The Reliance Group Saga - Break-up of the Largest Family-owned Business in India

            
 
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Case Details:

Case Code : BSTR182
Case Length : 19 Pages
Period : 2002-2005
Organization : Reliance
Pub Date : 2005
Teaching Note :Not Available
Countries : India
Industry : Diversified

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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EXCERPTS

The 'Ownership' Issue

According to the Hindu Succession Act, Kokilaben and her children, inherited the entire assets owned by Reliance Group. Three months after Dhirubhai's demise, all her four children (two sons and two daughters) signed a deed of release in favor of Kokilaben, according to which they gave rights over the entire property to their mother.

In order to have a firm control over the Reliance group companies, Dhirubhai had floated several investment companies which according to media reports varied between 400 and 1400. At the time of his death, Dhirubhai had not left any will. According to industry experts, 29% of shares of RIL were held by a web of investment companies known as 'persons acting in concert.' Experts believed that this made division of his huge business empire difficult and Dhirubhai purposely avoided writing a will. Reliance claimed that there was no connection between these investment companies and the Ambani family. During investigations about switching of shares during the 1990s, Reliance repeatedly claimed before the capital market regulator, department of company affairs and income tax department that it had no connection with these investment companies...

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Allegations and Counter Allegations

Once the rift relating to ownership issues between the brothers became public, there was no stopping in the charges and counter charges between the two camps. Internal e-mail messages and confidential boardroom documents were leaked to the media from time to time, and were reported in newspapers in great detail.

In a board meeting on July 27, 2004, Mukesh had put forward a proposal to redefine powers of Chairman, managing directors, executive directors and various other committees of directors. The resolution gave Mukesh authority to "vary or evoke all or any duties, responsibilities or powers given to the managing director - Anil, and to confirm, modify or countermand any actions or decisions made by him." This resolution was accepted by other directors of RIL board. Anil did not agree to this as the matter was not discussed with him. He wrote to Mukesh that he was "legally advised that the proposal redefinition of powers of the managing directors is not in accordance with law..."

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