TaxTMI 
TaxTMI 
2020 (1) TMI 1558
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....e defendants herein or any other person(s) in terms of the application being filed along with the present suit; b. Pass a decree of declaration declaring that any and all the securities and or documents whatsoever such as power of attorneys, non-disposable undertakings, charge on assets, encumbrance, mortgage, lien, pledge of shares, etc. already created/sought to be created by the defendant Nos. 1 to 15 in favour of defendant No. 16 to 19 or any other person or entity pursuant to and/or in furtherance of the Facility Agreement dated 14.05.2018 or any other agreement are non-est, null and void: c. Pass a decree of declaration declaring all terms and conditions of the Facility Agreement dated 14.05.2018 by which the defendants No. 1 to 15 have undertaken to create securities in relation to their assets, properties as non-est, null and void; d. Pass a decree of permanent injunction directing the defendants Nos. 1 to 15 not to pledge, mortgage, encumber, dispose of, sell or alienate any of their assets, shares, properties (moveable and immovable), in any manner whatsoever without obtaining the prior written permission of the Receiver of the plaintiff; ....
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....m. The purpose of the supplementary and ancillary agreements was only to aid the execution and performance of the purchase agreement, which is the principal/mother agreement. Reliance is also placed on the Debenture dated 28.04.2011 executed between the plaintiff company and defendant No. 20. The Debenture provides that security created under the debenture becomes enforceable upon occurrence of an event of default and upon security becoming enforceable. In that eventuality, defendant No. 20 has the rights to appoint a receiver to perform various functions as stated in the Debenture. 5. Subsequently, the plaintiff which was registered in the Isle of Man was registered as a company continuing to exist in the Republic of Cyprus. The parties executed a supplementary agreement dated 22.02.2013 so that the Re-domiciliation of the plaintiff in the Republic of Cyprus is duly recorded. 6. The plaintiff was unable to adhere to the scheduled maturity date i.e. 25.05.2013, it requested defendant No. 20 for an extension for payment of the amount due and payable. The said request was accepted and the time period for making repayment was extended up to 25.05.2015. It is pleaded that as on 3....
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....agreement between the plaintiff and defendant No. 20. However, it is apprehended that other financial facilities are proposed to be sought by the plaintiff and its subsidiaries i.e. defendants No. 1 to 15 without a prior written permission/consent of the plaintiffs Receiver. 11. It is further stated that the plaintiff receiver has gained knowledge of the fact that a Facility Agreement dated 14.05.2018 has been executed amongst, defendant No. 3, defendants No. 15 and 16 in pursuance of which a loan facility for an aggregate amount of Rs. 100 crores was proposed to be advanced by defendants No. 15 and 16 to defendant No. 3/SARE Gurugram. To secure the said loan facilities being availed by defendant No. 3, the securities proposed to be created in terms of the Facility Agreement suggested various areas including Village Lodivali and Indore. Other such agreements are also said to have been executed. Hence, it has emerged that defendant 3 has availed/proposed to avail the financial facility by illegally encumbering its properties. 12. It is further stated that the plaintiff is aware that defendant No. 20 has also initiated legal proceedings against the plaintiff before the Hon'....
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....clause creates an obligation on the plaintiff and not on the answering defendants. There is no legal or contractual obligation of the answering defendants. iv) It is further stated that attorney holder Mr. Augoustinos Papathomas has not been validly authorized to file the present suit. The special power of attorney signed by the receiver is neither stamped nor registered under the laws of India. v) The present suit, it is pleaded is a surrogate action on behalf of defendant No. 20 and seeks to circumvent the exclusive jurisdiction clause. vi) It is further stated that answering defendants are engaged in the business of real estate projects. The answering defendants have eight projects where approximately 15,000 apartments are under construction in Gurgaon, Ghaziabad, Amritsar, OMR Chennai and Kolathur Chennai. Based on this, they have 8,000 customers. It is stated that the answering defendants are separate and distinct legal entities and the plaintiff by virtue of its shareholding, would not be entitled to claim the assets of its step-down subsidiaries. The plaintiff could not have validly entered into contracts on behalf of answering defendants, much les....
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....aded that that this court does not have territorial jurisdiction. The purchase agreement has accorded the jurisdiction only to the courts of the State of New York, USA as appropriate courts. The debenture provides for jurisdiction to the courts at Isle of Man which was later amended on 01.02.2016 to give jurisdiction to the court of the Republic of Cyprus. Hence, this suit is not maintainable. iii) Defendants No. 1 to 15 are not the signatories to the Purchase Agreement and there is no privity of contract between defendant No. 20 and defendants No. 1 to 15. 15. I may note that IA No. 14239/2018 is filed by the plaintiff company under Order 39 Rules 1 and 2 CPC seeking ex-parte injunction to restrain defendants No. 1 to 15 from pledging, mortgaging, encumbering, disposing of, selling or alienating any of their assets and shares or properties in any manner whatsoever without prior permission of the receiver of the plaintiff. This court on 12.10.2018 passed an interim order restraining defendants No. 1 to 10 from creating any encumbrance/charge or lien or mortgage of any of their assets, shares, properties to any third party till the next date. Defendants No. 16 and 17 wer....
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.... The plaintiff is the parent/holding company of the entire SARE Group. The said Group is a single economic entity as the business of the entire Group is being carried out in such a manner. Defendants No. 1 to 10 are controlled subsidiaries of the plaintiff. Defendants No. 11 to 14 are controlled subsidiaries of SARE in Cyprus. Defendant No. 15 is a controlled subsidiary of SARE Group in Singapore. It is stated that due to the structure of the SARE Group where all investments are transferred by the plaintiff into its controlled subsidiaries, the valuation of the SARE Group and the value of the shares of the subsidiaries is based on open market value of the Group's Property Portfolio. (ii) It is further stated that defendant No. 20 had invested USD 50 million in convertible bonds issued by the plaintiff to be utilized by the plaintiff solely or indirectly through its controlled subsidiary to acquire, develop and sell middle income residential projects across India. A purchase agreement for secured convertible bonds was entered into along with other several ancillary agreements. It is pleaded that under Clause 12.1 of the said agreement, the entire SARE Group, namely, the....
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....roperties. (iv) It is further pleaded that the defendants against who orders are sought are situated in and carrying on business within the territorial jurisdiction of this court. A part of the cause of action for filing of the present suit arises within the jurisdiction of this court as the Facility Agreement dated 14.05.2018 has been executed within the territorial jurisdiction of this court. Further, registered offices of various defendants fall within the jurisdiction of this court. 19. Learned senior counsel appearing for defendants No. 1 to 10 submits as follows to plead that the interim order be vacated:- (i) It has been urged that the present suit is not maintainable as this court does not have the jurisdiction to try the same. It is pleaded that as per Clause 20.2 of the Purchase Agreement, the courts of the State of New York and the courts of the USA shall have the exclusive jurisdiction to settle any dispute and to hear and determine any suit, action or proceedings. It is hence pleaded relying upon the judgment of the Supreme Court in the case of Modi Entertainment Network and Anr. vs. W.S.G. Cricket PTE. Ltd., (2003) 4 SCC 341 to contend that where ....
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....ver the properties. Reliance is placed on the judgment of the Supreme Court in the case of Haryana Financial Corporation vs. Gurcharan Singh and Anr., (2014) 16 SCC 722. It is also pleaded that the Purchase Agreement dated 28.04.2011 has not been registered. Any purported charge or security created is unenforceable. Reliance is placed on Sections 17 and 49 of the Registration Act, 1908. (vii) It is further stated that the interim order passed by this court has an adverse effect on the business of the defendants who are currently developing five projects in various cities. Out of 9030 units launched by the defendants, 6667 units have been sold and 4539 units have been delivered to home buyers. 2308 units need to be constructed and delivered. It is pleaded that as the projects are ongoing projects, this court may keep the larger public interest in mind while deciding the issue of injunction. 20. Learned senior counsel for defendant No. 17 has also broadly reiterated the submissions addressed on behalf of defendants No. 1 to 10. It is reiterated that the transaction in question which has been challenged in the present proceedings took place in 2015-16. The plaintiff was fu....
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....the facility agreement dated 14.05.2018 was executed between defendant No. 3 and defendants No. 16 & 17 pursuant to the loan facility within the jurisdiction of this court. Further registered offices of various defendants fall within the territory of Delhi. (iv) It is pleaded that the defaulter like the plaintiff and defendant No. 1 and 3 to 10 cannot in equity claim any defence. 23. I now first come to the crux of the whole issue, namely, as to whether defendants No. 1 to 15 are bound by the relevant clause of the Purchase Agreement dated 28.04.2011 and can be restrained from creating any charge, mortgage, etc. on their immovable properties/assets as prayed. 24. Reference may be had to clause 12.1 of the Purchase Agreement dated 28.04.2011 which reads as follows:- "12 NEGATIVE COVENANTS So long as any Bond remains outstanding the Issuer shall not, and the Issuer shall cause each of its Subsidiaries not to, directly or indirectly: 12.1 Liens Create, incur, assume or suffer to exist any Lien upon any of its Property, assets or revenues, whether now owned or hereafter acquired, or sign or file or authorize the filing under the Unifor....
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.... though they are merely departments of one large undertaking owned by the holding company. But, the business of a subsidiary is not the business of the holding company (see Gramophone and Typewriter Ltd. v. Stanley: (1908-10) All ER Rep 833], All ER Rep at p. 837). 256. Subsidiary companies are, therefore, the integral part of corporate structure. Activities of the companies over the years have grown enormously of its incorporation and outside and their structures have become more complex. Multinational companies having large volume of business nationally or internationally will have to depend upon their subsidiary companies in the national and international level for better returns for the investors and for the growth of the company. When a holding company owns all of the voting stock of another company, the company is said to be a WOS of the parent company. Holding companies and their subsidiaries can create pyramids, whereby a subsidiary owns a controlling interest in another company, thus becoming its parent company. 257. The legal relationship between a holding company and WOS is that they are two distinct legal persons and the holding company does not own th....
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....low the separate corporate entities to be used as a means to carry out fraud or to evade tax. Parent company of a WOS, is not responsible, legally for the unlawful activities of the subsidiary save in exceptional circumstances, such as a company is a sham or the agent of the shareholder, the parent company is regarded as a shareholder. Multinational companies, by setting up complex vertical pyramid-like structures, would be able to distance themselves and separate the parent from operating companies, thereby protecting the multinational companies from legal liabilities." 27. Clearly, the settled legal position is that the holding company and the wholly owned subsidiary are two distinct legal entities. The holding company does not own the assets of the subsidiary. 28. There is another aspect which may be noted. Admittedly, the properties are not charged in favour of the plaintiff or defendant No. 20. Reference in this context may be had to the judgment of the Supreme Court in the case of Haryana Financial Corporation vs. Gurcharan Singh & Anr.,(supra) where the court held as follows: "13. So far as the present case is concerned, no registered mortgage deed was execute....
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....harge over those properties, unless charge is created by deposit of title deeds or through a registered document. We also hold that even if the purpose of the decree obtained in Civil Suit No. 767 of 1995 between the respondents was fraudulent and collusive one so as to defeat the undertaking made on 5-3-1994, that would not confer any charge over the properties, unless the undertaking is registered. We, therefore, find no error in the judgment of the lower appellate court which was affirmed by the High Court." 29. Hence, mere undertaking of a person that he will not dispose of his properties during the currency of the loan does not confer any charge on the immovable properties. 30. In the light of the above legal position, prima facie the plaintiff merely based on the terms of the Purchase Agreement cannot restrain defendants No. 1 to 15 from dealing with their immovable assets/assets. The Purchase Agreement between the plaintiff and defendant No. 20 is not executed by defendants No. 1 to 15. There is no commitment or promise held out by defendants No. 1 to 15 to the plaintiff that the said defendants will not deal with or encumber their immovable properties. Mere execution ....
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.... what the intention of the parties was from the language used. And, why is it that parties cannot clear the latent ambiguity in the language by a subsequent interpreting statement? If the meaning of the word or phrase or sentence is clear, extrinsic evidence is not admissible. It is only when there is latent ambiguity that extrinsic evidence in the shape of interpreting statement in which both parties have concurred should be admissible. The parties themselves might not have been clear as to the meaning of the word or phrase when they entered into the contract. Unanticipated situation might arise or come into the contemplation of the parties subsequently which would sharpen their focus and any statement by them which would illuminate the darkness arising out of the ambiguity of the language should not be shut out. In the case of an ambiguous instrument, there is no reason why subsequent interpreting statement should be inadmissible. ....." xxx 18. In these circumstances, we do not think we will be justified in not following the decision of this Court in Abdulla Ahmed v. Animendra Kissen Mitter [AIR 1950 SC 15] where this Court said that extrinsic evidence to deter....
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....aid judgment may not help the plaintiff at this stage. At best, the said judgment could be pressed after evidence to record a finding that defendants No. 1 to 15 by virtue of their conduct, acknowledgement and admission have created a privity with defendant No. 20. 36. The plaintiff/defendant No. 20 has also relied upon the judgment of the Supreme Court in the case of Cheran Properties Ltd. vs. Kasturi and Sons Ltd. (supra). In that case the Supreme Court held as follows:- "29. As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a group of companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and non-signatory entities within the same group. In holding a non-signatory bound by an arbitration agreement, the court approaches the matter by attributing to the transactions a meaning consistent with the business sense which was intended to be ascribed to them. Therefore, factors such as the relationship of a non-signatory to a party which is a signatory to the agreement, the commonality of subject-ma....
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.... has initiated proceedings before the appropriate court in the State of New York which are pending adjudication. Based on this, a plea is raised that this court would not have the jurisdiction to adjudicate the present suit. 39. Reference may be had to the relevant clause i.e. clause 20.1 and 20.2 of the Purchase Agreement dated 28.04.2011. The said clause reads as follows:- "20 GOVERNING LAW AND JURISDICTION 20.1 Governing Law This Agreement and all matters arising from or connected with it shall be governed by, and construed in accordance with, the Internal laws of the State of New York applicable to agreements made and performed in such state without regard to conflicts of law principles thereof that would require the application of the laws of a jurisdiction other than such state. 20.2 Jurisdiction The courts of the State of New York and the courts of the United States of America, in each case, located In the County of New York, shall have jurisdiction to settle any dispute (a "Dispute"), and to hear and determine any suit, action or proceedings ("Proceedings"), arising from or connected with this Agreement (including a dispute re....
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....ence in this context may be had to the judgment of the Supreme Court in the case of Modi Entertainment Network and Anr. vs. W.S.G. Cricket PTE. Ltd., (supra) wherein the Court held as follows:- "11. In regard to jurisdiction of courts under the Code of Civil Procedure (CPC) over a subject-matter one or more courts may have jurisdiction to deal with it having regard to the location of immovable property, place of residence or work of a defendant or place where cause of action has arisen. Where only one court has jurisdiction, it is said to have exclusive jurisdiction; where more courts than one have jurisdiction over a subject-matter, they are called courts of available or natural jurisdiction. The growing global commercial activities gave rise to the practice of the parties to a contract agreeing beforehand to approach for resolution of their disputes thereunder, to either any of the available courts of natural jurisdiction and thereby create an exclusive or non-exclusive jurisdiction in one of the available forums or to have the disputes resolved by a foreign court of their choice as a neutral forum according to the law applicable to that court. It is a well-settled princ....
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....fficient reasons, with a view to prevent injustice in circumstances such as which permit a contracting party to be relieved of the burden of the contract; or since the date of the contract the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of a vis major or force majeure and the like. (5) Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. (6) A party to the contract containing jurisdiction clause cannot normally be prevented from approaching the court of choice of the parties as ....
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....erty is situated. In the present case the Plaintiff has made no prayer with regard to the recovery of the land or determination of his right or interest in the immovable property nor the suit seeks compensation for wrong to the immovable property. Hence the territorial jurisdiction would be covered under Section 20 CPC and the suit can be filed where the cause of action wholly or in part arises. The Hon'ble Supreme Court while dealing with an issue as to what is a suit for land in Adcon Electronics Pvt. Ltd. (supra) held: 15. From the above discussion it follows that a "suit for land" is a suit in which the relief claimed relates to title to or delivery of possession of land or immovable property. Whether a suit is a "suit for land" or not has to be determined on the averments in the plaint with reference to the reliefs claimed therein; where the relief relates to adjudication of title to land or immovable property or delivery of possession of the land or immovable property, it will be a "suit for land". We are in respectful agreement with the view expressed by Mahajan, J. in Moolji Jaitha's case. 16. In a suit for specific performance of contract for sale....
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...."suit for land". 19. We cannot also accept the contention of Mr. Chitale that the suit is for acquisition of title to the land and is a "suit for land". In its true sense a suit simpliciter for specific performance of contract for sale of land is a suit for enforcement of terms of contract. The title to the land as such is not the subject-matter of the suit." 46. Admittedly some of the defendants have their registered office in Delhi. That apart, agreement dated 14.05.2018 with defendants No. 16 and 17 is said to have been executed in Delhi. In view of the above, in my opinion, at this stage, the suit cannot be returned for lack of territorial jurisdiction of this court. 47. Though I have above recorded a prima facie finding that the plaintiff has failed to make out a case to show that non-signatory parties, namely, defendants No. 1 to 15 are bound by the Purchase Agreement, however, I cannot also overlook the fact that the plaintiff have still not repaid the bond amount of USD 50 millions which they have taken from defendant No. 20. If the interim order is completely vacated, it may leave defendant No. 20 remediless. In contrast, I also cannot help noticing the p....