PUNJAB AGRO INDUSTRIES CORPORATION LIMITED Vs. SUPERIOR GENETICS I LIMITED

JUDGEMENT

(1.) THE 1st respondent is a joint venture company promoted jointly by the petitioner and the 2nd and 3rd respondents in terms of a financial collaboration agreement dated 30.9.1993. This company was incorporated on 26 October, 1993, with the main object of setting up a semen processing laboratory for the production of superior genetics. As per the financial agreement, initially, the petitioner and the respondents were to contribute 50% each towards share capital and, ultimately, the petitioner was to have 26% shares and the respondents 25% shares and the public and financial institutions 49% shares. THE project envisaged a total expenditure of about Rs. 6.53 crores to be financed by the petitioner Rs. 1.80 crores, the 2nd and 3rd respondents Rs. 1.73 crores and IDBI Rs. 3 crores by way of term loan. THE petitioner has so far invested Rs. 1.35 crores and the 2nd and 3rd respondents, Rs. 1.82 crores. Even though IDBI had sanctioned Rs. 3 crores, yet, the same had not been disbursed. THE Board of directors of the company consisted of 5 directors - 3 from the petitioner side including the Chairman and the 2nd and 3rd respondents. THEse respondents were entrusted with powers to carry on the day-to-day management of the company including the power to operate the bank accounts. After having incurred an expenditure of over Rs. 3.17 crores on the project, the project has come to a standstill and in terms of the agreement, the petitioner has invoked arbitrary proceedings.

(2.) In this petition filed under Section 235 of the Act, the petitioner has sought for an investigation into the affairs of the company on the ground that the 2nd and 3rd respondents, being in charge of overall management of the company all these years, have not only siphoned off funds of the company, but also have incurred various expenditure without the authority of the Board and, as such, an investigation should be ordered into the affairs of the company.

(3.) SHRI Anil Aggarwal, practising company secretary, appearing for the respondents, submitted : this petition is not maintainable in terms of Section 235 of the Act, as according to that section only members holding 10 per cent of shares in company could file a petition. The petitioner, as a single shareholder, has no right to file the petition. The claim of the petitioner that the respondents have been managing the affairs of the company, is unfounded. The petitioner has 3 nominees on the Board including the Chairman and there have been regular Board meetings wherein the working of the company was being reviewed regularly. The petitioner started investing in the company only after it carried out verification of the accounts for the year 1993-94 and only after satisfying himself that the accounts were being maintained property. Therefore to allege that the accounts of 1993-1994 suffer from infirmities -- is an after-thought. Due to some political reasons, the petitioner withdrew from the project by not investing the balance amount of committed Rs. 1.8 crores. The 2nd respondent had promoted another company in the name of Punjab Meats Ltd. which was ordered to be closed by the State Government for some political reasons. Because of the closure of that company, that company could not service the loans taken from IDBI and, therefore, IDBI did not disburse any loan to the respondent company resulting in shortage of funds to complete the project. The nominees of the petitioner always constituted the majority on the Board and this Board has approved every balance sheet right from 1993-94 and, as such, they cannot allege that there had been financial mismanagement or siphoning off of funds. When the respondents collaboration with the petitioner to establish the project, they had legitimate expectation of full and complete cooperation from the petitioner, the non-availability of which has resulted in the project coming to a standstill. As far as the specific allegations are concerned, the respondents have furnished full details in the reply including copies of registration of the land in favour of the company, from which it could be seen that none of the alleged financial mismanagement is founded on any material. Therefore, this petition deserves to be dismissed.