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TMI Blog2007 (5) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... of the gas based energy undertaking. 3. The controversy in the present proceedings is in relation to the gas sale master agreement (GSMA) and gas sale purchase agreement (GSPA) executed between the applicant and respondent companies on 12-1-2006 as amended on 27-1-2006. According to the Applicant, the said Agreements have neither been executed in accord with the scheme sanctioned by this Hon ble Court nor the stipulations therein are consistent with the spirit of demerger scheme sanctioned by Court. In fact, the same if given effect to, would frustrate the scheme sanctioned by Court. Whereas, according to the Respondent company, the said agreements were executed between the two companies in furtherance of clause 19 of the scheme sanctioned by this Court. 4. It is relevant to note that the new Board of Directors of the applicant company after the scheme became effective, came to be constituted on 7-2-2006, on which date, the management of the applicant company was taken over by the Anil D. Ambani Group. It is the case of the applicant that soon thereafter the applicant protested about the scope of the two agreements by letter dated 28-2-2006. As the grievance of the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( c )For such other and further reliefs, as this Hon ble Court may deem fit and proper." 6. It appears that the hearing of the applications filed by the applicant was deferred from time to time. In the meantime, the parties have exchanged pleadings contesting the rival claim. The applications were in fact listed for hearing and final disposal on 29-3-2007 before another Judge of this Court, but were removed from the Board with direction not to be placed before that Judge. The Applications are now assigned for hearing as per the directions of the Chief Justice, to me. On 13-4-2007, matter was mentioned by the Counsel for the parties for fixing date of hearing. As the counsel indicated that hearing of the Applications may take some time, on account of heavy board of Notice of Motions for ad interim reliefs, Counsel for the parties were told that the matter can be finally heard only after the Summer Vacation. However, Counsel for the Applicant insisted that the Court may give some tentative date on which dates, it may consider prayer for grant of ad interim relief. Counsel for the Applicant pointed that although the proceedings have been filed in November 2006 and as the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 and other enabling provisions of the scheme sanctioned by the Court as such. The purported agreements, however, are entered into by the erstwhile management of the applicant company the alter ego of the demerged company/respondent and not the new Management under the leadership of Anil D. Ambani as per the Scheme sanctioned by the Court. Under the Scheme sanctioned, Anil D. Ambani is expected to take responsibility for providing focussed management attention and leadership to the segregated and demerged business. In absence of suitable arrangement arrived at between the new regime of the applicant company with the respondent company, after the new management took over the reigns of the applicant company on 7-2-2006, there can be no proper working of the compromise or arrangement. Indubitably, on and after the date when the scheme sanctioned by the Court became effective on 21-12-2005, the erstwhile management of the applicant company (the alter ego of the demerged Company/Respondent) could not have taken decisions on policy matters till the new management of the Applicant Company in terms of the Scheme sanctioned by Court took over the management of the Applicant Company, which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generation of power as an integrated whole, constituted the gas based energy undertaking of RIL. It is this defined business carried on by the undertaking of RIL was to be segregated and demerged to be vested in the Applicant Company under the leadership of Shri Anil D. Ambani who was to take responsibility for providing focussed management attention and leadership to the segregated and demerged business. Sub-clause ( b ) of clause ( B ) of the Preamble unmistakably spells out this position. The spirit of the scheme approved by the shareholders and eventually sanctioned by the Court was to provide new management and leadership to the Applicant Company of Anil D. Ambani in relation to the segregated and demerged business. Indubitably, the gas based energy resulting company was incorporated with one of its main objective as "to carry on, manage, supervise and control the business of transmitting, manufacturing, supplying, generating, distributing and dealing in electricity and all forms of energy and power generated by any source whether nuclear, steam, hydro or tidal, water, wind, solar, hydrocarbon fuel, natural gas or any other form, kind or description". The scheme sanctioned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme. Provision regarding conduct of business in terms of clause 6 of the scheme sanctioned by the court also would indicate that the activities relating to each of the demerged undertakings which are carried on by the demerged company between appointed date and including the effective date for and on account of and in trust for the respective resulting companies. There is no provision authorizing the erstwhile management of the demerged undertaking to carry on activities or permit them to take decisions on policy matters pertaining to the business of the demerged undertaking even after the "effective date". As per the scheme sanctioned, that was expected to be done by the new Board of Directors of the Applicant Company under the leadership of Anil D. Ambani. 10. Thus understood, the suitable arrangements in relation to the supply of gas for power projects of Reliance Patal Ganga Power Limited and RIL with the gas based resulting company (Applicant) was required to be entered into between the Applicant and Respondent albeit after the new Board of Directors under the leadership of Anil D. Ambani had taken over the reigns of the Applicant Company on 7-2-2006. The purported agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant Company will only remain as a shell company without any actual business. 12. Prima facie, there is substance even in this submission. Going by the scheme sanctioned by the Court as is noted earlier, the spirit of the scheme was to bind the respondent (demerged company) of its commitment of setting up of gas based power generation projects in India already announced by it in anterior to the scheme and also its further commitment to use part of its gas discoveries for the generation of power for which purpose, an appropriate gas supply arrangement was to be entered between the demerged company and Global Fuel Management Services Limited (now RNRL-Applicant) pursuant to which gas was to be supplied to RIL for their power projects including Reliance Patal Ganga Power Limited for generation of power. The scheme is in relation to demerger of business of supply of gas to REL for their power projects including Reliance Patal Ganga Power Limited for generation of power as an integrated whole. 13. Thus understood, the purported Agreements not being in accord with the scheme sanctioned by Court, are not ascribable to suitable arrangement envisaged by clause 19 and other enabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit, also will be of no avail. Rejection of pricing pattern agreed between the parties by the Government does not, in any manner, prohibit the parties from entering into appropriate suitable arrangement regarding supply of gas to the applicant company as per the scheme sanctioned by the Court, which indeed, should be consistent with the extant regulations. It is, however, seen that the Contractor has freedom to sell natural gas within India. The valuation of the natural gas is only for the purpose of determining royalty and other calculations required under Production Share Contracts (PSC) and royalty and PLT under CDM contracts. As it was the commitment of demerged company (Respondent) to supply gas to the demerged undertakings (Applicant) and that being the basis of approval by the shareholders and Scheme sanctioned by the Court, the demerged company (Respondent) is under obligation to discharge that commitment of supply of gas to applicant for their power projects including Reliance Patal Ganga Power Limited for generation of power as integrated whole. 15. On the above finding there can be no doubt that this Court will have to consider the issues raised in the main appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified quantity, there is no question of stalling the entire auction process, in particular, with regard to the remaining quantity. In other words, it will be open to the respondent company to continue with the process of selling the remainder quantity of gas after setting apart the specified quantity of gas which the respondent has committed to supply to the applicant company as per the scheme sanctioned by the Court. 18. Counsel for the Respondent would, however, fervently argue that the Applicant Company is not entitled for any ad interim relief on account of delay and latches. It is submitted that the purported agreements have been executed in January 2006 and the new Board of Directors of the applicant company was constituted and took over change on 7-2-2006, whereas the subject Applications have been filed in this Court only in November 2006 and prayer for ad interim relief is pressed only recently. Indeed, this argument is attractive. However, in the fact situation of the present case, at this stage of the proceeding, I am inclined to take the view that the same cannot be the basis to deny the relief claimed by the Applicant of calling upon this Court to supervise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll have to be directed to ensure that no third party interest or reign is created in respect of specified quantity of gas to be supplied to the Applicant under the Scheme on form basis. In other words, the Respondent Company may proceed with the process of sale of the gas through auction, but of the remainder quantity of the gas explored and produced by it. Respondent Company will take all precautions to ensure that specified quantity of gas to be supplied to the Applicant is set-apart and made available if and when directed. This direction is only ad interim arrangement till the Application is heard. 21. Having regard to the nature of controversy and sizeable number of stake-holders in both the companies, the affairs of the Company being in public domain, it is appropriate that the main Application is heard expeditiously. The main Application being Company Application No. 1122 of 2006 be listed for hearing immediately on re-opening of the Court after Summer Vacation. The said Application be peremptorily listed on 7-6-2007 for hearing. If there is any other controversy, all those aspects can be considered and addressed in the main Application, which may be decided prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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