The following is the entire letter that Reliance Vice Chairman Anil Ambani wrote to his brother and Chairman of the company, Mukesh Ambani.

October 25, 2004
The Chairman and Managing Director
Reliance Industries Ltd.
Maker Chambers IV
Nariman Point
Mumbai 400 021.

Sir,

Sub: Item No. 17 of the draft Minutes of the Board Meeting of Reliance Industries Ltd (RIL) held on 27th July 2004

I wish to express certain views on the draft Minutes of the Board Meeting of 27th July 2004, as circulated along with the agenda papers for the Board meeting today. Item No. 17 deals with a very substantive matter concerning, inter alia, the redefinition of the powers and authorities of RIL's Chairman and Managing Director, the Vice Chairman and Managing Director, and Executive Directors.

I have expressed my views on this subject, through 9 communications exchanged with the Chairman, and RIL's Secretarial Department, within a span of just 3 days starting from 27th July 2004, the date of the last Board meeting (copies enclosed).

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In my communications, I have stated to the Chairman and RIL's Secretarial Department that Item No. 17 in the draft minutes has not been correctly recorded.

Further, in my 2 communications on 29th July 2004 and 30th July 2004, I have requested the Chairman to keep this item in abeyance, for the following reasons:

(i) Item No. 17 was introduced through a supplementary agenda at the end of the last Board meeting, without proper and due notice.

(ii) The supplementary agenda was introduced without my knowledge and/or consent, and keeping me completely in the dark. This is contrary to all past practice, whereby supplementary agenda items, like the main agenda, have always been pre-circulated, pre-discussed and pre-agreed between the 2 Managing Directors, before any Board meeting.

(iii) This is all the more surprising, as I have subsequently learnt that some of the other RIL Directors, and several RIL employees, had been taken into confidence on the supplementary agenda, and the contents and objectives of the same, while I, as VC&MD, was not even informed of the same!

(iv) In fact, some of the other RIL directors, to whom I later spoke, expressed surprise that I was not aware of this supplementary agenda item, and had not even been consulted on the same. They said they had simply assumed that, in accordance with past practice, whatever had come to the Board had been pre-discussed and pre-agreed between the 2 Managing Directors.

(v) The supplementary agenda item had a misleading title, which suggested the same was essentially concerned with formation of a Health, Safety and Environment Committee. The clubbing together of a very substantive proposal on redefinition of the powers of the Managing Directors, etc. with this unrelated subject of the HSE Committee, obscured the real purpose of the agenda item, and prevented a proper appreciation of the consequences thereof.

(vi) The relevant proposals on the substantial redefinition of the powers of the Managing Directors were available only in fine print in an Annexure, while the supplementary agenda note itself was completely silent on this aspect. This prevented Board members a proper opportunity to appreciate the consequences of the proposed changes.

(vii) There were no discussions or deliberations at the Board meeting, on this very substantial matter relating to the redefinition of the powers and authorities of the Managing Directors, as incorrectly stated in the minutes. The only discussion on this supplementary agenda item was in relation to the composition of a Health, Safety and Environment Committee (which discussion also lasted for barely about 2 minutes).

(viii) Specifically, the proposed redefinition of powers of the Managing Directors, reflected a substantial and material variation of the equation as has existed in RIL for the past more than 2 decades, and this clearly required intensive discussion and consideration of the Board of Directors, based on full facts and circumstances being presented to the Board. None of this has happened.

(ix) The issue of variation of powers of the Managing Directors, Executive Directors, and committees of directors, is a matter of great importance, vitally affecting the corporate governance structure of the company, and impacting its various stakeholders, including investors, banks, financial institutions, lenders, employees, and others, besides having consequences on diverse agreements to which the company is a party. These ramifications were neither discussed nor thought through at the Board meeting.

(x) The minutes incorrectly state that after discussions, all Directors (other than the CMD, who did not participate) unanimously approved of the resolution. The fact is that there were no discussions, and there was no vote, and the question of the resolution being passed unanimously thus does not arise.

(xi) The incorrectness of the minutes is evident from the fact that even I am supposed to have voted in favour of the proposed resolution. Clearly, I as VC&MD, would not vote for the prejudicial variation of my existing authorities and powers!

(xii) I have also been legally advised that the proposed redefinition of powers of the Managing Directors is not in accordance with law, and is in conflict with the provisions of the Companies Act, 1956, the Memorandum and Articles of Association of our company, and the Agreements approved by the shareholders for appointment of the Managing Directors.

(xiii) In addition, I regret to state that there was unseemly and unprecedented haste shown in preparation of the draft minutes, and obtaining of confirmations from the other directors, on the date of the Board meeting itself, before even showing the draft minutes to me, the VC&MD of the company!

(xiv) The draft minutes were not sent to me till 2 days after the Board meeting i.e. the evening of 29th July 2004, a full 48 hours after other Directors had already received the same. This too was done, only after my calls to K. Sethuraman and my e-mails addressed to the CMD and the Secretarial Department.

(xv) The above was all contrary to past practice, followed without interruption in our company for the past more than 10 years, whereby draft minutes of Board meetings are prepared about 20 to 30 days (sometimes more) after the Board meeting and first circulated to the 2 Managing Directors for confirmation, and only after receiving such confirmation, the same are sent to other Directors for approval (illustrative details enclosed in the Annexure)

(xvi) It is also evident that the draft minutes were kept prepared in advance of the Board meeting, because there was no adequate time for the Secretarial Department to prepare the draft after the conclusion of the meeting, and obtain signatures of several directors on the same day!

(xvii) Similarly, for all past Board meetings, the draft minutes have been prepared and circulated to the Managing Directors, and to other Board members, by Mr. K. Sethuraman, Secretarial Department. In another departure from this usual practice, the draft minutes, in the present case, were circulated by Mr. Vinod Ambani - something that has not been done in the past!

In view of all the above, I had spoken to a few of the Directors on 30th July 2004, and thereafter, and expressed to them my deep concern at this unhappy turn of events, and the sad reflection it represents of how we are seeking to preserve, and carry forward the legacy and past tradition of our beloved founder Chairman, Dhirubhai Ambani.

Regrettably, nearly 3 months, almost 90 days, after my second e-mail to the CMD, and my personal discussions with several directors, and their interventions in turn with the CMD, I have not received any acknowledgement, much less any response, from him to my aforesaid e-mails. Instead, it has been communicated to me on the CMD's behalf that the matter is final, and cannot be altered.

RIL is India's largest private sector company, and now a Fortune Global 500 company, and the country, the people, and the community have high expectations from us.

We have over 35 lakh shareholders. Leading domestic and international institutional investors are our important stakeholders. The entire banking and financial community has large exposures to our company. We make the largest contribution to the national exchequer as a single corporate.

It is my firm view that RIL should abide by the highest standards of corporate governance, and this should first be reflected at proceedings of our Board of Directors.

We have had more than 8 Board meetings and 2 AGMs in the past 2 years, after our founder Chairman, Dhirubhai Ambani left for his heavenly abode, and all matters have been pre-agreed between the 2 Managing Directors by mutual discussion and consent.

In keeping with this past practice, I propose that item no. 17 of the minutes be kept in abeyance, till we have had a full discussion, and have decided the forward path on a mutually agreed basis.

However, if this is not acceptable to the Chairman, my views, as above, on this subject, may kindly be placed on record, and taken into consideration by the Board.

Yours faithfully

Anil D. Ambani

Encl: as above
Copy to: Shri Vinod Ambani, President and Company Secretary, RIL