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TMI Blog1997 (9) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 2, Maruti Udyog Ltd. with effect from the same date. The communication in this regard reads as follows : "Government of India Ministry of Industry Department of Heavy Industry No. 2(8)/89-PE.VIDated 27-8-1997 To, Shri Abhijit Mukhopadhyay, Company Secretary, Maruti Udyog Limited, 25, K.G. Marg, New Delhi. Subject : Appointment of Managing Director in Maruti Udyog Ltd. (MUL) on behalf of Government of India Sir, In pursuance of article 88(4) of the articles of association of Maruti Udyog Ltd. (MUL), the Government has appointed Shri R.S.S. L.N. Bhaskarudu, JMD, MUL, as Managing Director on the Board of Directors of MUL w.e.f. 27-8-1997 and till further orders. Yours faithfully, Sd/ Sanjay Bhatia, Deputy Secretary" 3. The learned counsel for the petitioner has vehemently argued that in the above said Board meeting this decision could not have been taken as nominees of the petitioner-company were in majority and they had protested against the appointment of R.S.S.L.N. Bhaskarudu. The Board, therefore, could not have passed this resolution. The following grounds of attack have been reiterated : ( a )The appointment is illegal, void, invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it was not imperative on the part of the respondent company to have consultations before appointment of the managing director. The only condition which was applicable was that the petitioner and the Government shall have the right to designate the managing director by turns provided that the party which nominates the managing director shall be entitled to remove such managing director and nominate the new managing director for the term of the office on the expiry of term of office of the predecessor. It is submitted that presently, it is the turn of the Government to nominate the managing director and the petitioner company should have no grievance on that account. Lastly, in answer to the plea of the petitioner that the appointment of the managing director could only take place at the annual general meeting and the meeting of the Board held on 27-8-1997, nominating the manag- ing director was bad in law, the learned Attorney General has cited the provision of section 317 of the Companies Act, 1956 ('the Act') which lays down that no company shall, after the commencement of this Act, appoint or employ any individual as its managing director for the term exceeding 5 years at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove such Chairman and nominate the new Chairman of the Board of directors for the term of office upto the expiration of the term of office of the predecessor. The Government shall cause the Chairman of the Board of directors in office as of the date of this agreement to retire at the close of the annual general meeting of shareholders to be held first following the date of this agreement (such meeting currently scheduled to be held on or before 31 July, 1992) and the Government shall have the right to designate the next Chairman of the Board of directors to be appointed at such annual general meeting of shareholders. Chairman shall be a part-time director of Maruti.' ( b )Article 5.2 of the Joint Venture Agreement shall be amended to read as follows : '5.2 Officers. The managing director shall be the chief executive officer of Maruti, who will have the power and authority to represent Maruti. The term of office of the managing director shall expire at the close of the fifth annual general meeting of shareholders to be held following his assumption of office. Suzuki and the Government shall have the right to designate the managing director by turns: provided that the party whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be satisfactorily settled by correspondence or mutual conference between the parties hereto, shall be determined by arbitration in accordance with the then prevailing rules of conciliation and arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such rules upon written request of any party hereto. The site of such arbitration shall be London, United Kingdom. The decision of such arbitrator or arbitrators shall be final and binding upon the parties hereto and judgment thereon may be entered in any court having jurisdiction thereon or application may be made to such court for judicial acceptance of the award and/or order of enforcement, as the case may be." 7. The short question in the present facts which arises for consideration in this petition is as to whether it will be open for the court to pass restraint orders and stop annual general meeting of the company which is sched- uled to be held on 22-9-1997, at 3 P.M. The parties, admittedly, have equal stakes in the joint venture and it cannot be categorically said that views of each other can be by-passed, ignored and considered irrelevant. The term of the previous manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholders in the annual general meeting on the following terms and conditions ." 9. The Board in view of the above, approved the appointment of Mr. R.S.S.L.N. Bhaskarudu as managing director of the company with effect from 27-8-1997, till the conclusion of the 5th annual general meeting of the company following his assumption of office subject to the approval of the shareholders. The learned Attorney General is quite right to contend that in view of the provisions of section 317 an embargo is placed on the company that the term of the managing director cannot exceed five years at a time. Section 317 reads as follows : "317. Managing director not to be appointed for more than five years at a time. (1) No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time. (2) Any individual holding at the commencement of this Act the office of managing director in a company shall, unless his term expires earlier, be deemed to have vacated his office immediately on the expiry of five years from the commencement of this Act. (3) Nothing contained in sub-section (1) shall be deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the plaintiff submitted that this is what is popularly known as a 'quasi-partnership' case and that on the principles enunciated by the House of Lords in Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 All ER 492 (HL)], the court should restrain the first and second defendants, as two of the three partners in the quasi-partnership, from expelling the third partner, namely, the plaintiff. I will deal with the first and second submissions together. In my judgment, even assuming that the plaintiff's complaint of irregularities is correct, this is not a case in which an interlocutory injunction ought to be granted. I say that for the reason that the irregularities can all be cured by going through the proper processes and the ultimate result would inevitably be the same. In Browne v. La Trinidad [( 1888 ) 37 Ch D 1], Lindley LJ said : 'I think it is most important that the court should hold fast to the rule upon which it has always acted, not to interfere for the purpose of forcing companies to conduct their business according to the strictest rules, where the irregularity complained of can be set right at any moment.' It seems to me that the motion which is bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly accept, unless he undertakes the burden of proving fraud or mala fides. The just and equitable provision nevertheless comes to his assistance if he can point to, and prove, some special underlying obligation of his fellow member(s) in good faith, or confidence, that so long as the business continues, he shall be entitled to management participation, an obligation so basic that, if broken, the conclusion must be that the association must be dissolved...." (p. 1423) 14. In Dalpat Kumar's case ( supra ) the principle that existence of a prima facie case must be shown that non grant of injunction must result in irreparable injury to the parties seeking relief. Paragraph 5 of the judgment may be reproduced as follows : "5. Therefore, the burden is on the plaintiff by evidence aliunde by affidavit or otherwise that there is 'a prima facie case' in his favour which needs adjudication at the trial. The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition for the grant of temporary injunction. Prima facie case is not to be confused with prima facie title which has be established, on evidence at the trial. Onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the 'balance of convenience' lies, [see Wander Ltd. v. Antox India (P.) Ltd. [1990] (Supp) SCC 727, at pages 731-32]. In order to protect the defendant while granting an interlocutory injunction in his favour the court can require the plaintiff to furnish an undertaking so that the defendant can be adequately compensated if the uncertainty were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational Chamber of Commerce and the applicant/petitioner has requested Lord Mustill to be appointed as a sole arbitrator to adjudicate upon the disputes, differences and claims arising out of the JVA on a fast track route. 18. Mr. Bhaskarudu is functioning as managing director of respondent No. 2 with effect from 27-8-1997, till date (for about three weeks) and it will not be appropriate to set aside or hold his appointment in abeyance and stay the operation of the resolution appointing him or to restrain the holding of annual general meeting proposed to be held on 22-9-1997. The appointment, in any case, has to be ratified at the annual general meeting where in the petitioner Corporation will be at liberty to raise objections. 19. The question which has been highlighted and agitated is that the consent, concurrence and opinion of the petitioner Corporation was not taken into consideration before nominating Mr. Bhaskarudu. This ques- tion as to whether it was incumbent on the respondent company to take the decision in consultation and concurrence with the petitioner will have now to be determined by the arbitrator as the petitioner has chosen to take recourse to that reme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Arbitration, which shall proceed with the arbitration in accordance with these Rules." 20. An affidavit has also been filed in court by Director and General Manager of Asia and Oceanza, Automobiles Department, Overseas Auto-mobile Marketing Division, Suzuki Motor Corporation, which reads as under : "Affidavit I, J. Sugimori, son of Shri Yuri Sugimori, aged 55 years, resident of 1-406, 2640 Tomitsuka, Hamamastu, Japan, and temporarily resident in New Delhi do hereby solemnly affirm and declare as under : 1.I state that I am the Director and General Manager of Asia and Oceanza, Automobiles Department, Overseas Automobile Market ing Division, Suzuki Motor Corporation. 2.I state that Suzuki Motor Corporation commenced the arbitration proceedings before the commencement of section 9 proceedings in the Hon'ble Delhi High Court. 3.I state that M/s. Amar Chand and Mangal Das and Suresh A. Shroff Co., the Solicitors and Advocates of Suzuki Corporation, by their communication dated 18 September, 1997, bearing No. D-AB/6-A0001-02-03 sent out the requests to arbitrate to the International Chamber of Commerce (International Court of Arbitration) by Fax No. 003349532933) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made certain statements which cannot be said to be in the best interests of the parties and should have been avoided when the matter was subjudice before the court. The following paragraph which appeared in the daily newspaper 'The Eco- nomic Times' dated 29-9-1997, may be reproduced : "Maran calls Suzuki's bluff, says suitors a dozen. The face off between the Government and Suzuki Motor Corporation worsened today with Industry Minister Murasoli Maran cocking a snook at Suzuki saying other candidates were ready to step in if the Japanese car maker pulled out of the joint car venture Maruti Udyog Ltd. 'There are thousands of people waiting', he said. 'The Americans are there, the Germans are there, and there is no dearth of technology. There are several people better than Suzuki', he told newsmen today. Suzuki and the Government, which jointly own MUL, are at loggerheads over the nomination of the venture's new managing director. But Mr. Maran added the Government was not averse to a dialogue with Suzuki to sort out the crisis. The interests of Maruti would not be allowed to suffer at any cost. 'We are waiting for the High Court's decision. It is not going to affect f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person to do what he likes. He has to act reasonably. When it is found that no right thinking or conscientious person would have exercised the 'discretion' in the manner it was exercised, the action will have to be quashed. The power is to use the 'discretion' and not abuse it. The authority granted 'discretion' has to exercise power in a fiduciary capacity. If the court finds that there were illegitimate motives in exercise of the 'discretion', the action would not be sustained. While going into individual cases, we have kept in view that it is not for this court to usurp the 'discretion' of public authority. If the decision to make discretionary allotment is within the confines of reasonableness, this court will not go into the merits, even if two views are possible. But, at the same time, arbitrary exercise of 'discretion' cannot be legitimated (legitimized?) by this court. The court may overlook certain aberrations and allow considerable freedom of 'discretion' on being satisfied that the public authority was acting bona fide but at the same time when it is found that by exercising discretionary powers allotments were given only as benevolence to those who do not deserve it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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