ICSI CORPORATE LAW MOOT COURT PROBLEM 2008
IN THE HIGH COURT OF DELHI
C.P.No: 36 of 2007
Paolo Luscini & Co. (PL)…… Petitioners
RELIVE CO. LTD …… Respondent
1. RELIVE CO.LTD was incorporated in the year 1971 in the State of Maharashtra with the object of carrying on the business of media and telecommunications. The paid-up share capital of the company was 130 million comprising of 13 million shares of Rs. 10 each. The Company initially made a foray into radio and later into the television segment in India. In the 1990s, there was an unprecedented growth in television viewership, which led RELIVE CO.LTD to invest heavily in its TV division. 2. With the focus shifting to television, the radio business was largely neglected and contributed a very insignificant share to total revenues. At times, the Board of directors even considered discontinuing the radio business. However, the proposal was always thwarted by a few senior members of the management popularly known as the Phalke group, being headed by the one of the promoters, Natesh Phalke. This group did not subscribe to the new-age philosophy of television and internet but believed that radio, as a form of communication, still had the widest possible reach in the country and therefore, the business had to be nurtured and revived. 3. At that time, one of the biggest problems faced by the industry in general, and RELIVE CO. LTD in particular, was the rate of attrition amongst employees. The difficulty in retaining employees was more pronounced in the radio business and this led the Phalke group to moot the proposal of engaging Human Resource Consultants to address the problem of attrition in the company. When the matter was brought up in the Board Meeting held in October 2000, the directors responsible for managing the TV business opposed the suggestion contending that it would involve heavy investment with no commensurate tangible/perceivable benefits. After heated discussions, it was finally resolved that Consultants would be engaged for the entire company (not just the radio business) on an experimental basis for a period of 2 years initially, with an option for renewals every two years. It was further resolved that the entire amount of consultancy fees would be paid out of the annual budgetary allocation made to the Radio Division and would constitute expenses of the Radio business. Accordingly, a consultancy contract was entered into in December 2000 with a renowned Italian company Paolo Luscini & Co. (PL) which specialized in recruitment consultancy and employee retention programmes. 4. Some relevant clauses of the consultancy contract are reproduced below: Reorganization Clause:
(b) The Company agrees that no reorganization of business shall take place without notice to the Consultant. Provided that the consent of the Consultant shall not be required where no payments under the Contract are outstanding/due to the Consultant as on the date of sanction of the scheme for reorganization.” Payment Clause- “While the services may be delivered to different divisions separately and the Consultant’s fees and bills would be raised as a lump sum (giving a break-up of fees for each division), the payment would be made as a lump-sum without any demarcation of the amounts attributable to each division”. Dispute Resolution Clause: “Any dispute arising out of or in connection with this contract shall be referred to arbitration by a panel of three arbitrators with one arbitrator appointed by each party, who will in turn agree upon the third arbitrator. The place of arbitration shall be Singapore and the language of arbitration shall be English.” 5. In the year 2004, it was finally decided to hive off the radio business into a separate company under the Phalke group and a demerger proposal was accordingly drafted. With a revival in the radio audience, it was believed that a demerger of the...