Shareholders Pact Holds The Key: Experts

Legal experts dealing in corporate law are unanimous in their opinion that technicalities notwithstanding, both the government and Suzuki Motor Company (SMC) ought to follow the spirit of the shareholders agreement while running a successful company like Maruti Udyog Ltd (MUL)

The experts also said that despite clauses of the agreement being cited and interpretations sought, both the partners have to realise as to what extent clauses were amended or appear to be amended.

A lot will depend on understanding the clauses of the agreement. If the amended or added clauses say the government is entitled to appoint a managing director of its choice for this term, then it is right, Ajay Jugran, a legal consultant with Arthur Andersen, said, adding, but the finer prints have to be studied very carefully.

The government has been stressing on the fact that, according to the 1992 agreement, the government has the right to appoint the managing director (MD) for a five-year period without consulting SMC. It was in 1992 that SMC became an equal partner in MUL.

The Japanese car manufacturer has objected to the appointment of RSSLN Bhaskarudu as the MD on the grounds that it was not consulted and the spirit of the agreement has been violated.

Said Jyoti Sagar of J Sagar & Associates, that is a point only the original document can reveal as to what has been superseded or what can be superseded and to what extent the changes have been brought about.

The government has contended that the Japanese partners view is based on the mutual consultation and discussion clause 5.4(e) of the original 1982 agreement. According to the government, since then, this clause has been superseded by clauses 5.1 and 5.2 of the 1992 agreement to which both partners are signatories.

SMC had earlier contended that the government had violated clause 5.4(a) of the 1982 agreement, of shareholders mutually consulting each other on all important decisions, including the appointment of the MD.