TMI Blog1994 (5) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... d backing of Nestle SA, petitioner No. 1, which is a multinational company incorporated in Switzerland. 3. Under the then prevailing law in India, petitioner No. 1 could acquire only 40% equity share holding and the management of the Nestle India Limited seeing the possible viability of the project brought about the manufacturing license and technical assistance agreement between petitioner No. 1 and respondent No. 3. That agreement contemplated the provision of know-how and technical assistance to be provided by petitioner No. I for commissioning the project and for efficient manufacturing of high quality breakfast cereals. At that time Nestle India Limited made it clear to respondent No. 1 that there would not be any equity participation on its behalf. Respondent No. I was, however, not agreeable and again the terms were negotiated between respondent No. 1 and Nestle India Limited and respondent No. 1 wanted participation in equity share holding by Nestle India Limited and assured that he would have no objection in manufacturing the final products exclusively under the Nestie's brand name. 4. It is averred in the petition that petitioner No. 1 has been having joint vent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was approved by the Government of India vide letter dated November 30, 1988. Then some addendum was added on December 21, 1988 which defined the products to be manufactured and sold to mean extruded foods including breakfast cereals and other related processed foods. It also contemplated for increasing the capital to ₹ 4 crores divided into 40 lakh equity shares of ₹ 10/-each and the paid up capital was increased from ₹ 13,30,000/- to ₹ 35 lakhs by creation of 31,97,000 new equity shares. The promoters were to have 60% of the said shares and Nestle was to have 40%. pending public issue and there were to be Directors of the each party. Respondent No. I was appointed as permanent Director of respondent No. 2. D. K. Jain was appointed as nominee of respondent No. I as Director and R. N. Wahi and Jean Claude Degaudenzi as nominee Directors of the petitioner. Ranjit Raj was appointed as Alternate Director of Jean Claude Degaudenzi. 8. It is the case of the petitioner that there took place some perceptional differences between the petitioner No. 1 and respondent No. I as petitioner No. 1 wanted the new project to be a Board managed company whereas responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r manufacturing chocolates in India and there being no bar in the Joint Venture Agreement, disabling the petitioner from entering into any such project with anyone else. The petitioner, vide his letter dated 30th April, 1990 to respondent No. 1, again emphasised the necessity for petitioner No. I exercising control over the production of the end product as the products were to be marketed under the Nestle's brand name and the petitioner was to have enough control over the quality products of the reputed name and petitioner wanted amendment of Joint Venture Agreement so that said facts may be highlighted in the amended agreement. 12. The respondent No. 1 wrote a letter dated 16th May, 1990 in which he expressed apprehension that perhaps his powers as Managing Director are being curtailed and the petitioner wanted to take over the whole of the management and he wanted the petitioner to increase the product line. Respondent No. 1 again wrote a letter dated 9th December, 1990 proposing reconstructing of the capital of the respondent No. 3 to have more new products added and petitioner should contribute 76% of the equity while respondent No. 1 would contribute 26% of the equity a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 24th August, 1991 in Switzerland and was sent to respondent No. 1 for his signatures. However, respondent No. I realised from his previous commitments and refused to sign the said agreement on the flimsy ground that the Production Manager of the petitioner would permit sale of substandard products. In this, he suggested that if at any time new products were to be introduced, there should be enhancement of equity participation. The respondent No. 1 wrote letter dated 20th September, 1991 which indicated that respondent No. 1 was not keen to continue the relationship as co-ventured and he only wanted to attract more finance and technical expertise from petitioner No, f. The petitioner No. I, then, vide his letter dated 20th September 1991, suggested a mutual and amicable termination of the Joint Venture on account of basic differences having arisen between the petitioner and respondent No. 1 with regard to the management, production of the products agreed to be manufactured under the Joint Venture Agreement and it also informed respondent No. I that respondent No. I can purchase the shares of the petitioner in terms of the Joint Venture Agreement subject to alt advance being refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the petitioner has committed various violations of the Joint Venture Agreement that petitioner had not contributed its remaining ₹ 100 lakhs towards equity of respondent No. 3 and are not allowing the public issue and by entering into joint agreements with other parties and introducing new product of protein and processed foods in Indian market and by not furnishing an undertaking to I.F.C.I. for non-disposal of shares during the pendency of loan of I.F.C.I, and not allowing Nestle India to execute the firm marketing agreement in lieu of memorandum of understanding and not allowing dispatch of coating equipments to the factory of respondent No. 3 which had resulted in delay in completion of the project, It is averred that respondent No. 3 was in the process of establishing a plant for manufacture of processed food and had placed order on parties abroad for the supply of plant and machinery for which necessary Letters of Credit had been opened and established and thereafter negotiations commenced between the parties and that it was suggested that the products to be manufactured by respondent No. 3 must be conforming to Nestle's standard and they would be marketed under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursue the main substratum or the objects of the company and where a company is in substance an incorporated partnership and there are grounds on which a partnership could be dissolved. 23. The learned counsel for the respondent has argued that there were no features of partnership present in respect of the Constitution of the company inasmuch as the company was incorporated much before the petitioner No. 1 came into picture and it was in contemplation of the company of issuing the public issue. If that is so, there could arise no question of any partnership being there in the present case. 24. The learned counsel for the petitioner, on the other hand, argued that it may be that initially there was no element of partnership present at the time of incorporation of the company but the Court has to see the Constitution of the company at the time the petition is filed in order to see whether the company in question is in substance an incorporated partnership or not. It is significant to mention that the letter dated 27th December, 1990, which contains the amended terms of Joint Venture Agreement and has been signed by respondent No. 1, shows that the company was to be owned by pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally divided. 29. In Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla [1976]2SCR226 , the Supreme Court has held that when shareholding is more or less equal and there is a case of complete deadlock in the company on account of the lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground and in a given case, the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. 30. I have gone through the various documents produced on the record, particularly, letters exchanged between the parties. I, prima facie, come to the conclusion that there has occurred differences between the parties with regard to very basics as to how the management of the production in the factory of the company has to take place. The petitioner has been stressing in all its communications that petitioner would not allow any substandard products being manufactured under Nestle name and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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