RELIANCE NATURAL RESOURCES LTD. versus RELIANCE INDUSTRIES LTD.

Citation: [2010] 5 S.C.R. 704 · Decided: 07-05-2010 · Supreme Court of India · Bench: K.G. BALAKRISHNAN · Disposal: Disposed off
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Judgment (excerpt)

A 
B 
c 
[2010] 5 S.C.R. 704 
RELIANCE NATURAL RESOURCES LTD. 
v. 
RELIANCE INDUSTRIES LTD. 
(Civil Appeal No. 4273 of 2010) 
MAY 7, 2010 
[K.G. Balakrishnan, CJI., B. Sudershan Reddy and 
P. Sathasivam, JJ.] 
Companies Act, 1956: 
Sections 193, 194, 195, 293, 391, 392, 393 and 394 -
Gas Sales & Master Agreement (GSMA) - Entered into by 
Reliance Natural Resources Limited (RNRL) with Reliance 
Industries (RIL) on the basis of Memorandum of 
D Understanding (MoU) arrived at between Ambani brothers -
Scheme approved by Company Court - Hence Sections 392 
and 394 applicable - Power of the Court under Sections 391 
to 394 wide enough to make necessary changes in the 
Scheme - How&er, the power does not extend to making any 
substantial or substantive changes to the Scheme - The said 
E MoU does not fall under the corporate domain - Neither 
approved by the shareholders nor attached to the Scheme -: 
Thus technically the MoU is not binding - Nevertheless the 
MoU formed the backdrop of the Scheme - Hence contents 
of the Scheme to be interpreted in the light of the MoU -
F Suitable arrangement under Clause 19 of the Scheme - Must 
be suitable for the interests of shareholders of RNRL and RIL 
as also the obligation of RIL under the Production Sharing 
Contract (PSC) and the broader national and public interest 
- Article 21 of the PSC must be interpreted to give the power 
G to the Government to determine both the valuation and price 
of Gas - Government owns the gas till it reaches its ultimate 
consumer - PSC shall override any other contractual 
obligation between the Contractor and any other party - Gas 
Sales & Master Agreement (GSMA) and Gas Sale & 
H 
704 
RELIANCE NATURAL RESOURCES LTD. v. 
705 
RELIANCE INDUSTRIES LTD. 
Purchase Agreement (GSPA) entered into with RNRL should A 
fix the price, quantity and tenure in accordance with PAC -
Empowered Group of Ministers (EGOM) has already set the 
price of gas for the purpose of PSC - Parties must abide by 
this and other conditions placed by the Government policy -
Interests of the shareholders must be balanced -
This 
B 
balance cannot be struck by the Court as the Court does not 
have the power under Sections 391 to 394 to create new 
conditions under the Scheme -
RIL directed to initiate 
renegotiation with RNRL within six weeks so that the interests 
of the shareholders are safeguarded and finalise the same c 
within eight weeks thereafter - Resultant decision should be 
placed before the Company Court for necessary orders -
Constitution of India, 1950 -Article. 14, 39(b), 73, 77(3), 291, 
298 - Oil field (Regulation & Development) Act, 1948 -
Territorial Waters Continental Shelf, Exclusive Economic 0 
Zone and other Maritime Zones Act, 1976 - Petroleum and 
Natural Gas Rules, 1959. 
Constitution of India, 1950: 
Directive Principles of State Policy - Article 39(b) -
Natural gas is a mate/'.ial resource-_.,,.,__ Natural resources are 
E 
vested with the Government as a matter of trust in the name 
of the people of India - It is the solemn duty of the State to 
protect the national interest - Natural resources must always 
be used in the interests of th-e country, and not private 
interests - Articles 73, 77(3). 
F 
Doctrines: 
Public Trust Doctrine - Doctrine of Identification -
Applicability of. 
The appeals have been filed against the judgment G 
and order of the Division Bench of the High Court of 
Bombay passed in Appeal in Company Application and 
in Company Petition filed by Reliance Natural Resources 
Ltd. (RNRL) and Reliance Industries Limited (RIL). The 
Union of India has filed the SLP against the same 
H 
706 
SUPREME COURT REPORTS 
[2010] 5 S.C.R. 
A common order passed by the Division Bench of the 
Bombay High Court. The matter mainly relates to Gas 
Utilisation Po-licy and the Pricing Policy of the 
Government and the Memorandum of Understanding 
(MOU) entered into amongst the family members of the 
8 
promoter and its effect on RIL, apart from certain ancillary 
issues. 
c 
D 
E 
F 
G 
H 
In view of the rival contentions, the following issues 
arose for consideration: 
(a) 
Wh~ther the Company Petition filed by RNRL 
und~r Section 392 of the Companies Act, was 
maintainable? 
(b) 
Even 
if the 
Company 
Petition 
was 
maintainable,· whether the challenge raised by 
RNRL to the GSMA, that it is not a "suitable 
arrangement" was maintainable particularly in 
view ~f the fact that on merits, the Company 
Judge had found, these objections to be 
unsust
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