1993 (4) TMI 262 - HC - Companies Law

Summary

Issues Involved:
1. Restraint on the first respondent from granting approval to the third respondent's application under the EHTP Scheme.
2. Alleged violation of the court's interim order by the third respondent.
3. Definition and implication of a joint venture in the context of the case.
4. Lifting of the corporate veil and its relevance to the case.

Detailed Analysis:

1. Restraint on the first respondent from granting approval to the third respondent's application under the EHTP Scheme:
The petitioners sought a writ to restrain the first respondent from approving the third respondent's application to set up a unit under the Electronic Hardware Technology Park Scheme (EHTP Scheme). The petitioners argued that the approval violated an interim court order restraining the third respondent from entering into any joint venture or distributorship agreements with other parties in India. The court noted that the third respondent had applied under the EHTP Scheme to establish a subsidiary in India, which would be a wholly-owned entity, not a joint venture.

2. Alleged violation of the court's interim order by the third respondent:
The petitioners claimed that the third respondent's move to set up a subsidiary in India was in violation of the interim order dated October 15, 1992, which restrained the third respondent from entering into any joint venture or distributorship agreements. The court found that the interim order specifically prohibited joint ventures with third parties, not the establishment of a wholly-owned subsidiary. The court emphasized that the subsidiary would be entirely owned by the third respondent, with no involvement of any other party, thus not constituting a joint venture.

3. Definition and implication of a joint venture in the context of the case:
The court clarified that a joint venture involves the pooling of resources by two different entities. In this case, the proposed Indian subsidiary would be wholly owned by the third respondent, with no other entity involved, thus not meeting the criteria for a joint venture. The court stated, "By no stretch of imagination, can the setting up of the subsidiary company by the third respondent be construed as a joint venture."

4. Lifting of the corporate veil and its relevance to the case:
The court discussed the concept of lifting the corporate veil, referencing the Supreme Court's decision in State of U.P. v. Renusagar Power Co., which allows the corporate veil to be lifted when public interest demands. The court noted that in cases where a subsidiary is wholly owned and controlled by the parent company, the two entities can be treated as one. The court concluded that the subsidiary of the third respondent would not be considered a third party for the purpose of the interim order, and thus the approval for setting up the subsidiary did not violate the court's order.

Conclusion:
The court held that the approval granted by the Government of India for the third respondent to set up a wholly-owned subsidiary under the EHTP Scheme did not infringe the interim order dated October 15, 1992. The petitioners' claim that the subsidiary would constitute a joint venture was rejected, and the court emphasized the importance of the EHTP Scheme in promoting the electronic industry and boosting exports in the national interest. Consequently, the writ petition and the application were dismissed.