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Bhaskarudu to stay until arbitration court decides, rules Delhi HC

In a significant ruling, the Delhi high court on Monday said R S S L N Bhaskarudu will continue as the managing director of the joint venture Maruti Udyog Limited till the Paris-based International Court of Arbitration gave its verdict.

Dismissing Suzuki's application for a stay on the holding of the annual general meeting of the MUL, the court gave the green signal to Monday afternoon's AGM meeting to ratify the August 27 decision of the MUL board to nominate Bhaskarudu, a central government nominee, to the top post in the company.

Justice C M Nayar, however, took strong exception on the manner in which the government made certain statements in the press and television when the matter was sub judice.

''Regretfully, I am constrained to say that the government in the press as well as on television made certain statements which cannot be said to be in the best interests of the parties and should have been avoided when the matter was sub judice before the court.''

Industry Minister Murasoli Maran had on September 19, when the case was being argued before the high court, said that Suzuki was free to opt out of the joint venture if it does not agree to Bhaskarudu's appointment.

He said there were other candidates ready to step in if the Japanese car-maker pulled out of the joint venture. ''There are thousands of people waiting. The Americans are there. The Germans are there and there is no dearth of technology. There are several people better than Suzuki,'' Maran had told a press conference.

The judge dismissed Suzuki's application to stay Monday's AGM, saying there was no prima facie ground made out for restraining the holding of such meeting in the facts and circumstances of the present case.

The court ruling came after Attorney-General Ashok Desai submitted before the court that the government and Suzuki had failed to reach any agreement over the MD's issue.

The court left the confirmation of Bhaskarudu's appointment to the International Court of Arbitration after Suzuki submitted that a request of arbitration has been forwarded to the International Chamber of Commerce's ICA and Lord Mustill has been requested to be appointed as the sole arbitrator to adjudicate upon the disputes, differences, and claims arising out of the joint venture agreement on a fast track route.

The order said Bhaskarudu has been functioning as managing director of MUL for about three weeks and it will not be appropriate to set aside or hold his appointment in abeyance and stay the operation of the resolution appointing him, or to restrain the holding of the AGM.

The appointment, in any case, has to be ratified at the AGM where the petitioner corporation will be at liberty to raise objections, the order added.

The judge said the issue which has been highlighted was that the concurrence and opinion of the petitioner was not taken into consideration before nominating Bhaskarudu.

He said this question will now have to be determined by the arbitrator as the petitioner has chosen to take recourse to that remedy as provided by Article 7.7 of the joint venture agreement.

The order said it was established from records that the consent and concurrence of the petitioner was not taken while nominating the present managing director of the company. In any case, the appointment has to be concurred and approved at the annual general meeting, and it will not be in the interest of justice to restrain the holding of such a meeting, it added.

The petitioner will not suffer any irreparable injury which cannot be cured at a subsequent stage when the proceedings in arbitration were concluded, the judge said and concluded, that ''in view of the above, the present petition is disposed off,'' the order said.

The judgment said the attorney-general was right in contending that in view of the provisions of Section 317 of the Act, an embargo is placed on the company that the term of the managing director cannot exceed five years at a time.

Justice Nayar said on the basis of the provisions of Section 317, the appointment of the MD cannot be said to be outside the framework of the statutory provisions as well as of the joint venture agreement.

Suzuki had challenged the resolution adopted at the August 27 board meeting on the grounds that:
-- the appointment was illegal, void, invalid, and ultra vires and that the resolution was never passed and could not have been passed as the nominees of the petitioner company had rejected the appointment;
-- the resolution passed, in any case, on August 27 if put to vote would have been defeated by a margin of five to four;
-- the government and MUL 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 SMC and with its concurrence; the concurrence of the nominees of the petitioner was not obtained and the purported resolution could not be given effect to; and,
-- there was no vacancy as on August 27 as the previous MD took over on August 28, 1992 and he would only be deemed to have vacated the office at the close of fifth annual general meeting of shareholders, fixed for Monday.

The attorney-general countered Suzuki's arguments saying that the present petition filed under Section 9(ii)(e) of the Arbitration and Conciliation Act, 1996, for interim measures was not maintainable in law.

Bhaskarudu has acted as MD of Maruti Udyog since August 27 for the last three weeks and to impugn his appointment at the belated stage on the the eve of the AGM in the present proceedings is not permissible in law.

Suzuki's original miscellaneous petition, besides seeking the quashing of the August 27 decision of the Maruti board meeting on the appointment of Bhaskarudu to replace R C Bhargava as the managing director, had also sought the postponement of the September 22 annual general meeting, which was to ratify the decision.

The petition filed under Section 9(ii)(e) of the Arbitration and Conciliation Act, 1996, sought interim measures or protection in relation to the disputes, differences, and claims between Suzuki and MUL and the government.

Suzuki Motor Corporation, a 50 per cent share holder in Maruti Udyog Ltd, had sought a stay on the holding of the AGM or alternatively restraining the AGM from adopting the board resolution of August 27 on the nomination of Bhaskarudu as the managing director of MUL.

As another alternative, the Japanese firm had urged the court to appoint some senior court official or registrar or a senior advocate as chairman for the AGM to be held on Monday afternoon.

As the last alternative, the arbitration petition suggested the suspension of any resolution passed at the AGM pending adjudication of the dispute in the International Court of Arbitration.

The Indian side of the joint venture had filed the caveat in the high court preempting a Suzuki move against the nomination of Bhaskarudu.

The caveat seeks that the AGM of September 22 should not be stalled, ensuring that the Japanese car manufacturer did not get an ex parte order from the high court.

K K Venugopal, counsel for Suzuki, had on Friday said the decision does not hold good as Suzuki's concurrence was not taken. Suzuki was also not consulted before deciding the name of Bhaskarudu, which was in violation of the provisions of the joint venture agreement reached by the two parties in 1982.

On the other hand, Desai described Suzuki's move to approach the court as hasty and aimed at stalling the AGM, just two days away. ''They should have filed the case earlier when the minutes of the meeting was provided to them some 10 days ago. By moving to the court at the last moment, Suzuki has not only tried to derail the AGM, but also did not give us a chance to settle the issue,'' Desai had stated.

Maruti Udyog Limited had recently launched an upgraded version of its most popular 800 cc model and is planning to introduce upgraded versions of its Zen and Esteem models. Besides, it is also planning to introduce diesel models of its high-selling Zen and Gypsy models by 1998-end.

Meanwhile, the company has commissioned an in-house study to examine the viability of manufacturing gear boxes for all its models at its plant at Gurgaon. The gear box is the only major component which the company continues to import from Japan. If the proposal is cleared, the Maruti 800 cc model will achieve 100 per cent indigenisation. The project envisages an investment in the excess of Rs 2 billion.

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