By deciding that the MOU is not binding and that it has to adhere to Government Pricing policy, the Supreme Court has neglected to go into the issue of the "Sanctity of the MOU".
The division of the Reliance empire was based on the terms of the MOU. If these terms of MOU have been upheld to be not binding but open to outside influences, then Anil Ambani has, in my opinion every right to challenge the demerger of the Reliance empire.
The fundamental issue in any business deal is that once the terms are agreed between the parties, then the parties have to honour their commitments. The commitments cannot be rescinded based on the fact that one of the parties now stands to lose. If this was the case then no commerce can ever take place. Where will be trust in future agreements?
The SC has erred here, in my opinion by not going into the terms of MOU. The MOU clearly states that RIL is supposed to supply to RNRL at a predetermined rate. If RIL has to take a loss on this account, so be it. This must have been factored in when the division of the assets took place. I am sure that the division of assets was not 50:50.
This day will go down in the Indian history, as a day which shows that you can wriggle out of your moral and financial obligations, by having the government on your side.
The division of the Reliance empire was based on the terms of the MOU. If these terms of MOU have been upheld to be not binding but open to outside influences, then Anil Ambani has, in my opinion every right to challenge the demerger of the Reliance empire.
The fundamental issue in any business deal is that once the terms are agreed between the parties, then the parties have to honour their commitments. The commitments cannot be rescinded based on the fact that one of the parties now stands to lose. If this was the case then no commerce can ever take place. Where will be trust in future agreements?
The SC has erred here, in my opinion by not going into the terms of MOU. The MOU clearly states that RIL is supposed to supply to RNRL at a predetermined rate. If RIL has to take a loss on this account, so be it. This must have been factored in when the division of the assets took place. I am sure that the division of assets was not 50:50.
This day will go down in the Indian history, as a day which shows that you can wriggle out of your moral and financial obligations, by having the government on your side.
In my opinion SC's decision has a logical explanation. There cannot be an MOU for buy/sell of product that does not belong to either of the parties. When an MOU of this accord is framed it needs to be in compliance with Federal Laws. RIL is like a franchisee to the Govt. of India, it cannot set its own price, the trade has to be settled at the price allowed by the caretaker of the product. Moreover India does not allow free pricing of any fuel.
ReplyDeleteOut of the Govt. prescribed price a part of it is taxes, in no way will the Govt. foresake its revenue.