TaxTMI 
TaxTMI 
2016 (9) TMI 514
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...."). 2. The Petitioner Kalanithi Maran was a Director and non-executive Chairman of Spicejet Limited- respondent No.1 (a company incorporated under the Companies Act, 1956 having its registered office at Indira Gandhi International Airport Terminal 1D, New Delhi-110037 and corporate office at 319, Udyog Vihar, Phase-IV, Gurgaon-122016, Haryana) (hereinafter referred to as the "Company") which is a public listed company engaged in the business of scheduled airline services, international airline services, etc. under the brand name "Spicejet". 3. The relief claimed in OMP (I) (Comm) 71/2016 reads as under: "a. pass an ad-interim ex-parte order restraining Respondent No.1 and Respondent No.2 from allotting/ transferring/issuing/ alienating and/or creating any third party interest and/or encumbrance on any shares of the Company; b. pass an ad-interim ex-parte order directing the Respondents to deposit a sum of Rs. 835,00,00,000/- (Rupees Eight Hundred and Thirty Five Crores only)in the Court i.e. the value of the shares due to the Petitioner against the Warrants and CRPS shares; c. pass an ad-interim ex-parte order attaching the bank accounts of the Respondents bearing No....
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....on to the Petitioners;" 5. Both the petitioners were the shareholders of respondent No.1, they held 35,04,28, 758 Equity Shares of the company constituting 58.46% of the share capital of which 26,73,70,826 Equity Shares were free from all encumbrances and 8,30,57,932 equity shares were encumbered with various lenders (hereinafter both petitioners would be referred as petitioners). 6. During the years 2013-2015, the respondent No.1 company was in the midst of tremendous distress, due to which it was facing difficulties in maintaining its fleet, staff and operational integrity. The petitioner were therefore, keen and desirous of reviving the respondent No.1 company from the distress and in this regard. 7. Admittedly vide a Loan Agreement dated 18th December, 2013 (hereinafter "First Loan Agreement"), an amount of Rs. 75,00,00,000/- (Rupees Seventy Five Crores only) was given by the petitioner to the respondent No.1. Further, a Loan Amendment Agreement dated 7th November, 2014 was executed between the petitioner and the respondent No.1 whereby the parties agreed to reduce the amount of Rs. 10,40,83,830/- (Rupees Ten Crore Forty lakh Eighty Three Thousand Eight Hundred and Thi....
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....rsuant to proposed transfer of the Sale Shares by the Outgoing Promoters in favour of the Incoming Promoters; * The change in the management of the Company arising out of proposed changes in the equity holdings of the Company; * Grant permission to Mr. Ajay Singh to propose appointment of new directors on the Board of the Company. This is subject to the security clearance of the new promoters and directors by the Ministry of Home Affairs, restrictions imposed by DIPP/FIPB on FDI, AIC 12/2013 dated 01-0ct 2013 and relevant regulations of SEBI on Substantial Acquisition of Shares and Takeovers." 12. Based on many discussions and in order to restore the operation and market position of the respondent No.1, the petitioners had agreed to transfer their shares and respondent No.2 agreed to acquire the same. The share Sale Purchase Agreement ("SPA") was executed between both the petitioners and the respondents on 29th January, 2015. 13. By virtue of agreement, the respondent No.2 had acquired 35,04,28,753 equity shares in the respondent No.2 i.e. 58.46% share capital of both petitioners i.e. Kalanithi Maran and Kal Airways Pvt. Ltd. in the respondent No. 1 company by paying....
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.... issue and allot on a preferential basis, the Tranche 1 CRPS Shares, the particulars of which are set forth in Schedule B, free and clear from all and any Encumbrance, together with all rights and *advantages now and hereafter attaching or accruing thereto such that the Sellers shall, upon allotment of the Tranche 1 CRPS Shares in their name, receive full legal and beneficial ownership and all shareholder rights relating thereto. 3.4 On or before the Third Closing Date, the Sellers shall subscribe to, and the Company shall issue and allot on a preferential rights basis to the Seller 2, upon receipt of the Tranche 2 CRPS Amount to be delivered in a single tranche in immediately available funds to the Designated Account 1, the Tranche 2 CRPS Shares, the particulars of which are set forth in Schedule B, free and clear from all and any Encumbrance, together with all rights and advantages now and hereafter attaching or accruing thereto such that the Seller 2 shall, upon allotment of the Tranche2 CRPS Shares in his name, receive full legal and beneficial ownership and all shareholder rights relating thereto. 4. CONDITIONS PRECEDENT TO FIRST CLOSING 4.1 The obligation of the Acqu....
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....ed by Seller 2 on March 3, 2012 and December, 2012 for financing facility provided in favour of the Company, on or before February 24, 2015. The Seller 2 shall issue irrevocable instructions to the City Union Bank to forthwith release the Fixed Deposit in favour of the Company towards Tranche] CRPS Amount, upon receipt of an instruction of the Company in this regard. 7. SECOND CLOSING 7.1 Second Closing Date The Second Closing shall take place on February 15, 2015 or such other date as may be agreed between the Parties ("Second Closing Date'') subject to the achievement of the First Closing and the satisfaction of the Conditions Precedent specified in Clause 5.3.5 (d) and Clause 6.3. All transactions relating to the subscription of the Tranche I CRPS Shares by the Sellers shall be deemed to have occurred simultaneously. 7.2 Closing Agenda On the Second Closing Date, the following events shall take place: 7.2.1 The Sellers shall remit the Tranche 1 CRPS Amount (less Rs. 100,84, 06,170 (Rupees One Hundred Eighty Four Lakhs Six Thousand One Hundred and Seventy only) which shall be adjusted in the manner stated in Schedule D pursuant to the Amendment Agreements) ....
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.... Closing Agenda On the Closing Date, the following events shall take place: 8.2.1 The Seller 2 shall remit the Tranche 2 CRPS Amount into the Designated Account 1; 8.2.2 .... 8.2.3 The Parties agree and acknowledge that upon the payment of the Tranche 2 CRPS Amount, the Company shall issue the Release Notice to the Escrow Agent for the release the Collaterals being 41,77,699 equity shares of SUN DTH Private Limited and post dated cheque no. 001452 drawn on City Union Bank dated June 1, 2015 for an amount of Rs. 50,00,00,000 (Rupees Fifty Crores only) for Tranche 2 CRPS Amount." 15. In terms of Clause 12.2 of the SPA, the parties ensured and procured amounts in a designated account to be utilized only for the settlement of the existing outstanding statutory dues of the respondent No.1 to the statutory authorities. The said clause is reproduced below: "12.2 The Sellers and the Acquirer shall ensure and shall procure that the amounts in Designated Account 2 is utilized only for the settlement of the existing outstanding statutory dues to the Governmental Authorities of the Company and towards release of Sellers Guarantees as per the order of priority set forth in ....
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....ond Loan Agreement stated the following: i) Rs. 33,90,40,000/- (Rupees Thirty Three Crore Ninety Lakh Forty Thousand only) from the outstanding loan amount of Rs. 114,00,00,000/- (Rupees One Hundred and Fourteen Crore only) to be utilized for the subscription to 208,00,000 warrants to be issued by respondent No. 1 company and convertible in the financial year 2015-2016; ii) Rs. 43,84,70,000/- (Rupees Forty Three Crore Eighty Four Lakh Seventy -Thousand -only) from the outstanding loan amount of Rs. 114,00,00,000/- (Rupees One Hundred and Fourteen Crore only) to be utilized for the subscription to 269,00,000 warrants to be issued by respondent No. 1 company and convertible in the financial year 2016-2017; iii) The balance loan amount Rs. 36,24,90,000/- (Rupees Thirty Six Crore Twenty Four Lakh Ninety Thousand only) to be utilized for the future subscription to the non-convertible redeemable cumulative preference shares of face value of Rs. 1,000/-(Rupees One Thousand only) per share of the respondent No.1 company. 19. By letter dated 14th February, 2015, the First Closing Date as per Clause 5.1 of the SPA was amended and the date was extended to 24th February, 2015. 2....
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....gated to seek approval of the Competition Commission of India for the sale and purchase of the equity shares in the respondent No.1 Company. On 19th February, 2015, the respondent No.2 - Mr. Ajay Singh received the approval of the Competition Commission of India for the sale and purchase of 35,04,28,758 equity shares in the respondent No.1 Company constituting 58.46% of the paid up equity share capital of the respondent No.1 Company and to issue warrants as agreed. 24. The respondent No. 2 is become the promoter, director and majority shareholder of respondent No.1 and is a signatory to the SPA including the arbitration agreement contained in Clause 16 thereof. The equity shares of the respondent No.1 company are listed and admitted to trading on the Bombay Stock Exchange. 25. Both petitioners claimed to have paid entire amount towards their contractual obligations under the binding SPA including the amounts which were dues of the respondent No.1 Company to the statutory authorities. The petitioners case is that admittedly the respondents have received the amount of Rs. 679 crores till 23rd February, 2015 who failed to honour any contractual commitments under the binding SPA.....
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....he SPA read with Schedule-H and I, all the requisite amounts were deposited by the petitioners in the Designated Accounts, which were agreed to be utilized for settlement of the statutory dues payable by the Respondents to the Governmental Authorities, specially towards the Income Tax liabilities, service tax with respect to which the criminal proceedings have been initiated by way of the Complaints, however, the respondents have failed in their obligation. 29. The petitioners issued a letter dated 24th September, 2015 demanding as under: "a. To issue the Warrants in terms of the letter and spirit of clauses 3 .1 and 3 .2 of the SPA. b. To issue and allot the Tranche 1 CRPS Shares and Tranche 2 CRPS Shares in the names of the Petitioner and Mr.Kalanithi Maran, in terms of the letter and spirit of clauses 3.3, 3.4 and 7.2.2 and 8.1 of the SPA. c. To take all steps to utilize the amounts in the Designated Account 2 in order to pay the outstanding statutory dues, as claimed in the Complaints in terms of the letter and spirit of clause 12.2 of the SPA; d. To take all necessary steps for compounding the offence under Section 276B of the IT Act as alleged in the Complaints....
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....of 42 (3) of the Companies Act, 2013, the Respondent No.1 Company cannot make an invitation for fresh offer of securities unless and until the offer or invitation for issue and allotment of securities made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the Respondent No.1 Company. Accordingly, until the conclusion of the issuance of the warrants and completion of the obligations of the Petitioner under the SPA, the respondent No.1 Company shall be in violation of applicable laws and the terms of the SPA, should the Respondent No.1 Company proceed with the issuance of CRPS Shares and any such issuance of CRPS Shares will be illegal and irregular. Accordingly, the respondent No.1 Company has not been able to proceed with the issuance of the CRPS Shares. 35. It is submitted that the subject matter of the present dispute does not concern the shares of the respondent No.1 Company as admittedly, due to non-compliance with certain regulations, the respondent No.1 Company is unable to issue Warrants. Since the shares of the Respondent No.1 Company to which the petitioner would have been entitled to upon conversion of the Warrants have not even....
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.... 1 and Tranche 2 at an agreed price of Rs. 16.30/- per share. But the respondents failed to issue the same. In terms of the SPA the respondent No.2 ("Mr. Ajay Singh") acquired the 58.46% stake of the petitioners, i.e. Mr. Kalanithi Maran and Kal Airways Pvt. Ltd. in the respondent No. 1 company, Spicejet Limited (hereinafter "Spicejet") by paying just Rs. 2 (two) when the value of the said stake was atleast Rs. 765 crores as per the case of the petitioners. 40. Mr.Kapil Sibal, learned Senior Counsel submits that the entire payment for the warrants was made by Mr. Kalanithi Maran Rs. 777,510,000/- by KAL Airways Pvt. Ltd. Rs. 2,304,679,461/- i.e. Total sum of Rs. 3,082,189,461/- as consideration for Tranche 1 and Tranche 2 warrants by 23rd February, 2015 itself. It is submitted by him that his client was following the application dated 18th September, 2014 very strongly. However, when Company was taken over by respondent No.2 on 29th January, 2015. It was the duty of the respondents to do whatever was necessary for the purpose of ensuring the issuance and allotment of the warrants at the agreed price of Rs. 16.30/- per share. After 29th January, 2015, both petitioners have lost f....
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....arrants at a conversion price of Rs. 16.30 per Equity Share. As certain part of pre-preferential shareholding of Petitioner was pledged with the Banks (Yes Bank Limited and Allahabad Bank), the BSE on 25th September, 2014 raised a query and requested the Respondent No 1 Company to provide a non-disposal undertaking/confirmation from the said Banks in compliance with the lock-in requirements under applicable laws. On 1st October, 2014, the BSE sent a reminder to the Respondent No.1 Company in regard to its earlier communication dated 25th September, 2014. The Respondent No. 1 Company again wrote to the BSE vide its letter dated 7th October, 2014 seeking time to provide the said non-disposal undertakings/confirmations from the said Banks (being Yes Bank and Allahabad Bank). One of the Banks with which pre-preferential allotment shareholding of the Petitioner was pledged Le. Yes Bank Limited, provided the said non-disposal undertaking/ confirmation vide its letter dated 10th October, 2014. (which was subsequently withdrawn by the said Bank due to financial distress of the Respondent No. 1 Company). This letter was forwarded by the Respondent No. 1 Company to the BSE under cover of its....
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....ation and the reasons cited thereof. Thereafter, on 14th September, 2015, officials of the Respondent No.1 Company together with the representatives of the Petitioner and Mr.Kalanithi Maran attended the offices of the BSE and provided explanations sought by the BSE. It is stated by the respondents that the only remedy lies with the petitioners to challenge the disposal of the application in wrongful manner. 47. In reply to the submission of the respondents, Mr.Sibal has refuted the argument that the warrants under the SPA had no value. Currently, warrants would be issued by the Bombay Stock Exchange. He argued that since the allotment of warrants at Rs. 16.30/- per share would have afforded the Petitioners 24% equity (approx.) in Spicejet Ltd.-respondent No.1 and the attendant rights flowing from such shareholding in terms of the applicable law, but, if a fresh application is made today, the same would be at the prevailing price (Rs. 82/- approx) and the Petitioners would not have more than 3% equity. 48. Mr.Sibal submits that it is the admitted position that once the SPA is executed, it was the respondent No.2's obligation for the compliance. As there was no compliance on th....
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....s of this Agreement that specify a time for performance, provided, however, that the foregoing shall not be construed to limit or deprive a Party of the benefits of any grace or use period allowed in this Agreement." 51. If the Clauses 3.2 read with 17.8 read with 17.11 of the SPA are read co-jointly it appears that parties agreed that the respondents were obligated under the SPA to undertake all actions to ensure that the petitioners are allotted the warrants at the agreed price. 52. Though, the said issue of non-compliance which is disputed by the respondents is to be finally decided by the arbitral tribunal as to whom should be blamed with, but prima facie there is a force in the submissions of Mr.Sibal that after execution of SPA the obligation was of the respondents qua the issuance of warrants because on the date of execution of agreement dated 29th January, 2015, the respondent No.2 was fully aware about the pendency of the application. Assuming for the sake of argument, the respondent No.2 is not to be blamed but at the same time, it cannot be denied by the respondent No.2 warrants as per SPA were to be allotted to the petitioners and amount thereto were in possession....
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....the petitioner are controverted by the learned Senior counsel appearing on behalf of the respondents. 3. Various other issues were discussed by both the parties. Learned Senior counsel appearing on behalf of the respondents had also relied upon various paras of the reply dated 9th October, 2015 to the notice. After small submissions, both the parties agreed that the resolution would be passed by the Board of the respondent No.1-Company, authorizing an Agent to appear and represent the Company before the Bombay Stock Exchange (BSE)/Securities and Exchange Board of India (SEBI) in the matter of issuance of warrants and place the same before the BSE to consider the application dated 18th September, 2014. Thereafter, the matter was adjourned for today for the purposes of drafting the resolution to be passed by the Board as well as authorization to appear and represent the respondent No.1-Company in the matter of issuance of warrants. 4. It is pertinent to mention here that on 24th August, 2014, the Board Resolution was passed for the issuance of (i) 81,680,629 and (ii) 107,410,749 Warrants. On 18th September, 2014, 'in-principle' application for issuance of warrants was made by r....
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.... in the General Meeting dated 24th September, 2014. e) Since, the Company has paid the statutory dues stated in Schedule 1 of the SPA to the extent of the principle amount, as required under the amended Schedule H of the SPA and as the penal action has not been launched due to any breach/default of the terms of the SPA thus there is no breach of the undertaking given under the SPA. As the penal action has been launched despite payment of the statutory dues stated in Schedule 1, and has in fact been initiated prior to the SPA, the matter is in the domain of a dispute and would have to be adjudicated in an appropriate proceedings. 8. In view of the entire gamut of the matter, I am of the view that at present, there is no impediment if the BSE may consider the application dated 18th September, 2014 in the light of change of circumstances, because of the reason that earlier the respondent No.1-Company did not provide clarification and now, since the clarification is available coupled with the subsequent events, the application dated 18th September, 2014 can be considered by the BSE and the said subsequent events can also be informed to SEBI who is dealing with the represent....
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....2016. Notice dasti as well". 56. It appears that as on 14th March, the respondents were agreeable if the warrants are issued by the BSE in favour of the petitioners as petitioner application made in 2014 when the petitioners in the control of respondent No.1. At that time, they were also agreeable that once the warrants are issues, the compliance of CRPS was also offered by the respondents as per agreed terms of SPA. Their only plea was that if the warrants are not allotted by the BSE and SEBI, the respondents may be able to issue the CRPS, otherwise, their act would be considered as violation of Section 42 of the Companies Act CRPS, they may be prosecuted the same. 57. Later on, learned counsel appeared on behalf of Bombay Stock Exchange on 10th May, 2016 and informed the Court that the earlier application filed if proceeded further would amount to be contrary to the SEBI (ICDR) Regulations, 2009. Even Mr.Neeraj Malhotra, learned counsel appearing on behalf of SEBI took short adjournment to take the final instruction from his client and to inform the Court. However, on 18th May, 2016 he also informed that it was for the BSE to take the final call about the compliance of o....
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....PA have been rendered void. 61. As on 4th March, 2016, the price per share of respondent No.1 is Rs. 66.30 when commitment was made to the petitioners, price of per share was Rs. 16.30. The petitioners are insisting the same number of warrants as per SPA and on the other hand, the respondent is agreeable if fresh application is filed but the warrants are issued against the value of amount and not as per sum of warrants mentioned in SPA. In view of such situation coupled with the statement made by BSE and SEBI who refused to allot the warrants on the basis of old application in view of rules, it is clear that warrants as per old application cannot be allotted as even confirmed by the respondents. 62. The schedule D of the SPA depicts the details of amounts paid by the petitioners against the warrants as per agreements:- NAME TRANCHE 1 (FY 2015-I6) TRANCHE 2 (FY 2016-I7) No. of Warrants Total Consideration (NR) Advance/Loan Amount (Refer No.1) Amount payable for Tranche 1 after adjustment of Advance/loan Amount No. of Warrants Total Amount Payable (INR) Amount payable for Tranche 2 after adjustment of Advance/Loan Amount Total Amount t....
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....ensation on account of loss in investment and interest thereon. The said details referred as under: Kal Airways Private Limited investment & Loss Details Particulars Total Investment (2304679461+3008406000) Rs. 5,313,085,461 60880629*50 (loss) 3,044,031,450 Current Investment 8,357,116,911 The petitioners insist that the respondents must secure a sum of Rs. 835 crores approximately along with interest at the rate of Rs. 12% per annum from the date of receipt of money till the date of payment. 65. Warrants were to be issued to the Petitioner and KAL under Clause 3.1 and 3.2 the SPA in Tranche 1 and Tranche 2. Payments for the Warrants was made in the following manner: Petitioner- Rs. 777,510,000/-(Rupees Seventy Seven Crore Seventy Five Lakh and Ten Thousand only) KAL- Rs. 2,304,679,461/-(Rupees Two Hundred and Thirty Crore Forty Six Lakh Seventy Nine Thousand Four Hundred and Sixty One only) Total- Rs. 3,082,189,461/-(Rupees Three Hundred and Eight Crore Twenty One Lakh Eighty Nine Thousand Four Hundred and Sixty One only) 66. The total consideration for Tranche 1 and Tranche 2 warrant....
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....ed to protect the said amount. Non-issuance of CRPS 69. In relation to Non-issuance of Non-convertible redeemable cumulative preference shares (for short CRPS), Mr. Sibal has submitted that admittedly the CRPS shares were to be issued to the Petitioner and KAL under Clause 3.3 and 3.4 the SPA in Tranche 1 and Tranche 2. Payments for the CRPS shares was made in the following manner: "Mr. Kalanithi Maran- Rs. 700,293,000/-(Rupees Seventy Crore Two Lakh Ninety Three Thousand only) KAL Airways Pvt. Ltd. Rs. 3,008,406,000/-(Rupees Three Hundred and Eight Crore Four Lakh Six thousand only)" 70. Mr.Sibal submits that admittedly the total consideration for the Tranche 1 and Tranche 2 CRPS shares was Rs. 3,708,699,000/- was made as per SPA. These payments also included the adjustments of the advances monies provided to Spicejet by the petitioner and KAL under the loan agreements dated 18th December, 2013, and 21st November, 2014 and loan amendment agreements dated 7th November, 2014, 5th December, 2014 and letters dated 29th January, 2015 issued by the petitioner to Spicejet. The said position is also admitted by the respondents in the Reply filed to the petitions and paras 1....
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....by Mr. Sibal, learned Senior counsel for the petitioners that firstly, the Respondents have suppressed the amendment to Clause 7.1 of the SPA vide letter dated 23.02.2015 which states as under: "2.3. Clause 7.1 shall be deleted and amended and restated in its entirety as follows: 7.1. The Second Closing shall take place on February 24, 2015 or within two days after the date on which Consent of Export Development Canada ("EDC") has been obtained for repayment of the financing facility provided by City Union Bank("CUB") to the Company of Rs. 100,00,00,000(Rupees One Hundred Crores only) or such other date as may be agreed between the Parties("Second Closing Date") subject to the achievement of the First Closing and Clause 6.3. In case the Consent of EDC is not received within ninety(90) days from the date hereof, the Company shall have the lien removed from the Fixed Deposit and provide alternate form of security acceptable to CUB. Immediately upon release of lien on the Fixed Deposit, Seller 2 agrees to forthwith remit Rs. 100,00,00,000 (Rupees One Hundred Crores only) to Designated Account 2......." 74. It is submitted by Mr.Sibal that upon reading of the aforesaid provisi....
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....hen to remove the lien and further to provide alternate security to City Union Bank, which not having been undertaken during the stipulated time, he was not required under the SPA to remit the said amount to the Designated Account and due to lapse on the part of the respondents, the said amount could not be remitted. The attachment of the said FD lying with the City Union Bank by the Enforcement Directorate is irrelevant since the pre-requisitions for such remittance not having been met, there was no obligation for him to remit the said Rs. 100 Crores in the Designated Account. In any event, even if Rs. 100 Crores lying in the FD was attached, he could have made alternate arrangements provided the respondents had performed their obligations and inform the petitioners. 77. Even otherwise the said dispute relating to Rs. 100 Crores is to be determined in arbitration. But the fact remains that as per the case of the petitioners barring Rs. 1001 croers the respondents are paid of Rs. 579 Crores, which even in terms of Section 42(6) of the Companies Act, 2013 (hereinafter "CA13"), they are liable to have returned to the Petitioners within 60 days of the closure of the in-principal ap....
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....nce of warrants, CRPS shares cannot be allotted under the provision of Section 43(3) of the Companies Act, 2013. The contract under these circumstances is to become void. Once the contract is void and once the contract is liable to be restored and petitioners are entitled for compensation which were received by the respondents under the contract. 83. Section 65 of the Indian Contract Act, 1872 read as under as relied upon by Mr.Sibal: "65. Obligation of person who has received advantage under void agreement, or contract that becomes void When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore, it, or to make compensation for it, to the person from whom he received it." 84. Mr.Sibal submits that the consideration accepted by the respondents in lieu of the said CRPS must be repaid to the Petitioners with the applicable interest in terms of Section 42(6) of Companies Act, 2013 and as the respondents having received the consideration in contravention of Section 42(3) of Company Act, 2013 are liable for penalties under Section 42(10) of Companies Act, 2013. 85.....
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....he relevant provisions of the Companies Act 2013(the "Act") has expired as of date, it attracts the applicable consequent provisions, including penal, as well as the deeming provisions of the Act relating to acceptance of deposits." "3....... i....... The proposed action of adjusting the short term loan from the allottees(i.e. outgoing promoters) amounting to Rs. 178.59 crores against future subscription money due from the outgoing promoter in connection with issuance of proposed warrants and CRPS as stated in AR will result into non-receipt of the consideration by way of payment(as required in terms of said resolutions passed by the shareholders)" 86. It is the case of the petitioners that the respondents have received the entire consideration for the warrants and CRPS barring a sum of Rs. 100 Crores (which is an arbitrable dispute). However, CRPS have not been allotted/issued even after receipt of the consideration even when the same is statutorily liable to be returned to the petitioners together with the loss caused to the petitioners, being the subject matter of arbitration, is required to be preserved. 87. Prima facie, this Court does not find any force in the ....
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.... in para 4 of the reply, it is submitted by the respondents that no doubt that the obligation of the respondents but the same was limited to defending the petitioner and cannot by any stretch of imagination be taken to include compounding of offences. It appears from SPA that in terms of Clause 12.3 the respondent No.2 indemnified, ensured and undertook to take all steps to defend and hold harmless the petitioners from any penal action, liability or claim due to non-payment of statutory dues in relation to Respondent No.1. The said clause is reproduced below: "12.3. The Acquirer shall procure that the Company shall undertake the Business in compliance with Governmental Approvals and shall ensure that the Company undertakes all steps to defend and hold harmless the Sellers, the nominee Directors of the Sellers who have resigned on the First Closing Date or Representatives of the Sellers as well as existing Directors on the Effective Date from any penal action, liability or claim due to non-payment of statutory dues stated in Schedule I in relation to the Company." 91. It also appears from record that the respondent No.1 also issued a letter dated 24th February, 2015 to the ....
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....upces One Hundred Eighty Four Lakhs Six Thousand One Hundred and Seventy only) which shall be adjusted in the manner stated in Schedule D pursuant to the Amendment Agreements) and the Seller 1 shall remit the Balance Warrants Payment into Designated Account 1 and Designated Account 2 respectively, in such proportion and manner as set out under Schedule H; 7.2.2 A meeting of the Board shall be held at which meeting, the following shall be resolved, subject to the approval of the shareholders of the Company pursuant to Clause 4.1.4: (a) The Tranche 1 CRPS Shares shall be issued and allotted to the Sellers, free and clear of all Encumbrances, in accordance with the applicable provisions of the Act; (b) The name of the Sellers shall be entered in the register of members of the Company as the legal and beneficial owner of the Tranche 1 CRP$ Shares; (c) Certificates representing the Tranche 1 CRPS Shares shall be issued to the Sellers in such numbers as may be required by the Sellers; 7.2.3 The Parties agree and acknowledge that upon the payment of the Balance Warrant Payment and the Tranche 1 CRPS Amount, the Company shall issue the Release Notice to the Escrow Agent for ....
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.....66 Seller-2 Tranche-1 CRPS Amount 24-Feb-15 100,00,00,000.00 Seller-1 Balance Warrants Payment Designated Account 2 24-Feb-15 79,97,06,961.00 Seller-1 Balance Warrants Payment 24-Feb-15 20,02,93,039.00 Seller-1 Tranche 1 CRPS Amount 24-Feb-15 5,20,35,549.34 Seller-2 Tranche 1 CRPS Amount 24-Feb-15 100,00,00,000.00 Seller 2(FD to be created with CUB in lieu of release of Collaterals provided to CUB Tranche 1 CRPS Amount TOTAL 205,20,35,549.34 Order of Priority for payment 100. The amount in designated Account 1 shall be utilized by the Company for its operations in the ordinary course. The amounts in Designated Account 2 shall be utilized for settlement of the existing outstanding statutory dues to the Governmental Authorities of the Company and other liabilities of the Company as mentioned below: a. Rs. 100 crores to be utilized towards repayment of the financing facility obtained by the Company from the City Union Bank. b. Rs. 891,682.799 shall be utilized towards payment of Income Tax liabilities (being the principal amount of Tax ....
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....Private Limited Utilised by the Respondent No. 1 under the ownership, management and control of the Petitioner The amount was provided as advance towards subscription of warrants proposed to be allotted to the Petitioner. During December, 2014 178,59,16,170.00 Mr. Kalanithi Maran Utilised by the Respondent No. 1 under the ownership, management and control of the Petitioner The amount was provided as unsecured loan to the Company and by letter dated February 29, 2015 was agreed to be utilised towards the payment to be made by Mr Kalanithi Maran towards the outstanding dues for warrants and the CRPS Shares. 24-Feb-15 94,79,64,450.66 Mr. Kalanithi Maran Utilised by the Respondent No. 1 (ordinary operations of the Company as per SSPA Performed by the Parties - the amount was paid for subscription of CRPS 24-Feb-15 100,00,00,000.00 KAL Airways Private Limited Utilised by the Respondent No. 1 for ordinary operations of the Company as per SSPA Performed by the Parties - the amount was paid for subscription of warrants. 24-Feb-15 79,97,06,961.00 KAL Airways Private Limited (a) Rs. 891,682,799 utilized towards payment of Income ....
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....any relief for refund of the amount. 105. It is also the admitted case of the respondents that both petitioners had transferred the equity shares of 35,04,28,478 constituting of 58.46% of respondent No.1 for just Rs. 2/-. The value of the said shares was Rs. 765 crores at that time in the market. Obviously, the respondent No.2 to clear the liabilities of respondent No.1 and in lieu thereof, the shares were transferred for Rs. 2/-. The respondents have not shown any cogent evidence before this Court that by this time they have spent more than Rs. 765 crores. The petitioners admittedly asked the respondents by letter dated 24th September, 2015 to take the steps to utilize the amount in the designated account No.2 in order to pay outstanding statutory dues and to take the necessary steps for compounding the offence under Section 276B of the Income Tax Act as alleged in the complaint. No doubt, certain details are provided to show that some dues were cleared. At the same time, it is not denied by the respondents if the BSE would have allowed the application filed in 2014, the warrants were supposed to be issued. It was agreed earlier and even after execution of SPA. Further during h....
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....s and when it appears to the Court to be just and convenient, then the Court has ample power to exercise its discretion to secure the amount even when the condition of the company is solvent, under Sections 9(1)(ii)(b) and (e) of the Arbitration and Conciliation Act, 1996. The amount, under these circumstances, should be secured, once the dispute is of commercial in nature. The present case of the petitioner falls within the range of exceptional one where the amount is liable to be protected 60. The interim relief in the present case is sought on the respondent's admitted obligation under the contract. The interim relief claimed in the present case is nothing but an admitted obligation on the part of the respondent and such an obligation can be enforced under Section 9 of the Act by way of interim relief" ii) The High Court of Bombay in the case of Nimbus Communications Limited v. BCCI; 2013(1) MHLJ 39 held: "22 ...The Division Bench noted that the power being of a drastic nature, a direction to secure the amount claimed in the arbitration petition should not be issued merely on the merits of the claim, unless a denial of the order would result in grave inj....
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....tion and Conciliation Act, 1996. The underlying basis of Order 38 Rule 5 therefore has to be borne in mind while deciding an application under Section 9(ii)(b)." iii) This Court in S. Harinder Singh v. S. Nirmal Singh & Ors; 2009c (113) DRJ 784 (DB) has held: "28. We may note that repeated attempts to persuade the parties to settle their disputes amicably have failed. One of the primary reasons for the deadlock appears to be the unfair advantage being enjoyed by the respondents, who continue to hold the entire amount of US$ 550,000, even though, as per the agreement dated 29.08.2002 the amount of US$ 300,000 had to be transferred to the appellant and was to remain his custody till the resolution of the disputes. Where is the incentive for the respondents to settle their disputes with the appellant? The fact that the respondents are enjoying the custody, and possibly the gainful use and exploitation of the entire amount of US$ 500,000, in our view is a stumbling block to a fair and equitable resolution of the disputes between the parties who are brothers." "29. Section 9 of the Act (which could be invoked on 12.01.2009 as the appeal was even then pending) not on....
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....t of Bombay in the case of National Shipping Company of Saudi Arabia v. Sentrans Industries Limited; AIR 2014 Bom 136 has held: "7. In Pushpa P. Mulchandani (Mrs.) and Ors. v. Admiral Radhakrishin Tahilani (Retd.) and Ors., (2001)1BOMLR169, the learned Single Judge of this Court held that the provision contained in Section 9 of the Act of 1996 was a self operative code and that the provisions of Civil Procedure Code are not applicable while considering the application under Section 9 of the Act of 1996. 10...........In a special provisions of the nature like Section 9(ii)(b), we are afraid, exercise of power cannot be restricted by importing the provisions of Order 38, Rule 5 of the Code of Civil Procedure as it is. The legislature while enacting Section 9(ii)(b) does not seem to us to have intended to read into it the provisions of Order 38, Rule 5 of the Civil Procedure Code as it is. It is true and as has been held by the Supreme Court in ITI Ltd, (supra), that for want of specific exclusion of the Code of Civil Procedure in the Act of 1996, it cannot be inferred that the Code was not applicable but that would not mean that provisions of Code have to be read in....