UNION OF INDIA Vs. R C BHARGAVA

JUDGEMENT

(1.) THIS is a reference to the Company Law Board (CLB) by the Union of India under Section 388B of the Companies Act, 1956 (hereinafter referred to as "the Act") stating a case that in the opinion of the Union of India there are circumstances suggesting that the respondent, R. C. Bhargava, in the conduct and management of the affairs of the company, Maruti Udyog Limited (hereinafter referred to as "the company"), is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or breach of trust or that the business of the company is not or has not been conducted by the respondent in accordance with sound business principles or prudent commercial practices. THIS reference is now made with a request that Company Law Board may inquire into the case and record a decision as to whether or not the respondent, Bhargava, is a fit and proper person to hold the office of director or any other office connected with the conduct and management of the company.

(2.) Such opinion is alleged to have been formed on the basis of the CBI charge-sheets and reports relating to five cases against the respondent Bhargava and a few others in the employment of the company.

(3.) THE case of the applicant in this reference, in short, is that a joint venture agreement was signed by the Government of India, with Suzuki Motor Corporation (for short "Suzuki") of Japan in 1982. Suzuki had initially a shareholding of 20 per cent, which was later increased to 40 per cent, in 1987. THE equity shareholding of Suzuki was further increased to 50 per cent, in June, 1992. Initially, the company was a Government company within the meaning of the Act, and now from 1992, the Government of India is having a little less than fifty per cent, of the Maruti shareholding, i.e., 49.74 per cent. THE company is, therefore, no longer a Government company. THE respondent, Bhargava, is associated with the company since August, 1981, when the company was a Government company. He became the managing director in July, 1987, and chairman-cum-managing director from April, 1990. According to the applicant-Union of India, the respondent, Bhargava, was a public servant so long as the company was a Government company and, thereafter, he ceased to be a public servant. THE board of directors of the company has the nominees of the Government and Suzuki all throughout.