This case concerned an arbitration award and proceedings related thereto. Parties had litigated for over a period of 15 years and the allegation of breach of fiduciary duty cropped up after the Award had the imprimatur of the Supreme Court. The question that arose for consideration was – “Whether the High Court was justified in not entertaining the objections filed by the appellant under Section 47 of CPC and in dismissing the same?”. The Court was looking at the issue whether at least prima facie a case of breach of fiduciary duty was established by MMTC. On the basis of material placed on record, the Division Bench held that MMTC was not able to even prima facie demonstrate that the personnel of MMTC did not act in the best interest of the company.

A Division Bench of the Supreme Court proceeded to set out the legal parameters as laid down in judicial precedents in cases involving breach of fiduciary duty. The Division Bench held –

            “a court cannot be swayed by what the Court thinks would have been a reasonable course of action for the director to adopt but the duty is to enquire whether on the available evidence before the Court to consider whether the course adopted by the director was one reasonably competent directors could have adopted”.

and further –

            “as long as the decision taken falls within the range of options reasonably available, Court would defer to the decision of the Board under the “Business Judgment Rule””.

The Division Bench also held – “An objection petition under Section 47 should not invariably be treated as a commencement of a new trial.” And dismissed the appeal.

The Court added a small postscript –

“Whether in Government, Public Sector Corporations or even in the private sector, the driving force of the entity are the persons who administer them. A certain play in the joints is inevitable for their day-to-day functioning. If they are shackled with the fear that, their decisions taken for the day-to-day administration, could years later with the benefit of hindsight, be viewed with a jaundiced eye, it will create a chilling effect on them. A tendency to play it safe will set in. Decision making will be avoided. Policy paralysis will descend. All this will in the long run prove detrimental not just to that entity but to the nation itself. We are not to be understood to be condoning decisions taken for improper purposes or extraneous considerations. All that we are at pains to drive home is that great caution and circumspection have to be exercised before such allegations are brought forward and adequate proof must exist to back them. Otherwise for fear that carefully built reputations could be casually tarnished, best of talent will not be forthcoming, especially for government and public sector corporations.”.