D ROSS PORTER Vs. PIONEER SEED COMPANY LIMITED

JUDGEMENT

(1.) have heard arguments for deciding the application. The plaintiff, who is one of the directors of the defendant/company, has filed this suit seeking decree for declaration to the effect that the defendant- respondent has no power to reject and/or refuse the appointment of Mr. Brij. <PG>274</PG> Anand as an alternate director to the plaintiff and in the alternative a decree for declaration that the rejection of Mr. Brij Anand as an alternate director to the plaintiff is wholly, invalid, arbitrary and for declaration that the resolution passed by the Board of Directors of the respondent in October, 1988 in this respect is illegal and invalid and a relief of mandatory injunction is sought requiring the respondent to appoint Mr. Brij Anand alternate director to the plaintiff. Alongwith the suit the plaintiff bad moved an application under Order XXXIX Rules 1 & 2 read with Section 151 of the Code of Civil Procedure seeking interim injunction restraining the respondent from implementing the decision taken in any resolution passed in the meeting dated October 24,1988 and requiring the respondent-company to ensure that the plaintiff is duly represented on the Board's meetings through Mr. Brij Anand.

(2.) Facts leading to the filing of the present suit and the application, in brief, are that M/s. Pioneer Hi-bred International Inc. USA (hereinafter referred to as the 'PHI') is stated to be engaged world wide in the business of research and development, production and sale of Hi-bred seeds of various agricultural crops produced by the crossing of proprietary inbred lines developed through its research and development efforts. This business is stated to be in existence for the last 62 years and M/s. Pioneer Overseas Corporation (hereinafter referred to as 'POC') is said to be subsidiary company of PHI. Plaintiff, is the attorney and is also Assistant General Counsel to PHI and is director of the respondent. The respondent-company was incorporated on February 28, 1987. with the object to develop, grow, raise, process, and sell export, import and deal in all kinds of seeds. The authorised capital of the respondent was stated to be Rs. 30 lacs of which only prescribed capital was Rs. 5 lacs. PHI holds 2,000 shares of the face value of Rs. 100.00 each while Dr. Surinder M. Sehgal holds 1,000 shares and Mrs. S. Kapoor is stated to be holding 1996 shares and remaining four shares are held by others, it is alleged that Dr. Surinder has transferred his entire share holding in favour of one M/s. Asia Investment Inc., a company wholly owned by Dr. Surinder. Till March 8, 1988, Dr. Surinder was the Vice President of PHI and President of POC. Mrs. Kapoor is the sister of Dr. Surinder. According to the Indian laws PHI could not hold more than 40% shares in the respondent. It is the case of the plaintiff that since the inception of the respondent it is PHI which has incurred the expenses for research activity, technical assistance and has also allowed use of its secret technology and its process for producing Hi-bred seeds and also arranged for training the managerial staff of the respondent free of cost. It is also mentioned that vide agreement dated July 31, 1979, PHI had provided technical assistance, advice including new developments, practices, techniques to the respondent as were available to the PHI to develop Hi-bred and varieties of corn, sorghum and millet seeds. According to the plaintiff, under the said agreement the PHI has provided to the respondent basic breeding material and standard in-bred lines of the seed grains and at all material times the said genetic material was and is the propose of PHI. Then reference is made to certain agreements dated September 1, 1978, March 8, 1981 and July 21. 1986, by which the PHI and POC provided to the respondent invaluable research information, materials know-how and rendered all services and assistance associated therewith without any payment and it was provided in the agreements that the breeding material, genetic material, in-bred lines, the results, the data and the information arising out and connected with the performance of the said agreements would be owned by PHI and POC at all material times. So, in this way, it is alleged that the PHI had funded the entire research activity and programmes of the respondent which come to the <PG>275</PG> tune of Rs.2,09,34,682.00 and by virtue of agreement dated July 21, 1986, PHI had advanced one million US dollar to the respondent to set up, upgrade and modernize its research and other facilities. The said amount is stated to have been advanced without any security and on a non-repatriable basis which was to be adjusted against the future cost of research incurred on behalf of PHI. PHI is also stated to have given critical plant and machinery of the value of Rs. 10,55,568.00 free of cost. The respondent is stated to be owing Rs. 44,40,150.00 as on June 30, 1987, on export advance against future exports to be made by the respondent. So, it is averred that PHI has invested crores of rupees in the respondent and has vital staves in the conduct of the business, of respondent in India.. It is alleged that prior to the disputes and differences the business of respondent was being professionally run, managed and controlled by PHI and as Dr. Surinder was Vice President of POC, he was also looking after the interest of PHI in the respondent till March 1988 when he ceased to be connected with PHI and POC as there arose some disputes between him and PHI. Then, reference is made to the four additional directors being appointed to the Board of Directors of the respondent vide resolution dated April 22, 1988, which appointment is stated to be challenged byway of company petition.

(3.) It is averred that the plaintiff is admittedly being resident of USA, it was not possible for him to visit India frequently and/or every three months to attend and participate in the Board's meetings of the respondent. Then, making reference to Article 18 of the Article of Association of the respondent and Section 313 of the Companies Act, It was averred that the plaintiff has a right to nominate an alternate director for attending the meetings of the Board and thus, the plaintiff nominated Mr. Brij Anand as his alternate director under the said provisions. It was pleaded that the respondent was bound to accept the said nomination but in the alternative, it is pleaded that the discretionary power vested in the respondent in accepting or not accepting the said nomination has to be exercised in a bona fide manner and in the present case the respondent had rejected the nomination on ulterior grounds in a mala fide manner and that act of the respondent is bad in law. Then, in the plaint, reference is made to the dispute regarding the accounts of the respondent being audited by M/s. R.P. Malhan & Company. In the plaint it was mentioned that the main reason of the plaintiff's inability to visit India is that he apprehends that false and frivolous criminal cases would be instituted against him at the behest and instructions and/or by Dr. Surinder and Mrs. Kapoor. It is pleaded that the respondent is falsely alleging that the plaintiff and others have committed thefts of the material belonging to the respondent and had criminally mis-appropriated certain property of the respondent and committed criminal breach of trust. It is pleaded that vide letter dated October 31,1988, the solicitors of the respondent have communicate the reasons for refusing to appoint Mr. Brij Anand as alternate director. It has been mentioned that Mr. Anand has a competitive interest as he is director of Regency Magnetics Private Limited and he is also a share-holder in PHI Biogene Limited. It is pleaded that the plaintiff has similar interest in the said two companies as Mr. Brij Anand and if there cannot be any legal objection to the plaintiff, being a director, for attending the meetings of the Board of the respondent, there could be no justifiable reason for not allowing Mr. Brij Anand to attend the meetings as alternate director of the plaintiff.