Interim protection in acquisition disputes requires fulfilled conditions, proven performance, and a present need to preserve subject matter.
Interim protection for a proposed acquisition depends on fulfilled contractual conditions, performance of independently due obligations, and a present risk to the subject matter before preservative or mandatory relief is granted. A binding term sheet may create enforceable obligations while leaving completion conditional on due diligence, approvals, escrow, pre-conditions and definitive agreements. Loan advances do not become share-purchase consideration merely because transaction documents are read together; their character depends on the governing loan terms and contemporaneous records. An unpaid staged instalment may undermine readiness and willingness to perform. Control-oriented restraints over management or assets exceed limited preservative protection where immediate risk is not established.
Issues: (i) Whether the Binding Term Sheet was a binding but conditional arrangement, and the extent of the acquirer's funding obligations under it and the Addendum; (ii) Whether the advances of Rs.23.45 crore constituted acquisition consideration and whether the acquirer showed readiness and willingness to perform; (iii) Whether interim and ad-interim protection under Section 9 was warranted to preserve the shares, transaction and corporate assets pending arbitration.
Issue (i): Whether the Binding Term Sheet was a binding but conditional arrangement, and the extent of the acquirer's funding obligations under it and the Addendum.
Analysis: The express final-and-binding clause established that the Term Sheet created enforceable obligations. However, the payment structure, due diligence, regulatory approvals, escrow requirements, pre-conditions and contemplated Definitive Agreements showed that completion of the acquisition remained conditional. The Addendum provided for a Rs.20 crore infusion under one clause and a further Rs.20 crore creditor payment subject to pre-conditions under another clause. The contractual framework did not support either an absolute limit of Rs.20 crore on the acquirer's obligations or an unlimited and unconditional obligation to fund all liabilities of the target company.
Conclusion: The Term Sheet was binding in favour of the acquirer's contention, but it was not an unconditional completed transfer or an unconditional right to complete the acquisition. The competing absolute funding positions were not accepted.
Issue (ii): Whether the advances of Rs.23.45 crore constituted acquisition consideration and whether the acquirer showed readiness and willingness to perform.
Analysis: The Inter-Corporate Loan Agreement pre-dated the Term Sheet, provided for loan tranches, repayment and interest, and the first substantial payment followed its execution. Contemporaneous correspondence and the draft Definitive Agreement described the advances as loan tranches. The transaction documents could be read together for the limited purpose of understanding the overall arrangement, but loan advances did not thereby become share-purchase consideration. Under the staged payment clause, Rs.52.50 lakh became payable on the earlier of completion of due diligence or the thirtieth day from the Term Sheet; it was not shown to have been paid before the termination notice. The principle of reciprocal promises did not excuse that independently due instalment.
Conclusion: The Rs.23.45 crore advances were not established as acquisition consideration, and the acquirer failed to establish compliance with its payment obligations or readiness and willingness to perform. This issue was decided against the acquirer.
Issue (iii): Whether interim and ad-interim protection under Section 9 was warranted to preserve the shares, transaction and corporate assets pending arbitration.
Analysis: Interim protection requires a sufficient prima facie case and a present need to preserve the subject matter without granting control-oriented or mandatory relief beyond what is necessary. The incomplete pre-conditions, unexecuted Definitive Agreements, disputed performance, and unpaid instalment prevented the asserted right to immediate completion from being treated as established. The communication directing maintenance of status quo over the escrow shares materially reduced the apprehended immediate risk. The disputed status of the remaining securities did not justify a mandatory injunction, while restraints over corporate management, operational assets, permits and contracts would exceed limited preservative protection.
Conclusion: The acquirer did not establish a sufficient prima facie case, irreparable injury, or an immediate threat warranting the requested interim or mandatory protection. This issue was decided against the acquirer.
Final Conclusion: The contractual acquisition, accounting of advances, validity of termination and any appropriate protective measures remain matters for determination in arbitration, without the requested court-imposed restraints over the company or its securities.
Ratio Decidendi: Interim protection for a proposed acquisition cannot be granted where material contractual conditions remain unfulfilled, the applicant has not established performance of an independently due obligation, and no present risk requiring preservative or mandatory relief is shown.