TaxTMI 
TaxTMI 
2007 (10) TMI 402
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....1999 (NELP). This policy, for the first time, provided that various petroleum blocks could be awarded for exploration, development and production of petroleum and gas to private entities. 3. By virtue of article 297 of the Constitution of India, the Petroleum in its natural state in the territory waters and the continental shelf of India invested in the Union of India (The Government). The Oil Fields (Regulation and Development) Act, 1948 and the Petroleum and Natural Gas Rules, 1959, make provisions, inter alia, for the regulation of petroleum operation and grant of licence and leases for exploration, development and production of petroleum in India. The Territory waters, continental shelf, exclusive of Economic Zone and other Maritime Zone Act, 1976 (Maritime Zone Act) provides for the grant of a licence or Letter of Authority by the Government to explore and exploit the resources of the Continental Shelf and Exclusive Economic Zone and any Petroleum operation. 4. The Government always desires that the petroleum resources which may exist in the territory waters, the continental shelf and the exclusive economic zone of India be discovered and exploited with utmost expedition....
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....ock. 11. Sometime in the year 2003 the National Thermal Power Corporation Limited (NTPC) floated a global tender for supply of gas to its power projects. The Gas Sale and Purchase Agreement was annexed with the tender document. NTPC invited international competitive bids for supply of natural gas to its power plants, located in the State of Gujarat in India, to meet its fuel requirements. RIL, succeeded in its bid to sell, transport and deliver 132 TBTU (means one trillion BTU (British Thermal Unit) or 1000000 MMBTU). NTPC by letter dated 16-6-2004 confirmed RIL's deal. 12. Sometime in June, 2004 RIL entered into a State Support Agreement with Government of U.P. to make necessary arrangement for land, water and other facilities for Dadri Project. 13. On 20-10-2004 in a Board Meeting of Reliance Energy Limited (REL) which was attended by Mukesh Ambani and other Directors of RIL, after reviewing the Dadri Power Project recorded that gas from KG Bhasin would be supplied for the power projects of REL. The Board of REL was assured about the availability of gas, its timing, adequate quality and requested quantity at a competitive price for the project. 14. On 18-6-2005, the m....
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....reafter be controlled and managed by Anil Ambani. A suitable arrangement would be entered into in relation to supply of gas for power projects of Reliance Patalganga Power Limited and REL with the gas based energy resulting companies. 19. The relevant clauses of the Scheme are reproduced along with the part-pleading of the parties : "4. Transfer of Demerged Undertakings. 19. Agreements. The Resulting Companies will have the right to use the "Reliance" brand and logo and suitable agreements will be entered into in this regard. Further, suitable arrangements would also be entered into in relation to (i) non-competition in relation to the businesses of the Demerged Undertakings and the Remaining Undertaking; (ii) supply of gas for power projects of Reliance Patalganga Power Limited and REL with the Gas Based Energy Resulting Company; and (iii) Transfer of leasehold rights of RIL to the relevant Resulting Company with respect to the relevant Demerged Undertaking." 20. As recorded, the Scheme sanctioned by this Hon'ble Court provided for Demerger of four Undertakings of Reliance Industries Limited (RIL) and transfer of these Undertakings on a "Going concern" basis to four....
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....ing that it would be tabled at the meeting of 13-1-2006. Some of the objections as raised by Chalasani were also recorded. 29. On 26-1-2006 the GSPA copy was made available to ADAG for the first time. 30. On 27-1-2006, the shares of the applicants-company to the shareholders of RIL were allotted. 31. Sometime in January, 2006 an information Memorandum for listing of shares of RNRL submitted to the Stock Exchange and displayed on the website of Stock Exchange which, inter alia, sets out the risk factors arising out of uncertainty in respect of gas supply with RIL. It also sets out the main commercial point agreed upon for the supply of gas as part of the overall re-organisation, as alleged. 32. On 7-2-2006 the Board of the applicant re-constituted in order to hand over the management and control of the resulting companies to Mr. Anil Ambani. 33. On 14-2-2006 a letter addressed by RIL to the applicant stating that "a proforma Gas Sale and Purchase Agreement (GSPA) has been annexed to the above GSMA. The proforma contains the terms and conditions as are contained in the GSPA signed by RIL on 12-12-2005 and forwarded to the NTPC. It was further informed that they would b....
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....ch is required to be supplied to the applicant under the Scheme. (d)Pending the hearing and final disposal of the Application, direct RIL to supply the said 28 MMSCMD or 40 MMSCMD gas, as the case may be to the applicant on the same terms as per NTPC contract. (e) Ad interim reliefs in terms of prayer (c) and (d ) above. (f)Such further orders be passed and/or directions be given as this Hon'ble Court may deem fit and proper." 40. Subsequently, a company Application No. 1123/2006 in Company Application No. 1122/2006 dated 16-11-2006 has been filed having following prayer clause (a), as there was no interim relief granted till this time : "(a)RIL be restrained from creating any third party interests or rights in respect of (i) 28 MMSCMD of Gas to be supplied to the applicant, (ii) 12 MMSCMD to be supplied to the applicant on firm basis in case NTPS Contract does not materialize; and/or entering into any contract(s) and/or use or supply to any third party the said gas (28 MMSCMD or 40 MMSCMD, as the case may be) which is required to be supplied to the applicant under the Scheme." 41. On 10-11-2006 an application for ad interim relief was moved. However, on 23-11-200....
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.... ad interim relief in terms of prayer clause (a ) of the Application under consideration is granted. It is made clear that the view expressed in this decision is only a tentative view for consideration of prayer for ad interim relief. Pending proceedings will be decided uninfluenced by any of these observations. All questions therein are left open." 43. On 19-6-2007 another Company Application No. 695/2007 (Lodging No. 721/07) has been filed by the applicant and prayed as under : "(a)restraining the respondent from committing the sale/auction of any quantity of gas to any third party or from seeking requisite approval under the Production Sharing Contract for any sale/auction from the Government. (b)restraining RIL from creating any third party interest or rights without first satisfying the first option rights of the applicant. (c) ad interim relief in terms of prayer (a) and (b ) above." 44. By order dated 20-6-2007, after hearing both the parties, the Court has further observed in paragraphs 16, 17 and 18 as under : "16. Thus understood, I have no hesitation in observing that the respondent cannot be heard to say that they are free to negotiate for the proposed....
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....he Scheme is implemented effectively. Basic pleadings 49. In the above background, the applicants have averred in support of their submission as under : "6.5 The Board of Directors of RIL were appreciative of the resolution of the issues between Shri Mukesh Ambani and Shri Anil Ambani and in their meeting held on 18-6-2005 noted the settlement and amicable resolution of the dispute providing for reorganization of the Reliance Group including the businesses and interests of RIL and adopted a resolution appreciating the sincere and painstaking efforts by Smt. Kokilaben Dhirubhai Ambani in working towards the settlement. A Press Release issued by RIL on 18-6-2005 and the report sent by RIL to the Stock Exchange on that date are enclosed collectively marked Exhibit C. 6.6 The agreement arrived at between Shri Mukesh Ambani, Chairman and Managing Director of RIL and Shri Anil Ambani relating to the reorganisation of the RIL Group envisaged the supply of gas from RIL's current and future gas fields for various projects of Reliance - Anil Dhirubhai Group. The following are the part of the said agreement:- (a )Quantum of Supply and Source of Supply uSupply of 28 MMSCMD ga....
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....8 Consequently, as part of the reorganization of the business and undertakings of RIL, the power business of RIL including the Gas Based Power Business, described in the Scheme as the Gas Based Energy Undertaking, was also to be demerged. The Gas Based Energy Undertaking of RIL to be demerged under the Scheme consisted of the business of supply of gas for power projects REL and of Reliance Patalganga Power Ltd. ("RPPL") through suitable arrangements. uThe relevant provisions of the Scheme to give effect to this arrangement include the following : 1. Definitions 1. ****** 1.1 - 1.10 ****** 1.11 'Gas Based Energy Resulting Company' means Global Fuel Management Services Limited having its registered office at 3rd floor, Maker Chambers IV, 222, Nariman Point, Mumbai 400 021; 1.12 'Gas Based Energy Undertaking' as described in item (ii) of sub-clause (f) of Clause A of the Preamble means the Demerged Company's undertaking, business, activities and operations pertaining to supply of gas for the generation of power by Reliance Patalganga Power Limited and REL for their power projects (hereinafter referred to as "Gas Based Power") and comprising all the assets (movable an....
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.... securities acquired or received by the Demerged Company in the company comprised in the Gas Based Energy Undertaking shall, without any further act, deed, matter or thing be demerged from the Demerged Company and be and stand transferred to and vested in or shall be deemed to be transferred to and vested in the Gas Based Energy Resulting Company on a going concern basis such that all the properties, assets, rights, claims, title, interest, authorities and liabilities comprised in the Gas Based Energy Undertaking immediately before the demerger shall become the properties, assets, rights, claims, title, interest, authorities and liabilities of the Gas Based Energy Resulting Company by virtue of and in the manner provided in this Scheme. 19. Agreements u........ Further, suitable arrangements would also be entered into in relation to (i) .....; (ii ) supply of gas for power projects of Reliance Patalganga Power Limited and REL with the Gas Based Energy Resulting Company; and (iii). . . . . 6.9 Even though the Scheme was formulated in a manner in which the applicant would be put into the shoes of RIL, it was not possible on account of various contractual and regulatory consi....
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.... : "At any time after the Record Date, RIL shall cause the Board of Directors of each of the Resulting Companies to be reconstituted in such manner as is agreed between each Resulting Company and Anil D. Ambani and thereupon each of the Resulting Companies shall be controlled and managed by Shri Anil D. Ambani. The Demerged Company constituting the Remaining Undertaking shall continue to be controlled and managed by Shri Mukesh D. Ambani." 7.3 Further the agreements had to reflect an interest in gas produced by all of the gas fields of RIL so as to ensure that gas up to the agreed quantity i.e., 28 MMSCMD or 40 MMSCMD, as the case may be, would be made available to the applicant, in priority to any other sale or use by RIL, except for the gas to be used by RIL itself for operation and transportation and for the gas to be supplied to NTPC. The interest of the applicant was thus to extend to gas fields other than the KGD-6. 7.8 In spite of the failure to arrive at appropriate and suitable arrangements and despite serious differences on critical clauses between the parties, RIL decided to execute an agreement with the applicant titled as "Gas Supply Master Agreement (GSMA)" t....
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....Gas Supply obligation. (d) Supply of alternate fuel/at alternate permitted only with seven days notice and acceptance by Buyer. Acceptance of alternate time is fuel made mandatory upon the Buyer andthat too without notice. (e) Reimbursement for incremental cost of alternate fuel is only subject to Buyer having procured alternate fuel. Reimbursement is linked to not only to procurement but also to actual consumption of fuel. (f) Assignment to 100% subsidiary does not relieve the Seller of its obligation. Assignment relieves the assigning party of its obligations under the agreement. 7.11 Provisions not part of the NTPC contract Terms but included in 12-1-2006 agreement with the Applicant. . . . . . . 8.3 By this Application therefore, the applicant is seeking appropriate order and directions of this Hon'ble Court for modification of the Scheme to implement it and make it workable for the effective vesting of the Gas Based Energy Undertaking in RNRL and compliance with the requirements of the Scheme, the gas supply arrangement between RIL and the applicant to reflect the following commercial aspects : uAfter the NTPC entitlement (for 12 ....
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....e been arrived at between the promoters, such arrangement/agreement is nonetheless irrelevant. A Scheme for the demerger of a large company with a large number of shares being held by the public and by institutions, has to be in larger public interest as well as interest of the company. It must necessarily keep in view interest of a large body of shareholders of the Demerged Company as also the shareholders of the Resulting Companies. Any settlement of the disputes stated to have taken place between or amongst the promoters has, as a necessity, to abide by the final decision of the Board of the Demerged Company and such adaptations as may be necessary to protect and further the interests of the large body of shareholders or public interest. It is submitted once the Scheme as was placed before and duly approved by the shareholders (99 per cent shareholders approved the Scheme) which suggests that the Scheme had the support not merely of the General Body of shareholders but also the members of the promoters' family - all anterior or underlying agreements become irrelevant. The senior-most member of the family who (even as per the applicants) resolved all the disputes has, at no point....
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....wer Limited and REL was to be at the discretion by the Board of Directors of the Demerged Company who were not bound by any "agreement" as between two groups of promoters. The Board of Directors of Demerged Company was obliged and in fact had at all times kept the interests of the general body of shareholders as being a paramount importance and had taken such decisions as in the best judgment of the Board, accorded to their duty as the Board with the shareholders interests being of utmost importance." 51. The respondents have been unable to deny and/or place on record any contra-material to oppose the contents of MOU. Relevant correspondences - discussion prior and post sanction of the scheme referring to the MOU 52. Some of the extract from the important letters from Exhibit "F" filed by the applicants and not denied by the respondents. The existence of these documents "Exhibit F" are not in dispute. As replied and denied by respective letters and correspondences, the contents of these letters and e-mails are not seriously denied by the applicants. In fact the concerned persons have acted upon the same. ANNEXURE 2 EXTRACTS OF SOME IMPORTANT LETTERS FROM EXHIBIT "F" ....
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..... The direction further provides that if there is no agreed issues list by 6th August, I am to finalise the same on the basis of communications exchanged between the parties. Sl. No. Details of the issue ADA Group's remarks MDA Group's remarks 16. Gas supply agreements. Final NTPC Agreement awaited. RIL is negotiating the contract with an executed ADAE. The initiated NTPC. On draft of NTPC execution of agreement to be final contract, adopted with deviation to copy will be to provide for: provided to 1. swapping of gas; 2. bankability in the international finance markets; and Sl. No. Details of the issue ADA Group's remarks MDA Group's remarks 3. dealing with gas transportation capacity for which cost is but not used. ADA Group to agree for changes, if any, accepted by NTPC after the date of the execution of the execution agreement between RIL and ADA Group's fuel management company. Substantial delay in appointment of international consultant for evaluation of gas reserves. Need to be appointed without any further delay. Even for option gas NTPC agreement shall....
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....pg. 136). Subject: Deviation from MOU The KDA 4th direction refers to the consideration of MOU deviation so far as the Brand, Non-compete and Gas Supply Agreements are concerned. With a view to consider what further steps could be taken and the guidance that KDA could provide for going forward you are requested to urgently circulate a list of specific deviations from the MOU and suggested language where such deviations are to be found. Possibly this could be done in the form of a mark-up over the agreements that have been signed already. (x )E-mail from Mr.Cyril Shroff dated 24-2-2006 (pg.139). 2/24/2006 10.43 am Subject: Deviation from MOU This has reference to your mail of 23rd February in relation to the MOU deviations and enclosing the revised documents. Please forward your mail with enclosures to the MDA Group as well. They will need to comment upon your suggestions in detail. 53. These correspondences, therefore just cannot be overlooked while considering the submissions as raised by the learned senior counsel for the applicants Mr. Rohatgi that the Scheme has the foundation of the MOU in question, though not reflected in clear terms in any part of the Sc....
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....have taken a very liberal and broad view of the validity of the family settlement and have always tried to uphold it and maintain it. The central idea in the approach made by the courts is that if by consent of parties a matter has been settled, it should not be allowed to be reopened by the parties to the agreement on frivolous or untenable grounds. 42. . . . . . As observed by this Court in T.V.R. Subbu Chetty's Family Charities' case (supra), that if a person having full knowledge of his right as a possible reversioner enters into a transaction which settles his claim as well as the claim of the opponents at the relevant time, he cannot be permitted to go back on that agreement when reversion actually falls open." (p. 125) (2) K.K. Modi v. K.N. Modi [1998] 3 SCC 573 : AIR 1998 SC 1297, relevant paras 33 and 52 are reproduced below : "33. In the present case, the Memorandum of Understanding records the settlement of various disputes as between Group A and Group B in terms of the Memorandum of Understanding. It essentially records a settlement arrived at regarding disputes and differences between the two groups which belong to the same family. In terms of the settlement, ....
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....6 the Memorandum and Articles shall bind the company and the Members thereof. The Articles of Association are the regulations of a company which are binding on the company and its shareholders. Nothing outside the Articles can bind a shareholder vis-a-vis the company. He relied on V.B. Rangaraj v. V.B. Gopalakrishnan [1992] 73 Comp. Cas. 201 : AIR 1992 SC 453 and specially the following paragraph : "9. . . . . The private agreement which is relied upon by the plaintiffs whereunder there is a restriction on a living member to transfer his shareholding only to the branch of family to which he belongs in terms imposes two restrictions which are not stipulated in the Article. Firstly, it imposes a restriction on a living member to transfer the shares only to the existing members and secondly the transfer has to be only to a member belonging to the same branch of family. The agreement obviously, therefore, imposes additional restrictions on the member's right to transfer his shares which are contrary to the provisions of article 13. They are, therefore, not binding either on the shareholders or on the company. . . . . . ." (p. 457) 57. He contended that the question before the Sup....
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.... pursuance to the submission as raised by the learned senior counsel for the respondents about the non-existence of such agreement, the applicants as well as the respondents companies officials or Managing Directors ought not to have discussed the same before the settlement of the scheme and even thereafter. The correspondences as referred and as relied upon by the learned senior counsel for the respondents, show that the discussion as going on was intended to expedite the implementation of the MOU, by producing a workable commercial arrangement. Both the parties were trying to bring all the important facets of the private domain into the family corporate domain. There were various discussions and meetings took place apart from e-mails to use the MOU and the draft between RIL and NTPC as a guidance to finalise the agreement between the applicants and respondents to be "a suitable arrangement" as contemplated under clause 19 of the scheme. The submission therefore that there is no MOU at all in existence as referred and relied by the applicants and as resisted by the respondents is not acceptable. Though the actual copy of the MOU is not part of the record, yet in the absence of any....
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....y arrangements need to be maintained and not to be disturbed. Because some objections have been raised by the applicants to some of the clauses of this GSMA and GSPA that itself cannot be the reason to discard the whole scheme and/or the family arrangement as referred above. The respondents are estopped from raising such pleas having acted upon the MOU throughout till this date in all respects except some clauses of the GSMA and GSPA agreements. 65. The judgment as relied upon by the learned senior counsel for the respondents Mr. Harish Salve on the case of V.B. Rangaraj (supra) is not applicable to the facts and circumstances of the case. There was no such question of sanction of scheme of Demerger there. Except some clauses of the agreements the whole scheme has been implemented successfully till this date. This is not a case of agreement between two groups of shareholders which imposed certain restrictions on the transferability of the shares held by them which was not binding either to the companies or its shareholders. Only because of some challenges raised to the clauses of GSMA and GSPA that itself cannot be the reason as recorded above to discard the MOU or the scheme. T....
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....making provision for supply of gas to the power plants of RPPL and REL. The GSMA provides for sale of gas to be produced at the fields of the respondents to the applicants or its affiliates as defined in the agreement. The GSPA provides agreement for supply of gas to the actual power producing company, i.e., GSPA. The GSPA is part of GSMA. As per this agreement, the GSMA is expressly subject to approvals under the upstream arrangement i.e., Production Sharing Contract (PSC) which the respondents have with Government of India. The applicant's learned senior counsel with regard to these two agreements i.e., GSMA and GSPA submitted that; the arrangement as referred to and agreed in the MOU has been overlooked and breached; these agreements are not falling within the ambit of "suitable arrangement" as agreed in clause 19 of the scheme; and are not bankable documents. The terms and conditions as put in the GSMA and GSPA are one sided and not in the interest of the applicants. The Government Policy and the P.S.C. - Its knowledge 69. Mr. Anil Ambani of ADAJ was fully aware of the Government's New Exploration and Licensing Policy, 1999 (NELP) being part and important person/official ....
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....ions/terms. The following are the relevant terms for the purposes of deciding the rival contentions raised by the parties : "1.3 "Affiliate", 1.8 "Arms Length Sales", 1.28 "Cost Petroleum", 1.32 "Development Area", 1.35 "Development Plan", 1.52 "Good International Petroleum Industrial Practice (GIPIP), 1.74 "Petroleum operations", 1.75 'Production costs', 1.76 "Production Operation". 1.3 'Affiliate' means a company or a body. 1.8 'Arms Length Sales' means sales made freely in the open market, in freely convertible currencies, between willing and unrelated sellers and buyers and in which such buyers and sellers have no contractual or other relationship, directly or indirectly, or any common or joint interest as is reasonably likely to influence selling prices and shall, inter alia, exclude sales (whether direct or indirect, through brokers or otherwise) involving Affiliates, sales between Companies which are Parties to this Contract, sales between Governments and Government-owned entities, counter trades, restricted or distress sales, sales involving barter arrangements and generally any transactions motivated in whole or in part by considerations other than normal commerci....
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.... practices or methods to the exclusion of all others, but rather to be a spectrum of reasonable and prudent practices, methods, standards, procedures and safety regulations. In the event that a question is raised by a Party as to what constitutes GIPIP in a particular circumstance, it shall be agreed to by the Management committee and failing which the same shall be decided by the Government with input from DGH or inputs from amongst a list of organisations or persons, as decided by the Government based on recommendations of DGH and its decision shall be binding provided, however, that in case a Party has earlier approved or agreed to a plan, activity, practice, procedure etc. under this Contract, then it shall not raise a question about GIPIP on that matter. 1.74 'Petroleum Operations' means, as the context may require, Exploration Operations, Development Operations or Production Operations or any combination of two or more of such operations, including construction, operation and maintenance of all necessary facilities, plugging and abandonment of Wells, safety, environmental protection, transportation, storage, sale or disposition of Petroleum to the Delivery Point, Site Rest....
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....e Oil, Condensate and Natural Gas (refer article 21) shall be based on the price determined as provided herein. 19.2 . . . . . The basis of valuation given in this article for the purpose of articles 15, 16 and 17 shall apply only where Government is of the view that sale prices realised by the Company(ies) are not consistent with the price realisable at Arms Length Sales. 19.10 The price of Natural Gas shall be determined as provided in article 21. 21.1 Subject to article 21.2, the Indian domestic market shall have the first call on the utilisation of Natural Gas discovered and produced from the Contract Area. Accordingly, any proposal by the Contractor relating to Discovery and production of Natural Gas from the Contract Area shall be made in the context of the Government's policy for the utilisation of Natural Gas and shall take into account the objectives of the Government to develop its resources in the most efficient manner and to promote conservation measures. 21.6 Valuation of Natural Gas. 21.6-1 The Contractor shall endeavour to sell all Natural Gas produced and saved from the Contract Area at arms length prices to the benefits of Parties to the Contract. ....
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....rnment upon giving ninety (90) days written notice to the other Parties of its intention to do so in the following circumstances, namely, that the Contractor or a Party comprising the Contractor ('the Defaulting Party') (e )has assigned any interest in the Contract without the prior consent of the Government as provided in Article 28; or (f )has failed to make any monetary payment required by law or under this Contract by the due date or within such further period after the due date as may thereafter be specified by the Government; or (g )has failed to comply with or has contravened the provisions of this Contract in a material particular; or (i )has failed to carry out or observe any of the terms and conditions of the License or Lease or the provisions of the Acts or Rules in force thereunder, subject however, to article 31." 74. The description of contract area is provided in Appendix "A" with map, Accounting Procedure to production sharing contract is provided in Appendix "C" which also deals with cost, expenses, expenditure and incidental income of the contract. It also provides classification, definition and allocation of costs and expenditure. It also provides ....
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....ms or settlement of claims for or on behalf of or against the contractor in excess of limits fixed by the Management Committee from time to time; Plans for the production of Crude Oil and Natural Gas prior to the date of commencement of Commercial production. 77. The Management Committee consists of two members nominated by the Government and each constituting contractor's one member or maximum two. The representative of the Government shall be designated as the Chairman of the Management Committee and the second representative of the Government shall be designated as the Deputy Chairman. 78. There it is also provided, how the Management Committee take decisions based upon the votes or unanimous votes or majority votes as mentioned in article 6.13. It is specifically provided that in case of unanimity, if not achieved within a reasonable period, the decision of the Management Committee may be approved by the majority participating interest of 70 per cent or more, with the Government having a positive vote in favour of the decision. 79. The submission, therefore, is that the Government plays a very dominant role in every aspect of discovery, development, production, sharing....
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....ment" in the scheme are very vital and important. 83. In the background of existence of PSC, MOU, after due deliberation and discussion, the scheme has been sanctioned. As noted, both the learned senior counsel appearing for the parties have put their submission based upon their respective pleadings and in perspective of the words "suitable arrangement". Clause 19 of the scheme provides the words "suitable arrangement" only in respect of supply of gas for the power projects of RIL & RNRL. Such "suitable arrangement" would also mean the negotiations and discussion between RIL and RNRL based upon the existing background and underlying facts. It cannot be a unilateral document or agreement. It also means that it should be suitable to both RIL and RNRL. The issue of suitability of arrangement cannot be beyond the scheme and Government policy pertaining to supply of gas. It is clear to both the parties therefore, even on the date of sanction of the scheme that the draft agreements and/or arrangement through GSMA/GSPA have been the matter of discussion and deliberation, which were based upon the basic terms of the MOU. It is clear that the successful implementation of the scheme in no....
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.... Ltd. AIR 1962 SC 1810 has observed as under : "We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be expressed or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances. . . . ." 88. In Gopisetti Venkatratnam v. Vijaywada Municipality AIR 1966 SC 353, the Supreme Court in para 3 observed as under : "(3) . . . As the meaning of the word is ambiguous, it is legitimate, in order to ascertain its true meaning, not only to study the document as a whole but also to....
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....ation of the contract, obviously that aspect cannot be overlooked while determining what were the obligations undertaken under the formal contract. 38.......In our opinion, this over-simplification of the clauses of the contract involving works of such magnitude is impermissible. The whole gamut of discussions, negotiations and correspondence must be taken into consideration to arrive at a true meaning of what was agreed to between the parties. . . . . ." 91. In Life Insurance Corporation of India v. Dharam Vir Anand [1998] 7 SCC 348, the Apex Court, while dealing with the construction of deeds and documents construing contractual clause, has observed as under : ". . . . . . In construing a particular clause of the contract, it is only reasonable to construe that the words and the terms used therein must be given effect to. In other words, one part of the contract cannot be made otiose by giving a meaning to the policy of the contract." 92. Recently, the Apex Court in CIT v. Hoogly Mills Co. Ltd. [2006] 157 Taxman 347, while reiterating the principle for interpretation of the agreement held that it has to be read as a whole. 93. Apart from that the following extracts....
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....vision we look not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except insofar as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the contract." 95. The same author has further elaborated the principles of construing the documents as a whole as under : "6.02 In order to arrive at the true interpretation of a document, a clause must not be considered in isolation, but must be considered in the context of the whole of the document. 6.03 In construing a contract all parts of it must be given effect where possible, and no part of it should be treated as inoperative or surplus. The construction of a document as a whole necessarily involves giving effect to each part of it in relation to all othe....
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.... the time of grant of sanction. It obviously cannot be expanded to interfere with a scheme that has been sanctioned. Therefore, he further submitted that under section 392 of the Companies Act, the Court may supervise and in certain cases modify, an arrangement between the company and its own members sanctioned under section 392 of the Companies Act but the Court has no such powers in respect of schemes of re-construction of a company (amalgamation or demerger) as approved by the shareholders and creditors and sanction under section 394 of the Companies Act. 98. In Company Application No. 1122/2006, the applicants have invoked basically section 392 of the Companies Act. This is an off-shoot of the scheme sanctioned by this Court by an order dated 9-12-2005 for demerger of four Undertakings of Reliance Industries Limited (RIL)-Demerged company and their transfer to four Transferee companies as a going concern (resulting companies). Both these terms i.e., Demerger, Demerged company and the resulting company are not defined under the Companies Act. These terms are defined under the Income-tax Act. Those are sections 2(19AA), 2(19AAA) and 2(41A) respectively. For convenience the sam....
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....reditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound-up, on the liquidator and contributories of the company : Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like. (3) An order made by the Tribunal under sub-sec....
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....mpromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i)the transfer to the transferee company of the whole or any part of the undertaking property or liabilities of any transferor company; (ii)the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii)the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; (iv)the dissolution, without winding up, of any transferor company; (v)the provision to be made for any persons who, within such time and in such manner as the Tribunal directs, dissent from the compromise or arrangement; and (vi)such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out : Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is bei....
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....ts on merit. 102. The Supreme Court in S.K. Gupta v. K.P. Jain 1979 (3) SCC 54, has elaborated further the purpose and object of section 392. The relevant paragraphs are as under : "13. When a scheme is being considered by the Court, in all its ramifications, for according its sanction, it would not be possible to comprehend all situations, eventualities and exigencies that may arise while implementing the scheme. When a detailed compromise and/or arrangement is worked out hitches and impediments may arise and if there was no provision like the one in section 392, the only obvious alternative would be to follow the cumbersome procedure as provided in section 391(1) viz., again by approaching the class of creditors or members to whom the compromise and/or arrangement was offered to accord their sanction to the steps to be taken for removing such hitches and impediments. This would be unduly cumbersome and time-consuming and, therefore, the Legislature in its wisdom conferred power of widest amplitude on the High Court under section 392 not only to give directions but to make such modification in the compromise and/or arrangement as the Court may consider necessary, the only li....
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....because section 391 is referred to therein. Unlike section 391, section 392 does not specify that a member or creditor or in the case of a company being wound up, its liquidator, can move the Court under section 392. On the other hand, the Legislature uses the expression 'any person interested in the affairs of the company' which has wider denotation than a member or creditor or liquidator of a company. In fact, the ambit of the power to act under section 392(2) can be gauged from the fact that the Court can suo motu act to take action as contemplated by section 392(1) or it may act on an application of any person interested in the affairs of the company. (p. 62) 16. . . . . . . The Court has to reach an affirmative conclusion before acting under section 392(2) that the compromise and/or arrangement cannot be worked satisfactorily with or without modification [see J.K. Bombay (P.) Ltd. (supra)]. It follows as a corollary that if the compromise or arrangement can be worked as it is or by making modifications, the Court will have no power to wind up the company under section 392(2). . . . ." (p. 65) The submission, therefore, as raised that the present dispute is a case of Sche....
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....sions of sections 391 to 394 merely on technical grounds. Investment Corpn. of India Ltd. In re [1987] 61 Comp. Cas. 92 (Bom.), the word 'arrangement' has been interpreted in a wider manner. Another case is Guardian Assurance Co. In re [1917] 1 Ch. D. 431 (CA) to demonstrate that the word 'arrangement' has a wide meaning and interpretation, even under the English laws. . . . . ." (p. 500) 103. Admittedly, the present Scheme of arrangement has all the ingredients of demerger and the formation of resulting companies and/or ongoing companies and in this background the arrangement therefore as arrived at by the parties, in the absence of any other provision, it is difficult to accept the submission that once the Scheme is sanctioned and in the present case under section 394, the Court becomes functus officio. 104. In Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 10 SCL 70 (SC), after dealing with even S.K. Gupta's case (supra) at para 28 it is observed 'the aforesaid provisions of the Act show that the compromise or arrangement can be proposed between a company and its creditors or any class of them or between a company and its members or any class of them. Such a comprom....
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....fications to the scheme, which are necessary for the proper, efficient and smooth working of the scheme could be made. Modification can be made at the instance of any person who is interested in the affairs of the company and the court can also introduce modification suo motu. But the paramount consideration while issuing any such direction by way of modification is that, such direction must be necessary for the proper working of the compromise or arrangement. The power of the court under the section does not go beyond the implementation of a scheme already sanctioned under section 391, and, if necessary, its modification. Therefore, the power of the Court to modify the scheme either at the time of according sanction to the scheme or subsequently, at the time of working of the sanctioned scheme is statutorily provided under the aforesaid provision and such power has to be exercised only for the purpose of proper working of the scheme, which is the only limitation which is imposed on the court under this provision." (p. 483) 107. The Bombay High Court also in D.S. Venkatraman v. Gujarat Industries (P.) Ltd. [1977] 47 Comp. Cas. 352 has observed that "If any difficulty arises in t....
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....391 to 394 after sanctioning of the Scheme. The Company Court is not powerless. The Company Court can never become functus officio under the present Scheme and object of sections 391 to 394 in all such cases. The parties or persons interested cannot be rendered remedyless. All these sections 391 to 394 are inter-linked and inter-connected. This is a complete code for sanctioning any Scheme including of arrangement, demerger, merger and amalgamation. 112. The words "arrangement" and/or "compromise" are not defined under the Companies Act. Both the words have their different meaning and purpose. In the present case, there is an arrangement between the demerged company and the resulting company. The said arrangement, therefore, take into its sweep all the earlier events, MOU and various discussions between these two entities till and even after the sanctioning of the Scheme. There is no dispute that the demerged companies and/or the resulting companies were separate entity but under the control of one group until by the arrangement, they agreed and, accordingly, the Bombay High Court has sanctioned the Scheme. Both these new groups/entities have been formed and divided only thereaf....
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.... pierce the veil of corporate strategies. Otherwise, it is difficult to have judicial review of this aspect of globalisation and utility of material sources by the businessman or experts in the field. Business strategy is not the court's domain. It is difficult for the courts to express their opinion on such matters. Business adjustments or arrangements cannot be decided or thrust or imposed by the courts, specially, when such arrangement or adjustment or such scheme is within the framework of the law. (k )The scheme has taken care of all significant aspects of law, public policy and it is based on need and time of particular business and market. The scheme is fair, sound, reasonable and takes into consideration interest of shareholders, creditors, workmen and employees." (p. 517) 114. Therefore, though there is a power available to the Company Court to pass appropriate order including of modification of the Scheme for smooth working as contemplated under section 392 of the Companies Act as defined and explained in S.K. Gupta's case (supra), yet the observation of the Apex Court in Miheer H. Mafatlal's case (supra), which is reproduced as under, just cannot be lost sight of. ....
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....not agreeing to change and/or to amend the protested points. The protested points 118. The objectionable aspects as per the appellants are; of tenure, as per clause 3.1(b) of GSMA and; the quantity of gas to be supplied based upon a formula in clause 3.1(c) of GSMA; the formula of calculation of volume of actual quantities to be supplied to RNRL as per GSMA based upon clause 7.1 of NTPC contract; the identity of buyer including the expression as defined in GSMA of affiliate; and the limitation of liability [clause 14.3(i) of GSMA]. In the present case both the parties are insisting that their respective clauses of GSMA should be modified, altered or retained. The rest of the GSMA clauses therefore not much in dispute. Importantly, whatever may be the consequence of modification or deletion of these six clauses as rightly contended by the learned senior counsel for the respondents would have repercussions and/or affect the other clauses also. Therefore, even otherwise in such type of transactions or agreements, the clauses are always inter-connected and inter-linked. In the present case, it is not possible to hold that deletion of one clause would not affect other clauses. The....
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....f the GSMA, the quantity of gas to be supplied each year is determined according to a formula containing many variables (p. 373) This becomes even more uncertain when regard is to be had to provisions of clauses 3.1(f) and 6.2 which expressly record that RIL does not warrant the existence of any quantity or amount of daily supply of gas. A fixed quantity as provided in the NTPC contract. Price approval by Government Contract, not the MOU, provide approval by the Government necessary. The NTPC make price approval Clause 13.8, read with clause 13.9 In case the GOI fails to accord approval, the contract ceases to exist. This clause should be deleted (sic) Definition of affiliate Entities managed and controlled by NTPC without linking to 51 per cent ownership interest For other than RIL and Reliance Patalganga Power To be amended to be in line with NTPC contract or even to PSC or other agreements (such as Non Competition Agreement) signed Nature of the Contractual Term Provision in Scheme Provision in 12-1-2006 contract GSMA Proposed Revision . by RIL pursuant to the Scheme (....
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....tial Block KG-D6 Development Plan, in TCF". There are several mischievous aspects to this definition. First, the reserves have been restricted to the KG-D6 basin. However, the entitlement of the applicant is not merely from the KG-D6 basin but from any gas fields of RIL. This artificial restriction limits the CPR and reduces the tenure of the gas supply agreements. 14. Secondly, the definition is restricted to the Initial Development Plan. This is distinct from the Development Plan. The difference is that the Initial Development Plan contains only the preliminary assessment of the quantity of gas which would have been made. 15. Thirdly, the definition of Certified Proved Reserves for the purposes of the formula is different from the definition of Certified Proved Reserves in the main definition clause at p.368, Volume II. The main definition of Certified Proved Reserves at p.368 refers to the Development Plan of any field of RIL. This is different from the Initial Development Plan, of the KG D6 basin. This distinction makes clear the mala fide intent of RIL. RIL could simply have used the definition of Certificate Proved Reserves given in the main definition section. However, by....
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....i )The precise manner in which the Tenure of each GSPA is to be arrived at and fixed in the GSPA has been duly provided in the GSMA dated 12th January, 2006. 5.13-5 Quantity and Term of GSPA (i )Clauses 3.1 and 3.2 of the draft at Exhibit-J stipulates that the Annual Contract Quantity will be fixed throughout in the duration of the GSPA and that such duration shall not be less than 17 years. This is to be an absolute requirement irrespective of the fact whether these respondents have adequate reserves of gas to make such a commitment as certified by independent consultants. (ii )In the course of arguments, it was submitted by the applicants' advocate that the GSPA ought to stipulate that 28 of gas would be supplied for term of 17 years and that too, to RNRL and to enter into such a commitment without a stipulation of any limit on liability. (iii)Such a stipulation would require these respondents to make a commitment to supply quantity of gas even if the respondents have no proven reserves making the very existence of such reserves as doubtful and to undertake to do so without any limitation on liability. (iv)By no stretch of imagination, can these respondents be expe....
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.... The respondents, as noted, and considering the whole MOU and the Scheme and the purpose of demerging, bound to provide and supply gas to the resulting companies at least to the period and quantity to the nearest possible time and quantity. It is a matter of mutual understanding and negotiation. The survival of both the parties is essential and not the destruction, because of some clauses like this in GSMA or GSPA. The respondents cannot be asked to perform their part of the contract beyond their capacity. They further cannot be insisted upon signing and executing the document blindly even for future basically considering the nature of natural resource and the business of production of gas in question.". The quantity of gas to be supplied 124. In reference to the quantity of gas to be supplied, the basic clause of GSMA under challenge is 3.1(c) which reads thus : "(c )The quantity of Gas that is available for contracting under GSPAs for any Year 'n' during the Tenure ("Available Quantity"), expressed on an average daily basis in MMSCMD, shall be determined for each Development Plan as follows: 125. The submission of the appellants is that the above formula dep....
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....efore, that such gas supply contracts are always fixed guaranteed quantities. In the present case, as agreed and gas being a fuel unless its quantity and continuous availability is not assured, such contract is not bankable and no capital investment can be committed. The submission further is that in the NTPC contract with the RIL, a fixed quantity of gas provided as per clause 7.1 which is reproduced as under : "Article 7 quantities Article 7.1 Annual Contract Quantity. Annual Contract Quantity ("ACQ") is the quantity of Natural Gas required by Buyer in any Contract Year and shall be expressed in TBtu in respect of each Contract Year. During Build-Up period, ACQ shall be as specified under Article 6.1(a). ACQ for the remaining Contract Years shall, subject to any upward revisions made in accordance with the subsequent provisions of this Article 7.1 be 132 TBtu. During Contract Term, Buyer may by notice request Seller for an increase in ACQ for any specified period or the remaining period of Contract Term. Buyer and Seller may thereafter reasonably discuss and agree on any upward revision to ACQ, provided however that such increase in ACQ shall be on the same terms and ....
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....liate 130. The insistence that affiliate company must be 51 per cent of shareholding in other company to exercise the control in order to make it an affiliate as defined in the GSMA is contrary to the other RIL agreements contemplated under the scheme and even to the definition of "affiliate" under the Production Sharing Contract between the Government of India and RIL and to the definition given in the NTPC contract. 131. Clause 19 of the scheme requires that the respondent to supply the gas to the power plants of RPPL and REL. As per the MOU and/or as per the scheme, no other person or entity are entitled for this supply of gas. There is no dispute by the RIL to supply of gas to the power plants of RPPL and REL and also to the power projects of these entities. The requirement of 51 per cent share of RPPL or REL in this backdrop cannot be said to be unjust or bad. The appellant/applicants cannot insist that any company which the applicants hold any shares whatsoever irrespective of the percentage is not within the scheme and never contemplated under the MOU. In my view, therefore, there is force in the submission of the learned senior counsel for the respondent that such cla....
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....tive of its production and/or various other changes basically the prices, policies, environment apart from force majeure or frustration just cannot be overlooked. 134. Basically the principle of frustration and/or force majeure are normal clauses of such contracts. The respondents inability to supply gas for various other factors, if cropped up and in that case such clause would protect both the parties to avoid further complication and/or litigation. As noted, the respondents had added this clause even to the NTPC contract also. This type of transaction definitely need protection from all aspects. In the facts and circumstances of the present case, it is expected that the respondents shall act bona fide as per the MOU and as per the agreed terms of the Scheme. 135. As this is a case of demerging, it also means the existing companies and/or entities have decided to separate and work by different entities. So this voluntary arrangement is always with the background to see that both entities should work smoothly and develop like other commercial entities. The apprehension that by this clause, the respondents would wriggle out its commitment is all on presumptions and assumption....
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.... the matter of interpretation or decision and, therefore, the parties need to see and settle and negotiate the clauses which are of a commercial nature and specially when the Company Court has no authority and/or power imposed in such nature of transaction to accept or not to accept the particular clause or clauses. 138. Furthermore, the terms and conditions of the GSMA based upon above referred clauses and formula are not foreign to such nature of agreement of supply of gas. When the PSC agreement was entered into, Anil Ambani was a dominant member being important official of the RIL, at the relevant time, and was fully aware of such practice and procedure of such clauses based upon the formulas. As referred in the MOU itself, it has been observed that the agreements shall be subject to the international policy and/or practice. The PSC itself refers to various such international practices. Considering the peculiarity of the business in question and being the contract or agreement arising out of natural resources of the Government of India, the submission that such formula ought not to have been placed on record and/or ought not to have been the terms and conditions of the contr....
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....nt of the block the respondents are now required to follow and take all necessary steps for the exploration and production. This includes the various compliances of various laws and policies. The financial support for the large infrastructure, experts, technical, engineers and huge staff and their involvement in respective field. The contractor in the present case has invested huge money and have commenced the exploration and production. After the commercial discovery, the contractor/respondents have already moved to the Government, as per the development plan for approval which includes the proposed capital expenditure and production from the blocks. The Government, therefore, even at all these stages plays important and dominant role to monitor and review all these facts through their Management Committee. 141. The Government's interest, apart from the maximum utility and use of the natural resources to the benefit of people at large is also to have royalties and taxes and its share of profits. The profit share is only after cost recovery of all capital and operating expenditure of the contractor. The price formula for valuation purposes is also need to be approved by the Gove....
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....ce. The gas demand which is a very important natural resource and as it is important source of energy for the development of the country, its commercialisation in this competitive market, need to be respected for the development of the country. The commercial aspect of all sorts of dealing and documentation of development, exploration, production, supply and sale of gas definitely need constant scrutiny and deliberation. Therefore, the principle of fair, transparent and clear policy and/or procedure is always a bone of contention specially when it is a natural resource owned by the Government. They provide or allow and/or permit the contractors to utilise the same natural resource, in view of this NELP, for domestic purposes only. The competitive bidding or maximum earning or income are therefore always insisted upon in such type of contracts and/or transactions. The role of Government, therefore, just cannot be overlooked and has rightly contended by the learned senior counsel for the RIL-respondent that the approval even to GSMA and/or GSPA and or such other transaction by the contractors with the third person, even though from the share of profit of contractors. The Government d....
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....ing the cost petroleum results into profit petroleum. The other related factor is of the Government's profit share. A contractor's price if on higher side than the minimum price fixed or valued by the Government, it will affect a share of profit petroleum to the Government. The contractor's right to sell at the market discovered price is very important aspect even otherwise. Therefore the Government's role in all these is undissectable. 149. Though particular prices have been agreed, the aspect of price need to be considered from all angles on the date of actual commencement of supply or a reasonable period. There is no question of fixing the floor price for all the time to come. It needs to be revisable from time to time, as per the practice and Government policy having a price review clause. 150. The price so fixed and agreed by the RIL and RNRL is based on the NTPC contract. It was agreed and determined by following the then procedure and Government policy. Therefore the competitive bidding prices, as followed cannot be overlooked, based upon the then declared policy or decision. 151. To what extent RIL should commit and respect the MOU, even in respect of pricing and/o....
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....lar sectors and/or undertakings just cannot be overlooked. The respondents need to respect and consider the demand/or direction made by the Government, if occasion comes. 154. Further material aspect from the point of view of the contractor is that under the PSC, the contractor takes risk and takes all steps in such commercially exploitable reserves of oil and gas, as done in the present case by the respondent-RIL. The contractor, in the present case, is successful in its effort. Therefore, he would first recover investments made in the block from the sale of petroleum production from the field. As per the PSC, it is only after recovery of the cost, the surplus of the production, if any, would be shared between the Government and the contractor based on a given formula of increased share to Government. The respondents-RIL have already made huge investment based upon the PSC and licence granted by the Authorities. The prescribed period of licence granted to the RIL to explore the block is up to the year 2025. The respondent, based upon the PSC, entitled to recover the investment in particular exploration of block only from oil and gas which is recovered and produced from that blo....
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.... Government insists for the market price for such sale. The respondents-RIL further cannot commit sale of higher quantity than it is entitled to under the PSC. There is force to some extent in the submission as raised by the learned senior counsel for the respondents as regards to the point of pricing and Government approval and tenure based upon the terms and conditions of the PSC and the Government policy in question but it is as recorded subject to suitable arrangement based upon the MOU and the Scheme. 157. The respondents as agreed must provide and/or supply and/or sale 40 (28 + 12) MMSCMD of gas but insofar as the price is concerned, the parties must sit and decide together as the price at US D 2.35 per MMBTU has already been rejected by the Government. 158. The respondents-RIL cannot be compelled to commit such breaches to face the risk of termination of the PSC itself. Therefore, there is a force in the submission that RIL cannot sell or commit quantities of gas which are in excess of P-1 reserves in hand. Therefore, the provisions in the GSMA that RIL would enter into commitment for sale of gas up to 28 MMSCMD as agreed to provide to RNRL to the extent of 28 MMSCMD f....
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....ill the pricing policy of Government and the requirement of PSC, including the other statutory approvals and joint co-operation in this respect by both the entities as agreed by, even as per the MOU need to be complied with by both the parties and even now as per the Scheme. 162. Principally the parties are bound by their commitments. Its terms and conditions including quantity and tenure, specially in the facts and circumstances of the case, but those terms and conditions are always subject to the change in the Government policies and laws apart from national and international policies of supply of oil and gas. No further trading of gas by RNRL 163. Insofar as the trading by RNRL concerned, during the course of argument, the learned senior counsel for the applicants, on instructions, has expressly given up this issue of trading and submitted that the gas supply would be only for the power plant of any REL and RNRL. They are not pressing and/or pleading that RNRL is entitled to trade in gas. They are restricting their claim and submission only in respect of the supply of gas which will be for their power plants. The applicants are not a shell company 164. There is a ....
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....d undertakings to provide focussed management attention. In this background, it was necessary that RIL should have given full and proper opportunity to the applicants before passing such resolution hurriedly on 11-1-2006 and before executing such GSMA and GSPA in question. As per clause 19 as recorded the suitable arrangement should be suitable to both the parties in all respects. In this aspect, the decision as taken hurriedly on 11-1-2006, therefore, was one sided, specifically taking into consideration the background and/or events followed up to the sanctioning of the scheme. As noted, the control over the Board of the applicants on 10-1-2006 was of RIL, as control over had not been handed over to Anil Ambani. On 26-1-2006 final copy of GSPA was made available by nominee of RIL to nominee of Ambani Group. The drafts of GSMA and GSPA were only circulated on late night of 10-1-2006 through mail. It is to be noted that shares of RNRL were allotted/transferred to Anil Ambani only on 27-1-2006 to themselves admittedly after the Board meeting dated 27-1-2006 as referred above. The New Board was reconstituted in accordance with clause 17 of the scheme on 7-2-2006. As per clause 6 RIL c....
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....urdle and/or resulting into smooth working of the scheme as sanctioned. In this backdrop, meeting as held and the decision as taken hurriedly by the RIL, in my view, is not as per the sanctioned scheme and it is in the breach of the said scheme. Bankable document 168. The learned senior counsel for the applicants has rightly pointed out that as per MOU and even in the agreement of RIL with NTPC, the terms were clear in respect of tenure, price, cap liability and even of damages. Even when the same Government policy and PSC well within the knowledge of the respondent-RIL, based upon MOU and those clauses of NTPC both the parties have been discussing and deliberating on this issue. 169. The availability of gas and its impact on Indian economy is very important. There is no dispute that the comprehensive policy and guidelines to supply and utilise the gas through various procedure and chain in this country's need of energy, security, market and competitiveness is very important. The substantial contribution to the national exchequer by way of royalty, taxes and Government of India's share of profit petroleum and, therefore, to maximise the potential benefit of such huge gas f....
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....ient. Both entities have their respective expertised technicians of national and international level. Therefore, once we talk about the Bankable document for finance, then though parties or one of the entities may be expert in drafting such agreement based upon the alleged international practice, still, unless such formula or such clauses made explainable and/or understandable to the layman or consumer who is not expert in the field, just cannot be ruled out. It is not that every one should know or understand all the technical or electronic formulas, when we discuss and deal with the agreements and documentation, based upon the Government policy, everyone should be in a position to understand and rightly submitted to avoid further complication and litigation in the matter apart from bankable for the purpose of financial help from the Banks and Financial Institution. Allegations of fraud 170. There are various allegations made in the application while questioning the GSMA and/or GSPA by the applicants by referring the said documents to be a hollow, sham as the same were executed in fraudulent manner. Those are sham documents. These documents are unreasonable, un-conscionable, ....
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....ly in reference to the undertakings of the RNRL, it is necessary to secure the basic infrastructure, raw material and necessary permissions and approvals for the RNRL also. In the present case, it appears that gas is the basic raw material. Unless agreed and provisions are made and/or commitment is recorded to have a regular supply of gas, other partners or third person including Bank or such Financial Institutions would not like to commit such projects, but still it does not mean that the RIL must commit supply of gas without agreeing to suitable arrangement even though based on the MOU or the Scheme in question. Both the parties therefore on this issue also must come forward and settle to make the document Bankable, if required by executing such agreements by taking into consideration the MOU, the Scheme, PSC and the Government policy. The applicant is therefore also required to purchase the gas from the market for their projects being commercial entity in all respects, who wants to and/or start such undertakings. RIL being committed through MOU and/or in the Scheme also must see that the resulting companies like the applicant should develop and therefore must provide the gas fro....
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....its undertaking establishes and develop. It is in the interest of both the companies/entities that after investments huge amount in such projects and after deducting the Government's share as contemplated under the PSC, the RIL/contractor should be in a position to cover up the investments already made for the protection and exploration of the gas. The "suitable arrangement" therefore need to be re-amended and re-considered and negotiation by the parties taking into consider- ation all the facets, commercial, economic and above all Government policies and law. What should be the arrangement for supply and sale of the gas by the RIL to RNRL and at the same stroke to cover up the investment already made and/or earn the money out of the share of contractor. 175. In totality the MOU as provided for a demerger and transfer of Gas Based Energy Undertaking. It was at that time admittedly the gas which has been allotted to RIL and it has been decided to utilise the gas to the Group power projects. Both the companies RIL and EEL, therefore, agreed and recorded that RIL would support the Gas Based Power Projects of REL. The MOU has been agreed - in the presence of the mother after the dea....
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....uitable arrange- ment also therefore means the parties must themselves see and settle and put-forth their submission for proper and suitable working of the scheme specially when the scheme has been working smoothly except for this gas supply agreement. Interim orders 178. As noted, the applicants have prayed for interim relief of injunction in terms of prayers (c) and (d) in Company Application No. 1122/2006 at the time of the filing of the said application. By another Company Application No. 1123/2006 the main application in question, the applicants on 16-11-2006 have prayed for orders for injunction as quoted in para 42, whereby the prayer has been sought against the respondent-RIL from creating any third party interest or rights in respect of 40 MMSCMD of gas from supplying to any third person. By order dated 3-5-2007 as reproduced in para 51, this Court has granted ad interim relief in terms of prayer (a). The applicants thereafter have filed another Company Application No. 695/2007 on 19-6-2007 and further prayed that the respondents be restrained from committing the sale or auction of any quantity of gas to any third party and further from seeking requisite approval und....
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....erms of prayer (a) in Company Application No. 1123/2006 dated 3-5-2007 i.e., in Appeal No. 440/2007. The respondents, therefore, have also filed the Appeal No. 441/2007 and challenged the said order also. The Division Bench, after hearing both the parties on 18-7-2007 has observed in the following paragraphs as under : "2. Upon hearing the learned counsel for the parties for sufficient time and having gone through the impugned orders, we do not find anything in the impugned orders which prevents the Central Government from going ahead with the matter of the price fixation under the PSC between the Central Government and the appellant. 3. This is of course recorded without prejudice to the rights of both the parties in the main Company Application No. 112 of 2006. 4. The hearing of these Appeals stand adjourned for eight weeks. In the meanwhile, the learned Company Judge is requested to proceed with the hearing of the Company Application No. 1122 of 2006. 5. Liberty to the learned counsel for the parties to mention the matter if any contingency arises." The Division Bench has passed an identical common order in both the appeals. Both the appeals are still pending. How....
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....cation as the Division Bench of this Court in Appeal Nos. 440/2007 and 441/2007 arising out of interlocutory order in C.A. No. 1123/2006 and C.A. No. 695/2007 has in fact permitted to proceed with the hearing of Company Application No. 1122/2006. 183. Thus for the present purpose I have come to the following conclusions and passing the resultant order: 184. The conclusions are : (1)The present company application under section 392 of the Companies Act is maintainable. (2)The Company Court, however, under section 392 of the Companies Act cannot direct or dictate to maintain or amend or modify and/or insist for a particular clause or clauses of such gas supply agreement or such other commercial agreement/contract. (3)The GSMA as formed and finalised in the Board of Director's Meeting of RIL on 11-1-2007 and modified on 12-1-2007 is in breach of the Scheme. (4)The MOU (Memorandum of Understanding/Family Arrangement) and its content are binding to both parties RIL and RNRL and all the concerned, Mr.Mukesh Ambani and his group of Companies and Mr. Anil Ambani (ADA) and his group of Companies have already acted upon at the pre and post stages of the MOU and the pre and ....