DELTON CABLES LIMITED Vs. TDT COPPER LIMITED

JUDGEMENT

(1.) The short point involved in this case is whether the Court while deciding an application under Section 442 of the Companies Act for stay of the suits pending against the company in any other Court, has the jurisdiction to stay only such suit where a debt is sought to be recovered from the company and this jurisdiction cannot be extended to the cases where liability of the company is not being decided. If this question is decided in the affirmative, further question which arises for consideration is whether in the facts and circumstances of this case, the suit pending in the Court at Rewari is liable to be stayed? Let me first give a few facts:-

(2.) In or about 1992, the petitioner - Delton Cables Limited is lleged to have conceived the idea of setting up a continuous copper cost rod project in India and respondents 2 and 3, namely, Taihan Electric Wire Company Limited, a company incorporated under the laws of Korea and Tomen Corporation, a company incorporated under the laws of Japan, were stated to have been identified as prospective partners and they agreed to work on partnership basis and set up the project in India. A Memorandum of Understanding dated 24th April, 1993 was entered into between the parties setting out the broad principles on which the parties were to work together. A joint venture company was proposed to be incorporated in which it is alleged that the petitioner was to have 15% shares, respondent No 2 - 36% and respondent No.3 - 15%. The balance 34% shares were to be given to Indian financial institutions and/or the Indian public of which 11% could be contributed by the financial institutions or group/associates of the petitioner. Respondent No. 1 company being the joint venture of the parties was incorporated on 17th November, 1993 and the joint venture agreement was executed between the parties on 18th September, 1993. ,The petitioner allegedly owned a piece of land on the Delhi-Jaipur highway at Dharuhera, District Rewari, Haryana and its first capital contribution is stated to be by way of the said land. The factory of respondent No. 1 was to be constructed on the said land.

(3.) Under the joint venture agreement, the Board of Directors of the company consisted of 12 directors and Managing Director was to be nominated by the petitioner who was to hold the office for a term of three years. It is stated that to constitute the coram for the Board meetings of the company, presence of at least one nominee director of all the three parties was necessary. It is alleged that respondents 2 and 3 aking advantage of the fact that the petitioner was largely dependent upon them for exclusive implementation of the joint venture company, forced it to agree to make material changes in the joint venture agreement which allegedly caused the partial ouster of the petitioner from the management and control of the joint venture company. The equity participation of respondent No.l was reduced from 15% to 10%; the option of the petitioner to subscribe to additional 11% shares was taken away and the petitioner no longer retained the right to nominate the Managing Director of the company. The representation of the petitioner in the Board of Directors was also alleged to have been reduced from 2 to 1 and the land at Dharuhera was not to be treated as the petitioner's capital contribution but was to be sold to respondent No.l. There arose differences between the parties in the management of the company for which I am not to go in detail for deciding the present application. It is alleged that after some negotiations, the parties entered into a second Memorandum of Understanding dated 8th June, 1995., The petitioner is alleged to have been compelled to agree to the harsh and onerous terms of the second Memorandum of Understanding to its gross detriment which were alleged to have been inserted with the sole intention of ultimate ouster of the petitioner from the joint venture company and the project itself. The petitioner's nominee director is stated to have been attending the Board meetings of respondent No. 1 company from time to time, however, the minutes of the meeting were allegedly already pre-drafted and approved by the nominees of respondents 2 and 3 without the consent of the petitioner and only the formality of recording the attendance of the petitioner had been gone through and no effort was alleged to have been made by the respondents to include them in any matter. Certain items were alleged to have been discussed in the meetings even though they were not on the agenda for the Board meeting of that day.