TaxTMI 
TaxTMI 
2020 (6) TMI 273
X X X X Extracts X X X X
X X X X Extracts X X X X
....t amount of Rs. 4,00,00,000/- (Rupees Four Crores) in terms of the SC Order by creating an appropriate security in respect of such number of the Unsold Units in Towers C1 and C2 in Defendant No. 4's Project and/or by creating a hypothecation on the future receivables of sold units in Towers C1 and C2 in Defendant No. 4's Project as detailed in Paragraph 65 above without the requirement of any consent from the Plaintiffs in that regard ; (b) grant a mandatory injunction and pass such necessary orders and directions against Plaintiff No.2 to enable Defendant No. 4 to undertake its business and affairs including by raising finance for re-commencing and completing the development of the Project including Towers C1 and C2 by creating appropriate security in respect of Defendant No. 4's Project including the Land and the development of Towers C1 and C2 thereon and future receivables of units in Towers C1 and C2 in Defendant No. 4's Project as detailed in Paragraph 65 above, without requirement of any consent from the Plaintiffs in that regard; (c) pass such prohibitory orders and injunction restraining the Plaintiffs and/or their employees, servants, affiliates, associa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t a sum of Rs.5 crores within a period of eight weeks from the date of the order failing which the interim stay granted by the Bombay High Court against the execution of the arbitral award would stand vacated. 6. Since defendant No.4 was short of funds in order to comply with the order dated 4th February, 2020 an email dated 21st February, 2020 was addressed to the plaintiffs requesting their permission for generating funds by availing secured/unsecured loan facility, sale of remaining stock of flats etc. It is the case of the applicants that vide their reply dated 2nd March, 2020, plaintiffs made wrongful allegations against the applicants and rejected the proposal made by the applicants for generation of the funds. Due to the nationwide lockdown due to outbreak of COVID-19, defendant No.4 was unable to deposit the amount as directed by the Supreme Court. Consequently a miscellaneous application being Misc.Appl. No.927/2020 in SLP (C) No.25412/2019 was filed before the Hon'ble Supreme Court inter alia seeking extension of time to comply with the directions passed vide order dated 4th February, 2020. 7. According to the applicants vide order dated 11th May, 2020 the Hon'ble S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not only to defendant No.1 and 3 but also to the plaintiffs. 9. In view of the 'reserved matters' agreed to between the plaintiffs and defendant No.4 no major decision in regard to project can be taken without prior written approval of the plaintiff No.2. Under the Debenture Trust Deed (DTD) and the amended Article of Association (AOA), plaintiff No.2 has a right to appoint the majority Directors on the Board of defendant No.4 and from 2nd March, 2015 onwards till 31st September, 2019 the plaintiff No.2 was in control of the management of defendant No.4. All the nominee Directors of plaintiff No.2 resigned from the Board w.e.f. 31st September, 2019 so as to wriggle out of the rigours of RERA and other laws. The plaintiff No.2 has also not chosen to appoint any Director on the Board of defendant No.4 since 31st September 2019. Since in the suit the defendant No.4 is not being represented by any Advocate the applicants being the 100% shareholders of defendant No.4 have filed the present application in the representative capacity of defendant No.4 to secure its beneficial interest and recognised investment. In compliance with the terms relating to 'reserved matters' defendant No.4 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in equity shares thereby causing loss to the defendant No.3 and defendant No.4 is a dishonest plea for the reason there was no agreement between the parties for investment in equity as the DSA superseded the Term Sheet. Further this grievance was never raised by the applicants and only when in the month of 2019 the plaintiffs issued notice of default to the applicants, a suit was filed in Pune to circumvent the plaintiffs' actions against the defendants. Further even by the resolution dated 15th January, 2018 defendant No.1 was absolved to the limited extent of maintenance of customer relationship, delay in the project and any workman related issue or any accident however, defendant No.3 was never absolved. Further defendant No.1 was also not absolved of any other duties cast on him and specifically the liability with regard to the POSCO litigation. Referring to various provisions in the DSA, the schedule thereto and the resolution, learned counsel for the plaintiffs submits that the relief sought by the applicants is not maintainable. 12. The applicants have not challenged the provisions of DSA till date. The plaintiffs are secured creditors and have first charge with the rig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le to pay amount to defendant No.2. There is no obligation of the plaintiff No.2 to contribute either in equity or extend any further loan to defendant No.4. The sale/allotments of the apartments as informed during the course of the arguments in the project were made prior to the disbursement of the loan by plaintiff No.2, that is, before 2nd March, 2015 and the submission of learned counsel for the applicants that the apartments were allotted/sold between 2015 to 2018 is factually incorrect. Even if there is a liability of POSCO on defendant No.4 the same is at best like an unsecured creditor and cannot triumph the rights of plaintiff No.2 who is a secured creditor. 14. Learned counsel for the plaintiffs contends that a party who has not purged the contempt till date has no right of hearing as despite directions of this Court to file an affidavit by the defendant Nos.1, 2 and 3 in terms of the decision of this Court in M/s Bhandari Engineers & Builders Pvt. Ltd. vs. M/s Maharia Raj Joint Venture & Ors., Execution Petition No.275/2012 decided on 5th December, 2019, no affidavit has been filed. As regards the affidavit of assets filed earlier by defendant Nos.1 and 3 the plaintif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s maintainable. Every dispute involving a company is not liable to be decided as per the Companies Act. The jurisdiction of the Courts to try all suits of civil nature is very expensive as is evident from the plain language of Section 9 of the CPC. The two tests, relevant in dealing with the question about the exclusion of civil courts' jurisdiction are (a) whether the special statute which excludes such jurisdiction has used clear and unambiguous words indicating that intention; and (b) does that statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions. Reliance is placed upon the decisions of the Supreme Court reported as AIR 1969 SC 78 Dhulabhai v. State of M.P.; (2009) 4 SCC 299 Rajasthan SRTC v. Bal Mukund Bairwa (2); (2002) 6 SCC 416 Dhruv Green Field Ltd. v. Hukam Singh. 17. It is further contended that on a plain reading of Section 430 of the Companies Act it is clear that the civil Court's jurisdiction is not ousted in so far as the relief of injunction against the person from interfering with the smooth management of the company and its affairs by the directors of the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at defendant No.3 being 99% shareholder of defendant No.4 can bring an action on behalf of defendant No.4 in representative capacity, in case the wrongdoers themselves control the company or if the directors are in the wrong and carry out the affairs of the company in a prejudicial manner. [see (2002) 3 CompLJ 331 (Del) Spectrum Technologies USA Inc. v. Spectrum Power Generation Company Ltd. and ILR [1976] MP 30 : 1975 MPLJ 390 Prakashchandra Rajmal Jain v. Firm Swarupchand Hukumchand and Co.] 21. Heard learned counsel for the parties. 22. Present suit has been filed by Vistra ITCL (India) Ltd. and Ammon Holdings Pte. Ltd. as plaintiff Nos.1 and 2 respectively impleading Lalit Kumar Jain, Pranay Lalit Kumar Jain, Kumar Urban Development Private Limited (in short 'KUDPL'), Sinew Developers Pvt. Ltd. (in short 'SDPL') and Kumar Housing Corporation Pvt. Ltd. (in short 'KHCPL') as defendant Nos.1 to 5 respectively. 23. Case of the plaintiffs is that a resolution dated 3rd December, 2014 was passed by the Board of Directors and Shareholders of SDPL in relation to raising of funds by way of issuance of non-convertible debentures (NCD's) on a private placement basis in two tranch....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the Series A DTD and Series C DTD. Plaintiff No.2 thus subscribed to 30 unlisted redeemable, interest bearing Series C Debentures and remitted an amount of Rs.30 crores to defendant No.1. Thus the total investment of plaintiff No.2 with defendant No.4 was a sum of Rs.190 crores. After the subscription of the debentures by the plaintiff No.2 in defendant No.4, defendant Nos.1 to 4 continuously defaulted in complying with their obligations resulting in plaintiffs issuing a default notice being Series A default notice on 5th October, 2018 and Series C default notice on 11th October, 2018. 26. As the project was suffering the Board of Directors of defendant No.4 vide its Board Resolution No.19/2017-2018 dated 15th January, 2018 appointed an independent management team of professionals to aid the defendant Nos.1 to 3 to expedite the development, construction, marketing and sale of the project. However, due to subsequent events the independent management team fearing for their life, safety and career resigned from their posts for the reason there were various threats, hindrances and obstacles at the project site. The parties thereafter exchanged replies to the notice and the rejoi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the share capital of Defendant No. 5in any manner. Defendant Nos. 1to 4 are further restrained from or permitting a Transfer or attempting to Transfer any Pledged Shares, being 65,00,000 equity share constituting 100% of the share capital of Defendant No.4. 28. Vide order dated 30th July, 2019 this Court decided the question regarding the viability of the security option given by the defendants, to secure the amount claimed by the plaintiffs in the present suit till final adjudication of the injunction application and modified the order dated 28th May, 2019 as under: 42. Till the application is heard and decided, the Court will also have to ensure that Defendant No. 3 does not fetter away its assets to render the Plaintiff without any effective recourse. Having given my thoughtful consideration on every aspect, I feel that since the security being offered by the Defendants in the nature of Options 1, 2 & 3 cannot be accepted, the alternate proposal of depositing an amount, in a separate no lien account, generated from the sale of each flat or unit from any of Defendant No. 3's ongoing project or projects proposed to be launched in future, till further orders of this C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e passing of the order. 45. Subject to the above, the order dated 28th May 2019 is modified / clarified to the effect that it does not restrict Defendant No. 3 to carry out its routine/ordinary course of business which includes the construction and development of its projects, undertake sale of flats/units being developed by Defendant No. 3 and to receive sale proceeds therefrom; enter into fresh development agreements, joint ventures agreements and to receive consideration therefrom. However, the sale of flats/Units being developed by Defendant Nos. 1 to 3, is subject to the above-mentioned conditions. Defendants have sought further clarification by way of seeking permission to undertake corporate restructuring in the nature of Mergers and Amalgamations with Defendant No. 3. However it is not within the purview of this Court to expand or dilute the scope of its own order by way of a clarification to its previous order and therefore no clarification is necessary on the above aspect. 46. Needless to say that this order only clarifies the injunction order dated 28th May 2019 as modified on 9th July 2019 and the opinion expressed by the Court is only a prima facie vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for (or remedy in respect of) fraudulent misrepresentation by the Promoters. It is clarified that the Debenture Subscription Agreement dated July 26, 2014 executed between the Parties stands terminated and replaced by this Agreement. 2.5 Tenor and Redemption. 2.5.1 The Series A Debentures shall have a maximum tenor of 60 (sixty) months from the Tranche1 Deemed Date of Allotment ("Tenor"). The Company shall proportionately redeem all the Series A Debentures collectively through reduction in face value of each Series A Debentures without distinguishing between the Series A Debenture Holders. An indicative schedule for redemption is set forth at Schedule XV hereto. Notwithstanding anything contained in this Agreement, the Company shall mandatorily redeem all and not less than all of the Series A Debentures in full by paying the entire Redemption Amounts on or before the expiry of the Tenor ("Final Redemption Date"). 2.5.2 Notwithstanding anything contained in this Agreement and without prejudice to all the rights and entitlements of the Series A Debenture Holders under the Law or the Transaction Documents, (i) if an Event of Default has occurred and has not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transfer/conveyance/ lease/ sub-lease/ sub-let/ license disposal of the Project, the Project Land, the Additional Leased Lands and the ATSL Land or on any assets/ lands of the Company, or any part thereof or any other actions as set forth in this Section 2.5.2 shall apply to the development rights and, or, leasehold rights/ entitlements granted to the Company into the Project Land, the Additional Leased Lands and, or, the ATSL Land, and, or, any other rights, titles, interest that the Company has or it may acquire in the Project Land, the Additional Leased Lands, the ATSL Land and, or, the Project. In the event the Company, by the expiry of the Final Redemption Date, has not redeemed all and not less than all the Series A Debentures by paying the entire Redemption Amounts to the Series A Debenture Holders, the Series A Debenture Holders shall be entitled to take over the management, control and operations of the Company, including the Board of directors (in which event the Series A Debenture Holders shall be entitled to nominate and appoint all of the directors on Board of Directors of the Company) and the development rights, leasehold rights to the Project Land and assign/ transfe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pertaining to the Reserved Matters, unless the Reserved Matter has been first approved in the affirmative, in writing, by the Series A Debenture Holders. "SCHEDULE XII RESERVED MATTERS (i) xxx xxx xxx (ii) Any sale, transfer, lease, license, assignment, mortgage. Encumbrance, pledge, hypothecation, grant of security interest in, exchange or other disposition of any asset/ property of the Company or any business restructuring, merger, demerger, spin off or reconstruction of the Company, except the sale of units/ spaces/ built up area in the Project to its customers not below the price set forth in the Approved Business Plan. (iii) Obtaining secured and unsecured financing/ lending facilities (construction, permanent, working capital, bridge, mezzanine or any other financing). (iv) Guaranteeing of debts or obligations of any Person by the Company; and, or, recommending, giving or renewing any guarantee, indemnity or security' in respect of obligations of the Company. (v) xxx xxx xxx (vi) Any divestment or sale (including but not limited to a lease or exchange) of assets of the Company. (v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de in 4 tranches as per the following schedule: Tranche Amount Milestone 1 Rs. 1,500 MM Receipt of all approvals for commencement of construction of 460,358 Sq. ft. FSI area 1 saleable area of 700,000 Sq. ft. (refer Annexure for computation of Saleable Area). This investment amount may reduce on account of any downward variation in FSI or saleable area as mentioned above. 2. Rs. 500 MM Obtaining approval of building plans to build 7,15,763 Sq. ft. FSI totaling to saleable area of 1,009,689 Sq. ft. and achievement of at least a base sales price of Rs. 9,500 / Sq. ft. for 25 new units sold over and above 86 units already sold till date. This investment amount may reduce on account of any downward variation in FSI or saleable area as mentioned above. 3. Rs. 350 MM Achieving base sales price of Rs. 11,000 / Sq. ft. for 30 new units sold over and above those sold for meeting the milestones for previous tranches. 4 Rs. 450 MM Project achieving base ales price of Rs. 12,000/ Sq. ft.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d admeasuring 8,960 (eight thousand nine hundred sixty) square meters out of the total land bearing Survey No. 44/l(Part)/l/l/I situated at "45 Sinew Hills", Erandwane, Pune 411004, Maharashtra, India ("Project") and manage the affairs of the Company on a daily basis and the Independent Management be led by a Project Head. The Board shall decide on the appointment of the Project Head, the Sales Head and the Construction Head; and the remaining hiring shall be done by the Project Head and his/ her team and the other respective heads and they will keep the Board informed of the same." "RESOLVED FURTHER THAT the aim of the Independent Management will be to maximize profits of the Company, efficiently manage the Project, repay all the debenture holders of the Company, maximize profits in the hands of original promoters and the Independent Management shall work within the framework of a business plan approved by the Board." "RESOLVED FURTHER THAT the Independent Management shall undertake and be in control of all of the operations and management of the Company under the sole supervision of the Board and to the exclusion of supervision, control or direction of any speci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dam, Suresh Katkar, Lata Pokharkar, Girish Mande, and Sonica Tater and Mahesh Ram Patil, be terminated. Directors be and are hereby authorized on behalf of the Company to negotiate, alter, execute and sign all documents, deeds and agreements to give effect to this resolution." "RESOLVED FURTHER THAT with effect from the date of this resolution, the Independent Management and all employees of the Company will be placed and shall work out of the site office of the Company or a separate office, as may be approved by the Board, except for Sudhir Kadam, Lata Pokharkar, Girish Mande, and Sonica Tater and Mahesh Ram Patil." "RESOLVED FURTHER TBLAT appointment of Ms. Sonica Tater, as the company secretary of the Company, is hereby approved. It is taken on record that, Ms. Sonica Tater will be the company secretary of the Company, and shall at all times report to the Board and act as per the instructions of the Board. Ms. Sonica Tater shall be responsible for compliance with applicable laws and regulations by the Company." "RESOLVED FURTHER THAT it be taken on record that. Mr. Lalit Kumar Jain and KUDL (directly or indirectly or through its directors, shareholders, employees, agent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o are consultants appointed by the Company for handling various litigations of the Company will continue their services with the Company." "RESOLVED FURTHER THAT it be taken on record that any legal proceedings related to customers or any new matters related to the Project will be handled by the Independent Management." "RESOLVED FURTHER. THAT, in order to ensure that there is no sharing of resources/personnel by the Company with KUL and, or, KUL group of companies or any other group company other than Sudhir Kadam, Lata Poklrarkar, Girish Mande, Sonica Tater and Mahesh Ram Patil, approval is granted that: (i) all personnel/ employees of the Company will work exclusively for the Company, unless otherwise agreed as above or by KUDL and the Series A Debenture Holders of the Company in writing; (ii) all of the personnel/ employees will be given new email addresses, visiting cards, etc., by the Company having no reference to KUL and, or, KUL group of companies. It is clearly agreed that the Company is a subsidiary of KUDL. It is clarified that in line with the matters set out herein, this arrangement will not take away the rights available to KUDL, s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... counsel for the plaintiffs objecting to the maintainability of the present application relies upon Section 430 of the Companies Act which bars the jurisdiction of the civil Court to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal under the Companies Act 2013 is empowered to determine by or under the Companies Act or any other law for the time being in force and contends that no injunction can be granted by any Court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Companies Act. 34. Learned counsel for the plaintiffs relies upon the order of the Supreme Court in Shashi Prakash Khemka vs. NEPC Micon Civil Appeal Nos. 1965-1966 of 2014 decided on January 08, 2019. In the said order the Hon'ble Supreme Court reiterated the bar under Section 430 of the Companies Act, however what is required to be seen is whether the relief sought in the present application arises from a dispute between the parties which would be amenable to the jurisdiction of the Tribunal or the Appellate Tribunal under the Companies Act so as to oust the jurisdiction of the civil Court. Learned co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore the Board has not been taken into consideration, and it is held that the civil court is seized of the matter. Thus a simple suit for injunction seeking the equitable relief of permanent injunction about the day-to-day management of the company and its affairs is maintainable." 39. Further, this Court in Norma (India) Ltd. (supra) held that where allegations pertaining to oppression and mismanagement partake the character of a civil dispute, proceeding before the civil Court will be maintainable. 40. The present suit has been instituted by the plaintiffs against the defendant as noted above, inter alia, seeking a decree in favour of the plaintiff No.1 and 2 and against the defendant No.1 to 4 jointly and severally for a sum of Rs.160 crores being the principal sum of the Series A Debentures and Rs.30 crores being the principal sum of Series C Debentures along with the interest thereon, which amounts to Rs.250 crores and Rs.8,30,00,000/- approximately at the time of filing of the suit; decree of permanent injunction restraining defendants No.1 and 2 from selling, alienating, disposing of or transferring their movable or immovable assets, shares, etc., injunction against d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty of payment of a total sum of Rs.45 crores, the defendant Nos.1 and 3 on behalf of defendant No.4 responded to the Special Leave Petition in the Supreme Court filed by the contractor POSCO wherein the order of injunction passed by the Bombay High Court was modified directing defendant No.4 to deposit a sum of Rs.5 crores. Thus the defendant No.3 as 99% shareholder can in representative capacity file the present application. 44. In Prakashchandra Rajmal Jain (supra), the Madhya Pradesh High Court held that a shareholder is entitled to institute a suit in the representative capacity on behalf of the minority shareholders, when the minority are overborne by the vote of the majority, and one of the three things is established, that is, (i) where the act complained of is ultra vires the company; (ii) where the act complained of is a fraud on the minority; or (iii) when there is an absolute necessity to waive the rule in order that there may not be a denial of justice. 45. As per the applicants, the act of plaintiffs in declining to accede to the request of the defendant Nos.1 and 3 for deposit of a sum of Rs.4 crores by defendant No.4 by creating a charge on its properties, whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....interlocutory mandatory injunction laid down the following principles: 15. In one of the earliest cases in Rasul Karim A Anr. v. Pirubhai AMrbhm, ILR 1914 38 Bom. 381, Beaman, J. was of the view that the court's in India have no power to issue a temporary injunction in a mandatory form but Shah, J. who constituted a Bench in that case did not agree with Beaman, J. in this view. However, in a later Division Bench judgment in Champsey Bhimji & Co. v. The Jamna Flour Mills Co. Ltd., MANU/MH/0046/1914 , two learned Judges of the Bombay High Court took a different view from Beaman, J. and this view is now the prevailing view in the Bombay High Court. In M. Kandaswami Chetty v. F. Subramania Chetty MANU/TN/0050/1917, a Division Bench of the Madras High Court held that court's in India have the power by virtue of Order 39 Rule 2 of the CPC to issue temporary injunction in a mandatory form and differed from Beaman's view accepting the view in Champsey Bhimji & Co. v. Jamna Flour Mills Co. (supra). In Israil v. Shamser Rahman MANU/MH/0046/1914, it was held that the High Court was competent to issue an interim injunction in a mandatory form. It was further held in this c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion shall ultimately rest in the sound judicial discretion of the Court to be exercised in the light of the facts and circumstances in each case. Though the above guidelines are neither exhaustive or complete or absolute rules, and there may be exceptional circumstances needing action, applying them as prerequisite for the grant or refusal of such injunctions would be a sound exercise of a judicial discretion. [Emphasis supplied] 48. In the decision reported as (AIR 1975 Karn. 137) Suganda Bai v. Sulu Bai relied upon by learned counsel for the applicants, the Karnataka High Court quoted Lopes LJ in Carton v. Fey (1894(2) Ch. 541 (CA) (at 545) as follows: "The question is this whether the defendant can move an injunction against the plaintiff without filing a counter claim or issuing a writ in a cross action. In my opinion, he can in some cases, but only in cases where the defendants claim to relief arises out of the plaintiff's cause of action, or is incidental to it." [Emphasis supplied] 49. From the decisions qua the grant of mandatory injunction noted above the following principles emerge i.e., firstly, the relief of mandatory injunction sought as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hem in the absence of a counter claim. The reliefs sought are not in the nature of seeking restoration of status-quo ante or the position at the time when the suit was filed. The applicants/defendant Nos.1 and 3 have also not made out a strong case so that during the trial they would be in a position to assert the right as sought to be enforced by the present application. Further, the reliefs sought by the applicants/defendant Nos.1 and 3 do not arise out of the plaintiffs' cause of action nor are incidental thereto. At this stage it would also be appropriate to note that the applicants/defendant Nos.1and 3 had filed a prior suit before the Pune Civil Court seeking a decree of specific performance of the agreement against the plaintiffs herein and the reliefs sought in the present application though may be incidental to the prayers in the suit instituted in Pune Civil Court but are in no way incidental to the reliefs sought by the plaintiff in the present suit. Hence this Court finds no ground to grant the reliefs of mandatory injunction as prayed by the applicants/defendant Nos.1 and 3 under Order XXXIX Rule 1(a) CPC. 52. Learned counsel for the applicants vehemently states tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AMONGST GIZA HOLDINGS PTE LTD AND KUMAR URBAN DEVELOPMENT PRIVATE LIMITED AND LALIT KUMAR JAIN AND PRANAY LALITKUMAR JAIN AND SINEW DEVELOPERS PRIVATE LIMITED C. The Company and the Promoters have approached the Investors to invest in the Company so as to enable the Company to utilize the investment made, towards repayment of the existing loans obtained by the Company and towards construction and development of the Project. Accordingly, the Investors and the Promoters intend to make the Company as their joint venture company for the construction and development of the Project;" 55. Claim of the applicants based on the argument as noted above that defendant No.4 is a joint venture company of plaintiff No.2 and defendant No.3 is wholly misconceived as the share subscription agreement relied upon has not been entered into with plaintiff No.2. Any agreement of defendant Nos. 1 to 4 with a third party cannot change the status of the plaintiff No.2 from an investor to a partner in a joint venture. Further by virtue of clause 16.6 of the DSA dated 5th December, 2014 as reproduced in para 30 above, all the earlier agreement including the share subs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts and transactions and recapture value for the insolvency estate, classification of claims, voting procedures in reorganization and distribution mechanisms. An insolvency law should address problems of fraud and favouritism that may arise in cases of financial distress by providing, for example, that acts and transactions detrimental to equitable treatment of creditors can be avoided. xxx xxx xxx 5. Approval of a plan xxx xxx xxx (i) Classification of claims 27. The primary purpose of classifying claims is to satisfy the requirements to provide fair and equitable treatment to creditors, treating similarly situated claims in the same manner and ensuring that all creditors in a particular class are offered the same menu of terms by the reorganization plan. It is one way to ensure that priority claims are treated in accordance with the priority established under the insolvency law. It may also make it easier to treat the claims of major creditors who can be persuaded to receive different treatment from the general class of unsecured creditors, where that treatment may be necessary to make the plan feasible. Classification can, however, increase t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s found to be apparently incorrect, for the reason it was accepted that the land for the project was transferred to defendant No.4 on payment of approximately Rs.130 crores taken as a loan and when the agreement was entered into with the plaintiffs, from the sum of Rs.190 crores infused by the plaintiffs received as debenture subscriptions, the liability of Rs.130 crores which was the value of the project land was discharged. Thus the investment of the applicants in the defendant No.4 project even as per their claim is to the extent of approximately Rs.130 crores which fact is also refuted by the plaintiffs according to whom the defendant Nos.1 to 3 hold Series B Non-Convertible Debentures of defendant No.4 for an amount of Rs.17 crores only and not Rs.130 corres as claimed. Thus the investment of the plaintiff No.2 in defendant No.4 being admittedly Rs.190 crores is far more than that of the applicants. 59. It is for the reason that the plaintiffs are the secured creditors of defendant No.4 it has been agreed that any action of defendant No.4 has to be by approval of the plaintiffs and due to this covenant the defendant Nos.1 and 3 seek approval of the plaintiffs to create a ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y any awarded amount or decree would be on the defendant No.4. The liability to pay the cost incurred in litigation is different from liability incurred by way of an award or a decree. It will have to be gone into by the parties as to whether the decree was suffered due to any lack of commitment or action on behalf of the applicants or the plaintiffs. Therefore, even in terms of the Board Resolution dated 15th January, 2018 no charge can be created on the assets of defendant No.4 to satisfy the liability arising out of the litigation with POSCO. 61. Learned counsel for the applicants has repeatedly relied upon the term sheet to contend that the defendant No.4 was a joint venture of the plaintiffs and the defendant No.3. However, the Debenture Subscription Agreement dated 5th December, 2014 clearly noted in Clause 16.6 that the said agreement along with the transaction documents constitutes a whole agreement between the parties and supersedes any previous oral agreement/understanding, negotiation and discussions between the parties including the Debenture Subscription Agreement dated 26th July, 2014. Further the term of this term sheet had already expired as the same was for 180 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt suit. 65. At this stage it would be appropriate to note that in the present suit there is no interim orders vis-à-vis the property of defendant No.4 as the rights of the plaintiffs in the property of the defendant No.4 are governed by the contract. The interim injunction passed by this Court as modified vide order dated 30th July, 2019 only creates a charge on the properties of defendant Nos.1 to 3 as this Court directed that to balance the equities and in the interest of justice defendant Nos.1 to 3 will deposit 25% of the amount generated from the further development of their ongoing projects in a separate no lien account from the sale of each flat or unit on the ongoing projects or projects proposed to be launched in future either individually or under a joint venture or partnership etc. The Court also clarified that the amount generated from the sale of each flat or unit should be construed to include all the amounts received whether as booking amount, part payment or final payment on or after 31st July, 2019 and the said amounts should not be utilized for any purpose without permission of the Court. Thus to create a charge or to sell the flats from the projects of....