Financial Daily from THE HINDU group of publications
Sunday, Nov 28, 2004
Corporate - Corporate Disputes
Ambani brothers seeking legal opinion
Mumbai , Nov. 27
THE Ambani brothers are seeking legal opinion before taking the next step on their differences about ownership and management of Reliance group of companies.
Mr Cyril Shroff of Amarchand & Mangaldas & Suresh A. Shroff & Co, is advising Mr Anil Ambani about his legal options, sources at the law firm have confirmed to Business Line.
Mr Shroff is also on the board of directors of Reliance Energy Ltd.
Though media reports indicated that Mr Mukesh Ambani is not resorting to any legal recourse right now, it is understood that he is also seeking legal opinion. The circulation of Mr Anil Ambani's letter of dissent about what is now popularly referred to as Item No. 17 is viewed as a confirmation of the tussle for control of the board of Reliance Industries Ltd between the two brothers.
Experts are divided about legal alternatives that Mr Anil Ambani has at his disposal. Solicitors say that the issue is best resolved out of court. "Company Law does not have a clear cut provision of dealing with such a situation. Mr Anil Ambani is not in a position to call an extraordinary general meeting, for this issue, currently,'' said a city-based corporate lawyer.
In case there are any prior decisions taken by the board that have been given the go-by, Mr Anil Ambani could claim that his claim is being ignored. "In this case, Mr Anil Ambani could claim oppression and mismanagement of the company and file a case with the Company Law Board,'' said another legal expert.
While Mr Anil Ambani could litigate on the basis of family settlement documents, if any, there are still serious concerns about whether he would have a watertight case, according to legal experts.
Since the board has signed on the minutes of the meeting, approving item No. 17, it cannot go back and claim that it did not have knowledge of the existence of the clause. This will hold true, even though some normal practices regarding the board meeting and circulations of the minutes have been violated as Mr Anil Ambani has alleged.
Regarding Item no. 17, experts opine that there is no legal ground for challenging a board's decision. The board is open to propose any resolution to strip the powers of other members, including Vice-Chairman.
"Any person holding more than 10 per cent can requisition for a shareholders meeting. If Mr Anil Ambani can prove a ten per cent holding, he could take his case to the shareholders,'' he said.
If matters head to the court, the focus would be on the control of the investment companies that hold 29 per cent of Reliance Industries. Some of these investment companies are incorporated outside India and thus not governed by Indian regulations. Currently, as the Chairman and Managing Director of Reliance Industries, it is Mr Mukesh Ambani who has control over these companies.
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