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High Court Of Delhi
SUZUKI MOTOR CORPORATION - Appellant
Versus
UNION OF INDIA - Respondent
ORIGINAL MISCELLANEOUS PETITION 172 of 1997
Decided On : 09/22/1997
Held:
The term of the previous Managing Director had come to an end after the expiry of five years from the date of his appointment. The Board resolved in its meeting held on August 27, 1997 that the Government has appointed Mr. RS.S.L.N. Bhaskarudu, Joint Managing Director (MUL) ax Managing Director on the Board of Directors of MUL with effect from August 27, 1997 and till further orders. The appointment of Managing Director has to be in compliance with the provisions of law and as contained in the agreement entered into between the parties and must be ratified at the Annual General Meeting of shareholders which is scheduled to be held on September 22, 1997.
Section 9(ii)(e) — Urgent interim measures — Protection of Joint Venture Agreement — Term of Managing Director — Expiry of — Nomination of — Approval of nomination of — Holding of proposed AGM — Resolution of the Board — Consideration of — Not appropriate to hoid appointment in abeyance or stay of operation of Resolution or holding of AGM — Appointment has to be ratified — Company at liberty to raise objection in meeting.
It is established from record that the consent and concurrence of the petitioner was not taken while nominating the present Managing Director of the respondent-Company. In any case, his appointment has to be concurred and approved at the Annual General Meeting and it will not be in the interest of justice to restrain holding of such a meeting. the petitioner will not suffer any irreparable injury which cannot be cured at a subsequent stage when the proceedings in arbitration are concluded.
Words and Phrases - "Discretion" — Meaning of — Concept of — Defined and Explained — There cannot be any absolute discretion with one individual.
II: It is necessary to lay down as to what is the concept of discretion. Discretion implies good faith in discharging public duties. The exercise of discretion has to be based on relevant considerations. When it is exercised by taking into extraneous considerations, such action has to be quashed. The concept of absolute, untrampled or unfettered discretion is wholly inappropriate to a public authority. When given power to exercise discretion it has to be used for public good. The concept of unfettered discretion is appropriate only when dealing with a private property and not when dealing with public property. Discretion doesnot empower 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.
( 1 ) THE present petition is filed under Section 9 (ii) (e) of the Arbitration and Conciliation Act, 1996 for interim measures of protection by the petitioner against the respondents as specified in the prayer clause.
( 2 ) THE petitioner entered into Joint Venture Agreement with respondents 1 and 2 on October 2, 1982. This Agreement was amended on June 2, 1992. The controversy between the parties arose as a consequence of the Board Resolution allegedly passed in its meeting held on August 27, 1997 to nominate Mr. R. S. S. L. N. Bhaskarudu, Joint Managing Director as Managing Director of the Board of Directors of respondent No. 2, Maruti Udyog Limited 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. VI Dated 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 Sh. . RSSLN Bhaskaradu, 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 abovesaid Board meeting this decision could not have been taken as nominess 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 and ultra vires. The Restitution was never passed and could not have been passed as the nominess of the petitioner Company had rejected the appointment; (b) The Resolution passed, in any case, on August 27, 1997 if put to vote would have been defeated by a margin of 5 to 4; (c) The respondents failed to comply with the provisions of Article 5. 4 which lays down "that all major corporate decisions with respect to Maruti Udyog Limited will be made only after consultation with Suzuki Motor Corporation and with the concurrence of Suzuki Motor Corporation. The major corporate decisions with respect to Maruti Udyog Limited shall mean and action requiring shareholders approval under the Companies Act, 1956. " The concurrence of the nominees of the petitioner was not obtained and the purported Resultion dated August 27, 1997 could not be given effect to; (d) There was no vacancy as on August 27, 1997 as the previous Managing Director took over on August 28, 1997 and he would only be deemed to have vacated the office at the close of 5th Annual General Meeting of Shareholders which is now fixed to be held on September 22, 1997. Therefore, there was no vacancy as on August 27, 1997 when the Board allegedly approved the appointment of Mr. Bhaskarudu.
( 4 ) ON the other hand the learned Attorney General has argued that the present petition under Section 9 (ii) (e) of the Arbitration and Conciliation Act, 1996 for interim measures is not maintainable in law. Mr. R. S. S. L. N. Bhaskarudu acted as Managing Director of respondent No. 2 since August 27, 1997 for the last three weeks and to impugn his appointment at the belated stage on the even of the Annual General Meeting in the present proceedings is not permissible in law. It will not be in the interest of justice to stop a meeting as no restraint order can be passed in the facts and circumstances of the case. There is no balance of convenience or prima facie case in favour of the petitioner-Company. The new Managing Director was earlier the Joint Managing Director of the Company and he is fully qualified to hold the present post. The concurrence of the petitioner-Company was not required in terms of the
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