MAHARASHTRA POWER DEVELOPMENT Vs. DABHOL POWER COMPANY

JUDGEMENT

(1.) THE Maharashtra Power Development Corporation (MPDC) is the appellant; which we shall call the petitioner. The company petition for diverse reliefs was filed by the petitioner under sections 397, 402, 403 and 406 of the Companies Act, 1956. In view of the events that had taken place subsequently, the company petition was permitted to be amended. In the amended company petition the petitioner prayed that it be declared that the affairs of the Debhol Power Company (for short ‘the company) were being conducted in the manner oppressive to the petitioner and prejudicial to the public interest; that it may be considered whether it was just and equitable that the company be wound up or any provision be made with regard to the conduct of the affairs of the company in future; that the respondent Nos.4 and 5 be restrained from acting and representing as directors of the company; that respondent Nos.6, 7, 8, and 9 be restrained from acting, representing or holding themselves to be the directors of the company; the respondent Nos.4 and 5 be restrained from interfering and/or intermeddling with the management and affairs of the company in any manner whatsoever.; that the respondent Nos.6, 7, 8 and 9 be restrained from interfering and/or intermeddling with the management and affairs of the company in any manner whatsoever; that the respondent Nos.1 to 5 be restrained from altering the composition of the Board of Directors of the company without leave of the Company Law Board; that the respondent Nos.2, 4 and 5 be restrained from representing in the name or on behalf of the company; that the declaration be made that that the action/s taken by respondent Nos.2, 4 and 5 acting as directors of the company/managing director are null and void and not binding upon the shareholders of the company and on the company and that an investigation be made with regard to the billings and transactions of the respondent Nos.2 to 5 in relation to the management and affairs of the company since 2nd May, 2002 by an independent person to be appointed by the Company Law Board for conducting such investigation and thereafter, appropriate orders be passed under the provisions of Companies Act.

(2.) DABHOL Power Company was incorporated on 9th April, 1993 as a private company with unlimited liability under the provisions of the Companies Act, 1956 (for short Act of 1956). The Company was promoted by Enron Development Corporation (Enron)- a company incorporated in the State of Delaware, U.S.A., General Electric Company (GE)- a company incorporated in the State of New York, U.S.A. and Bechtel Enterprises, Inc., (Bechtel)- company incorporated in the State of Delaware. U.S.A. Originally the three shareholders viz. Enron Mauritius Company (EMC), Energy Enterprises Mauritius Company (EEC) and Capital India Power Mauritius (CIPM) held the entire equity of the company; EMC (80%), EEC (10%) and CIPM (10%). EMC, EEC and CIPM are special purpose vehicles of Enron, Bechtel and GE respectively. The petitioner is a public limited company incorporated on 4th December, 1997. The Maharashtra State Electricity Board (MSEB) holds 100% share capital of the petitioner. In or about December, 1998, the petitioner purchased 30% of Phase I equity of the company from EMC. This shareholding was reduced to 14.15% equity of the company after the said company issued phase II shares in January, 2002 to other three shareholders EMC, EEC and CIPM. On the date of the company petition and presently. EMC holds 65.85%, the petitioner 14.15% EEC 10% and CIPM 10% share in the equity of the company.

(3.) THE meeting held on 4th June, 2002 is challenged in the company petition on diverse grounds interalia; (a) that no meeting of the board of directors could take place as there was no quorum, and (b) that appointment of respondent No.4 as director could not be validly made for the reasons stated therein. It is alleged that the petitioner was kept in dark and not provided with the information regarding the manner of the appointment of the director and the managing director. The respondent No.2 failed to give information about the number of meetings of the board of the company held after 2nd May, 2002, and also did not supply the agenda, notes and resolutions passed therein despite demand. The respondent Nos.2 to 5 sought to act in breach of their fiduciary obligations to the petitioner and the company. The sole object of respondent Nos.2 to 5, according to the petitioner, is to acquire exclusive control of the company and perpetrate and perpetuate their illegal and wrongful control of the same for some ulterior motive. The illegal appointments and the manner of conducting the affairs of the company is harsh burdensome and wrongful. There is total lack of confidence arising from the oppressive manner of working. There is total lack of probity and fair dealing affecting the rights of the shareholders. The affairs of the company are being conducted in illegal, invalid and wrongful manner and in complete violation of the provisions of Articles of Association, the Companies Act and principles of natural justice. The facts would justify the making up of a winding up order on the ground that it was just and equitable that the company should be wound up but such winding up order shall unfairly prejudice the shareholders who have invested substantial funds in the company.