M.B.SHARMA, J. - (1.) THE dispute relates to M/s J.T. Precision Castings Pvt. Ltd. (for short, Private Company) respondent No. 2 and the petitioner, an Ex -Director of the Company has prayed that this Court may declare that the re -entry effected by the Rajasthan State Industrial and Mineral Development Corporation (for short, the Corporation), now converted into Rajasthan State Industrial Development and Investment Corporation (RIIC) O, in the factory of the Private Company is ilegal and the Corporation be ordered to hand over the possession of the factory to the Private Company and it be further ordered to pay compensation to the petitioner.
(2.) THE necessary facts for the disposal of this writ petition are these. The Corporation is a company under the Companies Act, 1956 and it was incorporated under the aforesaid Act on March 7, 1969. One of the objects of the corporation was to promote, establish and execute industries, projects or enterprises for manufacture and production of goods, plant, machinery, tools, implements, materials or substances of any decription whatsoever which in the opinion of the company are likely to promote or advance the industrial development of Rajasthan. According to the petitioner the Corporation is a public body under the control of theGovernment of Rajasthan both directly and indirectly, as not only as per the fourth annual report of the Corporation, the Government of Rajasthan made avilable to the Corporation an amount of Rs. 25 lacs towards share capital, it also to act as an agent of the Government of Rajasthan and the Government of Rajasthan has the control over the Corporation. A project was introduced by the Government of India for assisting educated unemployed persons. As per this project the Corporation proceeded td notify 'Learn and own your Industry Scheme '(Annr. 1). A perusal of the aforesaid scheme will show that the scheme was promoted to help the engineers who after completing their studies, either found it difficult to get a suitable job or to start their own industry. Atleast two unemployed engineers were to be encouraged to set up their industries on small scale and they were to be selected from those who have received training sponsored by the Small Industries Service Institute under the Government of India's Scheme for employed engineers. After some title as soon as the industries are put on sound footing, the Corporation was to hand over the unit independently to the engineers. The Corporation was to enter into an agreement with the engineers defining each sides as powers and liabilities. The agreement was to bind the engineers to remain associated with the Project and they were to work actively for it for a minimum priod of three years and not to leave iit except on payment of liquidated damages. The promise of owning the unit independently was the main consideration for the engineers. Till the unit is transferred solely to the engineers, they shall be paid a minimum subsistence allowance of Rs. 250/ - per month each provided that this allowance may be revised by the Board of Directors of their Company as and when considered appropriate. The Corporation was to guarantee loans and the engineers were personally have to guarantee the payment of loans and also arrange two sureties. The industry to be set up was be a Private Limited Company. The said project provides that in case the entrepreneur does not have any resources, the Company shall be formed with a nominal share capital out of which 75% or above shall be contribute by the young engineers and the Corporation shall invest to more than 25% of the Issued Equity Capital. Each of the engineers was required to subscribe Rs. 2500/ -towards equity capital of the company. The Corporation could also purchase Debentures of the Company at 9.5% interest for a sum not exceeding Rs. 70,000/ - to Rs. 75,000/ -. The balance shall have to be met by loans from financial institutions. The debentures purchased by the Corporation shall be repaid out of the profits in maximum ten equal annual instalments which shall commence after two years of the unit starting commercial production.
(3.) THE petitioner and one Jhanwarlal Jain, twho two technocrates (unemployed engineers) entered into a promotional agreement with the Corporation on April 22, 1970. Thereafter, a suplementary agreement dated August 5, 1970 was also entered into and under the said supplementary agreement dated August 5, 1970., Clause 1 of the principal agreement was omitted. Similarly, Clause 6 of the principal agreement was substituted and some other chances were also made. It will appear from a perusal of the aforesaid principal agreement and supplemtary agreement that a private limited company was to be promoted with the authorised capital of Rs. 2 lacs divided into 100 equity shares of Rs. 10/ - each and the technocrates were to invest 51% of the share capital and the Corporation was to invest not exceeding 49% of the equity share capital. The company took loans for the purchase of machinery etc. and for other working capital on hypothecation and the Corporation, if so required, was bound to guarantee the payment of the said loan. Not only this, the Corporation was required to invest the balance of funds in the form of redeemable cumulative preference shares carrying 9 1/2% repayable within a period of 12 to 15 years and the security of this loan shall be a second charge on all the assets of the company. All rights and privileges were to cease to have any effect as and when the redeemable cumulative preference shares are fully redeemed or the loan is repaid in full or the liability of the corporation as a guarantee is waived by the financer. There were to be five directors out of which the Corporation had a right to appoint 3 Directors and one of them was to be the Chairman of the Board of Directors, who was to be nominated by the Corporation and who was not to be the subject to retirement by rotation. It was not necessary that the Directors should hold any qualification share. The Articles of Association of the Private Company were to be so formed as to give the above rights to the Corporatio.;