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Transcript of Ril Rnrl Case
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REPORTABLE
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. .... Aellant (s)
!ersus
Reliance "ndustries Ltd. .... Resondent(s)
#"$%
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&04 of 2009)
CIVIL APPEAL NO. 4277 OF 2010 (Arising out of S.L.P. (C) No. 1*929 of 2009)
I.A. NO. 1
"NC.A.No.42!-42!1"2010 # S. L. P. $C% .14414-
14415"2010# CC NO. 16126-16127 o& 200'
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J U D ( M E N T
P. S)*+),)/ J.
1) " +a,e +ad t+e -enefit of reading t+e erudite udg/ent of
/ learned rot+er %on. . Suders+an Redd 3. " a/
una-le to s+are t+e ,ie e5ressed - +i/ on so/e oints and
/ust resectfull dissent.
2) $+oug+ t+e facts and ro,isions of t+e rele,ant la +a,e
-een set out in t+e udg/ent reared - . Suders+an
Redd 3. 6eeing in ,ie of t+e i/ortance in t+e /atter "
roose to refer all t+e details and deli,er a searate udg/ent
in t+e folloing ter/s
') 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!).
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&) eing aggrie,ed - t+e udg/ent and order of t+e
8i,ision enc+ of t+e %ig+ Court of o/-a dated 1&.0.2009
in Aeal No. 1 of 200* in Co/an Alication No. 1122 of
200 and in Co/an Petition No. 7'1 of 200& Reliance
Natural Resources Ltd. (in s+ort RNRL:) +as filed S.L.P.(C)
Nos. 14997 ; 1&0'' of 2009.
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) rief facts
T+ ) o& RNRL
(a) "n 197' late 8+iru-+ai A/-ani set u t+e R"L consisting
of >il gas refining and e5loration te5tile arn olster
etroc+e/icals and co//unication -usiness it+ +is to
sons ?u6es+ A/-ani and Anil A/-ani. "n t+e ear 1999 t+e
o,ern/ent of "ndia announced a Ne B5loration and
Licensing Polic 1999 (in s+ort NBLP:). $+is olic ro,ided
t+at ,arious etroleu/ -loc6s could -e aarded for
e5loration de,elo/ent and roduction of etroleu/ and gas
to ri,ate entities.
(-) "t is t+e olic of t+e o,ern/ent t+at Petroleu/
Resources +ic+ /a e5ist in t+e territorial aters t+e
continental s+elf and t+e e5clusi,e econo/ic one of "ndia -e
disco,ered and e5loited it+ ut/ost e5edition in t+e o,erall
interest of "ndia and in accordance it+ good "nternational
Petroleu/ "ndustr Practice.
(c) "n t+e sa/e ear i.e. 1999 R"L +as for/ed a Consortiu/
it+ N"D>. $+eir consortiu/ as t+e successful -idder for
loc6 D8 and as called t+e Contractor.
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(d) >n 24.0'.2000 Reliance Platfor/s Co//unications.co/
Pri,ate Li/ited as incororated +ic+ as c+anged to lo-al
Euel ?anage/ent Ser,ices Li/ited and no called Reliance
Natural Resources Li/ited (RNRL).
(e) A Production S+aring Contract (in s+ort PSC:) +as -een
entered into -eteen t+e o,ern/ent of "ndia and t+e
Contractor on 12.04.2000. $+e PSC as recorded is it+in
t+e contract area identified as loc6 D 8#N9*'. D8 is
situated offs+ore coasts of And+ra Prades+ in t+e "ndian
>cean. Suc+ -loc6s are called as 8ee #ater B5loration
loc6s:. $+e e5loration in suc+ areas reFuire e/lo/ent of
+ig+l s6illed and e5erienced tec+nical ersonnel and an
e5tre/el e5ensi,e and ti/econsu/ing e5ercise. As
recorded all e5loration e5enses reFuired to locate etroleu/
resources +a,e to -e -orne - t+e Contractor. $+erefore t+e
Contractor is -ound to incur +uge cost and resources for
disco,er of reser,es in t+e area at t+eir ris6. $+e e5loration
acti,ities are still in rogress t+e first gas deal e5ected in
3une 200*. As er t+e PSC all t+e e5enses relating to t+e
e5loration de,elo/ent and roduction of cost incurred -
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t+e Contractor can onl -e reco,ered fro/ t+e etroleu/Ggas
actuall roduced and sold - t+e Contractor. $+e Contractor
+as freedo/ to sell t+e gas roduced fro/ t+e -loc6 su-ect to
t+e adust/ent and t+e ter/s of rofit s+aring -eteen t+e
o,ern/ent and t+e R"L as set out in t+e PSC.
(f) >n 0.07.2002 ?r. 8+iru-+ai A/-ani assed aa.
So/eti/e t+ereafter differences started -eteen ?u6es+
A/-ani and Anil A/-ani o,er t+e /anage/ent and control of
t+e grou co/anies. ot+ t+e -rot+ers at t+e rele,ant ti/e
ere loo6ing after t+e affairs of R"L in all resects including
t+e grou co/anies.
(g) $+e ro,isions of t+e PSC ere 6non to t+e resecti,e
oard of 8irectors as ell as to -ot+ t+e -rot+ers. ?u6es+
A/-ani as t+e ?anaging 8irector and Anil A/-ani as t+e
3oint ?anaging 8irector of t+e R"L.
(+) "n >cto-er 2002 t+e Consortiu/ (N"D> ; R"L)
announced disco,er of significant result of D8 loc6.
So/eti/e in t+e ear 200' t+e National $+er/al Poer
Cororation Li/ited (in s+ort N$PC:) floated a glo-al tender
for sul of gas to its oer roects. $+e as Sale and
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Purc+ase Agree/ent as anne5ed it+ t+e tender docu/ent.
N$PC in,ited international co/etiti,e -ids for sul of
natural gas to its oer lants located in t+e State of uarat
to /eet its fuel reFuire/ents. R"L succeeded in its -id to sell
transort and deli,er 1'2 $tu (/eans one trillion $=
(ritis+ $+er/al =nit) or 1000000 ??$=). N$PC - letter
dated 1.0.2004 confir/ed R"LHs deal.
(i) "n 3une 2004 R"L entered into a State Suort
Agree/ent it+ t+e o,ern/ent of =.P. to /a6e necessar
arrange/ents for land ater and ot+er facilities for 8adri
Proect.
() "n a oard ?eeting of Reliance Bnerg Li/ited (in s+ort
RBL:) +eld on 20.10.2004 +ic+ as attended - ?u6es+
A/-ani and ot+er 8irectors of R"L after re,ieing t+e 8adri
Proect it as recorded t+at gas fro/ D asin ould -e
sulied for t+e oer roects of RBL. $+e oard of RBL as
assured a-out t+e a,aila-ilit of gas its ti/ing adeFuate
Fualit and reFuested Fuantit at a co/etiti,e rice for t+e
roect.
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(6) >n 1*.0.200& t+e /edia released a state/ent
infor/ing t+e general u-lic t+at an a/ica-le settle/ent is
arri,ed at in resect of all disutes -eteen t+e A/-ani
rot+ers. "t as stated t+at ?u6es+ A/-ani ill ta6e o,er t+e
resonsi-ilit for R"L and "PCL and Anil A/-ani ill ta6e o,er
t+e resonsi-ilit for Reliance "nfoco// Ltd. Reliance Bnerg
Ltd. and Reliance Caital Ltd. >n t+e sa/e da Anil A/-ani
resigned as 3oint ?anaging 8irector of R"L.
(l) ot+ t+e -rot+ers it+ 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/il arrange/ent dated 1*.0.200&
and accordingl resol,ed t+eir disutes a/ica-l. ased
uon t+e said ?o= -ot+ t+e -rot+ers and t+e officials of R"L
and ot+er grou co/anies /ade ,arious discussions
e5c+anged corresondences e/ails and +eld conferences and
/eetings to i/le/ent t+e ?o= and to resol,e t+e disutes
and to di,ide t+e ,arious co/anies - a Sc+e/e of
Arrange/ent.
(/) >n 11.0*.200& RNRL as acFuired - R"L for t+e
urose of de/erger. $+e na/e as c+anged to lo-al Euel
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?anage/ent Ser,ices. R"L (de/erged co/an) /o,ed a
etition in t+e o/-a %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) -eteen R"L and four ot+er
co/anies ,i. (i) Reliance Bnerg !entures Li/ited (ii)
lo-al Euel ?anage/ent Ser,ices Li/ited (iii) Reliance
Caital !entures Li/ited and (i,) Reliance Co//unication
!entures Li/ited. order dated 09.12.200& t+e Co/an
3udge o/-a %ig+ Court +as granted sanction to t+e
Sc+e/e and inter aliadirected t+at t+e s+are+olders of R"L
ould +old s+ares in eac+ of t+e resulting co/anies in t+e
ratio of 11 in addition to t+e s+ares +eld in t+e arent
co/an (R"L). $+e sc+e/e ro,ides t+at R"L successfull -id
for offs+ore oil and gas fieldsI strategic in,est/ent in R"L
+ic+ +as engaged in oer roects in order to use art of
gas disco,ered for t+e generation of oerI aroriate gas
sul arrange/ent ill -e entered into -eteen R"L and
lo-al Euel ?anage/ent Ser,ices ursuant to +ic+ gas ill
-e sulied to R"LI refined gas -ased energ underta6ingI after
t+e record date t+e oard of t+e resulting co/anies s+all -e
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reconstituted and s+all t+ereafter -e controlled and /anaged
- Anil A/-ani. A suita-le arrange/ent ould -e entered
into in relation to sul of gas for oer roects of Reliance
Patalganga Poer Li/ited and RBL it+ t+e gas -ased energ
resulting co/anies.
(n) $+e Sc+e/e sanctioned - t+e Co/an 3udge ro,ided
for de/erger of four =nderta6ings of Reliance "ndustries
Li/ited (R"L) and transfer of t+ese =nderta6ings on a oing
concern: -asis to four resulting Co/anies. $+e are
(i) $+e Coal ased Bnerg =nderta6ingsGReliance Bnerg
!entures Li/ited.
(ii) as ased Bnerg =nderta6ingGlo-al Euel ?anage/ent
Ser,ices Li/ited no 6non as Reliance Natural Resources
Li/ited (RNRL).
(iii) Einancial Ser,ices =nderta6ingGReliance Caital
!entures Li/ited.
(i,) $eleco//unication =nderta6ingsGReliance
Co//unication !entures Li/ited.
$+e 8e/erged co/anReliance "ndustries Li/ited (R"L) is
to retain all ot+er -usinesses including Petroc+e/icals
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refining oil and gas e5loration and roduction te5tile and
ot+er -usiness. $+e Sc+e/e -eca/e effecti,e fro/
21.12.200&.
(o) A draft of S?A (as Sale ?aster Agree/ent) and SPA
(as Sale Purc+ase Agree/ent) ere e/ailed - an official of
R"L to sole no/inee of Anil 8+iru-+ai A/-ani rou on t+e
oard of R"L on 11.01.200 drafts of S?A and SPA ere
aro,ed - t+e oard of R"L at a ti/e +en t+e oard of
RNRL as under t+e control of ?u6es+ A/-ani. $+e no/inee
of Anil 8+iru-+ai A/-ani rou +ad raised o-ections -ut t+e
sa/e ere o,erruled. $+ere as no sufficient ti/e gi,en to
RNRL to read t+e draft. No indeendent or legal ad,ise could
-e ta6en on -e+alf of RNRL. asic clauses to t+e agree/ents
are t+e -one of contention of t+e resent litigation. ot+ t+e
agree/ents alleged to +a,e also -een settled and e5ecuted on
12.01.200. >n t+e sa/e da a letter addressed - ?r. 3.P.
C+alasani t+e no/inee of A8A on t+e oard of RNRL to
ot+er 8irectors on t+e oard of RNRL na/el ?r. Sandi
$andon and ?r. L.!. ?erc+ant +o ere t+e no/inees of
?u6es+ A/-aniGR"L stating t+erein t+at t+e roceeding in
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t+e oard ?eeting +eld on 11.01.200 to consider t+e
agree/ent it+ R"L in ter/s of t+e Sc+e/e ere illegal and
,oid. anot+er letter dated 1'.01.200 a reFuest as /ade
to ta6e t+e contents of letter dated 12.01.200 it+ regard to
t+e agendaite/ No.* (gas sul agree/ent) and -e /ade
art of t+e /inutes of t+e oard ?eeting.
() >n 1'.01.200 - a letter addressed to S+ri C+alasani
t+e /inutes of t+e oard of 8irectors +eld on 11.01.200 ere
infor/ed t+at it ould -e ta-led at t+e /eeting of 1'.01.200.
So/e of t+e o-ections as raised - C+alasani ere also
recorded. >n 2.01.200 t+e SPA co as /ade a,aila-le
to A8A for t+e first ti/e. >n 27.01.200 t+e s+ares of t+e
RNRL to t+e s+are+olders of R"L ere allotted.
(F) >n 07.02.200 t+e oard of t+e RNRL as 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 a letter addressed - R"L to t+e RNRL stating t+at
a rofor/a gas sale and urc+ase agree/ent (SPA) +as -een
anne5ed to t+e a-o,e S?A. $+e rofor/a contains t+e ter/s
and conditions as /entioned in t+e SPA signed - R"L on
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12.12.200& and forarded to t+e N$PC. "t as furt+er
infor/ed t+at t+e agree to carr out t+e c+anges to t+e
rofor/a SPA anne5ed to t+e S?A so t+at it reflects t+e
sa/e ter/s as contained in SPA -eteen N$PC and R"L as
and +en an c+anges are carried out to N$PC SPA.
(r) >n 2*.02.200 RNRL - its letter to R"L infor/ed and
ela-orated ,arious de,iations in t+e S?A fro/ t+e agreed
ter/s +ic+ ere necessar for de/erging t+e -usiness. A
suita-le draft agree/ent in co/liance it+ t+e Sc+e/e as
also sent it+ t+e letter. >n 12.04.200 R"L /ade an
alication to t+e ?inistr of Petroleu/ and Natural as
(?oPN) for aro,al of t+e gas rice at +ic+ t+e sale of 2*
??SC?8 of gas as agreed it+ t+e RNRL under t+e S?A.
(s) >n 09.0&.200 RNRL - a letter reFuested t+e ?oPN
to accord aro,al to t+e alication dated 12.04.200 /ade
- t+e R"L. >n 2.07.200 t+e ?oPN co//unicated to t+e
R"L its refusal to aro,e t+e rice of gas agreed -eteen t+e
RNRL and t+e R"L under t+e S?A. >n '1.07.200 R"L
forarded a letter to t+e RNRL a co of letter dated
2.07.200 recei,ed fro/ t+e ?oPN reecting t+e roosed
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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 details RNRL on 07.11.200G0*.11.200
filed a Co/an alication No. 1122 of 200 under Section
'92 of t+e Co/anies Act 19& (+ereinafter referred to as t+e
Act:) -efore t+e %ig+ Court of o/-a in +ic+ t+e folloing
raers ere /ade
(a)>rder and 8irect R"L to ta6e all necessar stes in orderto ensure actual sul of 2* ??SC?8 or 40 ??SC?8 ofgas to RNRL on t+e N$PC Contract $er/s and as er t+eco//ercial asect set out in Para *.' +ereina-o,e.
(-)>rder and 8irect R"L to e5ecute an a/end/ent to t+eas Sul ?aster Agree/ent dated 3anuar 12 200 andto t+e Eor/ of as Sale and Purc+ase Agree/ent attac+edin Sc+edule '.2 t+ereto to -ring t+e/ in line it+ t+e asSul ?aster Agree/ent and Eor/ of as Sale and
Purc+ase Agree/ent as set out in B5. 3 to t+is Alication.
(c) restrain R"L fro/ creating an t+ird art interestsor rig+ts in resect of i) 2* ??SC?8 of as to -e suliedto t+e AlicantI (ii) 12 ??SC?8 to -e sulied to t+eAlicant on fir/ -asis in case N$PC Contract does not/aterialieI andGor entering into an contract(s) andGoruse or sul to an t+ird art t+e said gas (2* ??SC?8or 40 ??SC?8 as t+e case /a -e) +ic+ is reFuired to-e sulied to t+e Alicant under t+e Sc+e/e.
(d) ending t+e +earing and final disosal of t+ealication direct R"L to sul t+e said 2* ??SC?8or 40 ??SC?8 gas as t+e case /a -e to t+ealicant on t+e sa/e ter/s as er N$PC Contract.
(e) adinteri/ reliefs in ter/s of raer (c) and (d) a-o,e.(f) Suc+ furt+er orders -e assed andGor directions -e
gi,en as t+is %onH-le Court /a dee/s fit and roer.:
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7) "n t+e said alication of RNRL it as +ig+lig+ted t+at to
/a6e t+e Sc+e/e as sanctioned - t+e %ig+ Court effecti,e
and or6a-le it is necessar to direct t+e a/end/ents and
alterations to t+e S?A dated 12.01.200 and draft SPA
anne5ed to t+e S?A 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 it+ t+e ter/s of t+e Sc+e/e of Arrange/ent in
its letter and sirit. $+e S?A and SPA are also not in
co/liance it+ t+e ?o= +ic+ as t+e ,er reason of t+e
Sc+e/e of Arrange/ent as filed - R"L. $+erefore RNRL
raed for Co/an CourtsH inter,ention to ensure t+at t+e
Sc+e/e is i/le/ented effecti,el.
*) "n addition to t+e a-o,e articulars RNRL laced t+e
folloing additional /aterials in suort of t+eir stand
a) $+e oard of 8irectors of R"L ere areciati,e of t+e
resolution of t+e issues -eteen S+ri ?u6es+ A/-ani and
S+ri Anil A/-ani and in t+eir /eeting +eld on 3une 1* 200&
noted t+e settle/ent and a/ica-le resolution of t+e disute
ro,iding for reorganiation of t+e Reliance rou including
t+e -usinesses and interests of R"L and adoted a resolution
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t+an6ing t+e efforts /ade - S/t. Do6ila-en 8+iru-+ai
A/-ani in or6ing toards t+e settle/ent.
-) $+e agree/ent arri,ed at -eteen S+ri ?u6es+ A/-ani
C+air/an and ?anaging 8irector of R"L and S+ri Anil A/-ani
relating to t+e reorganiation of t+e R"L rou en,isaged t+e
sul of gas fro/ R"LHs current and future gas fields for
,arious roects of RelianceAnil 8+iru-+ai rou. $+e said
agree/ent contains t+e folloing clauses
(a)
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S+all -e in accordance it+ "nternational est Practices. S+all -e -an6a-le in "nternational Einancial ?ar6ets.
(e) >t+er ter/s go,erning t+e Arrange/ent.
Reliance A8A rou s+all +a,e t+e otion to ta6e deli,erof gas at Da6inada on t+e Bast Coast and /a constructits on ieline. %oe,er RBL ould still +a,e to at+e transortation cost for sul to t+e #est Coast e,enif t+e facilit is not used -ut ill +a,e t+e rig+t to dealit+ t+e caacit as it dee/s fit and to sell or assign t+esa/e to anot+er art.
$+e gas sulGotion agree/ents ould -e -eteen R"Land a 100J su-sidiar of R"L +ic+ ould -e de/ergedto t+e RelianceA8A rou as art of t+e Sc+e/e andnot it+ RBL.
"n relation to alica-le go,ern/ental and statutoraro,als it+out in an /anner /itigating R"LHsresonsi-ilit R"L and RelianceA8A rou gi,e anirre,oca-le Poer of Attorne to t+e RelianceA8A routo al for and o-tain all suc+ go,ern/ental andregulator aro,als as are necessar on its -e+alf.
c) $+e understanding and agree/ents relating to t+e sul
of gas as art of t+e reorganiation of R"L are set out in t+e
"nfor/ation ?e/orandu/ filed for t+e -enefit of t+e
s+are+olders and in,estors - RNRL it+ t+e o/-a Stoc6
B5c+ange and of t+e RNRL. ConseFuentl as art of t+e
reorganiation of t+e -usiness and underta6ings of R"L t+e
oer -usiness of R"L including t+e as ased Poer
usiness descri-ed in t+e Sc+e/e as t+e as ased Bnerg
=nderta6ing as also to -e de/erged. $+e as ased Bnerg
=nderta6ing of R"L to -e de/erged under t+e Sc+e/e
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consisted of t+e -usiness of sul of gas for oer roects
RBL and of Reliance Patalganga Poer Ltd. t+roug+ suita-le
arrange/ents.
d) $+e Sc+e/e also e5lains
(i) as ased Bnerg Resulting Co/an(ii) as ased Bnerg =nderta6ing
e) $+e Sc+e/e ro,ided for suita-le arrange/ents +ere- t+e
RNRL ould recei,e gas fro/ R"L and sul t+e sa/e as R"L
ould ot+erise +a,e done for t+e oer roects of RBL.
f) "n t+e ear 200' N$PC +ad floated a glo-al tender for
sul of gas to its oer roects to -e located at Daas and
and+ar in t+e State of uarat. R"L +o e/erged as t+e
successful -idder +ad at t+e ti/e of su-/ission of -ids
unconditionall acceted all t+e ter/s and conditions
/entioned in t+e draft SPA. "n accordance it+ t+e agreed
ositionGsettle/ent t+e gas as to -e sulied - R"L to t+e
RNRL at t+e rice and ter/s no less fa,oura-le t+an t+ose of
N$PC and t+e gas sul agree/ent -eteen R"L and t+e
RNRL ould -e as er t+e said N$PC contract ter/s. R"L -
letter dated 14.02.200 signed - one D. Set+ura/an
Aut+orised Signator of R"L co//unicated t+at +e as
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directed to confir/ t+at R"L ould agree to carr out
a/ending c+anges to t+e rofor/a of SPA anne5ed to t+e
as Sul ?aster Agree/ent (S?A) so t+at it reflects t+e
sa/e ter/s as are contained in t+e SPA for 12 ??SC?8
-eteen N$PC and R"L as and +en c+anges are carried out
to N$PC SPA.
g) $+e Sc+e/e also ro,ided t+at ost t+e de/erger of t+e
8e/erged =nderta6ings of R"L S+ri Anil A/-ani ould o-tain
control and /anage/ent of t+e -usinesses and underta6ings
-eing de/erged.
+) Eurt+er t+e agree/ent +ad to reflect an interest in gas
roduced - all t+e gas fields of R"L so as to ensure t+at gas
uto t+e agreed Fuantit i.e. 2* ??SC?8 or 40 ??SC?8 as
t+e case /a -e ould -e /ade a,aila-le to RNRL in riorit
to an ot+er sale or use - R"L e5cet for t+e gas to -e used
for R"L itself for oeration and transortation and for t+e gas
to -e sulied to N$PC. $+e interest of RNRL as t+us to
e5tend to gas fields ot+er t+an t+e D8.
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i) $+e S?A and t+e for/ of SPA significantl deart fro/
t+e 8raft Agree/ent to t+e N$PC reFuest for -ids and
unconditionall acceted - R"L.
9) T+ ) o& RIL
a) A Sc+e/e for t+e de/erger of a large co/an it+
/aorit of s+ares -eing +eld - t+e u-lic and - institutions
+as to -e in larger u-lic interest as ell as in t+e interest of
t+e co/an. "t /ust necessaril safeguard t+e interest of
large -od of s+are+olders of t+e 8e/erged Co/an as also
t+e s+are+olders of t+e Resulting Co/anies. An settle/ent
of t+e disutes stated to +a,e ta6en lace -eteen or a/ongst
t+e ro/oters +as as a necessit to a-ide - t+e final
decision of t+e oard of t+e 8e/erged Co/an and suc+
adatations as /a -e necessar to rotect and furt+er t+e
interests of t+e large -od of s+are+olders or u-lic interest.
(-) >nce t+e Sc+e/e as as laced -efore and dul aro,ed
-I t+e s+are+olders (99J s+are+olders aro,ed t+e Sc+e/e)
+ic+ suggests t+at t+e Sc+e/e +ad t+e suort not /erel of
t+e eneral od of s+are+olders -ut also t+e /e/-ers of t+e
ro/otersH fa/ilall anterior or underling agree/ents
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-eco/e irrele,ant. $+e senior/ost /e/-er of t+e fa/il +o
resol,ed all t+e disutes +as at no oint contested t+e
Sc+e/e as -eing inconsistent it+ an arrange/ent t+at /a
+a,e -een arri,ed at. $+e resent alication is a t+inl
disguised atte/t to reoen t+e Sc+e/e after it +as -een full
i/le/ented in a /anner t+at is co/letel inconsistent not
onl it+ t+e de/erger of t+e -usinesses -ut t+e ro,isions of
Section '92 of t+e Co/anies Act 19&.
c) $+at none of t+e +eads of socalled Agree/ent are a art of
t+e Sc+e/e as roosed - t+e oard of 8irectors of R"L and
aro,ed - t+e creditors and general -od of s+are+olders.
$+ese allegations +a,e no lace in an alication /ade for
i/le/entation of t+e Sc+e/e as sanctioned - t+e %ig+
Court. $+e a,er/ents /ade t+erein are co/letel
e5traneous and irrele,ant. $+e issues if at all as -eteen
S+ri ?u6es+ A/-ani and S+ri Anil A/-ani ere ersonal to
t+e A/-ani fa/il and t+e oard of R"L as not aare of t+e
details of t+e settle/ent -eteen S+ri ?u6es+ A/-ani and
S+ri Anil A/-ani.
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d) $+e !ice C+air/an and 3oint ?anaging 8irector of R"L at
t+e rele,ant ti/e S+ri Anil A/-ani as or in an e,ent
s+ould -e dee/ed to -e full aare of t+e nature of t+e rig+ts
of R"L in relation to e5loration and roduction of gas fro/
,arious gasfields as also t+e ro,isions of t+e Production
S+aring Contract (PSC). Significantl t+e Production S+aring
Contract for loc6 D8 as e5ecuted a -ac6 in t+e ear
2000. eing oard /anaged co/an t+e -usiness and
affairs of R"L are under control and suer,ision of t+e oard of
8irectors and in fact t+e ?inutes of t+e oard /eeting clearl
s+o t+at in all /atters in +ic+ S+ri ?u6es+ A/-ani as or
could -e said to -e an interested director +e +ad refrained
fro/ articiating in t+e deli-erations and ,oting on t+e
resolutions. $+e ter/s and conditions on +ic+ t+e gas as
to -e sulied to t+e oer lants of Reliance Patalganga
Poer Li/ited and RBL as to -e at t+e discretion - t+e
oard of 8irectors of t+e 8e/erged Co/an +o ere not
-ound - an agree/ent: as -eteen to grous of
ro/oters. $+e oard of 8irectors of 8e/erged Co/an as
o-liged and in fact +ad at all ti/es 6et t+e interests of t+e
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general -od of s+are+olders as -eing a ara/ount
i/ortance and +ad ta6en suc+ decisions as in t+e -est
udg/ent of t+e oard accorded to t+eir dut as t+e oard
it+ t+e s+are+olders interests -eing of ut/ost i/ortance.
10) After considering t+e clai/ of -ot+ t+e arties ,i. RNRL
and R"L t+e Co) J89 +) )::,8 )* *+ &o;;o
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olicies and national international ractice in sul of gasor suc+ ot+er roducts.
(7) $+e contract of suc+ nature is su-ect to t+eo,ern/entHs aro,al in ,ie of NBLP ; PSC and suc+
related o,ern/ent olicies -ut 6eeing in ,ie t+e se,eralfactors including t+e freedo/ and rig+t of t+e contractorGR"Land t+e li/ited and restricted scoe of interference in suc+er/issi-le co//ercial asects of t+e contractor unless itis in -reac+ of an u-lic olic and u-lic interest.(*) $+e sul of gas contractGagree/ent needs to -e clearand -an6a-le docu/ents for all t+e concerned arties.:
Einall t+e Co/an 3udge directed t+e arties to re
negotiate for a ,*)>; )::)9*:.
11) As discussed earlier aggrie,ed - t+e said
orderGdirections of t+e Co/an 3udge RNRL +as filed Aeal
No. 1 of 200* R"L +as also filed Aeal No. *44 of 2007 -efore
t+e 8i,ision enc+. 8uring t+e course of +earing considering
t+e u-licGnational i/ortance t+e 8i,ision enc+ er/itted
t+e =nion of "ndia to inter,ene and ut fort+ t+eir stand.
12) $+e 8i,ision enc+ fra/ed t+e folloing , &o:
o,8:)*,o=
(1) #+et+er t+e Co/an Court +as urisdiction to entertain
t+e Alication filed - RNRL under t+e Co/anies Act 19&M
(2) #+at is a suita-le arrange/ent: -eteen t+e to
Co/anies in t+e /atter of sul of gas for t+e oer
roects of t+e Resulting Co/anies and its affiliatesM
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1') A *+ D,,,o B+
(a) $+e 8i,ision enc+ +as ansered t+e first issue in t+e
affir/ati,e. $+e reasoning of t+e 8i,ision enc+ +oe,er is
different fro/ t+at of t+e Single 3udge. $+e Co/an 3udge
+ad +eld t+at t+e Alication as /aintaina-le under Section
'92 read it+ Section '94 of t+e Co/anies Act. $+e 8i,ision
enc+ +oe,er found t+e Co/an Alication to -e
/aintaina-le on t+e -asis of Clauses 17 1* 20 to 24 of t+e
Sc+e/e of 8e/erger itself.
(-) >n t+e second issue t+e 8i,ision enc+ +eld as follos
(i) $+e suita-le arrange/ent as reFuired to -e /ade -
engrafting t+e ?o= on t+e S?A
(ii) As far as t+e fi5ation of rice is concerned t+e
o,ern/ent +as t+e oer to fi5 t+e rice -ut onl for its
ta6e: of t+e gas and
(iii) Alt+oug+ t+e o,ern/ent could la don t+e as
=tiliation Polic suc+ =tiliation Polic ould al onl to
t+e gas a,aila-le for allocation after certain Fuantit of gas
+ic+ according to t+e 8i,ision enc+ stood allocated: to
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RNRL as er t+e ?o=. $+e as =tiliation Polic could al
onl to t+e -alance Fuantities.
(i,) $+ere as not+ing in t+e PSC t+at re,ented t+e
Contractor fro/ selling gas at a rice loer t+an t+e rice
aro,ed - t+e o,ern/ent and R"L could fulfill its o-ligation
of sul of gas at a rice of =S 2.'4 er //-tu.
14) Aggrie,ed - t+e a-o,e directionsGconclusions RNRL R"L
as ell as =.>.". +a,e filed t+ese aeals - a of secial
lea,e etition -efore t+is Court.
1&) %eard ?Gs Ra/ 3et+/alani and ?r. ?u6ul Ro+atgi ?r.
Ra,i S+an6ar Prasad learned senior counsel for RNRL ?Gs
%aris+ N. Sal,e and ?r. Ro+ington E. Nari/an learned
senior counsel for R"L and ?r. oal Su-ra/aniu/ learned
Solicitor eneral ?Gs ?o+an Parasaran and ?r. !i,e6
$an6+a Additional Solicitor eneral for t+e =nion of "ndia.
1) H,*o:,); >)?9:o8
= to t+e earl 90Hs rior to t+e NBLP and reNBLP
ears natural gas as -eing roduced onl fro/ t+e fields
oerated - t+e o,ern/ent co/anies na/el >il ; Natural
as Cororation (in s+ort O>NCH) and >il "ndia Li/ited (in
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s+ort O>"L) out of -loc6s +ic+ ere gi,en to t+ese co/anies
- t+e o,ern/ent on no/ination -asis. Since t+ese fields
ere gi,en on no/ination -asis and onl to o,ern/ent
Co/anies t+e o,ern/entHs oer to regulate t+e Natural
as Sector as a-solute.
Later it as decided to oen t+e sector to Pri,ate Sector
"n,est/ent during t+e /id 1990s +en ri,ate in,est/ent
as soug+t on co/etition -asis and certain -loc6s ere
aarded to Pri,ate Sector co/anies under a Production
S+aring Contract (-etter 6non as t+e reNBLP Production
S+aring Contracts). $+is as done to increase ri,ate
in,est/ent in t+is sector since t+e e5loration and roduction
of oil and gas is associated it+ considera-le ris6 and no
in,est/ent ould +a,e -een attracted if t+e AP? regi/e
continued. %oe,er t+e Contractors +o signed t+e PSC
ere reFuired to sell all t+e gas roduced and sa,ed to t+e as
Aut+orit of "ndia Li/ited a PS= and did not +a,e /ar6eting
freedo/ as regards natural gas.
$+e reNBLP regi/e as relaced - t+e NBLP regi/e
under +ic+ t+e PSC rele,ant to t+e resent case as entered
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into -eteen a 3oint !enture co/osed of R"L and N"D>
Resources Li/ited and t+e o,ern/ent of "ndia. "n t+e NBLP
1 PSC /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
o,ern/ent.
17) Co*,**,o); )8 o*+: *)**o: P:o,,o
A:*,;2'7. T+,9 o& );
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e5ression Odistri-uteH under Article '9(-) cannot -ut -e gi,en
full la as it fulfills t+e -asic urose of restructuring t+e
econo/ic order. "t e/-races t+e entire /aterial resources of
t+e co//unit. "ts goal is so to underta6e distri-ution as
-est to su-ser,e t+e co//on good. "t reorganies - suc+
distri-ution t+e oners+i and control. $o distri-ute ould
/ean to allot to di,ide into classes or into grous and
e/-races arrange/ents classification lace/ent disosition
aortion/ent t+e sste/ of dis-ursing goods t+roug+out t+e
co//unit.
20) "n Salar un Suar *ills %td. "tc. vs. Stat" of
*+sor" & Ors. (1972) 1 SCC 2' at age ' aragra+ '*
t+is Court +eld as under
3!@@@8eli/iting areas for transactions or arties ordenoting rice for transactions are all it+in t+e area ofindi,idual freedo/ of contract it+ li/ited c+oice - reasonof ensuring t+e greatest good for t+e greatest nu/-er -ac+ie,ing roer sul at standard or fair rice to eli/inatet+e e,ils of +oarding and scarcit on t+e one +and anda,aila-ilit on t+e ot+er.:
21) "n #insu,-ia l"ctric Su//l+ Co$/an+ %td. vs. Stat"
of Assa$ & Ors. (19*9) ' SCC 709 t+is Court affir/ed t+e
,ies e5ressed in t+e a-o,e cases in t+e conte5t of electricit
sul and also affir/ed t+e o,ern/entHs role in t+e securing29
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and distri-uting of t+e resources of t+e co//unit t+at -est
su-ser,es t+e co//on good.
22) $+is Court in nu/erous decisions +as laid don t+at in
t+e aard of tenders and t+e distri-ution of national roert
and State largesse t+e State is -ound to follo t+e dictate of
Article 14.
2') "n a$ana 1a+ara$ S-"tt+ vs. Int"rnational Air/ort
Aut-orit+ of India& Ors(1979) ' SCC 4*9 t+is Court +as
ointed out t+at
@@..$+e oer or discretion of t+e o,ern/ent in t+e/atter of grant of largess including aard of o-s contractsFuotas licences etc. /ust -e confined and structured -rational rele,ant and nondiscri/inator standard or nor/and if t+e o,ern/ent dearts fro/ suc+ standard or nor/in an articular case or cases t+e action of t+e o,ern/ent
ould -e lia-le to -e struc6 don unless it can -e s+on -t+e o,ern/ent t+at t+e dearture as not ar-itrar -utas -ased on so/e ,alid rincile +ic+ in itself as notirrational unreasona-le or discri/inator :
24) "n 3ood Cor/oration of India vs. *s 'a$d-"nu
Cattl" 3""d Industri"s (199') 1 SCC 71 t+is Court o-ser,ed
as follos
"n contractual s+ere as in all ot+er State actions t+e Stateand all its instru/entalities +a,e to confor/ to Article 14oft+e Constitution of +ic+ nonar-itrariness is a significantfacet. $+ere is no unfettered discretion in u-lic la Au-lic aut+orit ossesses oers onl to use t+e/ for
30
http://fnopenglobalpopup%28%27/ba/disp.asp','16910','1');http://fnopenglobalpopup%28%27/ba/disp.asp','16910','1'); -
8/13/2019 Ril Rnrl Case
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u-lic good. $+is i/oses t+e dut to act fairl and to adota rocedure +ic+ is fairla in action. @@@:
2&) $+e >il Eields (Regulation ; 8e,elo/ent) Act 194* and
t+e Petroleu/ and Natural as Rules 19&9 /a6e ro,isions
inter alia for t+e regulation of etroleu/ oeration and grant
of licence and leases for e5loration de,elo/ent and
roduction of etroleu/ in "ndia. $+e $erritorial #aters
Continental S+elf B5clusi,e Bcono/ic Qone and ?ariti/e
Qones Act 197 ro,ides for t+e grant or a licence of Letter of
Aut+orit - t+e o,ern/ent to e5lore and e5loit t+e
resources of t+e Continental S+elf and B5clusi,e Bcono/ic
Qone and an Petroleu/ oeration.
2) =nder t+e Co/anies Act t+ere are no ro,isions e5cet
Sections '91 to '94 +ic+ deal it+ t+e rocedure and oer
of t+e Co/an Court to sanction t+e Sc+e/e +ic+ falls
it+in t+e a/-it of reFuire/ents as conte/lated under t+ese
sections. Since t+e Co/an 3udge as ell as t+e 8i,ision
enc+ of t+e %ig+ Court roceeded on t+e -asis t+at it +as
a/le oer and urisdiction to suer,ise t+e Sc+e/e as
sanctioned under Sections '91 to '94 of t+e Co/anies Act it
is -ut roer to refer t+ose sections +ic+ are as under
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3'1. Po
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(4) A co of e,er suc+ order s+all -e anne5ed to e,er coof t+e /e/orandu/ of t+e co/an issued after t+e certifiedco of t+e order +as -een filed as aforesaid or in t+e case ofa co/an not +a,ing a /e/orandu/ to e,er co so
issued of t+e instru/ent constituting or defining t+econstitution of t+e co/an.
(&) "f default is /ade in co/ling it+ su-section (4) t+eco/an and e,er officer of t+e co/an +o is in defaults+all -e unis+a-le it+ fine +ic+ /a e5tend to one+undred ruees for eac+ co in resect of +ic+ default is/ade.
() $+e $ri-unal /a at an ti/e after an alication +as
-een /ade to it under t+is section sta t+e co//ence/entor continuation of an suit or roceeding against t+eco/an on suc+ ter/s as t+e $ri-unal t+in6s fit until t+ealication is finall disosed of.
3'2. Po); *o &o: o:o, )8)::)9* (1) #+ere t+e $ri-unal /a6es an orderunder section '91 sanctioning a co/ro/ise or anarrange/ent in resect of a co/an it
(a) s+all +a,e oer to suer,ise t+e carring out of t+eco/ro/ise or an arrange/entI and
(-) /a at t+e ti/e of /a6ing suc+ order or at an ti/et+ereafter gi,e suc+ directions in regard to an /atter or/a6e suc+ /odifications in t+e co/ro/ise or arrange/entas it /a consider necessar for t+e roer or6ing of t+eco/ro/ise or arrange/ent.
(2) "f t+e $ri-unal aforesaid is satisfied t+at a co/ro/ise oran arrange/ent sanctioned under section '91 cannot -eor6ed satisfactoril it+ or it+out /odifications it /aeit+er on its on /otion or on t+e alication of an ersoninterested in t+e affairs of t+e co/an /a6e an orderinding u t+e co/an and suc+ an order s+all -e dee/edto -e an order /ade under section 4'' of t+is Act.
(') $+e ro,isions of t+is section s+all so far as /a -e alsoal to a co/an in resect of +ic+ an order +as -een/ade -efore t+e co//ence/ent of t+e Co/anies
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(A/end/ent) Act 2001 sanctioning a co/ro/ise or anarrange/ent.
3'3. I&o:)*,o ) *o o:o, o: )::)9*: - (1) #+ere a /eeting of
creditors or an class of creditors or of /e/-ers or anclass of /e/-ers is called under section '91
(a) it+ e,er notice calling t+e /eeting +ic+ is sentto a creditor or /e/-er t+ere s+all -e sent also astate/ent setting fort+ t+e ter/s of t+e co/ro/ise orarrange/ent and e5laining its effectI and inarticular stating an /aterial interests of t+edirectors /anaging director or /anager of t+eco/an +et+er in t+eir caacit as suc+ or as/e/-ers or creditors of t+e co/an or ot+erise
and t+e effect on t+ose interests of t+e co/ro/ise orarrange/ent if and in so far as it is different fro/ t+eeffect on t+e li6e interests of ot+er ersonsI and
(-) in e,er notice calling t+e /eeting +ic+ is gi,en -ad,ertise/ent t+ere s+all -e included eit+er suc+ astate/ent as aforesaid or a notification of t+e lace at+ic+ and t+e /anner in +ic+ creditors or /e/-ersentitled to attend t+e /eeting /a o-tain coies ofsuc+ a state/ent as aforesaid.
(2) #+ere t+e co/ro/ise or arrange/ent affects t+e rig+tsof de-enture+olders of t+e co/an t+e said state/ents+all gi,e t+e li6e infor/ation and e5lanation as resectst+e trustees of an deed for securing t+e issue of t+ede-entures as it is reFuired to gi,e as resects t+eco/ans directors.
(') #+ere a notice gi,en - ad,ertise/ent includes anotification t+at coies of a state/ent setting fort+ t+e ter/sof t+e co/ro/ise or arrange/ent roosed and e5laining
its effect can -e o-tained - creditors or /e/-ers entitled toattend t+e /eeting e,er creditor or /e/-er so entitleds+all on /a6ing an alication in t+e /anner indicated -t+e notice -e furnis+ed - t+e co/an free of c+arge it+a co of t+e state/ent.
(4) #+ere default is /ade in co/ling it+ an of t+ereFuire/ents of t+is section t+e co/an and e,er officer
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of t+e co/an +o is in default s+all -e unis+a-le it+fine +ic+ /a e5tend to fift t+ousand rueesI and for t+eurose of t+is su-section an liFuidator of t+e co/anand an trustee of a deed for securing t+e issue ofde-entures of t+e co/an s+all -e dee/ed to -e an officer
of t+e co/an
Pro,ided t+at a erson s+all not -e unis+a-le under t+issu-section if +e s+os t+at t+e default as due to t+erefusal of an ot+er erson -eing a director /anagingdirector /anager or trustee for de-enture +olders to sult+e necessar articulars as to +is /aterial interests.
(&) B,er director /anaging director or /anager of t+eco/an and e,er trustee for de-enture +olders of t+e
co/an s+all gi,e notice to t+e co/an of suc+ /attersrelating to +i/self as /a -e necessar for t+e uroses oft+is sectionI and if +e fails to do so +e s+all -e unis+a-leit+ fine +ic+ /a e5tend tofi,e t+ousand ruees.
3'4. P:o,,o &o: &),;,*)*,9 :o*:*,o )8));9))*,o o& o),(1) #+ere an alication is /ade to t+e $ri-unal undersection '91 for t+e sanctioning of a co/ro/ise orarrange/ent roosed -eteen a co/an and an suc+ersons as are /entioned in t+at section and it is s+on to
t+e $ri-unal
(a) t+at t+e co/ro/ise or arrange/ent +as -een roosedfor t+e uroses of or in connection it+ a sc+e/e for t+ereconstruction of an co/an or co/anies or t+ea/alga/ation of an to or /ore co/aniesI and
(-) t+at under t+e sc+e/e t+e +ole or an art of t+eunderta6ing roert or lia-ilities of an co/anconcerned in t+e sc+e/e (in t+is section referred to as atransferor co/an) is to -e transferred to anot+er
co/an (in t+is section referred to as t+e transfereeco/an)I
t+e $ri-unal /a eit+er - t+e order sanctioning t+eco/ro/ise or arrange/ent or - a su-seFuent order /a6ero,ision for all or an of t+e folloing /atters
(i) t+e transfer to t+e transferee co/an of t+e +ole oran art of t+e underta6ing roert or lia-ilities ofan transferor co/anI
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(ii) t+e allot/ent or aroriation - t+e transfereeco/an of an s+ares de-entures olicies or ot+erli6e interests in t+at co/an +ic+ under t+eco/ro/ise or arrange/ent are to -e allotted oraroriated - t+at co/an to or for an ersonI
(iii) t+e continuation - or against t+e transferee co/anof an legal roceedings ending - or against antransferor co/anI
(i,) t+e dissolution it+out inding u of an transferorco/anI
(,) t+e ro,ision to -e /ade for an ersons +o it+insuc+ ti/e and in suc+ /anner as t+e Court directsdissent fro/ t+e co/ro/ise or arrange/entI and
(,i) suc+ incidental conseFuential and sule/ental/atters as are necessar to secure t+at t+ereconstruction or a/alga/ation s+all -e full andeffecti,el carried out
Pro,ided t+at no co/ro/ise or arrange/ent roosed fort+e uroses of or in connection it+ a sc+e/e for t+ea/alga/ation of a co/an +ic+ is -eing ound u it+an ot+er co/an or co/aniesI s+all -e sanctioned - t+e$ri-unal unless t+e Court +as recei,ed a reort fro/ t+eRegistrar t+at t+e affairs of t+e co/an +a,e not -eenconducted in a /anner reudicial to t+e interests of its/e/-ers or to u-lic interest
Pro,ided furt+er t+at no order for t+e dissolution of antransferor co/an under clause (i,) s+all -e /ade - t+e$ri-unal unless t+e >fficial LiFuidator +as on scrutin oft+e -oo6s and aers of t+e co/an /ade a reort to t+e$ri-unal t+at t+e affairs of t+e co/an +a,e not -eenconducted in a /anner reudicial 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+etransfer of an roert or lia-ilities t+en - ,irtue of t+eorderI t+at roert s+all -e transferred to and ,est in andt+ose lia-ilities s+all -e transferred to and -eco/e t+elia-ilities of t+e transferee co/an and in t+e case of anroert if t+e order so directs freed fro/ an c+arge +ic+is - ,irtue of t+e co/ro/ise or arrange/ent to cease to+a,e effect.
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(') #it+in t+irt das after t+e /a6ing of an order under t+issection e,er co/an in relation to +ic+ t+e order is/ade s+all cause a certified co t+ereof to -e filed it+ t+eRegistrar for registration.
"f default is /ade in co/ling it+ t+is su-section t+eco/an and e,er officer of t+e co/an +o is in defaults+all -e unis+a-le it+ fine +ic+ /a e5tend to fi,e+undred ruees.
(4) "n t+is section
(a) roert includes roert rig+ts and oers of e,erdescritionI and lia-ilities includes duties of e,erdescritionI and
(-) $ransferee co/an does not include an co/anot+er t+an a co/an it+in t+e /eaning of t+is ActI -uttransferor co/an includes an -od cororate +et+era co/an it+in t+e /eaning of t+is Act or not.
3'4A. No*, *o > 9, *o C*:); (o:* &o:);,)*,o 8: *,o 3'1 )8 3'4$+e $ri-unal s+all gi,e notice of e,er alication /ade to itunder section '91 or '94 to t+e Central o,ern/ent ands+all ta6e into consideration t+e reresentations if an/ade to it - t+at o,ern/ent -efore assing an orderunder an of t+ese sections.:
27) ISSUES ARISIN( IN THE PRESENT APPEALS
a) #+et+er t+e Co/an Petition filed - RNRL under
Section '92 of t+e Co/anies Act as /aintaina-leM
-) B,en if t+e Co/an Petition as /aintaina-le +et+er
t+e c+allenge raised - RNRL to t+e S?A t+at it is not
a suita-le arrange/ent: as /aintaina-le articularl
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in ,ie of t+e fact t+at on /erits t+e Co/an 3udge
+ad found t+ese o-ections to -e unsustaina-leM
c) #+et+er t+e ?o= entered into a/ongst t+e fa/il
/e/-ers of t+e Pro/oter as -inding uon t+e cororate
entit R"LM
d) #+et+er t+e ter/s of t+e ?o= are reFuired to -e
incororated in t+e S?A as +eld - t+e 8i,ision enc+M
e) #+et+er t+e ro,isions in t+e S?A reFuiring
o,ern/ent aro,al for sul of gas to RNRL is
unreasona-le and t+at its inclusion renders t+e S?A as
not a suita-le arrange/ent: as contended - RNRLM
f) %a,ing insisted uon a as Sale and Purc+ase
Agree/ent (SPA) in confor/it it+ t+e N$PC draft
SPA dated 12t+ ?a 200& +ic+ contained an
uneFui,ocal stiulation for o,ern/ent aro,al for
Fuantit tenure and rice +et+er it is oen to RNRL to
no contend t+at t+e o,ern/ent aro,al for sul of
gas is not reFuired and furt+er t+at t+e ro,ision
reFuiring o,ern/ent aro,als s+ould -e deleted fro/
t+e S?AGSPAM
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g) #+et+er it is necessar for t+is Court to go into t+e
interretation of t+e ro,isions of t+e PSCM
+) i. #+et+er t+e aro,al of t+e o,ern/ent is reFuired
to t+e rice at +ic+ gas is sold - t+e contractor
under t+e PSCM
ii. #+et+er t+e o,ern/ent +as t+e rig+t to regulate
t+e distri-ution of gas roduced +ic+ it +as
e5ercised - utting in lace t+e as =tiliation
Polic under +ic+ sectoral and consu/erise
riorities (to t+e Fuantities secified) +a,e -een
identified and notified to R"LM
iii. #+et+er t+e Contractor +as a +sical s+are in t+e
gas roduced and sa,ed +ic+ it can deal it+ at its
on ,olitionM
i) "n ,ie of t+e as =tiliation Polic and t+e Pricing Polic
of t+e o,ern/ent +et+er t+e Suita-le Arrange/ent:
for sul of gas to 8adri Poer Plant of RBL can onl -e
on t+e sa/e ter/s as are alica-le to ot+er allottees of
gas and t+at too to t+e e5tent of t+e Fuantit of gas t+at
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/a -e allocated - t+e o,ern/ent as and +en t+e
8adri Poer Plant is read to recei,e gasM
2*) All t+ese issues can -e ansered in t+e folloing -road
+eadings
$A% M),*),)>,;,* o& *+ o) *,*,o
i) "t +as -een argued -efore t+is Court t+at t+e original
co/an alication as not /aintaina-le as t+e Co/an
3udge (single 3udge) did not +a,e an urisdiction. "t +as -een
argued t+at t+e urisdiction of t+e Court can onl -e found
under Section '94 of t+e Act and Section '92 is co/letel
inalica-le. R"L +as argued t+is -ecause t+e ording of -ot+
t+e ro,isions suggests t+at Section '92 ro,ides /uc+ ider
oer to t+e Court it+ resect to /a6ing additions in t+e
Sc+e/e. Section '92 (1)(-) states t+at t+e Court /a gi,e
suc+ directions in regard to an /atter or /a6ing suc+
/odifications in t+e co/ro/ise or arrange/ent as it /a
consider necessar for t+e roer or6ing of t+e co/ro/ise
or arrange/ent:. >n t+e ot+er +and Section '94 restricts
t+is oer essentiall to incidental conseFuential and
sule/ental /atters onl:. ?r. R.E. Nari/an learned senior
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counsel aearing for R"L concentrated +is argu/ent it+
reference to Sections '91 to '94 of t+e Co/anies Act.
According to +i/ Section '92 of t+e Act +ad no redecessors
eit+er in Bnglis+ La or in t+e Co/anies Act of 191'. $+e
reason + t+e Legislature aears to +a,e felt t+e necessit
of enacting Section '92 is to -ring Section '91 on ar it+
Section '94. Section '94 alies onl to Co/anies +ic+ are
reconstructing and or a/alga/ating in,ol,ing t+e transfer of
assets and lia-ilities to anot+er Co/an. "t is t+us
alica-le to a secies of t+e genus of Co/an referred to
under Section '91. Section '94 su-section 1 secificall
gi,es t+e Co/an Court t+e oer not /erel to sanction t+e
co/ro/ise or arrange/ent -ut also gi,es t+e Co/an Court
t+e oer - a su-seFuent order to /a6e ro,isions for
suc+ incidental conseFuential and sule/ental /atters as
are necessar to secure t+at t+e reconstruction or
a/alga/ation s+all -e full and effecti,el carried out:
TSection '94(1)(,i)U. $+is oer is a-sent in Section '91 so
t+at co/anies falling it+in Section '91 -ut not it+in
Section '94 ould not -e a/ena-le to t+e Co/an CourtHs
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/a6ing it clear t+at +ere a sc+e/e is go,erned - t+e
ro,isions of Section '94 Section '92 ould +a,e no
alication.
iii) $+e learned Single 3udge founded +is oer to gi,e relief
in t+e Co/an Alication filed - RNRL in Section '92 on
t+e ground t+at t+e alicants cannot -e rendered re/ediless.
Eor t+is ?r. Nari/an ointed out t+at t+e Co/an 3udge
as not correct for t+e si/le reason t+at t+e re/ed lies in
Section '94(1) su-clause (,i) +ic+ gi,es a/le oer to t+e
Co/an Court to full and effecti,el carr out t+e sc+e/e
go,erned - t+e ro,isions of Section '94. %e also ointed out
t+at t+e /arginal note can -e loo6ed at to indicate t+e drift of
t+e Section.
i,) "t is t+e clai/ of t+e R"L t+at t+e oer to enforce t+e
co/ro/ise or arrange/ent includes t+e oer to /a6e suc+
/odifications in t+e co/ro/ise or arrange/ent as t+e Court
/a consider necessar for t+e roer or6ing of t+e
co/ro/ise or arrange/ent. %oe,er ?r. Nari/an furt+er
ointed out t+at t+e oer to /a6e /odifications does not
e5tend o-,iousl to /a6e su-stantial or su-stanti,e
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/odifications to t+e sc+e/e itself +ic+ +as -een assed - at
least 7&J of t+e s+are+olders in e5ercise of t+eir rig+t of
Cororate 8e/ocrac. "n t+e resent case t+e Sc+e/e as
assed - an o,er+el/ing /aorit of /ore t+an 99J of t+e
eFuit s+are+olders of R"L. %e furt+er ointed out t+at aart
fro/ t+e language of Section '92 t+e oer under Section '92
cannot ossi-l -e a greater oer t+an t+e oer under
Section '91 to sanction t+e original sc+e/e. "n *i-""r 5.
*afatlal,s. *afatlal Industri"s %i$it"d(1997) 1 SCC &79
t+is Court delineated t+e e5tent of oer of t+e Co/an
Court under section '91 in ara 29 t+us
2'. %oe,er furt+er Fuestion re/ains +et+er t+e Court
+as urisdiction li6e an aellate aut+orit to /inutelscrutinise t+e sc+e/e and to arri,e at an indeendentconclusion +et+er t+e sc+e/e s+ould -e er/itted to got+roug+ or not +en t+e /aorit of t+e creditors or/e/-ers or t+eir resecti,e classes +a,e aro,ed t+esc+e/e as reFuired - Section '91 su-section (2). >n t+isasect t+e nature of co/ro/ise or arrange/ent -eteent+e co/an and t+e creditors and /e/-ers +as to -e 6etin ,ie. "t is t+e co//ercial isdo/ of t+e arties to t+esc+e/e +o +a,e ta6en an infor/ed decision a-out t+eusefulness and roriet of t+e sc+e/e - suorting it -
t+e reFuisite /aorit ,ote t+at +as to -e 6et in ,ie - t+eCourt. $+e Court certainl ould not act as a court of aealand sit in udg/ent o,er t+e infor/ed ,ie of t+e artiesconcerned to t+e co/ro/ise as t+e sa/e ould -e in t+ereal/ of cororate and co//ercial isdo/ of t+e artiesconcerned. $+e Court +as neit+er t+e e5ertise nor t+eurisdiction to del,e dee into t+e co//ercial isdo/e5ercised - t+e creditors and /e/-ers of t+e co/an +o+a,e ratified t+e Sc+e/e - t+e reFuisite /aorit.ConseFuentl t+e Co/an CourtHs urisdiction to t+at
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e5tent is eri+eral and suer,isor and not aellate. $+eCourt acts li6e an u/ire in a ga/e of cric6et +o +as tosee t+at -ot+ t+e tea/s la t+eir ga/e according to t+erules and do not o,erste t+e li/its. ut su-ect to t+at +o-est t+e ga/e is to -e laed is left to t+e laers and not to
t+e u/ire. $+e suer,isor urisdiction of t+e Co/anCourt can also -e culled out fro/ t+e ro,isions of Section'92 of t+e Act +ic+ reads as under@@..
@@.>f course t+is section deals it+ ostsanctionsuer,ision. ut t+e said ro,ision itself clearl ear/ar6st+e field in +ic+ t+e sanction of t+e Court oerates. "t iso-,ious t+at t+e suer,isor cannot e,er -e treated as t+eaut+or or a olic/a6er. ConseFuentl t+e roriet andt+e /erits of t+e co/ro/ise or arrange/ent +a,e to -eudged - t+e arties +o as sui uris it+ t+eir oen ees
and full infor/ed a-out t+e ros and cons of t+e sc+e/earri,e at t+eir on reasoned udg/ent and agree to -e-ound - suc+ co/ro/ise or arrange/ent. $+e Courtcannot t+erefore underta6e t+e e5ercise of scrutinising t+esc+e/e laced for its sanction it+ a ,ie to finding out+et+er a -etter sc+e/e could +a,e -een adoted - t+earties. $+is e5ercise re/ains onl for t+e arties and is int+e real/ of co//ercial de/ocrac er/eating t+e acti,itiesof t+e concerned creditors and /e/-ers of t+e co/an +oin t+eir -est co//ercial and econo/ic interest - /aorit
agree to gi,e green signal to suc+ a co/ro/ise orarrange/ent@@.
,) Again in S.'. Gu/ta & Anr. !s. '.6. ain & Anr. (1979)
' SCC &4 t+is Court dealt it+ t+e creditorsH sc+e/e
roounded under Section '91 to get a articular Co/an
out of inding u. >-ser,ations /ade in aragra+s 1' and
1& of t+is udg/ent if read out of conte5t ould /a6e it clear
t+at t+is Court +as e5tended t+e oer under section '92 to
/a6e /odifications +ic+ ould include additions and
o/issions to t+e sc+e/e at ill. $+is is not t+e correct45
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urort of t+e o-ser,ations in ara 1' and 1&. "n fact t+e
udg/ent ,er clearl states t+at t+e li/it on t+e CourtHs
oer is alas to see t+at t+e /odifications are done for t+e
roer or6ing of t+e sc+e/e and not for an ot+er urose.
A ,er i/ortant aragra+ of t+e udg/ent is ara 27 +ere
t+is Court ulti/atel o-ser,ed strictl sea6ing o/ission of
t+e original sonsor and su-stituting anot+er one ould not
c+ange t+e O-asic fa-ricH of t+e sc+e/e:. $+is udg/ent
t+erefore /ust -e understood as construing Section '92 in a
/anner t+at ould not er/it t+e Co/an Court to so
/odif a sc+e/e as to c+ange its -asic fa-ric.
,i) Anot+er udg/ent of t+is Court is in *"-al -o$"s (6)
%td.,s. S-r"" Ni7as Girni '.'. Sa$iti & Ors.(2007) 7 SCC
7&' +ic+ sFuarel raises t+e issue as to +et+er in t+e guise
of /odifing a sc+e/e t+e Co/an Court can su-stitute a
ortion of t+e original sc+e/e. $+is Court said an e/+atic
no
&'.ut -efore t+at e t+in6 t+at anot+er ste +as to -eta6en in t+is case. #+at +as no -een acceted - t+e8i,ision enc+ is not t+e sc+e/e as /odified - t+eeneral ?eeting as conte/lated - Section '91 of t+e Act.At least to of t+e /odifications +a,ing ra/ifications are-ased on underta6ings or state/ents /ade on -e+alf ofLPL and t+ere aears to -e difference of oinion on t+at/odification e,en a/ong t+e So/anis. $+ere is also t+eFuestion +et+er t+e roosals of a erson +o is not one of
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t+ose recognised - Section '91 of t+e Act could -eacceted - t+e Co/an Court +ile aro,ing a sc+e/e.#e are of t+e ,ie t+at t+e sc+e/e it+ t+e /odifications asno roosed or acceted +as to go -ac6 to t+e eneral?eeting of t+e /e/-ers of t+e Co/an called inaccordance it+ Section '91 of t+e Act and t+e reFuisite
/aorit o-tained.
&4."t as argued on -e+alf of t+e resondents t+at underSection '92 of t+e Act t+e court +as t+e oer to /a6e/odifications in t+e co/ro/ise or arrange/ent as it /aconsider necessar and t+is oer ould include t+e oerto aro,e +at +as -een ut forard - LPL +o +asco/e forard to disc+arge t+e lia-ilities of t+e Co/an ont+e rig+ts in t+e roerties of t+e Co/an ot+er t+an in t+eoffice -uilding and in t+e godon -eing gi,en to it forde,elo/ent and sale. As e read Section '92 of t+e Act itonl gi,es oer to t+e court to /a6e suc+ /odifications int+e co/ro/ise or arrange/ent as it /a consider
necessar for t+e roer or6ing of t+e co/ro/ise orarrange/ent. $+is is onl a oer t+at ena-les t+e court toro,ide for roer or6ing of co/ro/ise or arrange/ent itcannot -e understood as a oer to /a6e su-stantial/odifications in t+e sc+e/e aro,ed - 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 /a -econsidered necessar for t+e roer or6ing of t+eco/ro/ise or arrange/ent cannot -e ta6en as t+e sa/e asa /odification in t+e co/ro/ise or arrange/ent itself andan suc+ /odification in t+e sc+e/e or arrange/ent or anessential ter/ t+ereof /ust go -ac6 to t+e eneral ?eeting
in ter/s of Section '91 of t+e Act and a fres+ aro,alo-tained t+erefor. $+e fact t+at no /e/-er or creditoroosed it in court cannot -e considered as a su-stitute forfolloing t+e reFuire/ents of Section '91 of t+e Co/aniesAct for aro,al of t+e co/ro/ise or arrange/ent as no/odified or roosed 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+eacceta-ilit of a sc+e/e e,en in resect of a co/an not inliFuidation. $+erefore e are not in a osition to accet t+eargu/ent on -e+alf of t+e resondents t+at t+e sc+e/e noas /odified - t+e decision of t+e 8i,ision enc+ need notgo -ac6 to t+e eneral ?eeting of t+e /e/-ers in ter/s ofSection '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 -one of t+e So/anis +o are t+e ro/oters of t+e Co/anin liFuidation and t+e sonsors of t+e arrange/ent and t+ato-ection cannot -e -rus+ed aside.
&7. #e find t+at t+e /odifications roosed alters t+eosition of t+e s+are+olders ,isV,is t+e Co/an. "nsteadof t+e Co/an re,i,ing t+e sinning unit as reco//ended
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- t+e State an6 of "ndia Caital ?ar6ets Li/ited asadoted in t+e eneral ?eeting no t+e Co/an ill +a,enot+ing to do it+ t+e /ill lands and t+e +ole of t+e /illlands ill ass on to LPL on LPL aing a ,alue ofRs 97.&0 crores to SC?L and LPL ill start an industr ofits on in t+at roert. $+is cannot -e considered to -e a
/odification in t+e sc+e/e necessar for t+e roer or6ingof t+e co/ro/ise or arrange/ent. $+is is a /odification oft+e sc+e/e itself. Sa/e is t+e osition regarding t+ero,ision of relacing t+e resolution assed t+at if ansurlus a/ounts are a,aila-le SC?L ould start a ,ia-leindustr in an art of t+e State of ?a+aras+tra - aco//it/ent t+at SC?L ould esta-lis+ an industr in anart of t+e State of ?a+aras+tra on an in,est/ent of Rs 20crores. $+is again is an o-ligation cast on t+e /e/-ers ofSC?L and e are of t+e ,ie t+at t+is cannot also -e ta6ento -e a /odification +ic+ t+e court can -ring a-out on itson under Section '92 of t+e Act on t+e rete5t t+at it is a/odification necessar for t+e roer or6ing of t+e
co/ro/ise or arrange/ent. #e +a,e no +esitation in+olding t+at in an e,ent t+e 8i,ision enc+ of t+e %ig+Court oug+t to +a,e directed a recon,ening of t+e /eeting oft+e /e/-ers of t+e Co/an in ter/s of Section '91 of t+eAct to consider t+e /odifications and ensured t+at t+earo,al t+ereof - t+e reFuisite /aorit e5isted.:
,ii) ?r. Nari/an +as su-/itted t+at t+e Co/an 3udge in
t+e resent case referred to S. '. Gu/tas (su/ra)case and
finall +eld t+at since Sections '91 to '94 are interconnected
it ould -e a-le to grant relief as6ed for in a Co/an
Alication filed under Section '92. "t is t+e clai/ of t+e ?r.
Nari/an t+at it is not onl incorrect -ut it ould not -e
ossi-le in e5ercise of oer under Sections '92 or '94 to
/odif t+e ter/s of clause 19 of t+e Sc+e/e. "nsofar as t+e
8i,ision enc+ according to +i/ goes into ,arious clauses of
t+e Sc+e/e to sa t+at t+e su-seFuent oer of /odification
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of t+e Sc+e/e itself is contained in t+ese Clauses /ore
articularl clause 22. %e contended t+at e,en if it is to -e
alied no /odification can -e /ade under it it+out t+e
consent of t+e arties to t+e Sc+e/e. According to +i/ if t+e
conclusion of t+e 8i,ision enc+ is acceted t+e resultant
order of t+e 8i,ision enc+ is contrar to Clause 22 in t+at it
ould not -e ossi-le to read t+e ?o= dated 1*.0.200& into
Clause 19 of t+e Sc+e/e it+out t+e consent of t+e
S+are+olders and t+e oard of 8irectors of R"L. %e insisted
t+at t+e 8i,ision enc+ of t+e %ig+ Court as -ound - t+e
udg/ent in *"-al 5o$"s +ere t+e urisdiction of t+e
Co/an Court under Section '92 as clearl selt 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 - t+e o/-a %ig+ Court ,ide its order dated
09.12.200&. As er t+e said Sc+e/e R"L as reFuired to
e5ecute a suita-le arrange/ent for sul of gas to RNRL.
%oe,er R"L +as rongfull caused t+e e5ecution of a
docu/ent t+e effect of +ic+ ould -e t+at t+e -usiness of
sul of gas as conte/lated in t+e Sc+e/e of Arrange/ent
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ould 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 ell as
se,eral clauses of t+e Sc+e/e render t+e sa/e ,irtuall
unor6a-le. "n t+ese circu/stances it is ointed out t+at
RNRL +as aroac+ed t+e Co/an Court see6ing suita-le
reliefs under Section '92 of t+e Co/anies Act.
i5) "n t+e earlier art t+e udg/ent of t+is Court in S.'.
Gu/ta (su/ra)+as -een discussed. "t is t+e dut of t+e Court
to ensure t+at t+e Sc+e/e is full i/le/ented. Learned
senior counsel for t+e RNRL ointed out t+at in t+is case it
ould i/l t+at t+is Court /ust ensure t+at t+e gas -ased
energ underta6ing is in fact transferred to RNRL as
conte/lated under t+e Sc+e/e. Eor t+is urose t+e Court
+as t+e urisdiction and oer to direct /odification of t+e
S?A +ic+ as reFuired to -e e5ecuted ursuant to clause
19 of t+e Sc+e/e. Learned senior counsel furt+er contented
t+at Section '92 s+os t+e idt+ of t+e oer 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. $+e onl li/itation on t+e
oer of t+e Court is t+at it cannot c+ange t+e -asic structure
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or c+aracter or urose of t+e Sc+e/e. "t as furt+er ointed
out t+at su-ect to t+is t+e oer is of idest a/litude and
unli/ited. >n -e+alf of t+e RNRL it as ointed out t+at t+e
decision of t+is Court in *"-al 5o$"s (su/ra) is not
alica-le to t+e resent case firstl t+is udg/ent accets
t+e rincile t+at t+e Court +as ide oer under Section '92
t+oug+ t+e sa/e are circu/scri-ed secondl t+e said
udg/ent does not refer to Gu/tas cas"+ic+ as a -inding
decision of a t+ree3udge enc+. Eurt+er in *"-al 5o$"s
(su/ra)t+e c+allenge as t+e oer of t+e Court to sanction
t+e Sc+e/e and not oer to direct /odification to an alread
sanctioned Sc+e/e.
5) "n t+e lig+t of t+e stand ta6en - -ot+ arties t+is Court
analed t+e relief soug+t for in t+e Co/an Alication and
t+e rele,ant /aterials laced -efore t+e Co/an 3udge.
Section '92 creates a dut to suer,ise t+e carring out of t+e
co/ro/ise or arrange/ent. $+is oer and dut as
created to ena-le t+e Court to ta6e stes fro/ ti/e to ti/e to
re/o,e all o-stacles in t+e a of enforce/ent of a sanctioned
sc+e/e. #+ile sanctioning it s+all anticiate so/e +itc+es
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and difficulties +ic+ it can re/o,e - t+e order of t+e
sanction itself -ut clause 1(-) /a6es it clear t+at t+is oer
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 oer of /odification is unli/ited t+e
onl li/it -eing t+at t+e /odification s+ould -e necessar for
t+e or6ing arrange/ent.
5i) "n ,ie of t+e a-o,e discussion t+is Court +olds t+at
Section '92 is alica-le to t+e Co/an Alication filed -
RNRL. $+is is /ore so -ecause t+e Co/an Court +as
originall sanctioned t+e sc+e/e under -ot+ Sections '91 and
'94. Eurt+er t+e osition deri,ed fro/ Gu/ta (su/ra) t+e
oer of t+e Court under Section '92 is ide enoug+ to /a6e
an c+anges necessar for t+e or6ing of t+e Sc+e/e.
$+erefore Court does +a,e urisdiction o,er t+e resent
/atter. %oe,er it is /ade clear t+at t+e oer of t+e Court
does not e5tend to reriting t+e Sc+e/e in an /anner.
5ii) Eurt+er/ore in t+e Co/anies Act t+ere is no ro,ision
e5cet Section '91 to Section '94 +ic+ deal it+ t+e
rocedure and oer of t+e Co/an Court to sanction t+e
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Sc+e/e +ic+ fall it+in t+e a/-it of t+e reFuire/ents as
conte/lated under t+ese sections. "n t+e a-sence of an
ot+er ro,isions e5cet Section '92 it is difficult to accet t+e
contention as raised t+at t+e resent alication under
Section '92 of t+e Co/anies Act is it+out urisdiction. >n
t+e ot+er +and Section '91 to Section '94 +as a/le oer
and urisdiction to suer,ise t+e sc+e/e as sanctioned under
t+e Co/anies Act. As rig+tl o-ser,ed - t+e Co/an
3udge t+e e5igencies facts and circu/stances la do/inant
role in assing aroriate order under Sections '91 to '94
after sanctioning of t+e Sc+e/e. $+e Co/an Court is not
oerless and can ne,er -eco/e functus officio. Sections '91
to '94 are interconnected and it can ass aroriate order
for sanctioning of an Sc+e/e including of arrange/ent
de/erger /erger and a/alga/ation. $+erefore t+e
alication filed - RNRL under Section '92 is /aintaina-le.
Ne,ert+eless as o-ser,ed earlier t+e oer of t+e Court does
not e5tend to reriting t+e Sc+e/e in an /anner.
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$B% Mo:)8 o& U8:*)8,9 $MoU%
i) "n order to understand t+e osition of RNRL and R"L as
ell as suita-le arrange/ent: under t+e Sc+e/e: it is -ut
roer to refer t+e contents of ?o= (laced -efore t+e 8i,ision
enc+ of t+e %ig+ Court) +ic+ are as under
S$R"C$LK C>NE"8BN$"AL
?B?>RAN8=? >E =N8BRS$AN8"N
$+is ?e/orandu/ of =nderstanding (t+is ?o=:) is /ade at?u/-ai t+isWWW da of 3une 200& a/ongst Do6ila-en 8.A/-ani (Do6ila-en:) ?u6es+ 8. A/-ani (?u6es+:) andAnil 8. A/-ani (Anil:) (eac+ of Do6ila-en ?u6es+ and Anil+ereinafter referred to indi,iduall as a Part: andcollecti,el as t+e Parties.:)#%BRBAS
A. After t+e de/ise of S+ri 8+iru-+ai % A/-ani (late8+iru-+ai) on 3ul 2002 Do6ila-en is t+e +ead oft+e A/-ani fa/il and +as co/lete /oral aut+orit
o,er t+e fa/il. %er four c+ildren ?u6es+ Anil 8itiand Nina +a,e - 8eed of Release dated >cto-er 172002 released t+eir entire interest in t+e estate of late8+iru-+ai in +er fa,our.
. ?u6es+ and Anil +a,e -een /anaging t+e ,arious-usinesses of t+e fa/il co/rised in t+e Reliancerou (t+e usinesses:). 8ifferences +a,e arisen-eteen t+e/ in t+is -e+alf and +a,ing regard torecent e,ents and it+ t+e inter,ention of Do6ila-ent+e Parties +a,e no agreed t+at t+e -est a forard
ould -e to +a,e a segregation of t+e oners+i andusinesses into to grous it+ one grou oned/anaged and controlled - ?u6es+ and t+e ot+eroned /anaged and controlled - Anil. ?ost of t+e6e rinciles relating to t+e segregation of certainfa/il assets including controlling interest in t+eusinesses and co/anies +a,e -een agreed to-eteen t+e Parties.
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C. ?u6es+ and Anil +a,e also e5ressed t+eirunconditional trust in Do6ila-en and agreed t+at s+es+all la a final and decisi,e role in resol,ing anoen issues in t+e rocess of settle/ent and t+at t+es+all a-ide - all decisions /ade - +er to facilitate
earl closure of t+e settle/ent.
8. $+e Parties are no desirous of for/all recordingt+eir agree/ent in t+is -e+alf.:
ii) "t +as -een t+e consistent osition of RNRL t+at t+e ?o=
signed -eteen ?u6es+ A/-ani and Anil A/-ani is -inding
and t+erefore t+e suita-le arrange/ent: under t+e sc+e/e:
s+ould -e not+ing -ut t+e ?>= itself. >n t+e ot+er +and R"L
+as consistentl argued t+at t+e ?>= is not -inding for t+e/
since it is /erel a nonlegal instru/ent -eteen certain
fa/il /e/-ers. $+erefore it as argued t+at it ill not -ind
t+e co/anies and t+e s+are+olders +o +a,e a co/letel
different ersonalit.
iii) ?r. Ra/ 3et+/alani learned senior counsel aearing
for t+e RNRL strongl relied on t+e folloing decisions of t+is
Court it+ reference to t+e i/ortance of fa/il arrange/ent
(?o=) and its effect and ,alue.
1. 'al" & Ors. ,s. 1"/ut+ 1ir"ctor of Consolidation &
Ors., (197) ' SCC 119 (Paragra+s 9 17 19 ; 42) +ic+
states as under55
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9@@@@A fa/il arrange/ent - +ic+ t+e roert iseFuita-l di,ided -eteen t+e ,arious contenders so as toac+ie,e an eFual distri-ution of ealt+ instead ofconcentrating t+e sa/e in t+e +ands of a fe is undou-tedla /ilestone in t+e ad/inistration of social ustice. $+at is
+ t+e ter/ fa/il: +as to -e understood in a ider senseso as to include it+in its fold not onl close relations orlegal +eirs -ut e,en t+ose ersons +o /a +a,e so/e sortof antecedent title a se/-lance of a clai/ or e,en if t+e+a,e a ses successionis so t+at future disutes are sealedfor e,er and t+e fa/il instead of fig+ting clai/s inter se andasting ti/e /one and energ on suc+ fruitless or futilelitigation is a-le to de,ote its attention to /ore constructi,eor6 in t+e larger interest of t+e countr. $+e courts +a,et+erefore leaned in fa,our of u+olding a fa/ilarrange/ent instead of distur-ing t+e sa/e on tec+nical ortri,ial grounds. #+ere t+e courts find t+at t+e fa/ilarrange/ent suffers fro/ a legal lacuna or a for/al defectt+e rule of estoel is ressed into ser,ice and is alied tos+ut out lea of t+e erson +o -eing a art to fa/ilarrange/ent see6s to unsettle a settled disute and clai/sto re,o6e t+e fa/il arrange/ent under +ic+ +e +as+i/self enoed so/e /aterial -enefits@@..
17. "n rishna !iharilal,. "ulabchand,#$%# # &'' ()%,it as ointed out t+at t+e ord fa/il: +ad a ,er ideconnotation and could not -e confined onl to a grou of
ersons +o ere recognised - la as +a,ing a rig+t ofsuccession or clai/ing to +a,e a s+are.
1'.$+us it ould aear fro/ a re,ie of t+e decisionsanalsed a-o,e t+at t+e courts +a,e ta6en a ,er li-eral and-road ,ie of t+e,alidit of t+e fa/il settle/ent and +a,ealas tried to u+old it and /aintain it. $+e central idea int+e aroac+ /ade - t+e courts is t+at if - consent ofarties a /atter +as -een settled it s+ould not -e alloed to-e reoened - t+e arties to t+e agree/ent on fri,olous oruntena-le grounds.
42@@@.As o-ser,ed - t+is Court in T.*.+. &ubbu 'hettys-aily 'harities case t+at if a erson +a,ing full 6noledgeof +is rig+t as a ossi-le re,ersioner enters into atransaction +ic+ settles +is clai/ as ell as t+e clai/ oft+e oonents at t+e rele,ant ti/e +e cannot -e er/ittedto go -ac6 on t+at agree/ent +en re,ersion actuall fallsoen.:
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2. '.'. *odi ,s. '.N. *odi & Ors. (199*) ' SCC &7'
(Paragra+s '' ; &2) +ic+ states as under
''. "n t+e resent case t+e ?e/orandu/ of =nderstandingrecords t+e settle/ent of ,arious disutes as -eteen rouA and rou in ter/s of t+e ?e/orandu/ of=nderstanding. "t essentiall records a settle/ent arri,ed atregarding disutes and differences -eteen t+e to grous+ic+ -elong to t+e sa/e fa/il. "n ter/s of t+e settle/entt+e s+ares and assets of ,arious co/anies are reFuired to-e ,alued in t+e /anner secified in t+e agree/ent. @@
&2. rou A contends t+at t+ere is no /erit in t+e c+allengeto t+e decision of t+e C+air/an of "EC" +ic+ +as -een /ade
-inding under t+e ?e/orandu/ of =nderstanding. $+eentire ?e/orandu/ of =nderstanding including clause 9+as to -e loo6ed uon as a fa/il settle/ent -eteen,arious /e/-ers of t+e ?odi fa/il. =nder t+e/e/orandu/ of =nderstanding all ending disutes inresect of t+e rig+ts of ,arious /e/-ers of t+e ?odi fa/ilfor/ing art of eit+er rou A or rou +a,e -een finallsettled and adusted. #+ere it +as -eco/e necessar to slitan of t+e e5isting co/anies t+is +as also -een ro,idedfor in t+e ?e/orandu/ of =nderstanding. "t is a co/letesettle/ent ro,iding +o assets are to -e ,alued +o t+e
are to -e di,ided +o a sc+e/e for di,iding so/e of t+esecified co/anies +as to -e reared and +o +as to dot+is or6. "n order to o-,iate an disute t+e arties +a,eagreed t+at t+e entire or6ing out of t+is agree/ent ill -esu-ect to suc+ directions as t+e C+air/an "EC" /a gi,eertaining to t+e i/le/entation of t+e ?e/orandu/ of=nderstanding. %e is also e/oered to gi,e clarificationsand decide an differences relating to t+e i/le/entation oft+e ?e/orandu/ of =nderstanding. Suc+ a fa/ilsettle/ent +ic+ settles disutes it+in t+e fa/il s+ouldnot -e lig+tl interfered it+ eseciall +en t+e settle/ent
+as -een alread acted uon - so/e /e/-ers of t+e fa/il."n t+e resent case fro/ 19*9 to 199& t+e ?e/orandu/ of=nderstanding +as -een su-stantiall acted uon and +encet+e arties /ust -e +eld to t+e settle/ent +ic+ is in t+einterest of t+e fa/il and +ic+ a,oids disutes -eteen t+e/e/-ers of t+e fa/il. Suc+ settle/ents +a,e to -e ,ieeda little differentl fro/ ordinar contracts and t+eir internal/ec+anis/ for or6ing out t+e settle/ent s+ould not -elig+tl distur-ed. $+e resondents /a /a6e aroriate
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su-/issions in t+is connection -efore t+e %ig+ Court. #eare sure t+at t+e ill -e considered as and +en t+e %ig+Court is reFuired to do so +et+er in interlocutorroceedings or at t+e final +earing.:
i,) %oe,er ?r. %aris+ N. Sal,e learned senior counsel for
t+e R"L +ile draing our attention to Section ' of t+e
Co/anies Act 19& su-/itted t+at t+e ?e/orandu/ and
Articles s+all -ind t+e co/an and its /e/-ers. According
to +i/ t+e Articles of Association are t+e regulations of a
co/an +ic+ are -inding on t+e co/an and its
s+are+olders. %e t+erefore ointed out t+at not+ing outside
t+e Articles can -ind a s+are+older ,isV,is t+e co/an. "n
suort of t+e a-o,e stand +e +ea,il relied on aragra+ 9 of
t+e udg/ent of t+is Court in 9.!. anara: ,s. 9.!.
Go/al,ris-nan & Ors. A"R 1992 SC 4&' +ic+ reads as
under
9. @..t+e ri,ate agree/ent +ic+ is lied uon - t+elaitniffs +ereunder t+ere is a restriction on a li,ing/e/-er to transfer +is s+are+olding onl to t+e -ranc+ offa/il to +ic+ +e -elongs in ter/s i/oses to restrictions+ic+ are not stiulated in t+e Article. Eirstl it i/oses a
restriction on a li,ing /e/-er to transfer t+e s+ares onl tot+e e5isting /e/-ers and secondl t+e transfer +as to -eonl to a /e/-er -elonging to t+e sa/e -ranc+ of fa/il.$+e agree/ent o-,iousl t+erefore i/oses additionalrestrictions on t+e /e/-ers rig+t to transfer +is s+ares+ic+ are contrar to t+e ro,isions of t+e Art.1'. $+e aret+erefore not -inding eit+er on t+e s+are+olders or on t+eco/an@@:
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29) "t is seen fro/ t+e a-o,e decision t+at t+e agree/ent
-eteen t+e to grous of s+are+olders +ic+ i/ose certain
restrictions on t+e transfera-ilit of t+e s+ares +eld - t+e/
as not -inding eit+er on t+e co/an or its s+are+olders
-ecause t+e restrictions so i/osed - t+e agree/ent ere
contrar to t+e ro,isions of t+e Articles sale of s+ares +eld
- one of t+e to grous in -reac+ of t+e agree/ent could not
t+erefore -e +eld to -e ,alid. %e also ointed out t+at t+e
agree/ent -eteen t+e s+are+olders is not -inding on t+e
co/an unless t+e co/an adots it and it is incororated
in t+e Articles of Association. ased on t+e a-o,e rinciles
+e ointed out t+at t+e de/erger Sc+e/e as -ased on t+e
?o= and -e treated as guidance to t+e ter/ suita-le
arrange/ent. %e also ointed out t+at a fa/il arrange/ent
or t+e ?o= +as not -een referred to at an stage in t+e
Sc+e/e or in an reresentation /ade to t+e Stoc6 B5c+ange
and t+e sa/e is contrar to t+e RNRLHs on 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 E: filed - RNRL.
So/e of t+e lettersGe/ail dated '0.07.200& fro/ ?r. %aris+
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S+a+ (R"L) to ?r. !en6at Rao (RBL)I e/ail dated 0.10.200&
fro/ ?r. Cril S+roff to ?r. Sandee $andonGR"LI e/ail
dated 29.11.200& fro/ ?r. Cril 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 disuted t+e contents of t+e
letters or corresondences and e/ails referred t+erein. $+e
e5istence of lettersGcorresondence and e/ails re/ain
unc+allenged.
'0) "n t+e lig+t of t+e stand ta6en - -ot+ sides t+is Court
analsed t+e contents of ?o= and t+e su-seFuent
arrange/ent after e5c+ange of ,arious lettersGe/ails as ell
as deli-erations a/ong t+e officials of -ot+ t+e entities. "t is
clear t+at -ot+ arties acted uon t+e said fa/il
arrange/entG?o= dated 1*.0.200&. $+e a-o,e referred
letters and e/ails furt+er confir/ed t+at t+ere is an
arrange/ent /ade and agreed -eteen t+e R"L and A8A
(RNRL) it is also clear and s+o t+at t+e discussion -eteen
t+e grou of officials as intended to e5edite t+e
i/le/entation of t+e ?o= - roducing a suita-le
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arrange/ent:. $+oug+ co of t+e ?o= as not art of t+e
record -efore t+e Co/an 3udge - consent t+e a-o,e
e5tracted ortion as laced -efore t+e 8i,ision enc+ at t+e
ti/e of +earing of t+e aeal. "t cannot -e acceted t+at
neit+er R"L nor its oard ?e/-ers ere aare of t+e contents
of t+e ?>=. "n fact t+e Co/an 3udge +as ointed out t+at
a secific reference as /ade in t+e Co/an Alication No.
1122 of 200 and t+ere is no secific denial - t+e R"L. $+e
Press Release at t+e instance of t+eir /ot+er S/t. Do6ila-en
A/-ani (B5+. 8:) a-out t+e fa/il arrange/entG?>= cannot
-e o,erloo6ed. "t is clear t+at -ecause of t+e efforts of S/t.
Do6ila-en A/-ani t+e /ot+er of ?u6es+ A/-ani ; Anil
A/-ani t+e fa/il settle/ent +as -een arri,ed at and
folloed - 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 - t+e officials of -ot+ entities and t+eir oard of
8irectors as ell as t+e s+are+olders +a,e agreed for t+e
Sc+e/e. Eurt+er it as de/onstrated t+at after e5ecution of
?>= -ot+ t+e arties +a,e -een entering into contracts and
agree/ents as an indeendent entit. As ointed out t+at
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e5cet t+e gas sul agree/ent all ot+er co/anies as found
are or6ing and running t+eir affairs s/oot+l.
'1) efore t+e 8i,ision enc+ it as su-/itted - R"L t+at
t+e ?o= a/ongst t+e ro/oters does not -ind t+e cororate
entit R"L. "t as not oen to RNRL to roduce t+e docu/ents
at t+e stage of aeal +ic+ ere not laced -efore t+e learned
Single 3udge. $+e ?o= as clearl in t+e ri,ate do/ain and
as ne,er laced in t+e cororate do/ain e,en t+oug+ suc+
course of action as suggested - ?r. Cril S+roff t+e
Solicitor aointed to dra t+e Sc+e/e of 8e/erger. "t as
also t+e stand of t+e R"L t+at ?o= as ne,er laced -efore its
oard of 8irectors and contents t+ereof ere not 6non to t+e
oard. $+e corresondence contained in B5+i-it E of t+e
Co/an Alication at -est goes to s+o t+at ?o= as t+e
-road structure on +ic+ t+e de/erger as to -e or6ed out.
'2) >n t+e ot+er +and learned senior counsel aearing for
t+e RNRL de/onstrated t+e e5istence effect sanctit and t+e
-inding nature of ?o=. "t is t+eir definite case t+at t+e
e5istence of ?o= as secificall leaded in ara . of t+e
Co/an Petition. Learned Co/an 3udge found t+at t+e
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?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=
concerning t+e gas -usiness +a,e alread -een laced -efore
t+e 8i,ision enc+ in aeal it+ t+e consent of t+e arties
and t+e rele,ant ter/s relating to rice tenure ,olu/e etc.
are ad/itted -eteen t+e arties it is onl t+e interretation
t+ereof +ic+ is to -e considered. Eurt+er t+e ?o= itself
see6s to di,ide t+e -usiness into to grous i.e. Anil A/-ani
rou and ?u6es+ A/-ani rou +erein -ot+ indi,iduals
ould control and suer,ise ,arious -usinesses t+roug+
,arious cororate 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/an Court. Aart fro/ t+is it as ointed out t+at t+e
oard of R"L /ade a u-lic announce/ent on 1*.0.200& i.e.
soon after t+e e5ecution of ?o= on t+e sa/e da u-licl
ac6noledging it+ gratitude to t+eir /ot+er S/t. Do6ila-en
t+at a settle/ent of disutes +as -een reac+ed -eteen t+e
/e/-ers of t+e fa/il. Eurt+er B5+i-it E reflects t+e
6noledge of t+e ter/s of ?o= it+ t+e senior officials of -ot+
sides +erein efforts ere -eing /ade to or6 out /utuall
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negotiated S?AGSPA +ic+ ould -e in line it+ ?o=.
'') Aart fro/ t+e a-o,e factual details ?r. Ra/
3et+/alani learned senior counsel aearing for RNRL
e5lained t+e 8octrine of "dentification and su-/itted t+e
fa/il arrange/ent as arri,ed at and signed - S/t.
Do6ila-en A/-ani S+ri ?u6es+ A/-ani and S+ri Anil
A/-ani. A/ong t+e t+ree S+ri ?u6es+ A/-ani as and is
t+e C+air/an and ?anaging 8irector of R"L. As er t+e
8octrine of "dentification a co/an is identified it+ suc+ of
its 6e ersonnel t+roug+ +o/ it or6s. ?r. 3et+/alani
furt+er ointed out t+at +is actions are dee/ed to -e action of
t+e co/an itself +ence R"L is dee/ed to -e aare of and
-ound - t+e actions of t+e ?anaging 8irector. "n suort of
t+e rincile 8octrine of "dentification: +e relied on decisions
of t+is Court na/el Union of India ,s. Unit"d India
Insuranc" Co. %td.(1997) * SCC *' at age 9& Assistant
Co$$ission"r Ass"ss$"nt;II !analor" & Ors. ,s. *s
9"llia//a #"
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3actori"s and !oil"rs & Ors. (199) SCC & aragra+s
44 ; 4&.
'4) "n t+e lig+t of t+e stand ta6en - R"L and RNRL t+e
contents of ,arious clauses in ?o= articularl it+ regard to
distri-ution of gas and also t+e conclusion arri,ed - t+e
Co/an 3udge and t+e 8i,ision enc+ of t+e %ig+ Court
+a,e -een carefull ,erified.
'&) Eirstl t+e ?o= is not tec+nicall -inding -eteen R"L
and RNRL. "t is not in disute t+at ?o= is -eteen t+ree
ersons and t+e ersonalit of t+e co/an /ust -e
construed searate fro/ t+ese ersons. $+e rincile
e/+asied - ?r. 3et+/alani i.e. 8octrine of "dentification
/a -e alica-le onl in resect of s/all underta6ings -ut in
t+e case of R"L and RNRL t+e co/anies +a,e /ore t+an
t+ree /illion s+are+olders in suc+ a situation one cannot
/a6e t+e co/aniesH ersonalit t+e sa/e as t+at of ersons
in,ol,ed.
') Secondl in t+e lig+t of t+e conduct of ?u6es+ A/-ani
C+air/an of R"L ?o= as definitel t+e instru/ent +ic+
as t+e -asis of t+e sc+e/e. $+erefore it can -e used as an
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e5ternal aid for t+e interretation of suita-le agree/ent:
under t+e sc+e/e. $o ut it clear t+e ?o= is one of t+e as
in +ic+ t+e intention of t+e arties can -e /ade clear it+
regard to +at as considered suita-le. Ne,ert+eless t+ere is
no secific reFuire/ent t+at t+e S?A /ust confir/
co/letel it+ t+e ?o=.
'7) $+irdl it /ust -e ointed out t+at aart fro/ t+e ?o=
suita-le arrange/ent: /ust -e understood in t+e conte5t of
go,ern/ent olicies roduction s+aring contract (PSC)
-eteen R"L and t+e o,ern/ent national interest and
interest of t+e s+are+olders. $+erefore in our ,ie ?o= is one
of t+e /eans of construing suita-ilit of t+e arrange/ent and
not t+e sole /eans.
$C% (SMA )8 (SPA ;
)::)9*
'*) Su-seFuent to t+e for/ation of t+e Sc+e/e t+e oard
of 8irectors of R"L fra/ed t+e S?A and SPA. As er t+e
Sc+e/e clause !""" and su-clause (5,ii) t+e oard of
8irectors of eac+ of t+e resulting co/anies to -e re
constituted in suc+ /anner as is agreed -eteen eac+
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resulting co/anies and Anil A/-ani and t+ereuon eac+ of
t+e resulting co/anies s+all -e controlled and /anaged -
Anil A/-ani. $+e de/erged co/an constituting t+e
re/aining =nderta6ings s+all continue to -e controlled and
/anaged - ?u6es+ 8. A/-ani. As er t+e rea/-le of t+e
Sc+e/e and e,en ot+erise t+e R"L -eing contractor in
ursuance to t+e PSC 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 of as
ased Poer eneration of "ndia. R"L roosed to use art of
its gas disco,ered for t+e generation of oer for +ic+
urose an aroriate gas sul arrange/ent agreed to -e
entered into -eteen R"L and lo-al Euel ?anage/ent
Ser,ices Li/ited (no RNRL) ursuant to +ic+ gas agreed to
-e sulied to RBL for t+eir oer roects including Reliance
Patalganga Poer Li/ited for t+e generation of oer. $+is
-usiness of sul of gas to RBL for t+eir oer roects is an
integrated andGor constitute t+e as ased Bnerg
=nderta6ing of R"L. $+e intention t+erefore t+roug+out as
e,en under t+e Sc+e/e to reorganie and segregate t+e
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-usiness and underta6ings to ro,ide focused /anage/ent
attention. "n t+is -ac6ground it as contended - learned
senior counsel aearing for RNRL t+at it as necessar t+at
R"L s+ould +a,e gi,en full and roer oortunit to t+e RNRL
-efore assing suc+ resolution +urriedl on 11.01.200 and
-efore e5ecuting suc+ S?A and SPA in Fuestion. As er
clause 19 as recorded t+e suita-le arrange/ent s+ould -e
suita-le to -ot+ t+e arties in all resects. "n t+is asect t+e
decision as ta6en +urriedl on 11.01.200 t+erefore as one
sided secificall ta6ing into consideration t+e -ac6ground
andGor e,ents folloed uto t+e sanctioning of t+e Sc+e/e.
As noted t+e control o,er t+e oard of t+e RNRL on
10.01.200 as of R"L as control o,er +as not -een +anded
o,er to Anil A/-ani. >n 2.01.200 final co of SPA as
/ade a,aila-le - no/inee of R"L to no/inee of A/-ani
rou. $+e drafts of S?A and SPA ere onl circulated on
10.01.200 t+roug+ /ail. "t is to -e noted t+at s+ares of
RNRL ere allottedGtransferred to Anil A/-ani onl on
27.01.200 i.e. after t+e oard /eeting +eld on t+e sa/e da.
$+e Ne oard as reconstituted in accordance it+ clause
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17 of t+e Sc+e/e on 07.02.200. As er clause R"L
continued to /anage t+e resulting co/anies till t+e effecti,e
date in t+e caacit of trustees. $+erefore it is t+e clai/ of
RNRL t+at t+e oard of t+e ?eeting and t+e Resolution andGor
e5ecution of t+e said S?A on 11.01.200G12.01.200 -efore
t+e actual transfer of contro