange/ent s+ould -e suita-le to -ot+ t+e arties in all res ects. "n t+is as ect2 t+e
decision as ta6en +urriedl0 on 11.01.200(2 t+erefore2 4as one sided2 s ecificall0 ta6ing into consideration t+e -ac6ground andGor e,ents follo4ed u to t+e sanctioning of t+e Sc+e/e. As noted2 t+e control o,er t+e 1oard of t+e RNRL on 10.01.200( 4as of R"L2 as control o,er +as not -een +anded o,er to Anil A/-ani. >n 2(.01.200(2 final co 0 of ASPA 4as /ade a,aila-le -0 no/inee of R"L to no/inee of A/-ani Arou . $+e drafts of AS?A and ASPA 4ere onl0 circulated on 10.01.200( t+roug+ /ail. "t is to -e noted t+at s+ares of
RNRL 4ere allottedGtransferred to Anil A/-ani onl0 on 27.01.200( i.e. after t+e 1oard /eeting +eld on t+e sa/e da0. $+e Ne4 1oard 4as re)constituted in accordance 4it+ clause
68
As
er clause (2 R"L
continued to /anage t+e resulting co/ anies till t+e effecti,e date in t+e ca acit0 of trustees. $+erefore2 it is t+e clai/ of RNRL t+at t+e 1oard of t+e ?eeting and t+e Resolution andGor e5ecution of t+e said AS?A on 11.01.200(G12.01.200( -efore t+e actual transfer of control of t+e resulting co/ anies to Anil A/-ani and -efore re)constitution of t+e 1oard as er clause
17 of eac+ resulting co/ anies 4ere against clauses 17 and 19 and t+e -asic su '9) ur ose of t+e Sc+e/e in so far as t+e
l0 of gas is concerned. "t 4as ointed out -0 t+e learned senior counsel for t+e ending t+e decisions and discussion on ,arious l0 agree/ent +urriedl0 in s ite of o-.ection
RNRL t+at
as ects of gas su
-0 t+e/2 t+e 1oard on 12.01.200( too6 a decision -0 /a.orit0 and a ro,ed t+e AS?A and ASPA. "t 4as contended -0
RNRL t+at suc+ decision cannot -e said to -e -ona fide. $+e Resolution dated 12.01.200( 4it+out ne4 1oard of 8irectors of resulting co/ anies is not as Sc+e/e. er t+e agreed ter/s of t+e
sided and it safeguards onl0 t+e interest of R"L and not in t+e interest of RNRL or resulting co/ anies as it 4as -0 t+e 1oard of 8irectors of t+e R"L2 t+e trustee co/ an0 after t+e Sc+e/e2 -ut -efore t+e no/ination or for/ation of 1oard of 8irectors of RNRL. "t 4as argued t+at t+e rocedure as follo4ed to ado t "n
or resol,e or e5ecute t+e AS?A 4as unfair and un.ust. t+ose circu/stances2 it 4as
+a,e co//itted an0 -reac+ of clauses of t+e Sc+e/e 4+ic+ is creating +urdle. 40) $+e 8i,ision 1enc+ +as concluded t+at t+e allocation of l0 of gas for
4it+ t+e Aas 1ased Bnerg0 Resulting Co/ an02 a suita-le arrange/ent 4+ic+ is reFuired to -e /ade -0 incor orating t+e sa/e in t+e AS?A and ASPA according to t+e ?o= reac+ed -et4een t+e e5tract t+e rele,ant arties on 1*.0(.200&. "t is useful to l0
70
l0 An e5 ert international fir/ 4ill -e a ointed to e,aluate t+e nature and e5tent of gas reser,es articularl0 at DA8( and all ot+er gas fields fro/ 4+ic+ R"L roduces gas fro/ 4+ic+ gas could -e su lied to Reliance Bnerg0 Li/ited (9RBL:)2 for all its ro.ects (including 4it+out li/itation its ro osed 8adri Po4er Pro.ect). $+e e5 ert s+all -e a ointed -0 "C"C" 1an6 Li/ited in consultation 4it+ -ot+ grou s (4+o /ust agree 4it+in 72 +ours +ereof) and if t+e0 are una-le to agree2 an international energ0 consultanc0 fir/2 as /a0 -e no/inated -0 t+e energ0GB;P de art/ent of "C"C" 1an6 Li/ited 4ill no/inate an international e5 ert 4+o 4ill carr0 out t+is sur,e0 and ro,ide an inde endent re ort. Suc+ international consultanc0 fir/ s+all not +a,e an0 conflict of interest. $+e re ort of suc+ agenc0 could consider t+e 8A% letter as one of t+e in uts and its decision s+all -e final as to t+e Fuantit0 and nature of reser,e (including /atters suc+ as P2 P22 P' reser,es) and t+is 4ould -e t+e factual -asis for t+e rest of t+e decisions. $+e ?u6es+ A/-ani Arou 4ill no4 /o,e e5 editiousl0 for facilitating suc+ ,erification and is to ro,ide all infor/ation for t+is ur ose. >n t+e assu/ tion t+at onl0 12 ??SC8 is t+e current P1 reser,e and ot+er reser,es are in t+e stages of disco,er02 arrange/ents as to Fuantit0 of 9net gas: (R"LHs entitle/ent of gas as reduced -0 t+e Fuantit0 of t+e gas reFuired for o eration and trans ortation ) are as follo4s7 (a) $+e first rig+t 4ould -e to N$PC under its e5isting draft su l0 agree/ent to t+e e5tent of 12 ??SC8. $+is 4ould -e for deli,er0 on t+e 4est coast. "n t+e e,ent t+at t+e N$PC contract does not /aterialiCe or its cancelled2 t+e entitle/ent of N$PC to t+e said e5tent s+all go to t+e Anil A/-ani Arou in addition to its entitle/ent of 2* ??SC8 in (-) -elo4. 71
(ii)
(-)
$+ereafter2 and su-.ect to a,aila-ilit0 of adeFuate P1 reser,es t+e ne5t 2* ??SC8 4ould go to RBL. No sooner t+e P1 reser,es (deter/ined as er (i) a-o,e)2 are identified (4+et+er fro/ DA8( or else4+ere)2 t+is 4ould -e included in a -inding gas su l0 agree/ent in fa,our of RBL. $+is 4ould -e at rices no greater t+an N$PC rices. $+ereafter and for t+e entire future of t+e -alance reser,es (including ne4 disco,eries of gas fro/ ne4 e5 lorations andGor -ids as /a0 -e su-/itted fro/ ti/e to ti/e)2 t+e Fuantit0 of gas 4ould2 at t+e o tion of t+e Anil A/-ani Arou (e5ercised fro/ ti/e to ti/e)2 -e s lit in t+e ratio of (0740 4it+ (0J to ?u6es+ A/-ani Arou and 40J to Anil A/-ani Arou . Su-.ect to t+e a-o,e2 after t+e 2* ??SC8 to RBL2 t+e ne5t order of riorit0 4ould -e of R"L for its ca ti,e consu/ tion for ?u6es+ A/-ani Arou Co/ anies to t+e e5tent of a /a5i/u/ of 2& ??SC8. Suc+ 2& ??SC8 4ill -e set off against (0J entitle/ent of t+e ?u6es+ A/-ani Arou . An e5 ert a ointed -0 "C"C" 1an6 Li/ited 4ill ro,ide guidance2 4it+in a eriod of 4& da0s fro/ t+is ?>=2 on t+e a ro riateness of t+e a/ount of 2& ??SC8 or ca ti,e consu/ tion2 and in t+e e,ent t+at t+e a/ount considered necessar0 -0 suc+ e5 ert is /ateriall0 less t+an 2& ??SC82 Do6ila-en 4ill reconsider t+e issue. $+ereafter2 t+e ne5t order of riorit0 4ould -e at Anil A/-ani Arou Hs o tion2 go to Anil A/-ani Arou . All suc+ gas s+all -e su lied at /ar6et rates. 10 4a0 of e5a/ les7 "f t+e P1 reser,es are identified at (0 ??SC82 t+e seFuence 4ould -e N$PC)122 RBL)2* and R"L (ca ti,e)) 20. "n case t+e reser,es are 1002 t+e seFuence 4ould -e N$PC)122 RBL)2*2 72
(c)
R"L(ca ti,e))2&2 Anil A/-ani Arou (second install/ent))1(.(7 and in so far as t+e -alance 1*.'' is concerned2 t+e sa/e 4ould -e s+ared in t+e ratio of (0740. $+is s+all -e an o tion -ut not an o-ligation. (iii) Eor t+e first 2* ??SC82 t+e rice and t+e co//ercial ter/s s+all -e t+e sa/e as t+ose a lica-le to N$PC. RBL s+all +a,e t+e o tion to set u its o4n i eline fro/ t+e gas field to its lant at its o4n cost. $+is s+all not /a6e a difference to t+e rice for t+e gas su lied -0 R"L to RBL. RBL s+all +a,e t+e o tion to ta6e deli,er0 of gas at Da6inada on t+e Bast Coast and /a0 construct its o4n i eline. %o4e,er2 RBL 4ould still +a,e to a0 t+e trans ortation cost for su l0 to t+e #est Coast e,en if t+e facilit0 is not used2 -ut 4ill +a,e t+e rig+t to deal 4it+ t+e ca acit0 as it dee/s fit and to sell or assign t+e sa/e to anot+er art02 on t+e #est Coast or ot+er4ise. &0J of t+e co//it/ent for su l0 of gas 4ould -e su lied in t+e financial 0ear 200*)09 and t+e -alance &0J in 2009)10. As soon as t+e P1 reser,es are identified2 a -inding gas su l0 agree/ent2 in accordance 4it+ international -est ractices2 -an6a-le in t+e international financial /ar6et 4ould -e finaliCed and entered into2 not later t+an 4& da0s fro/ t+e date of t+is ?o=. As stated a-o,e2 t+e N$PC su l0 agree/ent 4ould -e a general guidance for t+e sa/e and s+all as far as ossi-le -e t+e -asis for suc+ contracts2 and t+e ter/s of suc+ contracts s+all -e no less fa,oura-le t+an t+ose of t+e N$PC contract. ?u6es+ 4ill ro,ide t+e Production S+aring Contract and also corres ondence 4it+ N$PC and t+e latest ,ersion of t+e draft contract to t+e 73
(i,)
(,)
(,i)
(,ii)
l0 4or6ing
(,iii) Do6ila-en recogniCes t+at a long ter/s2 sta-le source of gas fro/ R"L2 4+ic+ +as t+e largest find of gas2 4as a-solutel0 essential for t+e gro4t+ lans of t+e Anil A/-ani Arou and in order to ena-le Anil to carr0 RBL to e,en greater +eig+ts. Do6ila-en +as2 t+erefore2 s eciall0 stressed and i/ ressed u on ?u6es+ and ?u6es+ s+all ersonall0 ensure t+at at t+e ti/e of finaliCation of t+e -inding gas su l0 agree/ent t+e ter/s ro,ide t+e reFuired confor/ and sta-ilit0 in t+ese agree/ents2 e,en if t+at /eans so/e de arture fro/ t+e N$PC standard. (i5) $+e gas su l0Go tion agree/ents 4ould -e -et4een R"L and a 100J su-sidiar0 of R"L2 4+ic+ 4ould -e de/erge to t+e Anil A/-ani Arou as art of t+e Sc+e/e of Arrange/ent. Suc+ agree/ents 4ould not -e 4it+ RBL. $+e gas su lied to t+e Anil A/-ani Arou -0 t+e ?u6es+ A/-ani Arou s+all not -e used for trading2 ot+er t+an trading 4it+in t+e Anil A/-ani Arou . S4a ing of gas is er/itted.
(5)
(5i) (5ii)
(a) "n relation to a lica-le go,ern/ental and statutor0 a ro,als2 4it+out in an0 /anner /itigating R"LHs res onsi-ilit0 to .ointl0 4or6 to4ards o-taining suc+ a ro,als2 R"L 4ill2 if so reFuired -0 t+e Anil A/-ani Arou 2 gi,e an irre,oca-le Po4er of Attorne0 to t+e Anil A/-ani Arou GRBL to a l0 for an o-tain all suc+ go,ern/ental and regulator0 a ro,als as are necessar0 on its -e+alf. (-) $+e definiti,e agree/ents 4ill reflect t+at t+e ?u6es+ A/-ani Arou 4ill act in ut/ost good fait+ and 4ill /a6e -est endea,ours to 4or6 for and o-tain suc+ a ro,als. "f t+ere is an0 action ta6en in -ad fait+ for not o-tainingGscuttling t+e o-taining of suc+ a ro,als2 Do6ila-en reser,es +er a-ilit0 to 74
inter,ene again and t+e Anil A/-ani Arou 4ould also +a,e a clai/ for da/ages.:
fi5ed Fuantu/ of gas 4+ic+ stands allocated to RNRL2 i.e.2 2*??SC8 to RBL and in t+e e,ent N$PC contract does not /aterialiCe or is cancelled2 t+e entitle/ent of N$PC to t+e said e5tent s+all go to t+e RNRL in addition to its entitle/ent of 2* ??SC8 in addition to t+is allocation fro/ t+e cost and rofit
gas 4+ic+ 4ill -e a,aila-le for s+aring 4it+ t+e =nion of "ndia -0 R"L. "t is furt+er seen t+at for entire future of t+e -alance reser,es t+e Fuantit0 of gas -e s+ared in t+e ratio of (07402 i.e.2 (0 J to ?u6es+ A/-ani Arou Arou . 41) >n going t+roug+ t+e /aterials laced -0 RNRL2 R"L2 t+e and 40J to Anil A/-ani
Co/ an0 3udge and t+e 8i,ision 1enc+ reac+ed t+e follo4ing conclusions7
(a)
AS?AGASPA 4as +urriedl0 fra/ed 4+ic+ reflects .ala fides on t+e art of R"L.
(-)
$+ere is no fraud on t+e art of R"L in ter/s of Section 17 of t+e Contract Act as alleged -0 RNRL.
75
(c)
co/ liance of t+e AS?A 4it+ ?o=. (d) AS?AGASPA is not 9suita-le arrange/ent: as t+e0 are not true to t+e ?o=. (e) $+e Court2 under Section '922 does not +a,e t+e o4er to add clauses andGor a/end clauses. (f) $+e arties /ust negotiate t+e contents of 9suita-le
arrange/ent: in t+e Sc+e/e2 since t+e Court is not an e5 ert in suc+ t+ings. 42) >n t+e ,er0 sa/e issue2 after anal0Cing all t+e /aterials2
t+e 8i,ision 1enc+ agreed 4it+ t+e Co/ an0 3udge t+at ?o= 4as -inding on t+e arties -0 gi,ing different reasons. >n t+is conclusion2 t+e 8i,ision 1enc+ ruled t+at all t+e as ects of AS?A relating to su l0 of gas2 tenure2 ricing etc. /ust t+en
-e t+e sa/e as ro,ided under t+e ?>=. $+e 8i,ision 1enc+ also +eld t+at t+ere is no a-solute freedo/ to /ar6et t+e gas as argued -0 RNRL. =nder Articles 21.(.2(-) and (c) of t+e
PSC2 t+e Ao,ern/ent s+all regulate t+e sale on t+e -asis of a for/ula. 1ut at t+e sa/e ti/e2 t+e 8i,ision 1enc+ +eld t+at
76
t+ere is not+ing in t+e PSC to restrict t+e sale of gas -0 t+e contractor at a rice lesser t+an t+at a ro,ed -0 t+e
Ao,ern/ent. "n t+ose circu/stances2 t+e 8i,ision 1enc+ +as concluded t+at t+e Contractor +as freedo/ to sell gas at ar/s lengt+ rice to t+e -enefits of t+e arties to t+e PSC out of
$+e 8i,ision 1enc+ +as finall0 +eld t+at 9suita-le arties on t+e
reasona-le t+at t+e test /ust -e for/ulated to deter/ine 4+at 9suita-le arrange/ent: /eans. $+e deter/ination of 9suita-le arrange/ent: /ust not onl0 include t+e ?o= -ut ot+er considerations also. A/ong ,arious considerations2 t+e as ect relates to t+e role of t+e Ao,ern/ent2 t+e inter retation of PSC relating to ri/e ro er
national interest relating to t+e interest of consu/ers and rotection of natural resources. At t+e sa/e ti/e2 t+e ot+er consideration /ust relate to t+e interest of RNRL2 i.e.2 4+et+er
77
t+e AS?A results in RNRL -eco/ing a s+ell co/ an0 and 4+et+er t+e AS?A is a -an6a-le agree/ent. 44) "nsofar as t+e 4or6a-ilit0 of AS?A2 RNRL +as fourfold
o-.ections. $+e0 are7 1) t+at t+e 9suita-le arrange/ent: under t+e sc+e/e is not+ing -ut t+e ?o=I 2) t+at t+e AS?A is not a -an6a-le agree/entI ') /alafide on t+e art of R"L to -ring in an illegal gas agree/entI 4) Pursuant to t+e stand of t+e R"L and its res onse2 RNRL +as raised si5 oints of rotestation.
$+e AS?A 4as ut into t+e lace in ursuance of Clause 19 of t+e sc+e/e. Clause 19 of t+e sc+e/e ro,ides t+at in order to effectuate t+e de/erger or R"L2 a suita-le agree/ent +as to -e for/ulated. "n ot+er 4ords2 t+e osition of RNRL is t+at
9suita-le arrange/ent: 4it+in t+e /eaning of Clause 19 is su osed to -e t+e ?o=. Suc+ an arrange/ent /ust -e
suita-le for RNRL. According to RNRL2 since AS?A is not a re lication of t+e conditions of t+e ?o= and t+at it is not a -an6a-le agree/ent it 4ill reduce RNRL into a s+ell co/ an0. AS?A ,iolates t+e sc+e/e and /ust -e re laced ta6ing into account t+e ,arious oints of rotestation raised -0 t+e/. >n t+e ot+er +and2 it is t+e clai/ of R"L t+at since t+e ?o= is not
78
a -inding docu/ent2 t+ere is no reFuire/ent t+at t+e AS?A /ust re licate t+e ?o=. Eurt+er2 t+e0 Fuestioned t+e stand of RNRL t+at t+e AS?A is not suita-le for RNRL. Eurt+er2 t+e0 ut)fort+ t+eir case t+at t+e AS?A is in consonance 4it+ t+e o-ligations of R"L to t+e Ao,ern/ent under t+e 1SB and t+e reFuire/ents flo4ing fro/ t+e decisions of BA>?. SUITABLE ARRAN(EMENT2 4&) Suita-le Arrange/ent under Clause 19 of t+e sc+e/e
/ust not -e /erel0 suita-le for R"L alone. "n ot+er 4ords2 it +as a -roader /eaning. Suc+ an arrange/ent /ust -e
suita-le for t+e interest of s+are+olders of RNRL as reflected -0 ?o= and R"L2 t+e o-ligations of R"L under t+e PSC2 t+e National Polic0 of gas including t+e decisions of BA>? and Aas =tiliCation Polic0 (A=P) and t+e -roader national and u-lic interest. 4() $+ere is a need to construct a suita-le arrange/ent $+e -roader construction of suita-le
arrange/ent is t+at t+e arrange/ent /ust -e suita-le not onl0 for R"L and RNRL -ut also suita-le 4it+ res ect to t+e go,ern/entHs interest under PSC2 in consonance 4it+ t+e
79
olic0 as 4ell
as larger national interest. $+is is -ecause gas is an essential natural resource and is not o4ned -0 eit+er R"L or RNRL. $+e Ao,ern/ent +olds t+is natural resource as a trust for t+e eo le of t+e countr0. Su interest and in t+e l0 of gas is a /atter of national
co/ anies in,ol,ed2 t+ere are +uge nu/-er of s+are+olders and eo le 4+o 4ill -e indirectl0 affected -0 t+e olicies of t+e co/ anies. $+erefore2 t+e arrange/ent flo4ing fro/ Clause
19 /ust -e suita-le for interest of all t+e a-o,e)/entioned ersons. 47) Dee ing t+e said o-.ect in /ind2 Clause 19 /ust -e
inter reted -0 ta6ing into account 1) t+e interest of RNRL as reflected -0 t+e ?o=I 2) t+e interest of t+e s+are+olders of R"L and RNRLI ') t+e o-ligations of R"L under PSCI 4) t+e national olic0 of gas including t+e decisions of BA>? and Aas =tiliCation Polic0I and &) -roader national and u-lic interest.
80
$D% PRODUCTION SHARIN( CONTRACT $PSC%2 4*) i) So/e of t+e salient features of t+e PSC are as follo4s7 Clause ( of t+e Prea/-le /a6es it clear t+at disco,er0
and e5 loitation 4ill -e in t+e o,er all interest of "ndia. ii) Article *.'(6) /a6es t+e contractor is to -e /indful of t+e eo le of "ndia in t+e conduct of
Article 10.7(c) (iii) t+e contractor is dut0 -ound to ensure roduction area does not suffer an0 e5cessi,e rate of roduction or an e5cessi,e loss of reser,oir
t+at t+e
Article '2.2 /a6es it clear t+at t+e contractor is not ri,ileges and duties 4it+in t+e
contract in a /anner 4+ic+ contra,enes t+e la4s of "ndia. ,) Article 21(1) /andates t+at t+e disco,er0 and roduction
of natural gas s+all -e in t+e conte5t of go,ern/entHs olic0 for t+e utiliCation of natural gas. $+e a-o,e clauses in t+e for/ of articles /a6e it clear t+at PSC is su-.ect to t+e Constitution of "ndia2 t+e >il Eields Act2 194*2 t+e Petroleu/ and Natural Aas Rules2 19&92 t+e $erritorial #aters2 t+e Continental S+elf and
81
B5clusi,e Bcono/ic Qone and ot+er ?ariti/e Qones Act2 197( and also t+e gas utiliCation olic0. ,i) Article 27(1) deals 4it+ title to etroleu/ under t+e
contract areas as 4ell as natural gas roduced and sa,ed fro/ t+e contract area ,ests 4it+ t+e Ao,ern/ent unless suc+ title +as assed in ter/s of PSC. As er Clause (2)2 title re/ains
4it+ t+e Ao,ern/ent till t+e ti/e t+e natural gas reac+es t+e deli,er0 oint as defined in t+e PSC. 49) $+erefore2 it is not er/issi-le for R"L to enter into a l0 fi5ed Fuantit0 of gas as t+e gas
ro ert0 of t+e go,ern/ent till t+e ti/e it oint and t+us2 R"L +as no rig+t to ro,al of t+e =nion
!ai2 (19*4) 1 SCC &1& at &49 +eld 9to distri-ute 4ould /ean to allot2 to di,ide into classes or into grou s and e/-races arrange/ents2 a classification2 lace/ent2 dis osition2
&1)
"n t+e lig+t of t+e a-o,e2 t+e B5ecuti,e of t+e =nion of o4ers under Article 7' and
Article 77 (') in order to fulfill t+e o-.ecti,es of t+e 8irecti,e Princi les of State Polic0 relating to distri-ution of Natural Aas. $+is Natural Aas is a /aterial resource under Article '9(-). in ,ie4 of t+is2 along 4it+ t+e conte/ lation of a Ao,ern/entHs Polic0 for t+e utiliCation of Natural Aas under Article 21.1 and t+e decision of t+is Court referred to a-o,e2 t+e B5ecuti,e decided t+at distri-ution 4ould include 4it+in its a/-it acFuisition2 including acFuisition of ri,ate o4ned
/aterial resources. $+e fra/ing of t+e 9Aas =tiliCation Polic0: in identif0ing t+e riorit0 sectors2 and allocating t+e reFuisite
Fuantities in accordance 4it+ t+e needs of t+e said sectors and su-.ecting /ar6eting freedo/ to t+e order of riorit0 and
guidelines fra/ed is ,er0 /uc+ in accordance 4it+ la4. ConseFuentl02 Article 21.1 and Article 21.' s+ould -e read in consonance 4it+ t+e Aas =tiliCation Polic0 and t+e latter is neit+er inconsistent 4it+ t+e ro,isions of t+e Constitution2
nor t+e >il Eield Regulation Act2 194*2 Petroleu/ and Natural
83
Aas Rules 19&9 and t+e Articles of t+e Production S+aring Contract referred to a-o,e. &2) $o ut it clear2 -ot+ in ter/s of t+e Aas =tiliCation Polic0
and t+e Production S+aring Contract2 Ao,ern/ent in t+e ca acit0 as an B5ecuti,e of t+e =nion can regulate and distri-ute t+e /anner of sale of Natural Aas t+roug+ allot/ents and allocation 4+ic+ 4ould su-)ser,e t+e -est interest of t+e countr0. &') At t+e outset2 it is to -e noted t+at t+e rice deter/ined
-0 t+e Ao,ern/ent is not t+e su-.ect /atter of eit+er t+e Co/ an0 A lication nor is it an issue 4+ic+ arises out of t+e roceeding
4+ere an0 c+allenge +as -een laid to Ao,ern/ent Polic02 rice fi5ation2 grant or refusal of a ro,al. Eurt+er2 4it+out suc+ a
roceeding in e5istence and 4it+out N$PC -eing a art0 in t+e resent roceedings2 an0 issue touc+ing u on t+e ,alidit0 of
rice fi5ation or rice for/ula does not arise. &4) a $+e rice of N 4.20G//-tu is -ased on t+e for/ula
84
c+allenge or ad.udication -efore t+e Court. &&) ?r. Ao al Su-ra/aniu/2 learned Solicitor Aeneral
e5 lained t+at u to earl0 1990s2 rior to NBLP and re)NBLP 0ears2 gas 4as -eing roduced onl0 fro/ t+e fields o erated -0 t+e Ao,ern/ent co/ anies2 ,iC.2 >NAC and >"L2 out of -loc6s 4+ic+ 4ere gi,en to t+ese co/ anies -0 t+e Ao,ern/ent on no/ination -asis. Suc+ gas 4as su-.ected to ad/inistered
rice regi/e. $+is 4as -ecause2 firstl02 t+e fields 4ere gi,en on no/ination -asis and not on co/ etition -asis and secondl02 to t+e Ao,ern/ent co/ anies 4+ic+ are su-.ect to directions of t+e Ao,ern/ent. Ao,ern/ent2 at t+at ti/e2 4as guided
ri/aril0 -0 t+e needs of t+e consu/ers 4+o naturall0 li6ed to get t+e gas as c+ea as ossi-le. $+erefore2 t+e -asis for ricing 4as cost) lus.
Cost of roduction lus /arginal rofits as /a0 -e deter/ined -0 Ao,ern/ent 4as t+e sale rice. Eields 4ere gi,en to
Ao,ern/ent)o4ned co/ anies on no/ination -asis till earl0 1990s. $+ere 4as2 +o4e,er2 t+e roduction. ro-le/ of aug/enting t+e
energ0 securit0 and +ence it 4as decided to o en t+e fields to Pri,ate Sector in,est/ent. 8uring /id)1990s2 6no4n as NBLP 0ears2 re)
-asis and certain -loc6s 4ere a4arded to t+e/ under a Production S+aring Contract. $+e ricing for/ula 4as $+is 4as a /a.or "t 4as t+oug+t lace. Pre)
NBLP regi/e 4as furt+er i/ ro,ed to NBLP regi/e. Sourcing of in,est/ent2 tec+nolog0 and efficient o erations fro/ co/ anies 4it+in t+e countr0 and fro/ outside on a le,el la0ing field 4it+ do/estic u-lic sector co/ anies 4as t+e
/ain feature of t+e NBLP regi/e and2 t+erefore2 t+e Oar/Hs lengt+H rice2 4+ic+ is anot+er na/e for /ar6et rice2 4as roduction
of oil and gas is associated 4it+ considera-le ris6 and no in,est/ent 4ould +a,e co/e if to cost) lus or ad/inistered roduct rices 4ere su-.ected So2 t+e NBLP
rice regi/e.
ricing regi/e ro,ides for ar/Hs lengt+ rice 4+ic+ is anot+er na/e for /ar6et rice. 1ut since t+e gas /ar6et is not full0
86
de,elo ed unli6e /ar6ets for crude oil2 it is sti ulated in t+e PSC t+at t+ere 4ill -e a for/ula or -asis for t+e deter/ination of t+e rices 4+ic+ s+all -e a to sale and for granting t+is a ro,ed -0 t+e Ao,ern/ent rior ro,al2 Ao,ern/ent can not -e re,ailing olic02 if
ricing of natural gas2 including an0 lin6ages 4it+ $+e rele,ant PSC ro,isions in NBLP)"
(-)
(c)
Article 21.(.' S $+e for/ula or -asis on 4+ic+ t+e rices s+all -e deter/ined ursuant to Articles 21.(.2 (-) or (c) s+all -e a ro,ed -0 t+e Ao,ern/ent rior to t+e sale of Natural Aas to t+e consu/ersG-u0ers. Eor granting t+is a ro,al Ao,ern/ent s+all ta6e into account t+e re,ailing 87
olic02 if an02 on ricing of Natural Aas including an0 lin6ages 4it+ traded liFuid fuels2 and it /a0 delegate or assign t+is function to a regulator0 aut+orit0 as and 4+en suc+ an aut+orit0 is in e5istence.:
roac+2
Ao,ern/ent as6ed t+e Contractor to su-/it a for/ula on ar/Hs lengt+ -asis. BA>? 4as constituted -0 t+e
Ao,ern/ent of "ndia in August2 2007 4+ic+ loo6ed into t+e ricing and utiliCation of gas in ter/s of t+e Ao,ern/entHs rig+ts and o-ligations under t+e PSC. for/ula -ased on Ar/Hs Lengt+ Fuotations fro/ users of gas. R"L su-/itted a
e5a/ined -0 Co//ittee of Secretaries (C>S) and later -0 P?Hs Bcono/ic Ad,isor0 Council. BA>?2 assisted -0 t+eir ,ie4s2 a ro,ed a ne4l0 suggested for/ula 4it+ certain ro,ed -0
/odifications2 on 12G09G2007. $+e rice for/ula a t+e BA>? 4+ic+ is to -e a as follo4s7 Price (in =SN er //-tu) X 2.& Y (Crude Price &() "t is furt+er
0.1&
S 2&)
contractor relented leading to a lo4er rice -eing fi5ed at N4.2 instead of N4.'2 clai/ed -0 t+e contractor. $+is for/ula is ,alid for & 0ears as for/ula2 t+e er t+e BA>? decision. According to t+e
rice /a0 ,ar0 -et4een =S N 4.2 to =S N eriod of & 0ears. #it+ crude rices of
2.&G//-tu during a
=S N (0G-arrel or /ore2 t+e rice 4ill -e =S N 4.2G//-tuI for =S N 2&G-arrel2 it 4ill -e =S N 2.&G//-tu. t+us2 i/ oses a ceiling on gas $+e for/ula2
4+ere-0 t+e riorit0 sector and consu/ers 4ere decided. &7) "t is also -roug+t to t+e notice of t+is Court t+at BA>?
consisted of t+e C+air/an (B5ternal Affairs ?inister)2 4+o 4as a ,er0 senior ?inister in t+e Council of ?inisters2 ?inisters of t+e consu/ing sectors (suc+ as EertiliCer and Po4er)2 t+e ?inister fro/ roducing Sector (i.e.2 Petroleu/ ; Natural
Aas)2 and t+e ?inisters in c+arge of ?inistr0 of Einance2 La4 and Cor orate Affairs2 -esides Planning Co//ission. &*) a) $+e ricing for/ulaG-asis as er t+e PSC +as to -e7 Eirstl0 on ar/Hs lengt+ -asis2
89
-)
c) d)
$+irdl02 +a,ing lin6ages 4it+ traded liFuid fuels2 and Eourt+l02 Ao,ern/ent 4ill +a,e to erfor/ RegulatorHs function till one is a ointed for t+e ur ose. ricing re,alent in
&9)
"ndia in res ect of gases fro/ ot+er fields (e5cluding2 of course2 t+e gas fro/ t+e Ao,ern/ent co/ aniesH fields2 4+ic+ are at ad/inistered rices)7 (in =SNG//-tu) P?$ (4eig+ted) Ra4a Ra4a Satellite La6s+/i #eig+ted a,erage (0) $+e fi5ation of &.&1 '.& 4.' 4.7& &.2*
rice arose -efore t+e BA>? onl0 in rice for/ula 4as considered. As
90
art0 transaction.
A:*,1;0 1.! of t+e PSC as follo4s7 9Ar/s Lengt+ Sales: /eans sales /ade freel0 in t+e o en /ar6et2 in freel0 con,erti-le currencies2 -et4een 4illing and unrelated sellers and -u0ers and in 4+ic+ suc+ -u0ers an sellers +a,e no contractual or ot+er relations+i directl0 or indirectl02 or an0 co//on or .oint interest as is reasona-l0 li6el0 to influence selling rices and s+all2 inter alia2 e5clude sales (4+et+er direct or indirect2 t+roug+ -ro6ers or ot+er4ise) in,ol,ing Affiliates2 sales -et4een Co/ anies 4+ic+ are Parties to t+is Contract2 sales -et4een go,ern/ents and go,ern/ent)o4ned entities2 counter trades2 restricted or distress sales2 sales in,ol,ing -arter arrange/ents and generall0 an0 transactions /oti,ated in 4+ole or in art -0 considerations ot+er t+an nor/al co//ercial ractices.: (1) ?r. Ao al Su-ra/aniu/ reiterated t+at t+e su-/issions
/ade ertaining to t+e PSC are 4it+out re.udice to t+e stand of t+e Ao,ern/ent ,is)V),is N$PC and also 4it+out re.udice
to t+e su-/ission t+at t+is Court is not called u on in t+e resent roceedings to inter ret t+e PSC. (2) "n t+e case on +and2 Price for/ula 4as a ro,ed -0
Ao,ern/ent in Se te/-er2 2007 4+en it 4as e5 ected t+at gas 4ould -e roduced fro/ t+e -asin in 3une2 200*. $+e
utiliCation of 40 //sc/d of gas 4as decided u on in t+e /ont+s of ?a02 200* in ter/s of sectors and units to 4+ic+
91
gas 4ould -e su
lied.
As t+e
furt+er ,olu/es of gas 4ere 6no4n to -eco/e a,aila-le2 t+e go,ern/ent recentl0 decided on t+e utiliCation of a furt+er ,olu/e of 19.*2( (Y0.*7&) //sc/d on fir/ -asis Y '0.00 //sc/d on fall-ac6 -asis in >cto-er2 2009. As e/ +asiCed earlier2 it is u to t+e o4ner (t+e Ao,ern/ent) to decide as to
+o4 to utiliCe t+e gas and at 4+at rice it can -e sold and t+is +as -een done in accordance 4it+ Production S+aring Contract (PSC) 4+ic+ +as a statutor0 -asis. $+e PSC under Article 21.1 /a6es it clear t+at t+e Contractor is -ound -0 t+e Ao,ern/entHs olic0 for utiliCation of natural gas. (') $+e osition is t+at under Article 21.(.1 of t+e PSC2 t+e rice. Article 21.(.2
states t+at not4it+standing 21.(.12 if t+e gas is sold not to t+e Ao,ern/ent or its no/inee2 it /ust -e sold on t+e -asis of 9co/ etiti,e ar/Hs lengt+ sales in t+e region for si/ilar sales under si/ilar conditions:. "/ ortantl02 Article 21.(.' states t+at t+e -asis on 4+ic+ suc+ rices are to -e deter/ined s+all -e a ro,ed -0 t+e Ao,ern/ent rior to t+e sale. "n t+e
BA>? and e5a/ined -0 t+e Co//ittee of Secretaries and P?Hs Bcono/ic Ad,isor0 Council. 8ue to t+is t+e rice 4as rice
deter/ined to -e N 4.202 on t+e -asis of t+e for/ula2 eFui,alent to 2.& Y (Crude Price)2&)0.1&. (4)
t+at t+e PSC o,errides an0 ot+er contract 4+ic+ /a0 -e entered into for t+e su l0 for gas. $+is rinci le flo4s fro/
t+e follo4ing a) t+e natural resource2 gas2 is +eld -0 t+e Ao,ern/ent and trust on -e+alf t+e eo le. $+erefore2 for
legal ur oses2 t+e Ao,ern/ent o4ns t+e gas till it reac+es its final consu/erI -) t+e PSC is t+e -asis on 4+ic+ t+e contractor e5ercises +is rig+t o,er t+e su l0 of gas. Since it
is t+e ,er0 -asis of suc+ a rig+t2 t+e contractor does not +a,e t+e co/ etent o4er to gi,e an0 rig+ts 4+ic+ do not accrue to it under t+e PSC. (&) >ne of t+e /ain ur oses of t+e PSC is ricing and
distri-ution of gas. $+oug+ t+ere is 9freedo/ of trade: 4it+in t+e PSC2 -ut t+is freedo/ is e5ercised -0 t+e contractor t+roug+ a trans arent -idding rocess and non)interference of t+e Ao,ern/ent in t+e ad/inistration of gas su l0. As a
93
/atter of
deter/ine t+e ,aluation for/ula as 4ell as t+e $+erefore2 6ee ing t+ese considerations in /ind2
Ao,ern/entHs inter retation of t+e PSC as +as -een lucidl0 de/onstrated -0 t+e learned Solicitor Aeneral is ,alid. $+us t+e Ao,ern/ent +as t+e o4er to deter/ine ,aluation as 4ell
as rice for t+e ur ose of t+e PSC. (() "t is also rele,ant to ans4er a funda/ental Fuestion t+at o4er of t+e Ao,ern/ent under t+e PSC to ricing is t+e selling rice
is 4+et+er t+e
Ao,ern/ent or is it t+e rice at 4+ic+ R"L /ust sell t+e gas to RNRL. $+e 8i,ision 1enc+ of t+e %ig+ Court +as +eld t+at
e,en if t+e rice is to -e deter/ined -0 t+e Ao,ern/ent2 t+ere is no reason 4+0 R"L cannot sell t+e gas to RNRL at a lo4er rice t+an t+at. reasons7 1) $+e o4er of t+e Ao,ern/ent under t+e PSC is Fuite $+is osition is unsustaina-le for t4o
-road and includes t+e o4er to regulate t+e rice and distri-ution of gas. Suc+ a o4er reFuires
94
deter/ination of
rice of su
deter/ination of t+e s+are of t+e Contractor -ut also for t+e Ao,ern/ent. $+us 6ee ing t+e o-.ecti,es of ossi-le to restrict
t+e PSC in /ind2 it 4ould not -e t+e o4er of t+e Ao,ern/ent. 2) $+e arrange/ent in
Sc+e/e /ust -e suita-le for t+e s+are+olders of R"L as 4ell. $+e osition of R"L is t+at if gas is sold at rice lo4er t+an t+e one decided -0
N2.'4 t+at is at a
t+e Ao,ern/ent2 t+ere 4ill -e a disconnect -et4een t+e actual a/ount 4+ic+ t+e Contractor 4ill earn fro/ t+e sale of gas and t+e a/ount 4+ic+ 4ill -e dee/ed to +a,e -een earned -0 t+e Contractor under t+e PSC. 8ue to t+is2 t+e Contractor 4ould -e losing out on its o4n rofits 4+ic+ R"L clai/s 4ould -e +al,ed. "t is
also t+e grie,ance of R"L t+at t+e Court /ust ta6e into account t+e fact t+at t+e PSC ro,ides for t+e
legiti/ate rig+ts of t+e Contractor to earn certain rofits. "f t+ese rofits are reduced to suc+ a degree2 it 4ould affect t+e interest of t+e s+are+olders of R"L.
95
')
-efore us is t+at t+e AS?A is not suita-le for t+e/ -ecause it 4as not a -an6a-le contract and t+at t+e ?o= is t+e suita-le arrange/ent. $+e Fuestion
re/ains 4+et+er t+e AS?A is unsuita-le due to it not -eing a -an6a-le contract or it reducing RNRL to a s+ell co/ an0. BANDABLE CONTRACT2 (7) $+e Fuestion of -an6a-ilit0 +as -een argued in detail -0
R"L. ?r. Sal,e2 learned senior counsel ointed out t+at AS?A cannot -e considered a non)-an6a-le contract. >n -e+alf of R"L2 it 4as ointed out t+at t+e Fuestion of -an6a-ilit0 +as to
-e seen in t+e conte5t of t+e Po4er Pro.ect t+at 4ould -e and or s+ould -e ro/oted -0 t+e RNRL. $+ere is no e,idence o4er ro.ect 4as
-e non)-an6a-le. "t -ears e/ +asis t+at under t+e AS?A in res ect of s ecific o4er ro.ects2 a ASPA Fua t+at ro.ect
96
(*)
ro.ect (i.e.
a situation 4+ere t+e finance for t+e reco,ered fro/ t+e o4ner of t+e
ro.ect and not fro/ t+e assets of t+e ro.ect itself) 4ould +0sical assets -ut rice of
also fro/ re,enue strea/s (nor/all0 t+e sale electricit0 4ould -e reFuired to -e fir/ su su
l0 contract. $+e
-an6er could assign t+is resource to so/e ot+er liFuid -u0er and t+ere-0 reco,er its de-t. Si/ilarl02 if t+e -an6er is una-le to reco,er its de-t -ecause of t+e default -0 ra4)/aterial su lier (on 4+ic+ t+e ro.ect is -ased)2 t+e -an6er could
directl0 reco,er t+e liFuidated da/ages2 in re a0/ent of its de-ts fro/ suc+ ra4 /aterial su features of 9-an6er contracts:. (9) RNRLHs case is t+at t+e ro.ect -eing ro/oted reFuire lier. $+ese are general
-an6a-le contracts -ecause t+e0 4ere 9non recourse pro/ects: i.e. t+ese ro.ects 4ould -e self sustaina-le ro.ect 4+ic+ 4ere -0 t+e/sel,es to -e co//erciall0 and econo/icall0 feasi-le
97
suc+ understanding eit+er in t+e ?o= or in t+e Sc+e/e. 70) R"L facilitates for roduction of gas and RBLHs 8adri
o4er
lant 4as to -e co/ leted in t+e sa/e ti/e fra/e. ut its eFuit0 and also -orro4ed /one0 and ro.ect2 RNRL is not e,en in initial stage of o4er ro.ect. >-,iousl0 to secure finance
ro.ect RNRL 4ould inter alia +a,e to esta-lis+ t+at gas ro.ect on suita-le ter/s. Eor t+at
ro osed in t+e AS?A t+at it 4ould enter l0 contract t+at 4ould +a,e a definite
t+at t+e AS?A is not a -an6a-le agree/ent +as to -e seen in t+is conte5t. 71) "t 4as ointed out -0 R"L t+at 4+et+er or not t+e
contract is -an6a-le is not a Fuestion of la4 -ut a Fuestion of fact. $+ere are t4o 4a0s to deter/ine t+is2 na/el0 S a) -0 4a0 of fact e,idence s+o4ing t+at
re.ected t+e
certain clause of AS?AI or -) e5 ert e,idence suggesting t+at on t+e -asis of suc+ AS?A it could not -e ossi-le for RNRL to raise
funds for t+e gas -ased o4er ro.ect. 72) "t 4as furt+er ointed out t+at RNRL +as acted in lied for grant of er/ission to la0
i elines on an assertion t+at t+e AS?A is a suita-le and ,alid -inding contract. "n its letter dated 1*t+ 8ece/-er2 200( after filing of t+e etition RNRL soug+t Ao,ern/entHs a for la0ing i eline. RNRL +as acted under t+e ro,al of t+e rice a ro,al ro,al
rice of =S N
RNRL +ad also /o,ed t+e Ao,ern/ent for see6ing rice of =S N 2.'4 -0 t+eir letter dated 17t+
ro,al of t+e
3ul02 2007. 7') #+ile RNRL +ad all along -een contending t+at for 4ant l0 agree/ent it could not esta-lis+ a
of -an6a-le gas su
o4er lant including 8adri. "n fact2 /one0 +as alread0 -een raised N &10 / for 8adri Plant -0 4a0 of B5ternal Co//ercial 1orro4ings. $+is osition 4as candidl0 acce ted -0 RNRL.
99
Reliance Po4er Ltd.2 t+e co/ an0 t+at is no4 ro/oting 8adri +as raised Rs.11000 crores fro/ t+e u-lic. $+e s+ortage of
funds is an e5cuse S it is si/ l0 not true. 74) Eurt+er/ore2 according to R"L2 it is a fact t+at ot+er gas o4er lants +as -een set u in t+e countr0 4it+out
-ased
contention t+at AS?A is not a -an6a-le docu/ent is 4it+out an0 factual -asis. 7&) RNRL +as enu/erated t+e follo4ing /ain ele/ents 4+ic+ +a,e2 according to t+e/2 resulted in t+e agree/ent -eing not -an6a-le 7)
1. Price)
rice
of
=S
2.'4
4rongl0
su-.ected
to
go,ern/ent a
2. $er/) as
ro,al
er t+e for/ula (clause '-) gi,en in t+e AS?A2 l0 co/es to -e .ust 1 to 4 0ears instead
t+e ter/ of su
100
3.
<uantit0) as
AS?A2 RNRL 4ould recei,e onl0 ( ??SC?8 of gas instead of 2* e,en if t+e total roduction is '*.
4. Ca
lia-ilit0 of t+e seller i.e. R"L to /a5i/u/ of ( /ont+s onl0. &. 10 Fuoting clause 1'.* and 1'.9 of t+e AS?A su-/itted t+at as a result of t+ese clauses if t+e go,ern/ent does not acce t t+e rice 4+ic+ is t+e -asis for deter/ination etroleu/ under t+e
PSC2 t+e AS?A t+en 4ill stand annulled. 7() "n ,ie4 of all t+ese argu/ents and counter)argu/ents regarding t+e unsustaina-ilit0 of t+e arrange/ent under t+e AS?A2 4e +old t+at it is not ro er for t+e court under
Sections '91)'94 to /a6e /odifications of t+is nature in t+e Sc+e/e. $+ese c+anges /ust -e arri,ed at -0 t+e arties
t+e/sel,es t+roug+ negotiation. Eurt+er/ore2 4e +old t+at suc+ negotiations /ust -e done 4it+in t+e a/-it of t+e Ao,ern/ent olicies2 including t+e o,er)riding effect of t+e
101
PSC (including t+e 8e,elo /ent Plan under Article 10.7)2 BA>? decisions and ot+er related national olicies. $E% ROLE OF (OVERNMENT2 77) $+oug+ in t+e earlier art2 4e +a,e ad,erted to certain
as ects a-out t+e go,ern/entHs role since t+e a-o,e issue is rele,ant for dis osal of t+e dis ute -et4een t+e t4o entities2 it 4ould -e -eneficial to once again narrate certain facts and decide t+e issue. 7*) "n 19992 NBLP announced to a4ard etroleu/ -loc6s for de,elo /ent2 roduction of etroleu/ and
-loc6 DA)8(. Pursuant to t+e sa/e2 t+e go,ern/ent and t+e contractor (R"L ; N"D>) entered into a Production S+aring Contract (PSC). "n 20022 R"L ; N"D> announced disco,er0 of significant result fro/ DA)8( -loc6. 79) "n 200'2 N$PC floated a glo-al tender for su l0 of gas to
t+eir o4er ro.ects. R"L succeeded in its -id to sell2 trans ort and deli,er 1'2 $rillion 1ritis+ t+er/al unit ($1tu) or 1000000 ??1$=. N$PC confir/ed t+e sa/e on 1(t+ 3une 2004. "n a -oard /eeting of Reliance Bnerg0 Li/ited (RBL) +eld in 2004
102
4+ic+ 4as attended -0 ?u6es+ A/-ani and ot+er /e/-ers of R"L recorded t+at gas fro/ DA -asin 4ould -e su o4er t+e lied for t+e
8irector of R"L. $+ereafter2 a sc+e/e of arrange/ent 4as /o,ed and t+e co/ anies decided to /o,e 1o/-a0 %ig+ Court for sanction of t+e sc+e/e of de/erger. $+e %ig+ Court a a ro,ed t+e sc+e/e. $+e sc+e/e ro,ided t+at an
ro riate gas su
-et4een R"L and RNRL. *0) $+e learned Co/ an0 3udge in +is order +as concluded
t+at t+e AS?A is not in ter/s of t+e sc+e/e. ?o= is -inding on -ot+ arties. $+e ter/s as /entioned in ?o= and AS?A arties su-.ect to go,ern/ent ractice in su l0 of
gas or suc+ ot+er roducts. $+e Co/ an0 3udge furt+er said t+at suc+ a contract is su-.ect to go,ern/entHs a ro,al in
,ie4 of NBLP ; PSC2 -ut 6ee ing in ,ie4 t+e se,eral factors including freedo/ and rig+t to t+e contractorGR"L and t+e
103
li/ited and restricted sco e of interference in suc+ co//ercial as ects2 unless2 it is -reac+ of an0 u-lic olic0 or interest. *1) #+en t+e /atter 4as ta6en u -efore t+e 8i,ision
1enc+2 t+e 8i,ision 1enc+ +ad er/itted t+e =nion of "ndia to .oin as inter,ener in t+e a eals for t+e li/ited ur ose of
assisting t+e court in t+e /atter relating to Production S+aring Contract -et4een t+e union and t+e R"L 4it+ articular e/ +asis to Article 21 of t+e contract as t+e 8i,ision 1enc+ 4as of t+e ,ie4 t+at t+e distri-ution of gas +as far reac+ing conseFuences. *2) 1efore t+e 8i,ision 1enc+2 on -e+alf of t+e =nion of ricing and
"ndia2 it 4as su-/itted t+at "ndia +as -een facing a c+ronic s+ortage of natural gas due to de/and and aucit0 of su l0.
=nder NBLP2 t+e go,ern/ent +as gi,en contractors t+e freedo/ to /ar6et gas as 4ell as oil in "ndia in accordance 4it+ t+e ter/s and conditions ro,ided in t+e PSCs. $+is
freedo/ is not a-solute and certain restrictions +a,e -een i/ osed u on ,iCI t+e +a,e to -e ar/s)lengt+ rices at 4+ic+ t+e sale ta6es rices and are su-.ect to a lace
ro,al -0
ro,ed
ro,ed gas
Ao,ern/ent of "ndia continues to -e t+e o4ner of t+e gas till t+e deli,er0 oint. "t 4as furt+er ointed out t+at -0 ri,ate
negotiations no
4+ic+ are national assets ,esting in t+e Ao,ern/ent of "ndia are to -e dealt 4it+ and t+at t+e rice 4+ic+ +as -een arri,ed at is -inding on t+e contractor and no art0 can raise a
c+allenge regarding t+e sa/e in a co/ an0 etition. *') $+e 8i,ision 1enc+2 -0 t+e i/ ugned order2 +as
concluded t+e ter/s as /entioned in t+e ?o= and AS?A need to -e /odified suita-l0 for -ot+ t+e go,ern/entHs su arties su-.ect to t+e ractice in
and PSC and suc+ related go,ern/ent olicies2 -ut 6ee ing in ,ie4 t+e se,eral factors including t+e freedo/ and t+e rig+t of t+e contractorGR"L and t+e li/ited and restricted sco e of interference in suc+ er/issi-le co//ercial as ects of t+e u-lic olic0 and
105
l02 t+e
8i,ision 1enc+ o-ser,ed t+at t+e ?o= clearl0 car,es out t+at t+e N$PC su l0 agree/ent 4ould -e a general guidance for ossi-le -e t+e -asis for suc+
contracts and t+e ter/s of suc+ contracts 4ill -e no less fa,ora-le t+an t+ose of N$PC contract. $+e N$PC contract clearl0 su ro,ides 17 0ears as t+e eriod for 4+ic+ R"L 4ill
rice at 4+ic+ t+e gas +as to ro.ects including its affiliates roduction
-e su
S+aring contract 4+ic+ RBL +as entered 4it+ t+e /inistr0 of etroleu/ and N"D> resources li/ited on 12t+ A ril2 2000. "n ter/s of article 21.(.' t+e contractor s+all -e at t+e li-ert0 to /ar6et t+e gas -ut t+en t+e sa/e 4ill +a,e to -e regulated on t+e -asis of for/ula on 4+ic+ t+e rice s+all -e deter/ined ro,ed -0 t+e gas to t+e
ursuant to articles 21.(.2 (-) and (c) to -e a go,ern/ent rior to t+e sale of natural
consu/erG-u0er. $+e 8i,ision 1enc+ +as /ade it clear t+at t+ere is no s ecific ro,ision under t+e roduction s+aring
t+an 4+at is fi5ed -0 t+e go,ern/ent for ,aluation of gas to t+e e5tent of its s+are and furt+er o-ser,ed t+at t+at t+e contractor +as freedo/ to sell gas at ar/Hs lengt+ rices to t+e -enefit of t+e arties to t+e roduction s+aring contract out of t+eir s+are of Profit gas to 4+ic+ art. 21.( >f t+e PSC a *4) lies.
"t /ust -e noted t+at t+e constitutional /andate is t+at eo le of t+is countr0.
$+e nature of t+e 4ord 9,est: /ust -e seen in t+e conte5t of t+e Pu-lic $rust 8octrine (P$8). B,en t+oug+ t+is doctrine +as -een a lied in cases dealing 4it+ en,iron/ental
lication.
Natural Gas v. Union of India $2004% 4 SCC 4!'2 4+ile Fuoting 0"= Cauv"r+ >at"r 1is/ut" #ri&unal A"R 1992 SC &22 +eld t+at7
4&. "n 0"= Cauv"r+ >at"r 1is/ut" #ri&unal $S74:)% t+e rig+t to flo4ing 4ater of ri,ers 4as descri-ed as a rig+t P u-lici .urisP2 i.e. a rig+t of u-lic. So also t+e eo le of t+e entire countr0 +as a sta6e in t+e natural gas and its -enefit +as to -e s+ared -0 t+e 4+ole countr0. $+ere s+ould -e .ust and reasona-le use of natural gas for national de,elo /ent. "f one State alone is allo4ed to e5tract and use natural gas2 t+en ot+er States 4ill -e de ri,ed of its eFuita-le s+are. $+is osition goes on to fortif0 t+e stand ado ted -0 t+e =nion and 4ill -e a ointer to t+e conclusion t+at
107
Rnatural gasP is included in Bntr0 &' of List ". $+us2 t+e legislati,e +istor0 and t+e definition of P etroleu/P2 P etroleu/ roductsP and P/ineral oil resourcesP contained in ,arious legislations and -oo6s and t+e national interest in,ol,ed in t+e eFuita-le distri-ution of natural gas a/ongst t+e States ) all t+ese factors lead to t+e inesca a-le conclusion t+at Rnatural gasR in ra4 and liFuefied for/ is etroleu/ roduct and art of /ineral oil resource2 4+ic+ needs to -e regulated -0 t+e =nion.
#it+ relation to t+e Pu-lic $rust 8octrine2 t+is court in *.C. *"-ta v. 'a$al Nat- $1''7% 1 SCC 3!! +eld7
17. $+e Pu-lic $rust 8octrine ri/aril0 rests on t+e rinci le t+at certain resources li6e air2 sea2 4aters and t+e forests +a,e suc+ a great i/ ortance to t+e eo le as a 4+ole t+at it 4ould -e 4+oll0 un.ustified to /a6e t+e/ a su-.ect of ri,ate o4ners+i . $+e said resources -eing a gift of nature. $+e0 s+ould -e /ade freel0 a,aila-le to e,er0one irres ecti,e of t+e status in life. $+e doctrine en.oins u on t+e Ao,ern/ent to rotect t+e resources for t+e en.o0/ent of t+e general u-lic rat+er t+an to er/it t+en) use for ri,ate o4ners+i or co//ercial ur oses. 27. >ur legal s0ste/)-ased on Bnglis+ Co//on La4 ) includes t+e u-lic trust doctrine as art of its .uris rudence. $+e State is t+e trustee of all natural resources 4+ic+ are -0 nature /eant for u-lic use and en.o0/ent. Pu-lic at large is -eneficiar0 of t+e sea) s+ore2 running 4aters2 airs2 forests and ecologicall0 fragile lands. $+e State as a trustee is under a legal dut0 to rotect t+e natural resources. $+ese resources /eant for u-lic use cannot -e con,erted into ri,ate o4ners+i .
lication in t+e
108
trustee of t+e eo le at large. *() R"LHs rig+t of distri-ution is -ased on t+e PSC2 4+ic+ o4er of t+e Ao,ern/ent under t+e
constitutional ro,isions. $+us t+e ,er0 -asis of R"LHs /andate is t+e constitutional conce ts t+at +a,e -een discussed -0 no42 including Article 2972 Articles 14 and '9(-) and t+e Pu-lic $rust 8octrine. $+erefore2 it 4ould -e -e0ond t+e o4er of R"L to do so/et+ing 4+ic+ e,en t+e Ao,ern/ent is not allo4ed to do. $+e transactions -et4een R"L and RNRL are su-.ect to t+e o,er)riding role of t+e Ao,ern/ent. *7) "t is rele,ant to note t+at t+e Constitution en,isages l0 of gas to -e 4it+in t+e
do/ain of go,ern/ental functions. "t is t+e dut0 of t+e =nion to /a6e sure t+at t+ese resources are used for t+e -enefit of t+e citiCens of t+is countr0. 8ue to s+ortage of funds and ri,atiCed suc+
4ould +a,e -een ideal for t+e PS=s to +andle suc+ e5clusi,el0. "t is co//enda-le t+at
suc+ acti,ities can ideall0 -elong to t+e State 4+ic+ is in a -etter osition to distri-ute t+e/ for t+e -est interests of t+e ri,ate arties are e/ lo0ed for
suc+ ur oses2 t+e0 /ust -e accounta-le to t+e constitutional set)u . **) $+e statutor0 sc+e/e of control of natural resources is
go,erned -0 a co/-ined reading of t+e >il Eields (Regulation and 8e,elo /ent) Act2 194*I t+e Petroleu/ and Natural Aas Rules2 19&9I and ?ariti/e Qones Act. *9) As ointed out earlier2 t+e ro er inter retation of PSC
gi,es t+e
-asis of ,aluation of gas2 -ut also its rice. According to Article 21 of PSC2 -efore t+e contractor sells t+e gas2 t+e rice of suc+ gas /ust -e a 90) ro,ed -0 t+e Ao,ern/ent.
"t +as -een argued -0 RNRL t+at t+e decision of t+e of ?inisters) does not a l0 to t+e
rig+ts of RNRL under t+e Sc+e/e. $+is argu/ent is -ased on t+e te5t of t+e decision 4+ic+ states t+at t+e u on -0 BA>? is 94it+out ricing decided
Court2 i.e. R"L ,. N$PC and R"L ,. RNRL. $+is is contested -0 -ot+ t+e Ao,ern/ent and R"L. unsustaina-le. As of 94it+out $+is osition of RNRL is
arties accruing
fro/ t+e ?o=2 t+e Sc+e/e or t+e inter retation of PSC to t+e court. "n ot+er 4ords2 t+e court is to deter/ine 4+et+er t+e Ao,ern/ent +as t+e o4er to deter/ine t+e ,aluation and
ricing of t+e gas. $+is deter/ination -0 t+e court is not affected -0 t+e BA>? decision2 as it 4ould de end solel0 on t+e inter retation of t+e ro,isions of t+e PSC itself. 1ut once o4er to
it is deter/ined t+at t+e Ao,ern/ent does +a,e t+e deter/ine t+e rice 4ould -e a
rice of gas2 BA>?Hs decision regarding t+e lica-le. $+e sa/e goes for t+e general gas
utiliCation olic0 and t+e olic0 of t+e Ao,ern/ent 4it+ regard to ricing. $+erefore2 once t+e PSC is read to gi,e o4er to t+e Ao,ern/ent to deter/ine t+e state/ents 4ill -e a lica-le.
111
olic0
91)
sustaina-le conclusions 4+ic+ can -e deri,ed fro/ t+e osition of t+e =nion7 1) $+e natural resources are ,ested 4it+ t+e Ao,ern/ent as a /atter of trust in t+e na/e of t+e eo le of "ndia. $+us2 it is t+e sole/n dut0 of t+e State to national interest. 2) B,en t+oug+ e5 loration2 e5traction and e5 loitation of natural resources are 4it+in t+e do/ain of rotect t+e
go,ern/ental function2 t+e Ao,ern/ent +as decided to ri,atiCe so/e of its functions. Eor t+is reason2 t+e constitutional restrictions on t+e go,ern/ent 4ould eFuall0 a l0 to t+e ri,ate la0ers in t+is rocess.
Natural resources /ust al4a0s -e used in t+e interests of t+e countr02 and not ri,ate interests. ') $+e -roader constitutional rinci les2 t+e statutor0
sc+e/e as 4ell as t+e ro er inter retation of t+e PSC /andates t+e Ao,ern/ent to deter/ine t+e t+e gas -efore it is su lied -0 t+e contractor. rice of
112
4)
$+e
=tiliCation Polic0 and t+e decision of BA>? 4ould -e a &) lica-le to t+e ricing in t+e resent case.
$+e Ao,ern/ent cannot -e di,ested of its su er,isor0 o4ers to regulate t+e su l0 and distri-ution of gas.
92)
A. E70 *,o5 o& M),5*),5)>,;,*6 o& *+0 Co.4)56 A44;,1)*,o5 RNRL filed an a lication under t+e Co/ anies Act arguing
t+at AS?A ut in lace -0 R"L does not satisf0 t+e Sc+e/e of de/erger. $+e Sc+e/e under Fuestion 4as a Co/ an0 Court on t+e ro,ed -0 t+e
and '94. $+erefore2 contrar0 to R"LHs argu/ent2 Sections '92 and '94 are a Eurt+er2 t+e lica-le. o4er of t+e court under Sections '91 to '94 of
t+e Co/ anies Act is 4ide enoug+ to /a6e necessar0 c+anges for 4or6ing of t+e Sc+e/e. $+is o4er is s ecific to t+e facts
and circu/stances of t+e case at +and. Ne,ert+eless2 t+is o4er does not e5tend to /a6ing an0 su-stantial or
$+erefore2 t+e Co/ an0 Court en.o0s .urisdiction to entertain t+e a Act. B. B,58,59 N)*7:0 o& *+0 M0.o:)587. o& U580: *)58,59 $+e ?o= 4as signed as a ri,ate fa/il0 arrange/ent or lication under Sections '92 and '94 of t+e Co/ anies
understanding -et4een t+e t4o -rot+ers2 ?u6es+ and Anil A/-ani2 and t+eir /ot+er. Contents of t+e ?o= 4ere not /ade u-lic2 and e,en in t+e resent roceedings2 t+e0 4ere
arts. Clearl02 t+e ?o= does not fall under t+e do/ain ) it 4as neit+er a ro,ed -0 t+e
s+are+olders2 nor 4as it attac+ed to t+e sc+e/e. $+erefore2 tec+nicall02 t+e ?o= is not legall0 -inding. Ne,ert+eless2 cogniCance can -e ta6en of t+e fact t+at t+e ?o= for/ed t+e -ac6dro of t+e Sc+e/e2 and t+erefore2
contents of t+e Sc+e/e +a,e to -e inter reted in t+e lig+t of t+e ?o=. C. Co5 ,80:)*,o5 *o 80*0:.,50 3 7,*)>;0 )::)590.05*= 7580: C;)7 0 1' o& *+0 S1+0.0. 9Suita-le arrange/ent: under clause 19 of t+e Sc+e/e /ust not -e /erel0 suita-le for R"L. "t +as a -roader /eaning. Suc+
114
an arrange/ent /ust -e suita-le for t+e interests of t+e s+are+olders of RNRL as reflected -0 t+e ?o=2 and R"LI t+e o-ligation of R"L under t+e PSCI t+e national olic0 on gas
including t+e decisions of BA>? and t+e Aas =tiliCation Polic0I and t+e -roader national and u-lic interest. D. P:o40: I5*0:4:0*)*,o5 o& *+0 PSC $+e o-.ecti,e of t+e PSC inter alia is to regulate t+e su l0 and
distri-ution of gas. Dee ing t+is o-.ecti,e in /ind2 Article 21 of t+e PSC /ust -e inter reted to gi,e t+e Ao,ern/ent to deter/ine -ot+ t+e ,aluation and "t is not feasi-le to restrict t+e o4er to t+e rice of gas.
suc+ /atters of national i/ ortance2 es eciall0 4+en t+e go,erning contract2 t+e PSC2 also ro,ides for it. E. Ro;0 o& *+0 (o-0:5.05* "n a constitutional de/ocrac0 li6e ours2 t+e national assets -elong to t+e eo le. $+e Ao,ern/ent +olds suc+ natural
resources in trust. Legall02 t+erefore2 t+e Ao,ern/ent o4ns suc+ assets for t+e interests of t+e ur oses of de,elo ing t+e/ in t+e resent case2 t+e Ao,ern/ent
A /ec+anis/ is
Ao,ern/ent and t+e Contractor (R"L2 in t+e resent case). $+e PSC s+all o,er)ride an0 ot+er contractual o-ligation -et4een t+e Contractor and an0 ot+er art0. F. R0;,0& a) $+oug+ t+e Contractor (R"L) +as t+e /ar6eting freedo/
to sell t+e roduct fro/ t+e contract area to ot+er consu/ers2 t+is freedo/ is not a-solute. $+e rice at 4+ic+ t+e roduce
4ill -e sold to t+e consu/er 4ould -e su-.ect to go,ern/entHs a ro,al. $+e tenure of suc+ contracts canHt -e suc+ t+at it lan as a ro,ed -0 t+e go,ern/ent.
$+erefore2 t+e AS?A and t+e ASPA entered into 4it+ RNRL s+ould fi5 t+e t+e PSC. -) $+e BA>? +as alread0 set t+e rice of gas for t+e rice2 Fuantit0 and tenure in accordance 4it+
ur ose of t+e PSC. $+e arties /ust a-ide -0 t+is2 and ot+er conditions laced -0 t+e Ao,ern/ent olic0. $+e AS?AGASPA dee l0 affects t+e interests of t+e s+are+olders of -ot+ t+e co/ anies. $+ese interests /ust -e -alanced. $+is -alance cannot -e struc6 -0 t+e court as t+e court does not +a,e t+e
116
o4er under Sections '91)'94 to create ne4 conditions under t+e sc+e/e. "n ,ie4 of t+e sa/e2 R"L is directed to initiate
renegotiation 4it+ RNRL 4it+in si5 4ee6s t+e ter/s of t+e AS?A so t+at t+eir interests are safeguarded and finaliCe t+e sa/e 4it+in eig+t 4ee6s t+ereafter and t+e resultant decision -e laced -efore t+e Co/ an0 Court for necessar0 orders. c) #+ile renegotiating t+e ter/s of AS?A2 t+e follo4ing
/ust -e 6e t in /ind7 1) $+e ter/s of t+e PSC s+all +a,e an o,er)riding effectI 2) $+e arties cannot ,iolate t+e olic0 of t+e Ao,ern/ent
in t+e for/ of t+e Aas =tiliCation Polic0 and national interestsI ') $+e arties s+ould ta6e into account t+e ?o=2 e,en
t+oug+ it is not legall0 -inding2 it is a co//it/ent 4+ic+ reflects t+e good interests of -ot+ t+e artiesI d) $+e arties /ust restrict t+eir negotiations 4it+in t+e olic02 as reflected inter alia -0
117
9')
eals
.@@.@@.@@@@@@@@C3". $D.(. BALADRISHNAN% ....@@@@@@@@@@@@@3. $P. SATHASIVAM% NB# 8BL%"2 ?AK 72 2010.
118
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4273 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 14997 OF 2009 RELIANCE NATURAL RESOURCES LTD. VERSUS RELIANCE INDUSTRIES LTD. WITH CIVIL APPEAL NO.4274 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 15033 OF 2009 RELIANCE NATURAL RESOURCES LTD. VERSUS RELIANCE INDUSTRIES LTD. WITH CIVIL APPEAL NOs. 4275 427! OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NOs. 150!3 !4 OF 2009 RELIANCE INDUSTRIES LTD. VERSUS RELIANCE NATURAL RESOURCES LTD. .RESPONDENT .APPELLANT .RESPONDENT .APPELLANT ..RESPONDENT .APPELLANT
119
WITH CIVIL APPEAL NO. 4277 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 1"929 OF 2009 UNION OF INDIA VERSUS RELIANCE INDUSTRIES LTD. & ANR. WITH I.A. NO. 1 IN CIVIL APPEAL NOs.42"0 42"1 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) N#s.14414 14415$2010 % CC 1!12! 1!127 OF 2009 VISHWESHWAR MADHAVRAO RASTE VERSUS RELIANCE INDUSTRIES LTD. & ORS. ..RESPONDENTS .APPELLANT .RESPONDENTS .APPELLANT
&U'G(ENT B. SU'ERSHAN RE'')* &. I.A. No. 1 i %##o'e(. for permi io! "o fi#e Spe$i%# Le%&e Pe"i"io!
120
).
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"+e %ppe%# . PART I PROLOGUE ,Jus publicum privatorum pactis mutari non potest. Public law cannot be changed by private pacts. - Digest of Justinian Political democracy cannot last unless there is at its base social democracy. On the social plane we have in !ndia a society based on the principle of graded ine"uality which means elevation of some and degradation of others. On the economic plane we have a society in which there are some who have immense wealth as against many who live in ab#ect poverty. $ow long shall we continue to live this life of contradictions% $ow long shall we continue to deny e"uality in our social and economic life% !f we continue to deny it for long we will do so only by putting our political democracy in peril. &e must remove this contradiction at the earliest possible moment or else those who suffer from ine"uality will blow up the structure of political democracy which this 'ssembly has so laboriously built up. -. T+o e '+o .!o' "+e Co! "i"/"io!%# +i "or0 of I!(i%
re$o*!i1e "+e %2o&e "o 2e "+e 'i e 'or( of Dr. Am2e(.%r3 o!e
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of o/r fo/!(i!* f%"+er . T+o e '+o %re $o!$er!e( %2o/" "+e 'e#f%re of o/r peop#e3 %!( "+e f/"/re of o/r !%"io!3 +i '%r!i!* 'i## %#'%0 e$o!(
(onstitution. &hat we will have to say is that )an was vile. I" i !e&er e!o/*+ "o +%&e % 'ri""e! $o! "i"/"io!. We !ee( peop#e '+o3 i! "+e $o/r e of 'or.i!* "+e Co! "i"/"io!3 "o 2orro' % memor%2#e p+r% e from 6r%!&i##e A/ "i!3 'i## e7+i2i" 4/%#i"ie of *re%" i!"e*ri"0 %!( % (eep#0 fe#" e"+i$%# /r*e!$0 "o %me#ior%"e "+e o$i%# %!( e$o!omi$ $o!(i"io! i! '+i$+ o/r peop#e #i&e %!(
/ffer. T+%" o2#i*%"io! %ri e from "+e &er0 po#i"i$o8$o! "i"/"io!%# i(e%# %!( "r/$"/re /po! '+i$+ "+e S"%"e +% 2ee! forme( %!( "+e f/"/re of "+e !%"io! premi e(. I! (i p/"e /$+ % "+e o!e
2efore "+i Co/r"3 "+e #e! of "+e Co! "i"/"io! +% "o 2e / e( "o e7%mi!e "+e imp#i$%"io! i(e%# %!( "+e 'i"+ re pe$" "o %$+ie&eme!" of /$+
&e "e( i! "+e S"%"e3 %!( e7er$i e( 20 i" %*e!" 3 i "+e po'er of %## "+e peop#e %!( !o" 9/ " of "+o e 'i"+ *re%" 'e%#"+ %!( "%"/ . T+e &e "i!* of 4/%#i"ie /$+ po'er i %! %$" of f%i"+ %!( of "r/ "3 "'o / "%i!e( %!( !/r"/re(.
122
2e e%r!e(3
Co!"i!/%!$e of /$+ f%i"+ %!( "r/ " /!(o/2"e(#0 (epe!( 3 i! "+e #e% "3 o! "+e 2e#ief "+%" peop#e +%&e "+%" /$+ po'er %re 2ei!* e7er$i e( "o f/r"+er "+e Co! "i"/"io!%# *o%# . To "+e e7"e!" "+%" "+e peop#e 2e*i! "o 2e#ie&e "+%" "+eir f%i"+ %!( "r/ " 'ere mi p#%$e(3 %!( "+%" "+eir $o##e$"i&e po'er %re 2ei!* improper#0 / e( for "+e 2e!efi" of "+e fe'3 % oppo e( "o 2ei!* / e( for
p/2#i$ 'e#f%re %!( i!"ere " 3 o!e m%0 re% o!%2#0 $o!$#/(e "+%" %" #e% " "+e effe$"i&e f/!$"io!i!* of "+e S"%"e 'o/#( +%&e 2ee! $ompromi e(. T+o e 'i"+ .!o'#e(*e of +i "or03 %!( %! %ri#0 2e $o!$er!e( %2o/"
"+e i"/%"io! "o(%0 %!( po"e!"i%# $o! e4/e!$e i! "+e f/"/re. For "+em "+e 'or( %!( 'i e. :. T+e 'i (om of "+e %*e 3 *%r!ere( "+ro/*+ eo! of of Dr. Am2e(.%r 'o/#( %ppe%r "o 2e pre $ie!"
+/m%!i"0; $o##e$"i&e "r/**#e "o fi!( for %## % #ife of (i*!i"0 %!( fr%"er!i"0 < % (i*!i"0 "+%" %ri e from %!( i i!forme( 20 #i2er"03 e4/%#i"03 %!( 9/ "i$e i! %## '%#. of #ife %!( % fr%"er!i"0 "+%" ee. "o promo"e /$+ (i*!i"0 for %## i "+e fire i! '+i$+ "+e "r/$"/re %!(
"e7" of "+e Co! "i"/"io!3 '+e! &ie'e( "+ro/*+ "+e #e! of +i "or0
123
%!( "+e 'or.i!* of "+e i! "r/me!" i" e#f3 $#e%r#0 (emo! "r%"e "+%" i" $r0 "%##i1e $o##e$"i&e +/m%! 'i (om i! i" "ri%(i$ e"+i$%# o%r
i! e#o4/e!$e i! i" %r"i$/#%"io! of $o##e$"i&e +/m%! % pir%"io! % !%"io!%# *o%# %!( e" o/" "+e r%i o! (;e"re for "+e !%"io! i" e#f? =ii> "+e F/!(%me!"%# Ri*+" 3 "+%" pro&i(e &%rio/ free(om for "+e i!(i&i(/%# !e$e %r0 /po!
$o!(i"io!
free(om 3 o "+%" %## $%! "ri&e "o'%r( "+e %$+ie&eme!" of "+e *o%# e" for"+ i! "+e Pre%m2#e? %!( =-> "+e Dire$"i&e Pri!$ip#e %r0 for "+e o "+%"
of S"%"e Po#i$03 f/!(%me!"%# "o *o&er!%!$e %!( !e$e %$+ie&eme!" of %## ro/!( "+e *o%#
o$io8e$o!omi$ (e&e#opme!"
@. "+%"3 %
I" '%
I!(i% %'%.e!
(e&e#op if "+e $o!"r%(i$"io! 'ere !o" re o#&e( oo!. T+/ 3 i" '% fe#" "+%" "+e S"%"e o/*+" "o p#%0 % .e0 ro#e i! e! /ri!* "+%" %## "+e peop#e %re % /re(3 % #ife i!forme( 20 #i2er"03 e4/%#i"03 9/ "i$e
124
%!( fr%"er!i"03
%!( %
o$i%#
2ei!* 3 $%! 2e e$/re(. To "+i effe$"3 "+e S"%"e +% 2ee! *i&e! "+e po'er "o p#%$e re% o!%2#e re "ri$"io! e&e! o! "+e
F/!(%me!"%# Ri*+"
of "+e i!(i&i(/%#
#e*i #%"io! "o effe$"/%"e re8(i "ri2/"io! of 'e%#"+ %!( e! /re e4/i"%2#e %$$e "o m%"eri%# re o/r$e %!( "o fr%me po#i$ie "+%" of "+e $i&i# %!( "+e m%r.e" /$+ %r0
po'er i &e "e( i! "r/ " 20 "+e peop#e3 i" imp#ie 3 % % !e$e $oro##%r03 % "r/ " "+%" /$+ po'er
"+e Co! "i"/"io!%# *o%# 'i"+i! "+e fo/r $or!er of Co! "i"/"io!%# permi i2i#i"0. A&%i#%2i#i"0 of /$+ po'er "o / e3 i! % pr%$"i$%#
A.
T+e (%'! of i!(epe!(e!$e e&o.e( m/$+ +ope? %!( $+o#%r %!( o2 er&er
from "+e We "3 %2o/" "+e fe% i2i#i"0 of "+e e7perime!" of I!(i% % % Co! "i"/"io!%# (emo$r%$0. Be"3 i! o/r free(om %!( "+e e&e!"+ (e$%(e of % %
125
So&erei*!3 So$i%#i "3 Se$/#%r3 Demo$r%"i$ Rep/2#i$3 i" i %pp%re!" "+%" 'e +%&e /r&i&e(3 %!( i!(ee( 20 %!( #%r*e f#o/ri +e( % '% %
*re%" mor%# i!"e*ri"0 %!( 'i (om "+%" o/r fo/!(i!* f%"+er
e%r#0 po#i"i$%# #e%(er +ip 2ro/*+" "o "+e "%2#e3 %!( "+e effor" "+e0 p/" i! "o'%r( 2/i#(i!* "+e i! "i"/"io! of o/r (emo$r%$0. o$io8po#i"i$%# %!(
i!i"i%"e( %!( imp#eme!"e(3 of $o/r e 'i"+ /$$e %!( f%i#/re3 for / "%i!i!* "+e +ope
"+%" "+e promi e e! +ri!e( i! "+e Co! "i"/"io! %re %" #e% " 2ei!* o/*+" "o 2e %$+ie&e(. Ho'e&er3 % m/$+ #%r*er me% /re of $re(i" o/*+" "o *o "o "+e peop#e5 "+o e peop#e '+o "/r! /p i! e&er #%r*er !/m2er "o "+e &o"i!* 2oo"+ %!( $o!"i!/e "o re"%i! "r/ " i! "+e 2% i$ pri!$ip#e of (emo$r%$03 !o"'i"+ "%!(i!* "+eir
%20 m%# #o" i! #ife. Be"3 '+e! "+e S"%"e %""emp" "o %##e&i%"e 9/ " % p%r" of "+e 2/r(e! of "+eir $o!"i!/e( (e+/m%!i1e( $o!(i"io!3 /$+ %""emp" %re (e$rie( % pop/#i " 20 "+e e#i"e of "+i $o/!"r0. C. So3 'i##08!i##03 'e $ome 2%$. "o "+e 4/e "io! % .e( 20
Dr. Am2e(.%r5 +o' #o!* 'i## o/r peop#e 2e%r "+e $o!"r%(i$"io! of e!(emi$ %!( *ro i!e4/%#i"ie D A! % piri!* %!( 0o/"+f/#
126
pop/#%"io! $%! 2e % *re%" 2oo " "o "+e e$o!om0 %!( "+e o$ie"0. I" 'o/#( 2e "%/"o#o*i$%# "o "%"e "+%" "+e 6DP 'o/#( *ro' r%pi(#0 'i"+ % #%r*er propor"io! of "+e peop#e i! "+e pro(/$"i&e p+% e of "+eir #i&e . E/"3 "+e %me 0o/"+ /!emp#o0e( or /!(eremp#o0e(3 m%#!o/ri +e( %!( 'i"+o/" "+e $%p%$i"0 or +ope "o #e%( or %$+ie&e % (i*!ifie( #ife3 $%! 2e "+e mo " (%!*ero/ of %## for$e . F. (e$%(e 3 A +% m%## por"io! of o/r pop/#%"io!3 o&er "+e p% " "'o 2ee! $+%!"i!* i!$e %!"#0 for i!$re% e(
ome of "+em e&e! (o/2" '+e"+er "+e *o%# o$i%# 9/ "i$e %re $%p%2#e of 2ei!* %((re
"+%" e$o!omi$ *ro'"+ 'i## e&e!"/%##0 "ri$.#e (o'! %!( #if" e&er0o!e /p. For "+o e %" "+e 2o""om of "+e e$o!omi$ %!( o$i%# p0r%mi(3 i" %ppe%r "+%" "+e N%"io! +% for %.e! "+o e *o%# % /!%""%i!%2#e %" 2e " %!( /!'or"+0 %" 'or ". T+e !eo8#i2er%# %*e!(% +% i!$re% i!*#0 e&i $er%"e( "+e S"%"e of "%"/re %!( for
127
these global imbalances are morally unacceptable and politically unsustainable.* +emphasis added,. G. We +%&e +e%r( % #o" %2o/" free m%r.e" %!( free(om "+%" 'e 'ere perp#e7e( 20 "+e e( "+%" $o!"r%$"/%# %rr%!*eme!"
"o m%r.e". We m/ " $o!fe e7"e!" "o '+i$+ i" '% pre
2e"'ee! pri&%"e p%r"ie 'i"+ "+e S"%"e %!( %mo!* " "+em e#&e $o/#( (i p#%$e "+e o2#i*%"io! of "+e S"%"e "o "+e peop#e
"+em e#&e . J/(*e Ri$+%r( Po !er3 o!e of "+e (o0e! of "+e free m%r.e" i(eo#o*0 %!( re po! i2#e for 2/i#(i!* "+e i!"e##e$"/%#
fo/!(%"io! of "+e !eo8#i2er%# e*me!" of "+e #%' %!( e$o!omi$ 9/ri pr/(e!$e3 +%( "+i "o %0 %2o/" "+e re$e!" *#o2%# fi!%!$i%#
$ri i %!( i" i 'or"+ 4/o"i!* +im in-e-tenso5 ,.ome conservatives believe that the depression is the result of unwise government policies. ! believe it is a mar/et failure. 0he government1s myopia passivity and blunders played a critical role in allowing the recession to balloon into a depression and so have several fortuitous factors. 2ut without any government regulation of the financial industry the economy would still in all li/elihood be in a depression. &e are learning from it that we need a more active and intelligent government to /eep our model of capitalist economy from running
1 Quoted in Joseph Stiglitz !a"ing #lo$alization %o&"' (he )e*t Steps to #lo$al Justi+e p. 8 ,llen -ane (2006).
128
off the rails. 0he movement to deregulate the financial industry went too far by e-aggerating the resilience3the selfhealing powers3of laisse4-faire ) capitalismH. 1I. Hi "or0 +% repe%"e(#0 +o'! "+%" % $/#"/re of #e%( "o
(i % "er . H/m%! r%"io!%#i"03 'i"+ re pe$" "o p/r /i" of #/$re3 i e e!"i%##0 +or" r/!. So #o!* % "+ere %ppe%r "o 2e po i2i#i"ie "+%" "+e
of m%.i!* profi" 3 e pe$i%##0 'i!(f%## profi" 3 "+e fe%r $ompe"i"or 'o/#( re%p "+em 'i## (ri&e 2/ i!e e
i!"o "%.i!*
e#f8e!for$eme!" of
"o "+e po"e!"i%# for m%r.e" $o##%p e. To %0 "+%" i" '% "ri"e. M%r.e" f%i#e( 2e$%/ e re*/#%"io!
% f%i#/re of re*/#%"io! i
+%( pr%$"i$%##0 $e% e( "o e7i ". Fi!%##0 &eeri!* %ro/!( "o "+e &ie' "+%" re*/#%"io! of m%r.e" i %2 o#/"e#0 e e!"i%#3 %f"er pe!(i!*
% #ife"ime %r*/i!* for "+e oppo i"e3 %!( !o"i!* "+%" "+e $%p%$i"0 for e#f8re*/#%"io! '% +i*+#0 o&er8r%"e(3 J/(*e Po !er i! +i o'! i!imi"%2#e m%!!er %0 5 ,!f you1re worried that lions are eating too many 4ebras you don1t say to the lions 56ou1re eating too many 4ebras1. 6ou have
2 .i+ha&d ,. /osne&' 0, 1ailu&e o2 3apitalis4' (he 3&isis o2 508 and the 6es+ent 7nto 6ep&ession8 p. *i. 9a&:a&d ;ni:e&sit< /&ess (2009).
129
to build a fence around the lions. 0hey1re not going to build it.H11. Hi "ori$%##03 %!( %## %$ro "+e *#o2e3 pre(%"or0 form
of $%pi"%#i m
eem "o or*%!i1e "+em e#&e 3 fir " %!( foremo "3
%ro/!( "+e e7"r%$"i&e i!(/ "rie "+%" ee. "o e7p#oi" "+e &% "3 2/" e7+%/ "i2#e3 !%"/r%# re o/r$e . W%"er3 fore " 3 mi!er%# %!( oi# 8 "+e0 %re %## 2ei!* pri&%"i1e(? %!( !o" 0e" "+%" #e pe%. for pre(%"or0 $%pi"%#i m %"i fie(3 "+e &oi$e
of +i "or0 i "+%"3 2%rri!* % fe'3 mo " of "+e $o/!"rie e!(o'e( 'i"+ &% " %!( e% i#0 e7p#oi"%2#e !%"/r%# re o/r$e +%&e f%re( f%r 'or e "+%! "+o e 'i"+ m%##er e!(o'me!" 3 o! %#mo " e&er0
o$i%# %!( e$o!omi$ i!(i$i%. A Jo ep+ S"i*#i"1 poi!" o/"5 708here is a curious phenomenon.. 5resource curse.1 !t appears that on average resource rich countries have performed worse than those with smaller endowments 9 "uite the opposite of what might have been e-pected..728ut even when countries as a whole have done fairly well resource rich countries are often mar/ed by large ine"uality: rich countries with poor people .. 708wo-thirds of the peopleH i! %! oi# ri$+ $o/!"r0 "+%" i %# o % mem2er of % *#o2%# oi# pro(/$i!* $o/!"rie *ro/p live in poverty as
3 .i+ha&d ,. /osne& i$id.
130
the fruits of the country1s oil bounty go to a minority 0hese pu44les cry out for an e-planation one that will allow countries to do something to undo the resource curse.. &e understand in particular that much of the problem is political; in nature. 7&8hen compared to countries dependant on the e-port of agricultural commodities mineral and oil e-porting countries suffer from unusually high poverty poor health care widespread malnutrition high rates of child mortality low life e-pectancy and poor educational performance 9 all of which are surprising findings given the revenue streams of resource-rich countries. @ 1). We (r%' %""e!"io! "o "+i of"e! % pro2#em3 2e$%/ e3 e&e! "+%" (epe!( imi#%r
"+o/*+ i" i
e$o!om0. T%.e "+e $% e of I!(i% i" e#f. We $%!!o" 20 %!0 "re"$+ of im%*i!%"io! $#%im "+%" 'e %re % re o/r$e poor $o/!"r0. Be"3 % 'e $% " % *#%!$e %$ro i!$i(e!$e of "+e f%$e of o/r #%!(3 "+e *re%"er for *re%"er e#f
(e"ermi!%"io!3 eem "o o$$/r 20 %!( #%r*e i! "%"e %!( re*io! "+%" +%&e p#e!"0 of !%"/r%# 'e%#"+ %!( p%r%(o7i$%##0 /ffer from #o' #e&e# of +/m%! (e&e#opme!". We +% "e! "o %(( "+%" 'e %re
4 (he =o&d politi+al is $eing used in a te+hni+al sense to denote the state and all o2 its institutions &athe& than 4e&el< politi+al pa&ties o& to denoun+e the no&4ati:e desi&a$ilit< o2 de4o+&ati+ politi+al p&o+esses. 5 Joseph >. Stiglitz !a"ing )atu&al .esou&+es into a ?lessing &athe& than a 3u&se in 03o:e&ing @il8 >d. S:etlana (sali" and ,n<a S+hi22&in @pen So+iet< 7nstitute (2005) p. 13A14.
131
!o" /**e "i!* "+%" %2 e!$e of re o/r$e 'o/#( #e%( "o % 2e""er i"/%"io!. R%"+er3 i" i 2e$%/ e e7p#oi"%"io! /per&i io! "o poi!" o/" "+%" "+e pro2#em of 20 "+o e re o/r$e % o$$/r "o "+e %ri e
'i"+o/" r%"e of
%ppropri%"e
"+e S"%"e
e7p#oi"%"io!3 e4/i"%2#e (i "ri2/"io! of "+e 'e%#"+ i" *e!er%"e 3 $o##/ io! 2e"'ee! "+e e7"r%$"i&e i!(/ "r0 %!( ome %*e!" of
"+e S"%"e %!( "+e $o! e4/e!" e&i $er%"io! of "+e mor%# %/"+ori"0 of "+e i! "i"/"io! of "+e S"%"e. 1-. %0 5 .utili4ing petroleum wealth effectively is not easy 2ecause the institutional setting is generally incapable of dealing with economic manifestations of resource curse it ends up transforming them in a vicious development cycle or staple trap.< 1:. O!e 'o/#( +%&e e7pe$"e(3 "+%" 'i"+ "+e re o/r$e % !%"io!3 i" 'o/#( 2e "+e S"%"e T+e $r/7 of "+e pro2#em i 3 % Prof. Terr0 L0!! J%r#
i!(/ "r0. For % fe' (e$%(e "+%" '% "+e $% e3 %!( i" '% 2e e" 20 pro2#em
6
(e&&< -<nn Ba&l 0;nde&standing the .esou&+e 3u&se8 in 3o:e&ing @il (@pen So+iet< 7nitiati:e 2005).
132
"+e p% " "'o (e$%(e &% " "r%$" of N%"io!; re o/r$e +%&e %*%i! 2e*/! "o 2e #i$e! e( for e7p#oi"%"io! 20 pri&%"e p%r"ie . Ee "+%" % i" m%03 i" m/ " 2e emp+% i1e( "+%" "+e o! *oi!* pro$e
$%!!o" (i pe! e 'i"+ "+e ro#e "o 2e p#%0e( 20 "+e S"%"e. S"ro!* S"%"e i! "i"/"io! %re e&e! more !e$e %r0 '+e! 'e %re (e%#i!*
'i"+ N%"io!; re o/r$e %!( 'e %##o' $o!"r%$"or "o e7p#oi" "+em. 1@. T+e #%' i for "+e 2e!efi" of "+e peop#e. E&e! '+ere i"
(oe !o" 'or. i! i" f/## me% /re %## "+e "ime3 "+e p/2#i$ !%"/re of #%' i "i## $%p%2#e of e7er"i!* mor%# %/"+ori"0 %!( 2ri!*i!* p/ +e( i!"o /! ee! / pi$io!
8 e pe$i%##0 '+e! i" p/rpor" "o (e%# 'i"+ "+e $o##e$"i&e re o/r$e of "+e peop#e. W+e! "+e "+re +o#( of p/2#i$ $r/"i!0 i $ro r%i e &i"%# i /e e(3 i"
&%#/e 3 $o! "i"/"io!%#i m3 %$$o/!"%2i#i"03 "r%! p%re!$0 %!( "+e r/#e of #%'. Jo(0 Freem%! %!( M%r"+% Mi!!o' 'ri"e5 708he primary concern voiced in recent years by critics in public policy circles and in academia is that the ubi"uity of governance by private contractors stri/ingly outstrips our legal and political capacities of oversight meant to ensure that the contractors1
133
e-ecution of those governmental functions complies with democratic norms.C 1A. We %re !o" %0i!* "+%" m%r.e" +%&e !o ro#e "o p#%0 i! /ppre "oo# e( for
% (e&e#opi!* e$o!om0 or "+%" pri&%"e i!i"i%"i&e 2e %!( "+%" %## m%r.e" %re e e!"i%##0 %!( o!#0
e7propri%"io! %!( $o!"i!/%!$e of o$i%# i!9/ "i$e . We %re "%"i!* "+%" o/r Co! "i"/"io! po i" "+%" m%r.e" $%! 2e i!imi$%# "o o$i%# 9/ "i$e3 e pe$i%##0 '+e! #ef" /!re*/#%"e(. L%i m0"+ %!( i" i 3 % Prof. C% e1 f%ire m%r.e" i %
.a grotes"ue misdescription of what free mar/ets actually re"uire and entail. =ree mar/ets depend for their e-istence on law moreover the law that underlies free mar/ets is coercive in the sense that in addition to facilitating individual transactions it stops people from doing many things they would li/e to do. 0his point is not by any means a criti"ue of free mar/ets. 2ut it suggests that mar/ets should be understood as a legal construct to be evaluated on the basis of whether they promote human interests rather than as a part of nature and the natural order.. mar/ets are a tool to be used when they promote human purposes and to be abandoned when they fail to do so 'chievement of social #ustice is a higher value than the protection of free mar/ets> mar/ets
#o:e&n4ent $< 3ont&a+t' @utsou&+ing ,nd ,4e&i+an 6e4o+&a+< >d. Jod< 1&ee4an and ,4e&i+an 6e4o+&a+<.
134
are mere instruments to be evaluated by their effects.F 1C. T+e Co! "i"/"io! of I!(i% po "/#%"e "+%" mo!opo#ie 3 %!( "+eir
$o!$e!"r%"io! i! "+e +%!( of "+e fe'3 %re i!imi$%# "o (emo$r%$0 %!( "+e &%#/e of e4/%#i"0 %!( 9/ "i$e i! %## o! p+ere of o$i%#
mi*+" 2e !e$e
"% . 3 i" i imper%"i&e "+%" "+e S"%"e %#'%0 2e '%"$+f/# "+%" "+e0 (o !o" "%.e o&er "+e e e!"i%# f/!$"io! of "+e S"%"e3 e pe$i%##0 of (e%#i!* 'i"+ /$+ e!"i"ie 3 "+e S"%"e
+o/#( %#'%0 2e mi!(f/# "+%" i" (oe !o" $o!&e0 "+%" i" p/2#i$ #%' (/"ie $o/#( 2e 2o/*+" or %2ro*%"e( i! %!0 m%!!er.
1F. (i $/
/$+ %
i "+e !%"/re of "+e (i p/"e i" e#f. T+e Comp%!0 Pe"i"io!3 %!( "+e S$+eme of Arr%!*eme!" "+%" i" %ri e from3 o "e! i2#03 %re "o 2e (e%#" /!(er Se$"io! -G1 "+ro/*+ -G: of "+e Comp%!ie A$"? 2/"3 i!&o#&e %" "+eir fo/!(%"io! 3 % $#%im 20 Re#i%!$e N%"/r%#
8 3ass Sunstein' 1&ee !a&"ets and So+ial Justi+e (@*2o&d ;ni:e&sit< /&ess 1997)
135
Re o/r$e Limi"e( "+%" i" i e!"i"#e( "o re$ei&e3 o! %$$o/!" of % pri&%"e p%$" 2e"'ee! mem2er 4/%!"i"ie of "+e Am2%!i f%mi#03 &% " i*!ifi$%!" por"io! of
'+%" 'o/#( 2e %&%i#%2#e for "+e e!"ire $o/!"r03 %" % #o' pri$e %!( for % #o!* "ime3 (e8+or %!0 po#i$0 m%(e 20 "+e 6o&er!me!" of I!(i%. I" $#%im "+%" "+e 6oI +% % ri*+" "o e!"er i!"o %!( +%
%$"/%##0 e!"ere( i!"o % $o!"r%$" "+%" %##o' 3 Re#i%!$e I!(/ "r0 Limi"e( "o pro(/$e %!( (e$i(e +o' "o / e % pre$io/ $%r$e !%"/r%# re o/r$e 2e#o!*i!* "o "+e peop#e of "+i 'i"+o/" %!0 *o&er!me!"%# %!( % !%"io!
$#%im 3 "+%" i" &e "e( i!"ere " i! /$+ &% " 4/%!"i"ie of !%"/r%# *% i /$+3 "+%" /2 e4/e!"#0 fr%me( *o&er!me!"%# po#i$0 /$+ %! e!"i"#eme!" irre pe$"i&e of
m%!%*eme!" po'erf/#
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136
f%mi#0 $%! 2i!( "+e Eo%r( %!( "+e Comp%!03 i! "+e $o!"e7" of reor*%!i1%"io! of "+e $omp%!0 'i"+o/" "+e +%re+o#(er +%&i!* %!0 .!o'#e(*e of "+e e7"e!" of &%#/e "+%" i %$"/%##0 #i.e#0 "o 2e (emer*e(3 e&e! if /$+ #i.e#0 &%#/e r/! i!"o m%!0 "+o/ %!( of $rore of r/pee %!( po i2#0 +/!(re( fo#( more "+%! "+e % e"
%!( #i%2i#i"ie "+%" 'ere %$"/%##0 +o'! % 2ei!* (emer*e( i! "+e S$+eme (o$/me!" p#%$e( 2efore "+e +%re+o#(er . )I. For % #o!* "ime !o'3 i" +% 2ee! 'e## re$o*!i1e( "+%" $o!"ro#
"+e mo(er! i!(/ "ri%# %!( po "8i!(/ "ri%# $orpor%"io! /$+ % #%r*e e7"e!" of e$o!omi$ %!( %$"i&i"ie !e$e o$i%# p+ere
"+%" "+eir
#i&e of mo " of "+e peop#e of "+e $o/!"r0. We re$o*!i1e "+%"3 i! m%!0 !orm%# i! "%!$e 3 '+e! i /e of p/2#i$ i!"ere " %re !o"
%pp%re!" o! "+e f%$e of "+e re$or(3 "+e! % Comp%!0 Pe"i"io! i !orm%##03 %!( ri*+"#03 "re%"e( % % m%""er of $orpor%"e #%'.
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p/2#i$#0
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&%#/e "+%" i
2ro%(er pri!$ip#e of $orpor%"e #%'. )1. T+%" i '+0 'e 2e*%! "+i e$"io! 'i"+ %! epi*r%p+3 ,Jus
publicum privatorum pactis mutari non potest from "+e Di*e " of J/ "i!i%!. N%"/r%# 6% 2e#o!* "o "+e peop#e of I!(i%3 %!( &e " i! "+e U!io! of I!(i%3 "o 2e +e#( for "+e p/rpo e of "+e U!io!. T+e Co! "i"/"io! of I!(i% $omm%!( "+e 6o&er!me!" "o fr%me
po#i$0 "o pre&e!" "+e (i "ri2/"io! of /$+ re o/r$e i! % m%!!er "+%" m%0 2e i!imi$%# "o !%"io!%# (e&e#opme!". re i(/%# o'!er of % $omp%!0 %re i" U#"im%"e#03 "+e
+%&e % ri*+" "o .!o' '+%" i +%ppe!i!* "o "+e $omp%!0 %!( i" % e" 3 i!$#/(i!* % e" 20 '%0 of $o!"r%$"/%# ri*+" 3 o "+%" "+e0
$%! "%.e %! i!forme( (e$i io! %2o/" % propo %# "+%" i p/" /p for "+eir $o! i(er%"io!. For "+e p% " "+ree +/!(re( 0e%r of e&o#/"io! of $orpor%"e #%'3 "+e pri!$ip%# "+eme +% 2ee! "+e pro"e$"io! of "+o e '+o *i&e "+eir 'e%#"+ %!( re o/r$e i! "r/ " "o % $omp%!0. M%!%*eme!" %!( Eo%r( of Dire$"or of $omp%!ie +%&e %
/2 "%!"i&e o29e$"i&e
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)).
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%r0 i %!!e7e( +ere'i"+ for referr%#. 'i"+ "+e %2o&e o2 er&%"io! %!( "+e i /e 'e +%## !o'
PART II THE FACTUAL (ATRI+ ):. I!(/ "rie I! Apri# )III3 % $o! or"i/m of $omp%!ie 3 Re#i%!$e Limi"e( %!( NIJO3 "o*e"+er formi!* "+e Co!"r%$"or3
e!"ere( i!"o % Pro(/$"io! S+%ri!* Co!"r%$" 'i"+ "+e U!io! of I!(i% "o e7p#ore for %!( pro(/$e Pe"ro#e/m3 '+i$+ i!$#/(e 2o"+ $r/(e oi# %!( !%"/r%# *% % %pp#i$%2#e3 i! % 2#o$. J68DWN8GFK-3 #o$%"e( off "+e e% "er! e% +ore of A!(+r% Pr%(e +. T+i 2#o$. +% 2ee! referre( "o % J68DA 20 "+e p%r"ie %!( 'e +%## %(op" "+%" !ome!$#%"/re? +o'e&er3 "+e 9/(*me!" %!( (e$i io! +%## 2e /!(er "oo( % 2ei!* %pp#i$%2#e "o "+e e!"ire J68DWN8GFK- 2#o$.. )@. I! )II)3 RIL %!!o/!$e( "+e (i $o&er0 of % &er0 #%r*e i! J68DA. I! "+e %me 0e%r S+ri.
139
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D+ir/2+%i Am2%!i3 "+e fo/!(er of RIL3 p% /2 e4/e!"#0 "+e m%!%*eme!" of RIL '% Am2%!i3 "+e e#(er o!3 %
#e( 20
%!( A!i# D. Am2%!i3 "+e 0o/!*er o!3 % "+e Vi$e8C+%irm%! %!( Joi!" M%!%*i!* Dire$"or. $o!$#/ io! "o 6oI "+%" O! M%0 )13 )II-3 RIL "+e re er&oir /2mi""e( i" '% %
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MMSCMD
%!( "+%" i" $o/#( *o /p "o FI MMSCMD % fe' 0e%r %# o "%"e( "+%" !%"/r%# *% /pp#0 i! I!(i% '%
+i*+#0 $o! "r%i!e( %!( "+e +or" f%## +%( #e( "o m%!0 /!i" "+%" / e !%"/r%# *% % % f/e# or fee( "o$. 2ei!* "r%!(e(. RIL %# o e##i!*
"%"e( "+%" i" e7pe$"e( "o 2e "+e e7$#/ i&e %*e!" for
!%"/r%# *% pro(/$e( from J68DA. T+i I!i"i%# De&e#opme!" P#%! '% %ppro&e( 20 "+e M%!%*eme!" Commi""ee of "+e PSC i! /e( % Pe"ro#e/m Mi!i!* Le% e 'i"+
re pe$" "o J68DA o! I).I-.)II@. )C. I! "+e me%!"ime3 i! mi( )II- RIL 2i( i! re po! e "o
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/!(er"%.i!* 3 /$+ % pe"ro8$+emi$%# 3 $%p"i&e po'er p#%!" 3 "+e po'er p#%!" of Re#i%!$e P%"%#*%!*% Po'er Limi"e( %!( po'er p#%!" "o 2e e" /p 20 Re#i%!$e E!er*0 Limi"e(. A!
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e7i*e!$ie %!( "o f%$i#i"%"e 4/i$. re po! e3 %## "+e po'er of "+e Eo%r( 2e &e "e( i! MDA e7$ep" "+o e po'er "+%" "+e Eo%r( '% re4/ire(3 20 "+e Comp%!ie A o$i%"io!3 "o re"%i!. T+i A$"3 1G@A %!( "+e Ar"i$#e of
of "+eir mo"+er3 Sm". Jo.i#%2e! D. Am2%!i #e%(i!* "o % Memor%!(/m of U!(er "%!(i!*3 (%"e( J/!e 1F3 )II@3 "+%" '% (r%f"e( 'i"+ "+e +e#p of #%'0er %!( m%r.e( "ri$"#0 $o!fi(e!"i%#. O!#0 % por"io! of "+e MoU '% p#%$e( o! re$or( i! "+e #%"er
142
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2ro"+er 3 "+e o"+er m%""er &%rio/ 2/ i!e 20 '%0 of % pro(/$i!*3 (i&i io!
e 2ei!* e""#e( 8 "+e 2e " '%0 for'%r( 'o/#( 2e $+eme of reor*%!i1%"io! i! '+i$+ "+e e!er*0 er&i$e %!( "+e "e#e$omm/!i$%"io!
fi!%!$i%#
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6ro/p3 i!$#/(i!* pe"ro#e/m e7p#or%"io! %!( pro(/$"io! (i&i io!. T+e MoU pe$ifi$%##0 pro&i(e( "+%" "+e %ppro&%# of "%"/"or0 %!( re*/#%"or0 2o(ie 3 "+e of &%rio/ $omp%!ie +%re+o#(er 'o/#( 2e %!( "+e 2o%r( $o!(i"io! of Dire$"or for
pre$e(e!"
oper%"io!%#i i!* "+e reor*%!i1%"io!. I" '% %# o pe$ifi$%##0 "%"e( "+%" per o!!e# of 2o"+ MDA 6ro/p %!( ADA 6ro/p 'o/#( p%r"i$ip%"e i! "+e pro$e of prep%r%"io! of "+e S$+eme o "+%"
"+eir m/"/%# i!"ere " $o/#( 2e pro"e$"e(. I" '% %# o %*ree( "+%" "+e %me #%'0er '+o (r%f"e( "+e MoU 'o/#( %# o (r%f" "+e
S$+eme.
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#e&e# of $omfor". F/r"+er3 'i"+ re pe$" "o %## o"+er f/"/re pro(/$"io! of !%"/r%# *% 20 RIL3 /!(er %!0 $o!"r%$" %!( i! %!0 *% fie#(3 i" '% "o 2e p#i" i! % AI5:I r%"io 2e"'ee! "+e MDA ri*+" '% %! op"io! ri*+"
e7er$i %2#e 20 "+e ADA 6ro/p %!( "o 2e /pp#ie( "o i" %" "+e "+e! pre&%i#i!* m%r.e" pri$e %!( +% 2ee! referre( "o % "+e Op"io! Vo#/me 20 "+e p%r"ie . T+e *% /pp#ie( "o ADA 6ro/p '% o!#0
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144
e! /re "+%" "%2i#i"0 '% *i&e! "o "+e ADA 6ro/p 'i"+ re pe$" "o *% /pp#03 "+%" "+e MDA 6ro/p 'o/#( %$" i! ,/"mo " *oo( f%i"+H
%!( e7er" "+eir ,2e " e!(e%&o/r H "o 'or. for %!( o2"%i! %## "+e !e$e %r0 *o&er!me!"%# %!( re*/#%"or0 %ppro&%# . I" '% %# o
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MDA 6ro/p. JDA re er&e( "+e ri*+" "o i!"er&e!e %!( i" '% "%"e( "+%" ADA 6ro/p 'o/#( +%&e % ri*+" "o (%m%*e i! "+e
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'% e7e$/"e(3 "%"i!* "+%" "+e (iffere!$e 2e"'ee! +er o! 'ere e""#e( %!( "+%" ADA 'i## 2e re po! i2#e for Re#i%!$e I!fo$om3 Re#i%!$e E!er*0 %!( Re#i%!$e C%pi"%#. O! "+e %me (%0 "+e Eo%r( of Dire$"or of RIL %# o me". T+e mi!/"e re&e%# "+%" MDA "%"e( i! 2ro%( "erm "+e "erm of "+e e e""#eme!" < "+%" "+e e!er*03 'ere "o 2e (emer*e( "o ADA3 e .
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145
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for reor*%!i1%"io! %!( /**e " % propo %# "o "+e Eo%r(3 i!$#/(i!* %!0 $+eme. I" '% %# o re o#&e( "+%" "+e %i( $ommi""ee of io!%# 3 /$+ % 2%!.er e"$.3
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159
CONTENTIONS OF RNRL, @:. T+e #i!e of %r*/me!" "+%" RNRL +% "%.e! i! "+e
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160
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re er&e of !%"/r%# *% i! I!(i% %re %i( "o 2e %2o/" 1IC: ECM:@. T+%" m%0 %ppe%r "o 2e &er0 #%r*e. I" i !o". U!i"e( S"%"e
$o! /me %ro/!( ))8)- Tri##io! C/2i$ Fee":A of !%"/r%# *% e&er0 0e%r < 0e e&er0 0e%r. A$$or(i!* "o MoPN6 (o$/me!" "+e "o"%# *#o2%# re er&e %re %ro/!( A@-: TCF:C3 %!( o/r %$$e *#o2%# re er&e %re &er0 #imi"e(3 2e$%/ e of "o "+o e re#%"i&e#0
/!(er(e&e#ope( +ippi!* i!fr% "r/$"/re for "r%! por" of LN6 %!( "+e (iffi$/#"ie i! #%0i!* i!"er!%"io!%# %!( /!(er e% pipe#i!e for
45 !o/)# ?asi+ Statisti+s (2008A2009). 46 >ne&g< 7n2o&4ation ,d4inist&ation 6ept. o2 >ne&g< ;.S. #o:e&n4ent. 47 !o/)# ?asi+ Statisti+s (2008A2009) +iting ?/ Statisti+al .e:ie= o2 %o&ld >ne&g< June 2008 E @/>3 ,nnual Statisti+al ?ulletin.
190
i"
/$+ %
"+e Mi((#e
E% ". W+i#e ome !e' (i $o&erie 3 /$+ % "+e o!e i! J6 E% i!3 +%&e r%i e( +ope of "+e /pp#0 $o! "r%i!" e% i!* ome'+%"3 'e +o/#( %#'%0 remem2er *i&e! I!(i%; e7"reme#0 #o' < i! f%$" of e!er*03 /$+
(e8+/m%!i1e( < per8$%pi"% $o! /mp"io! #e&e# e% i!* of $o! "r%i!" pre o!#0 imp#ie
re pe$" "o po"e!"i%# (em%!( "+%" $o/#( %ri e 'i"+ e$o!omi$ *ro'"+ %!( $er"%i!#0 !o" i! re#%"io! "o "+e .i!( of #e&e# of
$o! /mp"io! "+%" 'o/#( e!%2#e o/r peop#e "o #i&e 'i"+ % mo(i$/m of (i*!i"0. A I!(i%; e!er*0 "+e P#%!!i!* Commi i of % io! +% or(er "%"e(3 'i"+
$+%##e!*e
f/!(%me!"%#
i!"er!%# %!( e7"er!%# e$/ri"0. I!(i%; e!er*0 e$/ri"0 $%!!o" 2e "%.e! for *r%!"e( %!( < % "+%" fr%/( 'o/#( o! 2e (i % "ro/ 3 Co! "i"/"io!. e"+i$%##0 P#%!!i!*
impermi Commi
i2#e
"+e
io! %# o '%r!
re er&e i /!'%rr%!"e(? %$$or(i!* "o i"3 m/$+ of "+%" $o%# i /!8 e7"r%$"%2#e %!( $#e%! $o%# "e$+!o#o*ie %re o!#0 po !o" $er"%i!"ie .
:F
i2i#i"ie %!(
191
CG.
or 'i## pe%. i! "+e f/"/re:G3 I!(i% 'i## i!$re% i!*#0 +%&e "o $ompe"e for prim%r0 o/r$e of e!er*0 %!( "+i m%0 #e%( "o *eo8 po#i"i$%# i! "%2i#i"0 o! % *#o2%# 2o/!(%rie . I(e!"ifi$%"io! of $%#e %!( e&e! 'i"+i! !%"io!%# o/r o'! (ome "i$ o/r$e 3
(e"ermi!%"io! of '+e"+er "+e0 $%! 2e e7"r%$"e( from %!( %/*me!"%"io! of /$+ o/r$e 'i"+ !e' form of e!er*0
pro(/$"io!3 %!( 2%#%!$i!* of !ee( 2e"'ee! $/rre!" $o! /mp"io! %!( f/"/re $o! /mp"io!3 re er&e for (efe! e p/rpo e e"$.3 %re %## %2 o#/"e#0 e 6oI@I. FI. i &er0 T+e !e"'or. of pipe#i!e for "r%! por" of !%"/r%# *% m%## i! #e!*"+ i! I!(i%3 of % fe' "+o/ %!( .i#ome"er e!"i%# "% . '+i$+ +%&e "o 2e performe( 20 "+e
o!#03 %!( "+e (e! i"0 i %# o &er0 #o'@1. E7$ep" for % fe' "%"e 3 %!( "+%" "oo % fe' m%## re*io! i! "+o e "%"e 3 %$$e "o
!%"/r%# *% i! "+e re " of "+e $o/!"r0 i !o!8e7i "e!". I" i !o" % 'o!(er "+%" %" #e% " o!e C+ief Mi!i "er 'ro"e "o "+e 6oI i! "+e
49 ,da4 .. ?&andt' (esting 9u$$e&t (2006)C ,le"lett 9oo" Ja"o$sson -a&delli Sno=den E Sode&$e&ge&' (he /ea" o2 the @il ,ge >ne&g< /oli+< Iol. 38 (2010). (he&e a&e o2 +ou&se 4an< 4o&e a&ti+les in the pu$li+ do4ain &ega&ding this. (he&e a&e o2 +ou&se indust&< e*pe&ts =ho do not ag&ee. 50 7nteg&ated >ne&g< .epo&t sup&a note 44. 51 See ?asi+ Statisti+s on 7ndian /et&oleu4 E )atu&al #as 2008A2009 !o/)# #o7.
192
mi((#e of "+e #% " (e$%(e pro"e "i!* %2o/" !o!8%&%i#%2i#i"0 of !e' !%"/r%# *% (i $o&ere( off "+e e% +ore of "+%" "%"e; $o% " for &%rio/ /!i" #o$%"e( i! "+%" "%"e '+i$+ +%( %#re%(0 2ee! "%r"e( %!( #0i!* "r%!(e( o! %$$o/!" of #%$. of (ome "i$ /pp#ie of
!%"/r%# *% . F1. Hi "ori$%##03 oi# pro(/$"io! +%( 2ee! /!(er"%.e! 20 i! "+e pri&%"e of e$"or@). T+eir
o&erei*! o'!er
pro(/$i!* e&e! %f"er (i $o&er0 %!( !o" re#i!4/i +i!* "+e %re% of e7p#or%"io!? =)> of oi# $omp%!ie formi!* i!"o poo# %!( "r/ " "o re(/$e pro(/$"io! #e&e# %!( .eep "+e m%r.e" pri$e %" % +i*+ %!(
i!"erferi!* i! po#i"i$%# % pe$" ? =:>of oi# $omp%!ie o'!er +ip ri*+" o&er "+e %re%
$#%imi!*
52 >&nest >. S4ith E John 6zien"o=s"i 0, 1i2t< Fea& /e&spe+ti:e on %o&ld /et&oleu4 ,&&ange4ents8
24 (>J. 7)(K- -. J. 13 (1989). (his is a $&oad su&:e< o2 the histo&< o2 this indust&< post nationalization o2 !e*i+an @il 7ndust&< and the +itations the&ein a&e :e&< :alua$le &esou&+es.
53 7n ;nited States legislatu&e and +ou&ts +o4$ated =ith de:elop4ent o2 antiAt&ust Hu&isp&uden+e. See >&nest >. S4ith E John 6zien"o=s"i i$id. ,lso see @s=ald %hit4an Bnauth' (he /oli+< o2 ;nited States (o=a&ds 7ndust&ial !onopol< ?i$lioli2e (2010).
193
pe"ro#e/m re o/r$e
%'%0 for m%r.e"i!* e# e'+ere? =A> of /!(er (e&e#opme!" of f%$i#i"ie %$$e for refi!i!* "+e pe"ro#e/m %!( "+e N%"io! !o" +%&i!* "o $+%!!e# "o m%r.e" %!( (i "ri2/"e "+e re o/r$e ?@: =C>
of (e$ep"io! 20 oi# $omp%!ie &i% #o' po "e( pri$e 3 %!( "+ere20 re(/$i!* "+e ro0%#"0 p%0me!" re%pi!* +i*+er re'%r( "o "+e o&erei*! o'!er %!(
"+%" 'ere %# o
$o!"ro##e( 20 "+e oi# $omp%!ie ? =F> o&erei*! o'!er !o" +%&i!* %!0 ri*+" "o (e"ermi!e '+%" #e&e# of pro(/$"io! $%! "%.e p#%$e %!( 'i"+o/" ri*+" i! m%!%*eme!" of pe"ro#e/m oper%"io! ? %!( =G> 9oi!" off "%.e %*reeme!" (o'! "re%m (i&i io! 2e"'ee! oi# $omp%!ie %!(
%" %! i!"er!%"io!%# #e&e#3 .eepi!* po "e( pri$e #o' o "+%" e&e! if o&erei*! "rie( "o "%.e o&er "+e i!(/ "r03 "+e0 $o/#( 2e 2e%"e! (o'! 'i"+ pro(/$"io! from e# e'+ere.@@ F). I! re po! e "o /$+ *re%" mi $+ief 3 (iffere!" "0pe of +%&e emer*e( 2e"'ee! T+e o&erei*! !%"io! %!( %!( oi#
%rr%!*eme!" pro(/$i!*
$omp%!ie .
p+i#o op+i$%#
oper%"io!%#
54 (he g&eat 4is+hie2s 3 to 6 led to nationalization o2 the oil indust&< in !e*i+o in 1938. (he< also led to the 2i&st 4ode&n de+la&ation that all natu&al &esou&+es $elong to the people as a nation and to $e used 2o& national de:elop4ent and su$stanti:el< in2o&4ed the p&og&ess in inte&national la= led $< 2o&4e& +olonies that the people in those lands a&e the &ight2ul o=ne&s and should $ene2its 2&o4 the use o2 su+h &esou&+es. 55 >&nest >. S4ith E John 6zien"o=s"i sup&a note 52.
194
(iffere!$e
of "ime o&er
'+i$+ e7p#or%"io! $o/#( "%.e p#%$e %!( "+e re4/ireme!" "+%" %f"er "+e i!i"i%# perio(3 if re4/i i"e e7p#or%"io! i (oe !o" /!(er"%.e! or
re"/r! of "+e $o!"r%$" %re%? =)> !%"/re3 e7"e!" %!( mo(e of p%r"i$ip%"io! i! m%!%*eme!" of "+e pe"ro#e/m oper%"io! ? =-> p%r"i$ip%"io! i! pri$e e""i!* %!( pri$e mo(/#%"io! f/!$"io! 3 %!( %# o "+ro/*+
&%r0i!* "+e 4/%!"i"0 %&%i#%2#e i! "+e m%r.e"? =:> e""i!* /p of % fi!%!$i%# 0 "em 2e"'ee! "+e oi# pro(/$e p%r%me"er /$+ % %!( "+e o&erei*!
+%ri!* of pro(/$"io! < "+e #% " o!e 2ei!* i! or i! "erm of re%#i1e( &%#/e %f"er
i"/ %!( %# o of e7"r%$"e( re o/r$e . T+e e p%r%me"er o2&io/ #0 &%r0 %$ro &%rio/ re*ime %!( 9/ri (i$"io! . T+e e % pe$" of f%$"or 'i"+ re pe$" "o /$+ % #e&e# of
$ompe"i"io! for e7p#or%"io! %$"i&i"ie o! % *#o2%# $%#e %" "+e "ime of % /$+ !e*o"i%"io! 3 "+e $er"i"/(e e me!" of fi $%# 0 "em propo e(3
(epe!(
from> e"$.3 'o/#( p#%0 % ro#e i! "+e p%r"i$/#%r 2%r*%i! % Le%r!e( So#i$i"or 6e!er%# S+ri. 6op%# S/2r%m%!i%m "re F-. S$+o#%r %!( e7per" e(.
2e"'ee! o&erei*! !%"io! %!( oi# $omp%!ie i!"o pe$ifi$ "0pe of %*reeme!" . Ho'e&er3 % $o! i(er%2#e o&er#%p. A D1ie!.o' .i poi!" o/"5 ,....there are four basic arrangements between host countries and multinational oil companies. +*, the concession> +L,the production sharing agreement> +K, the participation agreement and +;, the service contract. 'lthough each of these four arrangements can be used to accomplish the same purpose they are conceptually different from each other. 0hey provide for different levels of control by the company different compensation arrangements and different levels of state oil company involvement. !t is important to note however that some e-isting agreements have borrowed clauses and concepts from two or more of the types of arrangements. 0hus precise categori4ation of a particular country1s arrangements is not always possible.M< e7per" poi!" o/"3 "+ere i of"e! %
196
F:.
i! pro(/$"io!
+%ri!* $o!"r%$"
'o/#( %ppe%r "o 2e "+%" "+e pro(/$e( $o!"i!/e 2e%r &%r0i!* #e&e#
"o 2e 'i"+ "+e !%"io!3 %!( "+e $o!"r%$"or of %!( form %!( '+%" i of ri . 'i"+ re pe$" "o
=$%##e( Co!"r%$" Co " > %!( "o '+%" e7"e!" i! e%$+ 0e%r
=$%##e( Co " Pe"ro#e/m>. A$$or(i!* "o D%!ie# Jo+! "o!3 '+o '% $i"e( 20 Le%r!e( So#i$i"or 6e!er%#3 6op%# S/2r%m%!i%m5 contractual arrangements are divided into service contracts and production contracts. 0he difference between them depends on whether or not the contractor receives compensation in cash or in /ind +crude,. 0his is a rather modest distinction and as a result systems on both branches are commonly referred to as P.(1s or sometimes production sharing agreements +P.'1s, F@. O!e %/"+e!"i$ o/r$e +% 2ee! "+e U!i"e( N%"io! . I! for Pe"ro#e/m %!(
% (o$/me!" "i"#e( ,A#"er!%"i&e Arr%!*eme!" De&e#opme!"5 Ne*o"i%"or H@C A 6/i(e for 6o&er!me!"
Po#i$08m%.er
p/2#i +e(
20 "+e
U!i"e( N%"io!
Ce!"re o!
197
,almost all forms of agreements between Bovernments of host countries and foreign oil companies increasingly reflect the Bovernment1s ob#ectives of greater participation greater control over operations and a greater share.MN .haring of net revenue generated by petroleum e-ploitation has been a constant source of conflict between Bovernments and oil companies.. ' certain proportion of the gross revenue must be set aside to repay capital costs of e-ploitation and field development to meet current operating costs. 0he remainder of sales revenue is then available to provide a return to the oil company and to provide income to the .tate. 0he Bovernment in its role as sovereign and in most cases as owner of the petroleum resource e-pects to retain the bul/ of such rent and to restrict profits of oil companies to that which is re"uired to attract the companies investmentMJ Aven more variety appears in the provisions that determine how net revenue is shared if production is underta/en. !nspite of the variety most payments can be classified in one of two types: payments based on profitability and payments based on <O production. T+e pre e!" PSC i re4/ire( "o 2e i!"erpre"e( %!( /!(er "oo(
58 7$id page 5 pa&a 15. 59 7$id page 14 pa&a 48 60 7$id page 16 pa&a 57
198
FA.
"%"/"or0 m%"ri7 i! '+i$+ "+e 4/e "io! ,'+o e *% i i" %!0'%0DH !ee( "o 2e %((re FC. e(.
T+e !%"/r%# *% 3 /!(er (i p/"e i! "+e e pro$ee(i!* 3 i e% 2e(3 off "+e e% "er! 4/%re#0 'i"+i! "+e
p/r&ie' of Ar"i$#e )GC of "+e Co! "i"/"io! of I!(i% %!( i e7p#i$i"#0 !o"e( o i! "+e PSC. Ar"i$#e )GC of "+e Co! "i"/"io! (e$#%re "+%" ,A## #%!( 3 mi!er%# %!( o"+er "+i!* of &%#/e /!(er#0i!* "+e
o$e%! within the territorial waters or the continental shelf or the e-clusive economic 4one shall vest in the Enion to be held for the purposes of the EnionH. /!i4/e % %((re e i" i "+e o!#0 T+i Ar"i$#e of "+e Co! "i"/"io! i
/$+ pro&i io! i! "+e Co! "i"/"io! "+%" e" of po"e!"i%# re o/r$e i! %
of *eo*r%p+i$ 1o!e . I" *oe o! "o %0 "+%" "+e ,shall be such as may be
specified
Parliament.H We !ee( "o %ppre$i%"e "+e p/rpor" %!( me%!i!* of Ar"i$#e )GC of o/r Co! "i"/"io! % i!$re% i!*#0 "+e e re o/r$e i! "+e *eo*r%p+i$ 1o!e pe$ifie( 20 i" %re *oi!* "o 2e "%ppe(3
199
W+i#e "+e 'or( ,&e "H $o/#( !orm%##0 p%r"%.e of %" #e% " % o$i%"e( 'i"+ o'!er +ip3 "+e
imp#ie % (e#i2er%"e3 %!( !o" %! i!$i(e!"%#3 %$" 20 % 2o(0 %" "+e &%rio/ $o! "i"/"io!%# mome!" "+%" +%&e i!forme( o/r
Co! "i"/"io!. T+%" 2o(0 i "+e peop#e % % !%"io!. I" i !o' % 'e## e "%2#i +e( pri!$ip#e of 9/ri pr/(e!$e "+%" "+e "r/e o'!er of
,!%"/r%# 'e%#"+ %!( re o/r$e H %re "+e peop#e % % !%"io!. U.N. 6e!er%# A "%"e em2#0 Re o#/"io! 1FI- =OVII> of De$em2er 1GA)
sovereignty over their natural wealth and resources must be e-ercised in the interest of their national development and the well-being of the people of "+e .tate concerned.H =emp+% i /pp#ie(> Co! e4/e!"#03 'e +%&e "o +o#( "+%" i" i "+e peop#e of I!(i%3 "+e "r/e o'!er 3 '+o +%&e &e "e(3 "+e i!$#/ i&e po"e!"i%# re o/r$e i! % p%r"i$/#%r $#% e" of
of *eo*r%p+i$ 1o!e 3 i!
200
FG.
T+o e i! "r/$"io!
%!( +%r('ire(3 i! "+e $omm%!( ,"o 2e +e#(H ,for "+e p/rpo e of "+e U!io!.H T+e $ore %!( p/re p/rpor" of "+e 'or( ,+o#(H i "o $o! er&e3 "o pre er&e %!( "o .eep i! p#%$e %!( i" o!#0 e$o!(%ri#0 me%! N/ e; or N(i po %#;. T+e f%$" "+%" "+e p+r% e ,2e +e#(H i
/ e( i! Ar"i$#e )GC of "+e Co! "i"/"io!3 '+ere% i! Ar"i$#e )GF of "+e Co! "i"/"io!3 i! i" imme(i%"e !ei*+2or+oo(3 "+e 'or( ,+o#(H i / e( i! $o!9/!$"io! 'i"+ %2i#i"ie "o ,%$4/ireH %!( ,(i po eH i i*!ifi$%!" %!( % $#e%r i!(i$%"io! of "+e i!"e!" of "+e /preme of
(r%f"er of "+e Co! "i"/"io! < "+e peop#e. T+e / e of % erie 'or( i! % Co! "i"/"io!%# e""i!* $#e%r#0 imp#ie
2ei!* / e( pre$i e#03 o "+%" o&er#%ppi!* me%!i!* %re "o 2e e" % i(e %!( "+e p/rer %!( "+e $ore me%!i!* 2e (e#i!e%"e(. T+e
p+r% e ,2e +e#(H '+e! &ie'e( %#o!* 'i"+ "+e p+r% e , +%## &e "H3 '+i$+ &e "i!* '% (o!e 20 "+e peop#e % % !%"io!3 $%! o!#0 me%! "+%" i" '% / e( % % #o$. "o $o! er&e3 "o pre er&e %!( "o .eep i! p#%$e. A!( "+e .e0 "o "+%" #o$. i %# o "+ere i! "+e %me Ar"i$#e of "+e Co! "i"/"io!5 ,p/rpo e of "+e U!io!H '+i$+ $%! o!#0 me%!
201
GI.
% 2o(0 of "+o/*+" /!(er "+e 2ro%( r/2ri$ of H/m%! Ri*+" 3 "+%" "+e peop#e % "+e "r/e o'!er of !%"/r%# 'e%#"+ %!( re o/r$e 3 o&erei*!"0H i.e.3 "+e po'er "o
m%.e #%' 3 o&er /$+ re o/r$e "o e! /re !%"io!%# (e&e#opme!" %!( 'e## 2ei!* of "+e peop#e. T+e re po! i2#e / e of /$+ !%"/r%# re o/r$e ee! % for "+e 'e##82ei!* of "+e peop#e of % !%"io! +% 2ee!
pe%$e %!( % p%r" of "+eir ri*+" "o , e#f (e"ermi!%"io!HA1. F/r"+er3 "+e e ri*+" m%!0 ri*+" of "+e peop#e % for N%"io! +%&e 2ee! e$/re( 20 T+o e
"r/**#e e!$omp%
"+e free(om of
i!"er(epe!(e!" 1o!e of $o8e7i "e!$e 2e"'ee! !%"io!8 "%"e . G1. I! 'ssociation of Hatural Bas = /pr%>3 % Co! "i"/"io! Ee!$+
pe%.i!* "+ro/*+ E%#%.ri +!%!3 J.= % +e "+e! '% > %i(5 . 0he people of the entire country has a sta/e in the natural gas and its benefit has to
61 . See ;) #ene&al ,sse4$l< .esolution 523 (:i) o2 Janua&< 1952 626 (:ii) o2 6e+e4$e& 1952 1314 (*iii) o2 6e+e4$e& 1958 1515 (*:) o2 6e+e4$e& 1960 D all spe+i2i+all< &e2e&&ed in .esolution 1803 on /e&4anent So:e&eignt<
202
be shared by the whole country. 0here should be #ust and reasonable use of natural gas for national development. G). Ar"i$#e -F of "+e Co! "i"/"io!3 % Dire$"i&e Pri!$ip#e of
S"%"e Po#i$03 "%"e "+%"5 ,=1> S"%"e +%## "ri&e "o promo"e "+e 'e#f%re of "+e peop#e 20 e$/ri!* %!( promo"i!* % effe$"i&e#0 % i" m%0 % o$i%# or(er i! '+i$+ 9/ "i$e3 o$i%#3 e$o!omi$ %!(
po#i"i$%#3 +%## i!form %## "+e i! "i"/"io! of "+e !%"io!%# #ife.H A!( f/r"+er i" i "%"e( "+%" "+e ,S"%"e +%##3 i! p%r"i$/#%r3 "ri&e "o
i! i!$ome %!( e!(e%&o/r "o e#imi!%"e %!( oppor"/!i"ie 3 !o" o!#0 of peop#e re i(i!*
"%"/ 3 f%$i#i"ie
$%! ee "+%" Ar"i$#e -F3 "+o/*+ !o" e!for$e%2#e i! %!0 $o/r"3 2/" !e&er"+e#e Pre%m2#e f/!(%me!"%# i! *o&er!%!$e3 $o(ifie % p%r" '+%" "+e e" for"+ % "+e *o%# of "+e !%"io! i.e. !%"io!%# %!( % i"/%"io! i! '+i$+ %re
(e&e#opme!" % $o!(i"io! e
2o"+ % pro$e
e!"i%# for m%i!"e!%!$e of o$i%# or(er i! '+i$+ o/r peop#e $%! 2ee!
203
$o!$ei&e( %
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Po#i$03 "+%" +%&e 2ee! fr%me( for "+e %$+ie&eme!" of $o!(i"io! of o$i%#3 e$o!omi$ %!( po#i"i$%# 9/ "i$e i! i o#%"io!. T+e "r/$"/r%# #i!e of #o*i$3 of e"+i$%# imper%"i&e of "+e S"%"e %!( "+e #e o!
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po'er of "+e S"%"e i! / i!* !%"/r%# re o/r$e "+e $o!$ep" of ,p/2#i$ "r/ ".H Prof. Jo ep+ S%7 +%
7t8he idea of a public trusteeship rests upon three related principles. =irst that certain interests.. have such importance to the citi4enry as a whole that it would be unwise to ma/e them the sub#ect of private ownership. .econd that they parta/e so much of the bounty of nature rather than of individual enterprise that they should be made freely available to the entire citi4enry without regard to economic status. 'nd finally that it is a principal purpose of government to promote the interests of the general public rather than to redistribute public goods from public uses to restricted private benefits.HA) GF. T+e $o!$ep" of p/2#i$ "r/ " %$"/%##0 fi!( i" *e!e i
"r%$e( "+i $o!$ep" "o "+e C+;i! D0!% "0 i! C+i!% =):G8)IC EC> %!( "+e Rom%! J/ "i!i%! I! "i"/"e . T+i +% 2ee! e7"e!(e(
/2 "%!"i%##03 %!( "+e 2ro%(er !o"io! !o' i "+%" "+e S"%"e re%##0
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"o fi7 "+e pri$e 20 '%0 of %ppro&%#. Nor (o "+e (e$i io! of E6OM r/! $o/!"er "o %!0 of "+e $o&e!%!" of PSC. T+e $o!"e!"io! "+%" !o po#i$0 (e$i io! $o/#( +%&e 2ee! "%.e! 20 "+e 6o&er!me!" re"ro pe$"i&e#0 effe$"i!* "+e $o!"r%$"/%# ri*+" $o! i(er%"io! for "+e !ee( !o f/r"+er of E6OM
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(lause *J of the .cheme =rom the Perspective of .ection KJ*%: I" +% 2ee! % 'i(e#0 %$$ep"e( pri!$ip#e "+%" $omp%!ie $%! o!#0 "r%! fer /$+ ri*+" 3 po'er 3 (/"ie %!( proper"0 % %re
$%p%2#e of 2ei!* #%'f/##0 "r%! ferre( 20 % p%r"0 "o % $+eme? %!( "+i (e"ermi!%"io! +% "o 2e m%(e % if "+e Comp%!ie A$"3 1G@A i" e#f (i( !o" e7i ". W%0 2%$. i! 1G@F3 S%$+ J.3 +%( e!/!$i%"e( "+%" pri!$ip#e. Spe$ifi$%##0 +e +e#(3 %!( i" i 'or"+ 4/o"i!* +im ine-tenso5 !t is not necessary in a scheme to e-clude specifically from its operation things incapable of such transfer as general words in the scheme and any order in furtherance thereof must be ta/en to operate in a manner not repugnant to the general law !f however on a proper construction of the terms of a scheme some part of it happens by inadvertence e-pressly to order an act which had there been no scheme the parties could not either in relation to the interests of third parties or otherwise bind themselves to do then that part of the scheme would in my view have to be treated as a nullity in so far as it purports so to order. 0o my mind this latter principle e"ually applies where a scheme e-pressly prohibits an act which the parties could not under general law. bind themselves to refrain from doing.HAA
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%2#e "o e" /p "+e me*% *% 2% e( po'er p#%!" %" D%(ri 2e$%/ e i" (i( !o" *e" 2%!.%2#e %*reeme!" Fir " %!( foremo "3 i" 'o/#( 2%!.er % from RIL %re /!per /% i&e.
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'or.%2i#i"0 of "+e S$+eme i" e#f. 1:I. (an the )oE be binding on the company%:
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pri&%"e (om%i!3 'i"+ "+e +e#p %!( %i( of % #%'0er %!( "+e! m%r.e( $o!fi(e!"i%#. F/r"+er3 "+e i!(i&i(/%# 3 from %## i!(i$%"io! +%&e o!#0 e7e$/"e( i" i! "+eir i!(i&i(/%# $%p%$i"0 %!( i" '% !o" p/rpor"e( "o 2e i! e7er$i e of "+eir po i"io! i! RIL or %!0 o"+er $omp%!0 of "+e Re#i%!$e 6ro/p. I" i %# o &er0 $#e%r "+%" "+e MoU i" e#f re$o*!i1e "+%" "+e reor*%!i1%"io! "+%" "+e promo"er
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S+ri. Ro+i!"o!
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% $o##e$"i&e i
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reor*%!i1%"io! $%! o!#0 2e premi e( o! pro"e$"io! of "+e &%#/e of %## "+e +%re+o#(er . T+ere i !o" e&e! % '+i per of pro"e$"io! of % 2ro%(er $#% of +%re+o#(er i! "+e MoU. T+i i !o" ome
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241
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f%2ri$ of $omp%!0 #%' i" e#f %!( "+e fo/!(%"io! %!( +o!e " (e%#i!* 'i"+ "+e
Eo%r( of RIL $#e%r#0 i!(i$%"e "+%" i" (i( !o" $o!$ei&e i" "+%" m%!!er. 1:). promo"er I" i
4/i"e o2&io/ 3 from "+e MoU i" e#f3 "+%" "+e /e "o e""#e3
o&er "+em '% 2/" o!e. I" i %# o e4/%##0 o2&io/ "+%" '+%" +% 2ee! re&e%#e( i 2/" % por"io! of "+e "o"%# (o$/me!". If /$+ %
67 See pa&t 1.103 D 1.104 o2 /al4e&5s 3o4pan< -a= page 1011 25th >dn. Iol.1.
242
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"%**eri!*. W+ere !o re% o! for reor*%!i1%"io! %re %((/$e( i! "+e MoU3 %p%r" from % "%"eme!" "+%" +%&i!* e""#e( %## "+e o"+er f%mi#0 %!( o"+er 2/ i!e re#%"e( i /e "+e 2e " '%0 for'%r( % fr%me( %!(
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of ri . %!( pro pe$" 3 %!( "+%" "+e0 $o/#( %""r%$" (iffere!" e" of i!&e "or 3 "+%" % fo$/ e( m%!%*eme!" i "+e pro pe$" of e%$+ 2/ i!e !ee(e( "o e!+%!$e
3 e"$. Fi!%##03 i" i "+e Eo%r( '+i$+ +%re+o#(er %0i!* "+%" i"
pro %!( $o! of /$+ % reor*%!i1%"io! 2e /!(er"%.e! 20 "+e C6 Commi""ee of I!(epe!(e!" Dire$"or 3 %#o!* 'i"+ "+e $omm%!( "+%" "+e0 propo e % +e#p of profe io!%# $+eme of reor*%!i1%"io! if %!03 'i"+ "+e "o "/(0 "+e &%rio/ 2/ i!e e %!( "+e
243
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% pe$" 8 *o&er!me!"%# %ppro&%# 8 '+i$+ RNRL $#%im 'ere !o" !e$e %r03 "+e "+%" mi!/"e i" 2e re&e%# m%(e "+%" /re "+e "+%" Eo%r( %!0 *% %$"/%##0 /pp#0 /29e$" "o
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%rr%!*eme!" H i! p#%$e. If "+e Eo%r( +%( %*ree( "o "+e $ommer$i%# "erm of %*reeme!"3 % $o!"%i!e( i! "+e *% /pp#0
244
e$"io! of "+e MoU3 "+e! i" 'o/#( +%&e 2ee! m%!(%"or0 /po! "+em "o re&e%# "+e %me "o "+e +%re+o#(er of RIL3 2e$%/ e of "+e +eer $%#e of mo!e"%r0 &%#/e of "+e *% /pp#0 $o!"r%$" .
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$o!"e7" of % $+eme of %rr%!*eme!". No r%"io!%#e or 9/ "ifi$%"io! $%! /ppor" /$+ % propo i"io!. 1:@. T+e Comp%!ie =Ame!(me!"> A$"3 1GA@3 2% e( o! "+e of D%p+"%r08S% "ri for % =See5 Commi""ee pe$ifi$%##0
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"%.e+o#(er 3 i!$#/(i!* i!
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245
i!"erpre"%"io! or % fo/!(%"io! < "+e +eer f%$" "+%" "+e "erm of *% /pp#0 $o!"%i!e( i! "+e MoU 'ere 'i"++e#( from "+e imp#ie "+%" i" $%!!o" !o' 2e impor"e( i!"o "+e %re e!"ere( i!"o %## "+e
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Eo%r( from +i&i!* off %! /!(er"%.i!* 'i"+o/" %ppro&%# 3 i "o pre&e!" /$+ "r%! fer
+%re+o#(er
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(i $#o e( 'o/#( +%&e 2ee! (e$im%"e(. Co! e4/e!"#03 'e +o#( "+%" "+e S$+eme % propo/!(e( 20 "+e Eo%r(3 p#%$e( 2efore %!( %ppro&e( 20 "+e $o/r" i +%re+o#(er %!( "%.e+o#(er %!( %!$"io!e( 20
$omp#e"e#0 (iffere!" from "+e MoU. T+e MoU m%0 "%r"i!* poi!". T+e e!( poi!" i i*!ifi$%!"#03
246
/2 "%!"i%##0 %!( m%"eri%##0 (iffere!" from i" %!( i" $%!!o" !o' 2e 2ro/*+" 2%$. i! "+e */i e of i!"erpre"%"io!. 1:A.
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,Oii=%>5 I! re#%"io! "o %pp#i$%2#e *o&er!me!"%# %!( "%"/"or0 %ppro&%# 3 'i"+o/" i! %!0 m%!!er mi"i*%"i!* RIL; re po! i2i#i"0 "o 9oi!"#0 'or. "o'%r( o2"%i!i!* /$+ %ppro&%# 3 RIL 'i##3 if o re4/ire( 20 "+e A!i# Am2%!i 6ro/p3 *i&e %! irre&o$%2#e Po'er of A""or!e0 "o "+e A!i# Am2%!i 6ro/pKREL "o %pp#0 for %!( o2"%i! /$+ *o&er!me!"%# %!( re*/#%"or0 %ppro&%# % %re !e$e %r0 o! i" 2e+%#f.
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247
%!( "+e A!i# Am2%!i 6ro/p 'o/#( %# o +%&e % $#%im for (%m%*e .H =emp+% i /pp#ie(> 1:C. I! "+e $o/r e of "+e pro$ee(i!* 2efore / 3 S+ri. i!*/#%r#0
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%! %r*/me!"
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"+e %r*/me!" from RNRL; $o/! e# "+%" "+e e re#%"e "o #%0i!* of pipe %!( m%.e o"+er %rr%!*eme!" for "r%! por" of !%"/r%# *% from J%.i!%(%. Fi!%##03 i! "+e 'ri""e! %f"er "+e +e%ri!* e!(e(3 "+i i /2mi io! *i&e! "o /
248
i> Co!"r%r0 "o '+%" i f%# e#0 $o!"e!(e( 20 RIL3 MOU (i( !o" pro&i(e "+%" "+e $ommer$i%# "erm of /pp#0 of *% 'o/#( re4/ire 6o&er!me!"K "%"/"or0 %ppro&%#. ii> MOU mere#0 referre( "o %pp#i$%2#e re*/#%"or0 %!( o"+er %ppro&%# % RIL 'o/#( re4/ire "o e!*%*e i! %!( $%rr0 o! "+e *% e7p#or%"io! %!( pro(/$"io! 2/ i!e .H T+e e (efe! e e!"ire *% i /pp#0 of RNRL %2 o#/"e#0 +o#( !o '%"er. e$"io! of "+e MoU (e%# T+e
"e!/re3 %
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i! '+i$+ RNRL
249
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250
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m/$+ %
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251
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252
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of Eo%r( mem2er
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254
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$er"%i! % pe$" % /!%$$ep"%2#e "o "+e Eo%r( or "+e +%re+o#(er %!( !e$e permi "%.e+o#(er %ri#0 i!&o#&e or "+e Co/r". "ep F/r"+er3 i! "+o e pro$e e
$er"%i! e
o2"%i!i!*
+%re+o#(er
ome "e$+!i$%#i"ie
+i "or0 %!( i*!ore( i! m%.i!* mo(ifi$%"io! . W+%"e&er $+%!*e %re m%(e $%! o!#0 2e mi!or o!e "+e e e!$e of "+e $+eme. '+i$+ 'o/#( !o" "%mper 'i"+
258
1@C.
I! "+i
S$+eme3
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+%re+o#(er
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"%.e+o#(er
of
RIL 'o/#( +%&e 2ro%(#0 /!(er "oo( from "+e S$+eme "'o "+i!* 5 =1> "+%" "+e 6% 2% e( E!er*0 Re /#"i!* Comp%!0 '% "o e!*%*e i! "+e 2/ i!e of /pp#0 of m%!0 (iffere!" .i!( of f/e# 3 i!
'+i$+ /pp#0 of !%"/r%# *% "o i" %ffi#i%"e $omp%!ie i o!e? %!( =)> "+%" "+e 6% 2% e( E!er*0 Re /#"i!* Comp%!0 'i## e!*%*e i! "+e 2/ i!e of promo"i!* e!er*0 *e!er%"io! 2/ i!e 3 from
/ i!* %!0 %!( %## f/e# 3 i!$#/(i!* !%"/r%# *% 3 2o"+ from RIL %!( %# o from o"+er o/r$e . No'+ere (i( "+e S$+eme "%"e "+%" "+e o!#0 f/e# "+%" "+e 6% 2% e( E!er*0 Re /#"i!* Comp%!0 'o/#(
(e%# 'i"+ 'o/#( 2e !%"/r%# *% from RIL. To $+%!*e "+%" me%!i!* 'o/#( 2e "o 2e*i! "+e pro$e of "+e S$+eme. 1@F. e ,E% i$ f%2ri$H of % $+eme %# o imp#i$%"e "+e of "e%ri!* %p%r" "+e ,2% i$ f%2ri$H
of mem2er %me
'+o +%&e &o"e( "o*e"+er3 "+i!.i!* "+%" "+e0 %## +%&e "+e #e&e# of i!form%"io! %!( "+e $#% of mem2er % "o
%me /!(er "%!(i!* of "+e e!"ire '+%" "+e S$+eme e!"%i# . T+%"
/!(er "%!(i!* 'o/#( $er"%i!#0 !o" +%&e $ompre+e!(e( "+e $#%im "+%" RNRL i i!"e!" '% p/""i!* for'%r( i! "+e e pro$ee(i!* 5 =i> "+%" "+e +%re "+e 2e!efi" of "+e pro(/$"io! %!(
259
"o %$"/%##0
e7p#or%"io! %$"i&i"ie 3 i!$#/(i!* "+e 2e!efi" of i!"er!%# / e of !%"/r%# *% ? =ii> "+%" 2e$%/ e "+e %$$o/!" of %me '% !o" po i2#e o! /pp#0
"%"/"or0 %!( $o!"r%$"/%# pro2#em 3 "+e *% % '%0 o/"? =iii> "+%" "+e *% 2e
%*reeme!" '%
/pp#ie( i!
%!( "e!/re i! "+e MoU '+i$+ 'ere !e&er re&e%#e( "o "+em? =i&> "+%" "+e 2/r(e! of *% /pp#0 'o/#( i!&o#&e "+e "r%! *re io! of
"+e 2o/!(%rie of "+e PSC from '+i$+ "+e &%#/e f#o' "o RIL? %!( =&> "+%" "+e 2/r(e! 'o/#( e7"e!( "o RIL /2 i(i1i!* RNRL if i"
'ere re4/ire( "o p%0 % m/$+ +i*+er &%#/e "o 6oI "+%! '+%" i" re$ei&e $#% from RNRL. I! $o!"r% " "o "+e fore*oi!*3 %## "+%" "+e
%!$"io!e( i" 'o/#( +%&e /!(er "oo( '% "+%" !orm%# $ommer$i%# %*reeme!" p%r"ie %!( of /pp#03 "+%" 'o/#( pro"e$" "+e i!"ere " %# o i!$#/(i!* "+e $#%/ e of of 2o"+
*o&er!me!"%#
%*reeme!" 3 'o/#( 2e p/" i! p#%$e. S/$+ % $o!$#/ io! 'o/#( %# o fo##o' from "+e m%i! "e!e" of "+e S$+eme "+%" "+e "'o *ro/p 'ere "o f/!$"io! i!(epe!(e!"#0 of e%$+ o"+er. 1@G. If "+e 4/e "io! re*%r(i!* '+%" 'o/#( m%.e "+e
S$+eme 'or. +%( 2ee! fr%me( proper#0 20 "+e $o/r" 2e#o' %!( "+e0 +%( %ppre$i%"e( "+e ro#e of "+e $o/r" 2e""er "+e! "+i $% e
260
%!( "/r!
4/e "io! 'o/#( +%&e 2ee! '+e"+er "+e S$+eme i" e#f +% 2e$ome /!'or.%2#eD RNRL; %r*/me!" "+%" "+e *% /pp#0 i i!"e*r%# "o
"+e '+o#e S$+eme %re imp#0 %! /! / "%i!%2#e propo i"io!. 6% /pp#0 i 2/" % p%r" of "+e S$+eme % % '+o#e. T+e f%$" rem%i! "+%" RIL $%! /pp#0 *% "o RNRL pro&i(e( %ppropri%"e i2#e
/"i#i1%"io! po#i$ie 3 %re i! p#%$e? %!( moreo&er3 "+e $ommi"me!" "o /pp#0 *% i! "+e S$+eme '% "o e "%2#i +e( *% 2% e( e!er*0 *e!er%"i!* po'er p#%!" . T+%" po i2i#i"0 "i## rem%i! . We f%i# "o
ee '+ere e&e! "+%" % pe$" of "+e S$+eme +% f%i#e( "o 'or.. We 'ere *i&e! "o /!(er "%!( "+%" i! f%$" o!e of "+e *% 2% e( po'er *e!er%"i!* po'er p#%!" % i! f%$" 2ei!* o$i%"e( 'i"+ RNRL %!( ADA 6ro/p i
/pp#ie( !%"/r%# *% 3 %## i! %$$or(%!$e 'i"+ "+e e" i! p#%$e 20 "+e 6oI. If "+%" 2e "+e $% e3 m%## p%r" of "+e S$+eme i
/"i#i1%"io! po#i$ie
!o" 'or.i!* i $omp#e"e#0 /!'%rr%!"e( %!( 'o/#( !o" e&e! meri" % e$o!( #oo. %". 1AI. T+e Le%r!e( Co/! e# for RNRL o29e$"e( "o re#i%!$e of
RIL o! "+e r%"io of )iheer $. )afatlal = /pr%>3 o! "+e *ro/!( "+%" i" o!#0 per"%i! "o "+e i"/%"io! %" "+e "ime of %!$"io! of "+e
261
$+eme %!( "+%" "+e r%"io of )egal $omes = /pr%> $%!!o" 2e re#ie( /po! % /**e " ..C. Bupta = /pr%> % "+ree 9/(*e (e$i io!3 io! %2o&e 'e (o !o"
2o"+ pe%. of "+e %me "+i!*3 "+%" "+e 2% i$ f%2ri$ of "+e $+eme $%!!o" 2e $+%!*e(. W+i$+ % pe$" of "+%" 2% i$ f%2ri$ "+e $o/r" m%0 (e%# 'i"+ $o/#( &%r03 2/" $er"%i!#0 "+e pro$e "+e +%re+o#(er 3 "+eir ri*+" %!$"i"0 of "+e $#% "o .!o' '+%" i of mem2er e "+%" pro"e$"
%!( "+e
"o*e"+er $%!!o" 2e (ero*%"e( from. 1A1. I! "+e i! "%!" $% e 20 impor"i!* "+e *% /pp#0
e$"io! i!"o "+e S$+eme3 i! "+e */i e of i!"erpre"i!* i"3 "+e p+r% e , /i"%2#e %rr%!*eme!" H '% "r%! forme( i!"o , /i"%2#e /pp#0
%rr%!*eme!" % %*ree( /po! 20 "+e promo"er i! "+e *% e$"io! of "+e MoUH. S/$+ % mo(ifi$%"io! !e$e "+e 2% i$ f%2ri$ %!( $%!!o" 2e permi""e(. 1A). For "+e &ie' "+%" 'e +%&e "%.e! i" i !o" !e$e
%r0 "o
*o i!"o "+e pro"e "e( poi!" re*%r(i!* "+e I(e!"i"0 of "+e E/0er3 Defi!i"io! of Affi#i%"e %!( Limi"%"io! of Li%2i#i"0.
262
CONCLUSIONS, 1A-. =i> I! "+e re /#"3 'e +o#( "+%"5 2o"+ "+e #e%r!e( Si!*#e J/(*e %!( "+e Di&i io! Ee!$+ $ommi""e( % erio/ error i! e7er$i i!* 9/ri (i$"io! i! "+e m%!!er "+e0 (i( /!(er Se$"io! -G) of "+e Comp%!ie A$"3 1G@A3 for /$+ i!"erfere!$e +%
re /#"e( i! "+e pro&i io! of % (o$/me!" =MoU> '+i$+ '% !o" 2efore "+e +%re+o#(er /per e(e "+e
S$+eme of Arr%!*eme!". S/$+ % (o$/me!" $o/#( !o" +%&e 2ee! re%( i!"o %!( i!$orpor%"e( i! "+e S$+eme propo/!(e( 20 "+e Eo%r(3 %ppro&e( 20 "+e
+%re+o#(er %!( %!$"io!e( 20 "+e Comp%!0 Co/r"? =ii> "+e $o/r" 2e#o' +%&i!* ri*+"#0 (ire$"e( "+e p%r"ie "o !e*o"i%"e3 %!( f/r"+er +%&i!* ri*+"#0 ref/ e( "o *r%!" "+e pr%0er i! "+e Comp%!0 App#i$%"io!3 +o'e&er3 fe## i!"o error (ire$"i!* "+e MoU "o 2e 2i!(i!* %!( "+e 2% i for f/r"+er !e*o"i%"io! 2e"'ee! "+e p%r"ie . of
MoU i
263
=iii>
"+e E6OM (e$i io! 3 re*%r(i!* "+e /"i#i1%"io! of "+e !%"/r%# *% %!( "+e pri$e form/#%K2% i e"$. (o !o"
/ffer from %!0 #e*%# or $o! "i"/"io!%# i!firmi"ie . T+e0 +%## %pp#0 "o %## /pp#ie of !%"/r%# *% /!(er
"e!/re for /pp#0 of *% ? =i&> /!(er "+e PSC i! i /e "+e Co!"r%$"or =RIL> (oe !o"
2e$ome "+e o'!er of !%"/r%# *% 3 %!( "+ere i !o"+i!* #i.e pe$ifie( p+0 i$%# 4/%!"i"ie of !%"/r%# *% "o 2e +%re( 20 "+e 6oI %!( "+e Co!"r%$"or? =&> 'e3 %$$or(i!*#03 (ire$" "+e p%r"ie "o re!e*o"i%"e %
"o "+e /i"%2#e %rr%!*eme!" for /pp#0 of *% (e8hors "+e MoU. S/$+ re!e*o"i%"io! +%## 2e 'i"+i! "+e
fr%me'or. of *o&er!me!"%# po#i$0 %!( %ppro&%# re*%r(i!* pri$e3 4/%!"i"0 %!( "e!/re for /pp#0 of *% . T+e re!e*o"i%"io! +%## $omme!$e 'i"+i! ei*+" 'ee. +%## 2e
from "o(%0 %" "+e i!i"i%"i&e of RIL %!( $omp#e"e( 'i"+i! % perio( of i7 'ee.
of $omme!$eme!" of !e*o"i%"io! .
264
J/(*e %!( "+e Di&i io! Ee!$+ of "+e Eom2%0 Hi*+ Co/r" %re e" % i(e %!( 'e (i po e of %## "+e %ppe%# 'i"+o/" %!0 or(er % "o $o " . I!"er&e!"io! App#i$%"io! (o !o" re4/ire %!0 %(9/(i$%"io!.
T+e0 %re %# o %$$or(i!*#0 (i po e( of. 1A:. Eefore 'e p%r" 'i"+ "+e $% e3 'e $o! i(er i"
%ppropri%"e "o o2 er&e %!( remi!( "+e 6oI "+%" i" i +i*+ "ime i" fr%me % $ompre+e! i&e po#i$0K /i"%2#e #e*i #%"io! 'i"+ re*%r( "o e!er*0 e$/ri"0 of I!(i% %!( /pp#0 of !%"/r%# *% /!(er
pro(/$"io! +%ri!* $o!"r%$" . 1A@. W+%" rem%i! for / i "o p#%$e o/r %ppre$i%"io! o!
Je"+m%#%!i3 H%ri + N. S%#&e3 M/./# Ro+%"*i3 R.F. N%rim%! %!( R%&i S+%!.%r Pr% %(3 %## #e%r!e( e!ior $o/! e# %ppe%ri!* o! io!%"e
266
ANNEXURE GLOSSAR) OF TER(S ADA APM ECF ECM C6 CN6 D6H E6OM 6oI 6SMA 6SPA 6UP IDP JDA J68DWN8GFKLN6 MC MDA mmE"/ 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 A!i# D. Am2%!i A(mi!i "ere( Pri$e Me$+%!i m Ei##io! C/2i$ Fee" Ei##io! C/2i$ Me"er Corpor%"e 6o&er!%!$e Compre e( N%"/r%# 6%
Dire$"or%"e 6e!er%# of H0(ro$%r2o! Empo'ere( 6ro/p of Mi!i "er 6o&er!me!" of I!(i% 6% S%#e & M% "er A*reeme!" 6% S%#e & P/r$+% e A*reeme!" 6% U"i#i1%"io! Po#i$0 I!i"i%# De&e#opme!" P#%! Sm". Jo.i#%2e! D+ir/2+%i Am2%!i J68DA Li4/efie( N%"/r%# 6% M%!%*eme!" Commi""ee M/.e + D. Am2%!i Mi##io! Eri"i + T+erm%# U!i"
267
MMSCMD MoPN6 MoU NELP NTPC P1 Re er&e P) Re er&e P- Re er&e PN6 PSC PSU REL RIL RNRL RPPL S$+eme SCF TCF TE"/ UoI USD
5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Per D%0
Mi!i "r0 of Pe"ro#e/m %!( N%"/r%# 6% Memor%!(/m of U!(er "%!(i!* Ne' E7p#or%"io! Li$e! i!* Po#i$0 N%"io!%# T+erm%# Po'er Corpor%"io! Pro&e! Re er&e Pro2%2#e Re er&e Po i2#e Re er&e
Pe"ro#e/m %!( N%"/r%# 6% Pro(/$"io! S+%ri!* Co!"r%$" P/2#i$ Se$"or U!(er"%.i!* Re#i%!$e E!er*0 Limi"e( Re#i%!$e I!(/ "rie Limi"e( Re#i%!$e N%"/r%# Re o/r$e Limi"e( Re#i%!$e P%"%#*%!*% Po'er Limi"e( S$+eme of Arr%!*eme!" S"%!(%r( C/2i$ Fee" Tri##io! C/2i$ Fee" Tri##io! Eri"i + T+erm%# U!i" U!io! of I!(i% U!i"e( S"%"e Do##%r
268