Page 104 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 5: The Competition Act, 2002

Notes

Case Study Reliance
eliance Industries, the largest shareholder in Reliance Energy, has voted in favour
of entrusting itself with the power to appoint the majority of directors on the REL
Rboard.
Earlier these powers were vested with Mr Anil Ambani, REL Chairman and Managing
Director.
According to sources, RIL was among the 97.24-per cent REL shareholders who voted
in favour of the changes to its Articles of Association, a set of rules that govern day-to-
day workings of a company, through a postal ballot. The result of which was announced
today.
The altered Article envisages that so long as the Reliance Group of Companies holds 26 per
cent or more of REL’s paidup voting equity share capital, it will have the right to appoint
majority of REL’s directors on the board of the company.
Reliance Industries had earlier said that it had not sought in any withdrawal of powers
conferred on Mr Anil Ambani. It had also said that RIL had not been consulted by REL
before the proposed re-amendment of the relevant articles of association. The move to alter
the articles of association was seen as part of the ongoing differences between the Ambani
brothers over control of the ` 99,000 crores Reliance Group, of which REL is a subsidiary.
REL had, by way of a special resolution, asked shareholders to mail their votes through
postal ballot for a change in its Articles of Association.

The company had sought permission to change Article 131 (a), 131 (a) (ii) and 131 (aa),
which allowed Mr Anil Ambani the power to appoint one-third or majority of the total
directors on REL’s board, choose the Vice-Chairman of the company and even decide the
tenure of the Chairman, Vice-Chairman and the directors appointed by him.
REL sought to vest these powers with its prime shareholder, Reliance Industries.
Question
Why does Reliance want alteration in Reliance Energy’s articles? (Hint: due to the confl ict
between the ambani brother.)
5.9 Summary

The Competition Act, 2002 extends to the whole of India except the State of Jammu and
Kashmir.

It shall come into force on such as the Central Government may, by notification in the

Official Gazette, appoint. India has responded to globalization by opening up its economy,
removing controls and resorting to liberalization.
For this it is necessary that the Indian market should prepare itself competition from within
the country and outside.

The Monopolistic and Restrictive Trade Practice Act, 1969 became obsolete in certain
respects in the light of international economic developments relating more particularly to
competition laws.

The Objective of the act is to prevent adverse effect on competition, to promote and sustain
competition, to protect interest of c consumers, to ensure freedom of trade carried on by
other participants in Indian market, incidental and connected matters.

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