TaxTMI 
TaxTMI 
2012 (10) TMI 1164
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....s. 500 crores to secure the claim of the Plaintiff in the above suit, in the following circumstances: 2. Defendant No.1 herein - Zenith Infotech Limited - on 15th September 2006, offered US $ 33 million 3.0 % convertible bonds 2011 due for repayment or redemption in August 2011. Similarly on 14th August 2007 it also offered US $ 50 million 3.0 % convertible bonds 2012 due for repayment or redemption in August 2012. The bonds were issued at 100 per cent of the principal amount. The Plaintiff is the trustee holding the aforesaid bonds in trust for the bondholders, who subscribed to the said bonds. 3. When the 2011 bonds matured for repayment/redemption in August/September 2011, Defendant No.1 did not make any payment. In view of the default, the Plaintiff issued a demand notice as contemplated by the Agreements and also addressed notices in October 2011 to Defendant No.1, being notice of acceleration and declaring the 2012 bonds as due and payable. The Defendant No.1 also did not make any payment when the 2012 bonds actually became due and payable in August 2012. 4. According to the Plaintiff, the share of the Remot....
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.... November 2011, the learned Counsel for Defendant Nos. 1, 5 and 6 made a statement that till further orders, the said Defendants will not dispose of, sell, transfer, alienate or create any third party right or interest in respect of the cloud computing business of Defendant No.1. 9. In the above Notices of Motion, the Plaintiff moved this Court for ad­interim reliefs i.e. seeking a direction against Defendant No.1 to furnish security of Rs. 450 crores with interest thereon. This Court by its order dated 23rd December 2011 directed the valuation to be made of the Cloud Computing Business of Defendant No.1 and also directed Defendant No.1 to place on affidavit all the particulars of payments made to various parties from the sale consideration of MSD business i.e. the business which was already sold off by the Plaintiff prior to the filing of the above suit. The said Cloud Computing Business was valued by the Valuers M/s. Ernst & Young Pvt. Ltd. at Rs. 598 crores. Since the Plaintiff's claim on the date of the filing of suit is approximately Rs. 450 crores, this Court by its order dated 14th February 2012 noted that M/s. Ernst & Young had value....
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.....1 Company must give security for the suit claim with interest less Rs. 152 crores which is the valuation of the cloud computing division of Defendant no.1 Company....." In view thereof, the Division Bench by its said order dated 9th July, 2012, allowed the Plaintiff to move this Court for further ad­interim reliefs. 12. Mr. Janak Dwarkadas, the Learned Senior Advocate appearing for the Plaintiff, tendered a table setting out the cash and cash equivalents of Defendant No.1 as on 31st March 2011; proceeds received from sale of MSD business; cash and cash equivalent as on 30th September 2011, and the purported payments/investments made from the sale proceeds of the MSD business by Defendant No.1, and submitted that the Defendant No.1 after representing to its shareholders, the Bombay Stock Exchange and the City Civil Court at Mumbai, that the sale proceeds of the MSD business will be applied towards buy back/redemption of FCCBs, dishonestly siphoned away the sale proceeds and has admittedly not paid any amount whatsoever towards buy back/redemption of FCCBs 2011 as well as 2012. Mr. Dwarkadas submitted that Defendant Nos. 1, 5 an....
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....j Mundra vs. Md. Maneck Gazi and others wherein the Learned Single Judge after discussing several authorities on the subject has in paragraph 10 set out certain "guiding principles" required to be taken into consideration for deciding Application under Order 38 Rule 5 of the CPC, 1908. In the said decision, the Learned Judge has inter alia held that there is no rule that transactions before filing of the suit cannot be taken into consideration but the effect of attachment before judgment must be to prevent future transfer or alienation. The Court has further held that it is open to the Court to look to the conduct of the parties immediately before suit and to examine the surrounding circumstances and to draw an inference as to whether the defendant is about to dispose of the property and if so, with what intention. In the said decision, the Court has also held that where the defendant starts disposing of the properties one by one, immediately upon getting a notice of the Plaintiff's claim, and/or where he had transferred the major portion of his properties shortly prior to the institution of the suit and wa....
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.... i.e. there is no lien, charge, mortgage or pledge in respect thereof. Mr. De'vetre has stated on instructions that without prejudice to their rights and contentions, pending the hearing and final disposal of the above Notices of Motion, Defendant Nos. 1, 5 and 6 undertake to maintain status quo in respect of the fixed assets, investments, money held in joint escrow account (Wells Fargo Bank A/c. No. 83722000) as set out in the said Exhibit­B. He has submitted that the fixed deposits mentioned in the said exhibit aggregating to Rs. 7.50 crores have been utilised by the Company in July, 2012. He has submitted that the Company be allowed to use the cash and bank balances and the amount received from the sundry debtors of the Company from time to time, for the day­to­day working of the Company, including payment of wages of the said employees. Mr. De'vetre has stated that Defendant No.1 has received Rs. 21 crores out of the loans advanced to its subsidiaries, aggregating to Rs. 71 crores. He has submitted that any further amount received from its subsidiaries towards return of loan ....
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....ed against him, before power is exercised under Order 38 Rule 5 CPC. Courts should also keep in view the principles relating to grant of attachment before judgment. (See Premraj Mundra v. Md. Manech Gazi for a clear summary of the principles)". Mr. De'vetre has submitted that in any event since his clients are willing to give an undertaking as recorded hereinabove, the question of going into the above issues does not arise. 16. I have considered the submissions advanced by the learned Senior Advocates appearing for the Parties. It is not disputed that the FCCBs are matured and the Defendant No.1 has not made payments due under the said Bonds. In fact, the Division Bench of this Court in paragraph 3 of its order dated 3rd May 2012 has inter alia recorded that, "There is no dispute about the fact that when the maturity date of repayment/redemption of the 2011 bonds came in August/September 2011, defendant No.1 did not make any payment. In view of the default, the plaintiff issued notice of demand as contemplated by the agreements and also addressed notices in October 2011 to defendant No1. being Notice ....
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.... such cause or furnishes the required security or gives an undertaking to the Court to do or not to do a thing, and the property specified or any portion of it has been attached, the Court shall order the attachment to be withdrawn, or make such other order as it thinks fit." 18. In the present case, the Defendants have not disposed of any of its properties after filing of the suit. Though the provision as to attachment before judgment is not applicable where the property has already been disposed of, as held by the learned single Judge of the Calcutta High Court in Premraj v. Md. Maneck Gazi (supra) which decision is approved by the Hon'ble Supreme Court in Raman Tech. & Process Engg.Co. and another (supra), the conduct of the Defendants immediately before the filing of the suit can be taken into consideration by this Court to draw an inference as to whether the Defendant is about to dispose of the property and if so with what intention. Even if an order directing the Defendant Nos. 1, 5 and 6 is passed to furnish security and the Defendant Nos. 1, 5 and 6 fail to furnish the same, all that the Court can do is to pass an order of attachment aga....