VIPIN MALIK Vs. HINDUSTAN TIMES LIMITED

JUDGEMENT

(1.) THE plaintiff filed this suit under Order 37 CPC for recovery of rs. 3,14,35,327. 42 together with pendente lite and future interest on the basis of an MOU dated 22. 8. 1994 entered into between the plaintiff and K. K. Birla group of companies. The plaintiff is a Chartered Accountant working under the name and style of V. Malik and Associates (in short "vma" ). The defendant is stated to be a part of K. K. Birla Group of Companies. The contention of plaintiff is that under the MOU he was to provide professional services to K. K. Birla Group in respect of proposed activities, namely, insurance, financial services including brokerage, merchant banking services, leasing, hire purchase and other financial services, telecommunications, wireless and cable TV system including MMDS. The plaintiff was to identify, develop and screen a list of corporations, partnerships and other entities in USA in the above fields of business with which negotiations of potential business transactions could be held and business venture could be entered into. For providing these services, the plaintiff was to receive remuneration as per the clause 4 of the MOU which reads as under:-

(2.) IT is submitted by the plaintiff that in pursuance of MOU plaintiff performed all his obligations and identified various multi-national companies in the field of telecommunication. He corresponded and negotiated with the companies on behalf of the defendant. He introduced these companies to the defendants. The plaintiff also visited USA alongwith Ms. Shobhna Bhartia and mr. Shyam S. Bhartia, of K. K. Birla Group and M/s Enpro India Ltd. and made a joint presentation to a large number of foreign companies to highlight the experience and strength of K. K. Birla Group and Bhartia Enterprises. Because of his efforts initially M/s U. S. Global Telecommunications Inc. signed with the defendant company an MOU dated 9. 12. 1994 and agreed to form a Joint Venture company under the Companies Act, 1956 for making tender bids for cellular mobile service in one or more of the 18 telecom circles. On 9. 12. 1994 an information exchange agreement was executed between this foreign company and the defendant company for disclosing information and technology to each other. On 9. 3. 1995 m/s Protel India Pvt. Ltd. , a Joint Venture Company, was formed and finally on 5. 5. 1995 due to the professional services rendered by the plaintiff, a joint venture agreement was executed in Paris between Compagnie International Pour le radiotelephone (CIR), Fidelity Communiations International, Inc. , USTE and M/s enpro India Ltd. to inter-alia invest in the Joint Venture Company called M/s protel India Pvt. Ltd. enable it to carry out the provision of infrastructure and services as called for in the notice inviting tender in one or more states of the Punjab, Kerala, Haryana and Kanataka. However, the parties could not meet the net worth eligibility requirements of Rs. 100 crores as per the conditions of the tender floated by the Government of India. At that point the defendant i. e. the Hindustan Times Ltd. and M/s Enpro India Ltd. decided that it was necessary for the defendant to participate directly in the JVA so that net worth eligibility criteria could be met. Accordingly on 3. 6. 1995 an amendment was made to the aforesaid JVA dated 5. 5. 1995. By virtue of the this amendment the defendant participated in the equity of M/s Protel India Pvt. Ltd. to the extent of 1000 shares out of 51% equity shares held by Indian Investors and also agreed to all the terms and conditions of the JVA dated 5. 5. 1995. However, the bid documents still could not be submitted because of the failure on the part of the defendant and M/s Enpro India Ltd. to issue necessary counter guarantee to the ABN AMRO Bank (the bank engaged by the Steering Committee of the JVA dated 5. 5. 1995 to give financial support to M/s Protel India Pvt. Ltd. ). It is submitted by the plaintiff that in view of the execution of JVA dated 5. 5. 1995 and amendment dated 3. 6. 1995 to the said JVA, the plaintiff became entitled to claim his professional charges from the defendant. The professional charges were linked with the equity to be invested in the joint venture however, the plaintiff was liable to receive an amount of US$ 5,00,000 as per terms of MOU. Plaintiff also claimed interest over this amount @ 24% per annum from 6. 10. 1995 till the filing of this suit.

(3.) IN the application for leave to defend, defendant has submitted that the suit does not fall within the ambit of Order 37 CPC as it was not based on a written contract between the plaintiff and defendant. The alleged agreement dated 22. 8. 1994 was merely a Memorandum of Understanding which did not fructify into a legal agreement creating rights and obligations. Even otherwise the fee was chargeable by the plaintiff only on the success basis. A formula was set out in the MOU for calculation of the professional fees to the plaintiff as a percentage of the total amount of equity brought into the project by all partners to the Joint Venture after the award of tender and the formulation of business plan for the project. The entitlement of the fee to the plaintiff would have been there if the award of tender had been there in favour of K. K. Birla Group and there had been commencement of the project resulting into bringing in of equity into the project by JV partners. The amount of equity to be brought into project was to be decided upon by the parties after award of tender. It was an unknown quantity and therefore, the sub clause (a)of sub-clause 4-A of MOU provided that irrespective of the amount of equity actually brought in, a minimum fee of US$ 5 lac would be paid to the plaintiff on success basis. The MOU also provided that the plaintiff would be given all documents relating to the transaction from its inception till closing, in order to enable the plaintiff to accurately calculate the fee to which plaintiff was entitled in the event of consummation of the transaction. No fee was payable to the plaintiff unless the joint venture created in pursuance of MOU was successful bidder and had commenced the business after the grant of licenses. The joint venture company set up in this case was not even able to submit the tender documents issued by the Government of India and due to this failure the plaintiff was not entitled to receive its professional fee. It is further stated that Hindustan Times Ltd. (defendant) was sought to be introduced in the joint venture because of collusion between three foreign partners and the plaintiff so that the net worth of the defendant was added to the net worth of the parties so as to solve the problem of net worth condition requirement. The defendant was not a party to the MOU. Neither the defendant had anything to do with the MOU. The amendment agreement relied upon by the plaintiff was signed by the plaintiff himself on behalf of the defendant without proper authorization and approval and go ahead from the defendant. The plaintiff purported to execute the amendment agreement, even though the plaintiff and the three foreign parties knew as a matter of fact and as a matter of law that hindustan Times Ltd. could not become a party to the JVA. The amendment was therefore, illegal and null and void ab initio. The plaintiff illegally raised a bill of US$ 5 lac under Clause 4-A of MOU although the fee was payable to the plaintiff only on success i. e. on consummation of transaction which would have been signified by the award of tender and bringing in the equity for the project. It is further submitted that the MOU signed by the plaintiff with K. K. Birla Group was contrary to public policy and was void under section 23 of indian Contract Act and in view of the various clauses of MOU.