In a further blow to the beleaguered Premier Automobiles Ltd (PAL), the Mumbai High Court has directed the company not to seek its shareholders consent for its proposed joint venture with Fiat at its forthcoming extraordinary general meeting.
PALs EGM is scheduled for September 9 at Mumbai. Last month, the company had proposed a separate venture with Fiat to manufacture the Uno in India.
The 13-page order was delivered by Justice D G Deshpande of the Mumbai high court. PALs promoters, the Doshis, are reportedly seeking to resolve the issue through arbitration.
Automobiles Peugeot had filed a petition asking the court to stay the extraordinary general meeting being convened by PAL to consider the venture.
The French car company said the agreement with PAL, which led to the formation of PAL-Peugeot, prevents PAL from entering into any agreement with a third party in the car business through creation of a new company, merger, acquisition or cooperation until and unless such a project is first proposed to Peugeot or KMCL.
KMCL Kalyan Motor Company Ltd is the original name of the company, which was later renamed as PAL-Peugeot.
Under the agreement. PAL is free to negotiate with a third party if KMCL and Peugeot refuse to join the proposed project.
Further, the project must not be detrimental to the current and future activities of PAL-Peugeot.
Peugeot argued that PAL never proposed the project to the French company. However, I M Chagla, counsel for PAL, argued that the company had informed Peugeot about its joint venture with Fiat through a letter to the French company, dated July 28.
Chagla said it was known to Peugeot that the cars to be manufactured through the joint venture with Fiat would be of a small size, covering a different market segment. Chagla also told the court that Peugeot filed the suit against the joint venture one month after receiving the letter, with the malafide intention of gaining time so that Peugeot could itself enter into a joint venture with Fiat.
Justice Deshpande restrained PAL from considering the issue of the joint venture in any adjourned meeting. The judge said, The delay in itself cannot be a ground to refuse the consideration of Peugeots case, particularly when in the earlier correspondence of the letters written by PAL to Peugeot, the former has been representing that the foreign collaboration agreement which would be a joint venture company was with the Doshi family through their wholly owned private investment company.
