Ambani legal feuds not helping anyone

The episodic battle of legal claims and counterclaims between the Ambani brothers is beginning to become a bit monotonous even for the most ardent watchers of the two warring groups. The ordinary investors are left wondering why two of the country’s richest entrepreneurs, with great global ambitions, cannot get on with their respective businesses peacefully after they formally divided up the combined Reliance group companies among themselves in July 2005 as per a family agreement. Be that as it may, we are now only concerned with the impact that the mounting legal disputes between the two warring parties might have on the larger body of smaller shareholders on both sides. Needless to say, their legal battles are also impinging on critical public policy issues such as the development of India’s gas reserves at a time when oil prices are shooting through the roof and India is being seen as vulnerable on the energy front. The latest dispute has arisen on account of a provision in the family agreement which obliges Anil Ambani to offer the Right of First Refusal (RoFR) to Mukesh Ambani’s group before selling any of the ADAG group companies to a third party. This is in the context of Anil Ambani negotiating to merge Reliance Communications with South African telecom giant MTN into a single $70 billion entity. Post merger, Anil Ambani will have less than 35% share in the new entity. Therefore, Mukesh Ambani has asserted this is virtually a sale to MTN and demanded the right of first refusal. The ADAG management has countered this by saying the RoFR clause has no legal sanctity whatsoever. Anil Ambani has cited company law provisions and Supreme Court rulings to say the family agreement cannot block transfer of RCom shares to MTN. Besides, it is always open to the Mukesh Ambani group to make its own open offer as a counter to MTN’s open offer which will happen once the deal goes through. Whatever may be the outcome of the latest legal wrangle, we feel the interest of the larger body of shareholders will be better served by realising the synergies inherent in the Rcom-MTN merger. It is best, therefore, that the two brothers resolve this and other outstanding disputes out of court in the interest of millions of ordinary shareholders. They need to show some grace now. By Ms.Bobby Aanand, Metropolitan Jury.

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