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Case List: Binding Nature of the Memorandum of Understanding (MoU)

Reliance Natural Resources Ltd. Vs. Reliance Industries Ltd., 

Citation: [2010] 156 CompCas 455 (SC), (2010) 7 SCC 1

Decided on: 07.05.2010

Issue: Whether the MoU entered into amongst the family members of the Promoter was binding upon the corporate entity

Relevant Extract(s): 

  • “MoU is not technically binding between RIL and RNRL. It is not in dispute that MoU is between three persons and the personality of the company must be construed separate from these persons. The principle emphasized by Mr. Jethmalani i.e. Doctrine of Identification may be applicable only in respect of small undertakings but in the case of RIL and RNRL, the companies have more than three million shareholders, in such a situation, one cannot make the companies’ personality the same as that of persons involved.” (Para 35)
  • MoU “can be used as an external aid for the interpretation of “suitable agreement” under the scheme. To put it clear, the MoU is one of the ways in which the intention of the parties can be made clear with regard to what was considered suitable. Nevertheless, there is no specific requirement that the GSMA* must confirm completely with the MoU.” (Para 36)
  • “apart from the MoU, “suitable arrangement” must be understood in the context of government policies, production sharing contract (PSC) between RIL and the Government, national interest and interest of the shareholders. Therefore, in our view MoU is one of the means of construing suitability of the arrangement and not the sole means.” (Para 37)

*Gas Sale Master Agreement

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