Financial Daily from THE HINDU group of publications
Monday, Nov 29, 2004
Corporate - Corporate Disputes
Reliance Energy board to take up resignations `this week'
Mumbai , Nov. 28
RELIANCE Energy Ltd's board will meet over the next few days to consider the resignations of six directors, the company said on Sunday.
"The meeting should take place within the next three or four days," a senior REL official said. The Chairman and Managing Director, Mr Anil Ambani, also reiterated this position in an e-mail to the company's 25,000-odd employees in a bid to quell any apprehensions over the resignations.
In his e-mail, Mr Ambani is reported to have said: "Last Thursday, six directors of Reliance Energy tendered their resignations to the board. This development, widely commented upon in the media, has left all of you with a sense of anguish and uncertainty. I fully understand and appreciate these concerns.
"The board of directors of Reliance Energy is meeting, in the next few days, to consider these resignations. In the meanwhile, I have requested each of the six directors to continue to serve the company and to carry out their assigned roles and responsibilities as before."
Meanwhile, agency reports quoted the company officials as saying that the directors, who had announced their resignations last week, were working but did not elaborate whether they had agreed to take back their resignations.
Companies are managed through a body of directors and the Companies Act, 1956, provides, in some detail, the procedure for appointment of directors. But according to corporate law professionals, there is no mention in the Act about when a director's resignation becomes effective. In the absence of any provision in the Act, courts have held that one has to make a reference to the company's Articles of Association and follow the procedure, if any, prescribed in it.
They further state that according to the English Court, the resignation of a director became effective on and from the date it was tendered or submitted. The Court had also held that in such a case, there was no formality that the board of directors had to accept the resignation before it becomes operative.
Six REL directors, including its Executive Vice-Chairman, considered among those close to Mr Anil Ambani, resigned from the board on Thursday. No reasons were given.
Significantly, the resignations coincided with the release of a letter written by Mr Anil Ambani, who is also the Vice-Chairman and Managing Director of Reliance Industries Ltd, questioning the RIL board's decision to vest more powers with Mr Mukesh Ambani, RIL's Chairman and Managing Director.
REL is believed to have brought forward the board meeting that was earlier scheduled for December 8. The press release issued by REL, however, did not mention any date, instead saying the board would meet in the next few days.
REL stock closed at Rs 549.10 on the Bombay Stock Exchange last Thursday, the day of the resignations, Rs 34 below the previous day's close of Rs 583.10. The company's stock was the hardest hit among all Reliance group stocks.
The markets are expected to continue taking a grim view of the stock this week unless the two brothers seem to come closer to a settlement over the ownership dispute, a senior analyst said.
Reliance Industries holds 50.15 per cent stake in Reliance Energy, which supplies electricity to Mumbai and Delhi suburbs.
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