Reliance Natural Resources Ltd. v. Reliance Industries Ltd. (2010) 7 SCC 1

Quick Summary

This case is about gas from the KG-D6 block, a family MoU, and who controls price and supply. The Supreme Court held: (1) a Section 392 petition is maintainable for limited clarifications to a court-approved scheme; (2) the Production Sharing Contract (PSC) and public law (Articles 297, 39(b), public trust doctrine) prevail over private MoUs; (3) pricing/allocation of natural gas sits with the Union Government. The family MoU may guide intent but cannot override the PSC or law.

Citation

(2010) 7 SCC 1

Court

Supreme Court of India

Keywords

PSC supremacy, Section 392, MoU effect, Govt pricing, public trust

Issues

• Is a petition under Section 392 of the Companies Act maintainable to work out/clarify a Scheme?
• Does the PSC override private contracts (MoU/GSMA/GSPA) and give the Government control on price and allocation?
• What is the legal nature and binding force of a family MoU not embedded in Articles?
• How far does the identification/attribution doctrine apply to widely held companies?

Rules

• Section 392: Court may issue directions to work out an approved Scheme, if changes don’t alter its core.
• PSC + Constitution: Natural resources vest in the Union (Art. 297); distribution for common good (Art. 39(b)); public trust governs.
• MoU: External aid to interpret intent; not binding unless reflected in corporate documents and consistent with law/PSC.
• Identification doctrine: Narrow use; not apt for corporations with millions of shareholders.
• Board powers: Commercial decisions like pricing lie with the Board (see statutory scheme, e.g., s.293 era context), subject to PSC/public law.

Facts (Timeline)

Arguments

Judgment (Supreme Court)

• Maintainability: Yes. Section 392 petition lies for limited working-out of the Scheme.
• PSC supremacy: PSC + constitutional/public trust principles override private MoU terms on gas supply/price.
• Govt control: Pricing/allocation of natural gas remain with the Union in public interest.
• MoU status: External aid to interpret intent; not per se binding on companies unless lawfully embedded.
• Identification doctrine: Inapt for widely held companies; cannot attribute promoter promises to the company automatically.

Ratio

Natural gas is a public resource. The PSC framework and constitutional mandates control price and allocation. Private MoUs yield to this regime. Section 392 enables the Court to give practical effect to a Scheme without rewriting it.

Why It Matters

• Clarifies the hierarchy: Constitution/PSC → corporate Scheme → private MoU.
• Confirms Government primacy in pricing/allocation of natural resources.
• Guides how family/promoter MoUs interact with public law and Articles.

Key Takeaways

1. PSC trumps MoU on gas supply/price.
2. Section 392 = limited tool to implement Schemes.
3. Govt approval is central for price/allocation.
4. MoU can guide, but is not self-executing against companies.

Mnemonic + 3-Step Hook

Mnemonic: “P-U-B” — PSC prevails, Union controls price, Bring Section 392 only to work out the Scheme.

1. Check PSC & public law first.
2. Align any MoU/agreements with Govt approvals.
3. Use Section 392 for practical directions, not for rewriting.

IRAC Outline

Issue: Can a family MoU fix gas price/supply despite PSC and does Sec. 392 permit enforcing the Scheme to that end?

Rule: PSC + Constitution/public trust govern natural gas; Sec. 392 allows limited scheme-working directions.

Application: MoU is persuasive intent only; pricing/allocation require Govt approval; GSMA/GSPA must fit PSC.

Conclusion: PSC/public law prevail; Sec. 392 maintainable but within narrow bounds.

Glossary

PSC (Production Sharing Contract)

Contract between Government and explorer, controlling production, pricing, and allocation within policy.

Public Trust Doctrine

State holds natural resources for the people and must manage them for the common good.

Section 392

Legacy Companies Act power allowing courts to give effect to Schemes without altering their substance.

Student FAQs

Related Cases

• Cases on public trust and natural resources management.
• Decisions on how MoUs interact with corporate Articles and Schemes.