Ambani family split pact 'piece of trash': RIL counsel
Harish Salve, senior counsel for Reliance Industries said that the 2005 MoU was between the Ambani brothers and not RIL and RNRL. India Inc's hotshots
MUMBAI: It formed the basis for the biggest split in Indian corporate history. Millions of shareholders rejoiced when they were told that the feuding Ambani brothers have reached an agreement to bury their differences and part ways amicably. The June 2005 agreement was the lodestar that guided the Ambani brothers during the turbulent early days of separation.
On Tuesday, Harish Salve, senior counsel for Reliance Industries, dubbed the document as ���trash���. ���As far as Reliance is concerned, the MoU (family arrangement) is a piece of trash. The agreement is only between the two brothers,��� Mr Salve told ET after the hearings on the gas dispute between the two brothers concluded on Tuesday.
Mr Salve���s statement was in response to a question about how RIL and RNRL intended to resolve the dispute within the framework of the 2005 MoU between the Ambani brothers as directed by the Bombay High Court. The comment has a chance of becoming hugely controversial, especially if the Reliance ADA Group takes umbrage at what appears to be repudiation of the June 2005 agreement that led to the split of the Reliance Group.
RIL officials, realising the sensitive nature of the statement, refused to be drawn into a discussion. An RIL spokesman offered no comments. ���We are committed to the family agreement and the court has also upheld this agreement,��� Reliance ADAG officials said. They will get their chance to respond to Mr Salve on Wednesday when their argument is heard by the Bombay High Court.
On Tuesday, Harish Salve, senior counsel for Reliance Industries, dubbed the document as ���trash���. ���As far as Reliance is concerned, the MoU (family arrangement) is a piece of trash. The agreement is only between the two brothers,��� Mr Salve told ET after the hearings on the gas dispute between the two brothers concluded on Tuesday.
Mr Salve���s statement was in response to a question about how RIL and RNRL intended to resolve the dispute within the framework of the 2005 MoU between the Ambani brothers as directed by the Bombay High Court. The comment has a chance of becoming hugely controversial, especially if the Reliance ADA Group takes umbrage at what appears to be repudiation of the June 2005 agreement that led to the split of the Reliance Group.
RIL officials, realising the sensitive nature of the statement, refused to be drawn into a discussion. An RIL spokesman offered no comments. ���We are committed to the family agreement and the court has also upheld this agreement,��� Reliance ADAG officials said. They will get their chance to respond to Mr Salve on Wednesday when their argument is heard by the Bombay High Court.
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Mr Salve also said the stay on RIL for selling gas to third parties stands technically cancelled ���as the court did not pass any orders and RIL is eligible to enter into third party agreements���.
When asked for his comments, RNRL counsel Mukul Rohatgi said: ���The stay on RIL for selling gas to third parties continues. The matter will come up for hearing on Wednesday.��� He refused to comment on Mr Salve���s remarks terming the family arrangement a piece of trash.
However, Mr Salve���s comment could be significant for an entirely different reason. Far from being a knee-jerk, vituperative attack in the tradition of past acrimonious exchanges between the two groups, it could indicate RIL���s line of defence as it seeks to protect its interests in a dispute with very high stakes.
It is perhaps an expression of the thinking within RIL as its legal experts and officials seek to differentiate between what they see as an agreement between two family members and the broader interests of shareholders.
First, a recap of the basics. The June 2005 agreement between the Ambani brothers formed the basis for the split in the Reliance Group. Mukesh Ambani got RIL while Anil Ambani got Reliance Capital, Reliance Communications and Reliance Energy.
The June agreement said gas from RIL���s KG basin fields would be allocated to Reliance Energy for its upcoming power plants. As per the agreement ��� which has never been made a public document ��� Reliance Energy would have the right to 28 million cubic metres of gas per day from KG basin at a price of $3.18 per mmbtu. It would also be allotted another 12 million cubic metres of gas if an earlier agreement between RIL and power major NTPC falls through. On top of it, the ADA Group will have the first right of over 40% of all future gas discoveries made by RIL.
In 2006, the central government stepped in and said the gas sale price as contained in the June 2005 agreement would not hold. It is not an arm���s length price and the government would lose a lot of revenue if that price were to receive official sanction, the government added. Based on the government directive, RIL refused to enter into a gas contract with RNRL, the ADA Group company. RNRL sued RIL in late 2006 and the matter is still pending before the courts.
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Mr Salve���s statement on the MoU is a reflection of the thinking within RIL that the MoU is a document between two family members and that RIL shareholders should not suffer because of that. Shareholders, they argue, would lose a lot if RIL is forced to sell gas at $3.18 per mmbtu when global prices are hovering over $7 per mmbtu. Since the June MoU was never made public, it would be unwise to incur shareholder ire, especially when global conditions have changed so dramatically. The argument relies heavily on protecting the interests of RIL shareholders. It is not unreasonable. But the one against it also equally compelling.
ADAG officials said the MoU may be a private agreement, but it has formed the basis for the biggest demerger and family split in corporate India. The RIL board in June 2005 not only thanked Kokilaben Ambani, wife of Dhirubhai Ambani, for concluding an amicable settlement, but also proceeded to act on the provisions.
Third, the Bombay High Court in a judgement last year ruled that MoU and its contents are binding on both parties, RIL and RNRL. The court had also said the term ���suitable arrangement��� as referred to in the scheme (demerger scheme) needs to be read and interpreted by taking into account the terms of the MoU as well as the scheme and it is necessary for the working of the scheme.
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A division bench comprising chief justice Swatantra Kumar and Justice VM Kanade adjourned the matter for further hearing to take up the matter for day-to-day hearing from Wednesday.Download
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