Corporate Law

RIL(Reliance
RIL(Reliance Industries
Industries
ltd.)
ltd.) Vs
Vs RNRL(Reliance
RNRL(Reliance
Natural
Natural Resources
Resources ltd.)
ltd.)
 CASE HISTORY
• Reliance industries found gas in KG(krishna-
godavari) basin in 2002.
• It is producing 31 million metric standard
cubic metres per day (mmscmd), which is
expected to hit a peak of 80 mmscmd.
• When the two brothers separated there was
an MoU(memorandum of understanding)
signed between the two brothers.
MoU ( Memorandum of Understanding)
• Signed on June 18, 2005.
• It entitles RIL to 28 mmscd(million metric
standard cubic metres per day) of gas from KG
Basin for 17 years at $2.34/mmbtu.
• Additionally if the contract b/w RIL & NTPC
does not materialise, then Anil’s side will also
get NTPC’s share of 12 mmscd
 MUKESH’S SIDE {RIL}
• Never committed a price since it is subjected to govt.
approval. Govt. has rejected the price of $2.34 in
january 2006.
• $4.22/mmbtu was approved by govt.
• $ 2.34 doesn’t compensate for cost escalations.
• If govt. values gas at $ 4.2 for its profit share and RIL
has to sell it at $ 2.34, it could suffer a loss of $ 5
billion.
• The MoU was not shared with the RIL board or its
shareholders.
 ANIL’S SIDE {RNRL}
• The cost of production in the KG(Krishna-Godavari) basin
is $ 1.41 and at $ 4.20/mmbtu RIL will make huge profit.
• He feels that the price of the gas should not be above $
1.5/mmbtu .
• $ 4.20 price has been determined by the govt. for its take
as a part of PSC(Production Sharing Contract).
• RIL will make a profit of Rs. 50,000 crore by pricing gas at
$ 4.20.
• RNRL will lose $ 1 Billion( Rs. 4,800 crore) over 17 years.
• RIL is free to sell gas at any price it want to.
 GOVERNMENT SAYS…
• Petroleum ministry says that the brothers are fighting over
something that does not belong to them.
• Article 297 of the Constitution of India lists petroleum as
a resource, which Union of India has an authority over.
• So Gas is owned by the govt., RIL can’t sell it unilaterally.
• Price of $4.20 was approved by EGoM(Empowered
Group of Ministers).
• Govt. can’t approve of the price lower than $ 2.34 ( as
Anil suggested).
• Has objections regarding the MoU.
HIGH COURT’S VERDICT

“……. Within one month from the date of

prouncement of this judgement and order the parties
should enter into a ‘ suitable arrangement’ on the
basis of quantity, tenure and price as specified and
agreed between the parties under the MoU either by
renegotiating the terms and conditions of the
agreement so as to make it a bankable agreement or
revert back to Kokilaben Dhirubhai Ambani who had
reserved her ability to intervene again if the parties
fail to act upon the MoU dated 18th June,2005 and the
Anil Ambani Group may opt for a claim for the
damages…….”
 CONCLUSION
• To come to a conclusion taking into consideration
Article 297 of the constitution, the government has
the right to decide the price of the natural gas as it is
a natural resource of India.
• This does not mean that it does not take into
consideration the parties. The price should be
decided such that the cost of production and
maintenance is taken into consideration and RIL gets
some profit, but the price should not be too high so
that RNRL does not run this project in losses.
JET Vs SAHARA
Acquisition Case
Taxation Case
Acquisition Case
CASE HISTORY
Jet’s Side……
• The policy though clear on parking bays and landing slots, does
not specify the status of aircraft hangars, check-in counters, cargo
warehouses, passenger lounges and other such airport facilities.
• Air Sahara’s rival Air Deccan, which owned more aircraft and a
higher market share than Sahara had been valued at about $ 200
million. One the other hand, Jet would have to pay $ 500 million
for Sahara , whose entire fleet is leased and which flies fewer
routes than Air Deccan.
• Among the other bidders Vijay Mallya (Kingfisher Airlines) has
valued Air Sahara at $ 300 million.
• Willing to go ahead with the deal only if the price was lowered by
20-25 per cent.
Sahara’s Side….
• Sahara was running into losses. 10 of its flights
were not operational.
• This acquisition was a great deal for Sahara.
• But the main point for Sahara was the price of
acquisition. It wanted jet to stick to the
contract and pay $500 million for the
acquisition.
Statistical details of both parties….
 Benefits Of Acquisition
• Both the airlines had more or less similar fleet (most
of which are Boeing aircrafts), resulting in inventory
saving cost.
• Common maintenance base and route
rationalization could cut down operational costs.
• Sharing of resources, infrastructure for
maintenance, ground handling, engineers and pilots
between the two airline.
• Common facilities, like crew training, airport
handling, finance and administration.
• Access to parking bays, trained manpower and an
established route network.
• Jet can now fly global destinations to which Air
Sahara had rights.
 Conclusion
• The acquisition is worth because as it is Sahara
was running into losses and because of the
benefits listed before.
• Till now most of the mergers have failed, let’s
see further what has happened after this
merger.
Taxation Case
 Case History
• Jet bought Sahara Airlines from the Sahara Group in April 2007 for Rs
1,450 crore. It paid Rs 900 crore and agreed to pay the balance in four
instalments. The Income-Tax department had however demanded dues of
Rs 107 crore from Sahara Airlines after Jet took over the company.
According to Jet, this amount was due from Sahara Group as it pertained
to the period before the acquisition.
• While paying Sahara the installment of Rs 137 crore last March, Jet
deducted Rs 37 crore against the IT dues. This year too, Jet deducted Rs 50
crore on the same account.
• Sahara however has argued that the company cannot deduct from the
agreed amount of installment which is enshrined in the share purchase
agreement. It also pulled up Jet for not paying the second installment on
time and said that they are withdrawing the concession of Rs 550 crore
given to Jet on condition that they pay on time. They have now demanded
that this extra amount has to be paid by Jet.
High court said…..
• The Bombay High Court granted two months’
time to Jet Airways and Sahara India
Commercial Corporation Ltd (SICCL) for filing
affidavits for the ongoing tax dispute between
the two parties since March 2009.
• Both the parties sought time to file additional
affidavits following which the Court deferred
the case for further hearing to January 19,
2010.
 Conclusion
• According to us,both the parties should adhere to
the contract they have agreed to.
• The Sahara airlines are liable to pay the tax as the tax
is liable before the acquisition and so it should
accept the deducted amount.
• As far as the delay of payment is considered jet
should have paid the installment on time. It should
be given a warning and if next time the installment
doesn’t come on time then it is liable to pay a price
for it.
 Bibliography

• The Economic times.

• Internet.
 Thank you

Sheetal Jaimalani
Inderraj Singh Kohli
Abhishek Ahir