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Snapshot of the Case
together with its subsidiaries. polyester fibres. It has contract for the transportation of coal from Korba to Dahanu Thermal Power Station. It is being received at RIL¶s onshore facility at Gadimoga village in East Godavari district and delivered to the East West Pipeline of Reliance Gas Transportation Infrastructure (RGTIL).Introduction Reliance Industries Limited. It also has interest in a block in the state of Mizoram for the exploration and production of oil and gas. poly butadiene rubber.8 million standard cubic meters per day (mscmd) and could reach 10 mscmd in a week. Reliance Natural Resources Limited engages in the exploration. polypropylene. 1 . Reliance Industries Ltd.5 to 2. The company also engages in the textile. ethylene glycol. butadiene. polyvinyl chloride. The Petrochemicals segment includes production and marketing operations of petrochemical products. aromatics. The company has interest in four blocks with acreage of 3. The company has a gas supply master agreement (GSMA) with Reliance Industries Limited (RIL). retail. It also supplies approximately 5 lakh metric tonnes of imported coal to Dahanu Thermal Power Station. development and production of crude oil and natural gas. paraxylene. and production of oil and gas. The gas is flowing at the rate of 2. polyester yarn. purified terephthalic acid. including high and low density polyethylene. polyethylene terephthalate. olefins. and SEZ development business. The Oil and Gas segment includes exploration. development. The company¶s segments include Petrochemicals. engages in the exploration and production of oil and gas in India and internationally. coal. The company also focuses on the exploration and production of coal bed methane (CBM). has started production of gas from the Dhirubhai 1 and 3 discoveries of the KG-D6 block in the Krishna Godavari Basin. Refining and Oil and Gas. linear alkyl benzene. It supplies coal to the power plants.251 square kilometers for the exploration and production of CBM. The Refining segment includes production and marketing operations of Petroleum products. and the sourcing and supply of gas. and liquid fuels in India. acrylonitrile and caustic soda.
21 per unit. has claimed a share. as this was the price.34 per unit after assigning 12 million units to the state-run National Thermal Power Corp. and are one of the biggest discoveries made in Asia in recent years. based on the family pact. mainly concerns the supply and pricing of natural gas from the Krishna Godavari basin. to Anil Ambani-led Reliance Natural Resources. Last month. for 17 years. tenure and quantity were all based on a family re-organisation pact in 2005 but RIL subsequently said it could only sell the gas for $4. Reliance Industries has challenged this verdict in the Supreme Court. The price. brokered by their mother Kokilaben when the Reliance empire was split a few years ago. The dispute is over the supply of 28 million units of natural gas. rather than one between the two companies. had recommended the price of natural gas from the Krishna Godavari basin at $4. hydrocarbon prices have more than doubled. even as the ministry of petroleum and natural gas has joined the dispute as part owner of the gas.20 per unit. at $2. This stand has been contested by RNRL.34 per unit. from the natural gas fields.between the time the family pact was reached in 2005 and now. All parties have filed their respective affidavits and stated their positions in the Supreme Court. the company claimed. Anil Ambani wants a part of the gas for his group's power plants. were won by Mukesh Ambani-led Reliance Industries.Snapshot of the Case The raging dispute being heard in the Supreme Court between the companies belonging to the two Ambani brothers. Mukesh and Anil. At the core of the dispute is how valid is a family pact reached between the two brothers. too. The government. based on the recommendations of a committee led by the present Finance Minister Pranab Mukherjee. and has called for the family pact to be declared null and void. It says the dispute has been depicted as one with the government. But the ministry of petroleum and natural gas is not happy with the price at which Anil Ambani has asked for the gas -. the Bombay High Court asked Reliance Industries to supply 28 million units to RNRL for 17 years at $2. 2 . adding the government actually has little role to play in it. in deciding the price of gas in which the government. that was fixed by the government. off the Andhra Pradesh coast.
However. it has become the most misunderstood term. The term MOU.Comments Memorandum of Understanding (MOU) .O. Reliance Industries Ltd (RIL) sought to impress upon the Supreme Court that the family pact between the promoter brothers. Therefore. The legal nature of M. No doubt. however all understandings do not mature in contracts or in other words may not result in conferring of rights and imposition of duties and as such cannot be enforced by the legal process. Seven directors of RIL filed affidavits stating they had no knowledge of the contents of the family pact. in practice. Memorandum of Understanding (MOU) as this term is being used. d) There must be lawful consideration. However. b) Consent of the parties must be free.brokered by their mother Kokilaben was not binding on the company as the family pact was "in private domain" and "not in the corporate domain". It is used for relationship varying and oscillating in between non binding to binding nature. the term ³Memorandum of Understanding"(MOU) should only be used to depict and embody the understanding of the parties in principle without creating any right or obligation of binding nature. it embodies understanding of the parties in principle. it can be clearly inferred that the MOU signed by the brothers was binding. the essential requirements of a legally binding agreement are as follows: a) There must be offer from one party and its acceptance by another. 3 . obligation/ duties or legal relationship it creates among the parties.Mukesh and Anil Ambani . e) There must be lawful object. Based on the above characteristics. from a legal point of view. f) There must be intention to create legal relations.In present day business parlance. c) Parties must be competent to contract. In essence. As per Section 10 of the Contract Act 1872.U essentially rests on the nature of rights. it is necessary to probe deeper and dwell in detail so as to understand and appreciate nature of relationship created amongst the parties by MOU. MOU is a simple and pure gentlemen's agreement which does not create any right or duty of binding nature to be enforceable by a Court of law. is used to denote relationship which may be binding or non-binding in nature.
Hence. Additionally. Hence. Anil Ambani was vice chairman. if RIL was not aware of the binding character of the MoU then how did they come to know about the arrangement for the supply of 28 mmBtu of gas to RNRL. This exhibits that RIL accepted that MoU was binding on them by conduct too. incase of failure of the family pact. managing director and on the board of RIL. as envisaged. the MoU was in the knowledge of the RIL Board and its directors who were acting upon it. if the scheme is not implemented. neither he nor the company are entitled to take the position that the family reorganisation pact was not known and take exemption from its liabilities. 2004 Resolution by which all powers of RIL Board was delegated to him. Inspite of the company having a distinct identity of its own. Anil Ambani is entitled to be reinstated in RIL board with full powers as existed before the July 27. The corporate veil should be lifted in since RIL is clearly trying to evade laws by masking their identity. RIL came out for the first time to say MoU was not binding. Since Anil's elder brother. Only when the dispute came to the court. Mukesh Ambani and RIL should not be treated as a separate identity. since Mukesh Ambani was acting for the RIL clearly from the July 27. Mukesh is chairman of the company and its 'alter ego'. 2004 board resolution. If RIL was not aware of the MoU how could RIL know about the supply of 28mmBtu of gas. 4 . under Section 392 of the Companies Act. in this case.On the other hand. The 2005 family MoU involving their mother Kokilaben led to the division of RIL between the Ambani brothers. Prior to that.
Bibliography 1) Economic Times 2) Times of India 3) Business Week 4) Internet 5 .
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