TaxTMI 
TaxTMI 
2019 (11) TMI 1844
X X X X Extracts X X X X
X X X X Extracts X X X X
....r. H.S. Chandhoke, Adv., Mr. Anshul Tyagi, Adv., Mr. Sanjeev Kumar, Adv., Mr. Vaibhav Kakkar, Adv., Mr. Abhishek Kisku, Adv., Mr. Anshul Sehgal, Adv., Mr. Rohit Dahiya, Adv. and Mr. Faisal Sherwani, AOR JUDGMENT Deepak Gupta, J. The Backdrop A dispute between Daiichi Sankyo Company Limited (hereinafter 'the petitioner') and the respondents in Special Leave Petition (Civil) No.20417 of 2017, was referred to international arbitration. An arbitral award was passed on 29.04.2016 in Singapore whereby the petitioner was held entitled to receive Rs. 3500 crores approximately from respondent no.1 to 15 in S.L.P.(C) No.20417 of 2017. This award was challenged both in Singapore and India. The objections have been dismissed and the award has become final. Though the respondents submit that in Singapore they have filed an appeal to the Court of Appeal, however they have not placed any stay order of the Court of Appeal on record. Admittedly, the award can be enforced. 2. The petitioner filed proceedings for the enforcement of the foreign award in Delhi High Court. The respondents no.1 to 15 in the SLP objected to the same and filed objections under Section 48 of the Arbitration and Concili....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urance should not be recorded in the order of the Court, since that might affect the value of their shares in the share market. This was the first assurance given by the respondents to the High Court of Delhi. It would be pertinent to mention that the fact that such an assurance was made is also recorded in the order of the High Court dated 23.01.2017 wherein Mr. Harish N. Salve, learned senior counsel appearing for the respondents 1 to 4 and 13 therein reiterated the assurance given to the Court as recorded in the letter dated 24.05.2016. The second assurance 5. On 25.07.2016, the High Court of Delhi passed an order directing the respondents to disclose the details of their immovable assets and also to disclose the details of assets that have been alienated and encumbered to third parties. It appears that during this period reports appeared in various newspapers that the respondents were disposing their stakes in subsidiary companies and were also clandestinely disposing of their assets. Left with no alternative, the petitioner filed an Interlocutory Application being I. A. No. 618 of 2017 before the High Court of Delhi in which the following prayer was made:- a. "Urgently pas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....before the Registrar within one week. Certificates of Chartered Accountants of the respondents were also directed to be filed giving the following details:- (i) "the value of all the unencumbered assets, including both movable and immovable assets of Respondents 14 and 19, both the book value as well as the fair value; (ii) where these assets include investments in equity shares, preference shares and debentures, to indicate to what extent are these investments in related/group entities of the Respondents and in companies whose shares are listed and which of these shares have a condition of right of first refusal. (iii) a clarification as to how much of the borrowings reflected in the balance sheets are secured by way of pari passu charge on the present and future current assets of the companies." The Court again noted the statement of Dr. A. M. Singhvi and Mr. Rajiv Nayar to the following effect:- "12. Both Dr. Singhvi and Mr. Nayar state that if any change is proposed in the status of any of the unencumbered assets whose details are to be furnished as directed hereinbefore, the Respondents will first apply to the Court." This was the third assurance on behalf of the res....
X X X X Extracts X X X X
X X X X Extracts X X X X
....encumbered asset as disclosed to the court and by mere passing of the impugned resolution, the shareholding as disclosed, in terms of order dated 06.03.2017, shall not be affected. 6. The statement is taken on record. 7. In view of the above statement, the application is disposed of." This was the fourth assurance given by the respondents. The fifth assurance / undertaking 11. Despite this order having been passed, it appears that an attempt was made to reduce the shareholding of OIL and RHC through FHHPL in FHL. A newspaper report was published on 20.06.2017 one day after the order had been passed by the Court reporting that IHH Healthcare Bhd. (Malaysian Company) was set to acquire 26% stake in FHL. 12. Thereafter, the petitioner filed a contempt petition before the High Court of Delhi alleging that the orders dated 06.03.2017 and 19.06.2017 had been violated. The matter was taken up by the High Court of Delhi on 21.06.2017. The High Court again recorded the undertaking of the learned senior counsel appearing for respondents 14 and 19 therein by which the High Court of Delhi was assured that the value of the shares held by OIL and RHC which have been disclosed as 452.60 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and also prayed that a clarification be issued that the order dated 11.08.2017 is limited to shares other than to those pledged to banks and financial institutions. In I.A. 77497 of 2017, OIL had stated as follows:- "24. It is in these circumstances that the Respondent Company seeks a direction from this Hon'ble Court that the order dated 11 August 2017 passed by this Hon'ble Court is limited to shares other than those pledged to the banks and the financial institutions, the sale of which is being made after obtaining prior consent of the pledgee(s). 25. It is submitted that the said direction will not, in any event, have an impact on the potential creditors and that the availability of these funds will only help pare down the debt. This will only raise the value of the shares held by Respondents." Similar application being I.A. No.76959 of 2017 with identical paragraphs 24 and 25 was filed by RHC. 15. On 31.08.2017, this Court directed as follows:- "As the present Special Leave Petition is due to come up for a fuller consideration on 23rd October, 2017, we do not consider it necessary to delve into the issues raised at this stage as the time taken to answer the same would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gan Banga. They have been arrayed twice separately in their capacities as Directors of IHFL and IVL. From the materials on record as far as the second set is concerned, we are only inclined to proceed against Malvinder Mohan Singh (contemnor nos. 9 and 12) and Shivinder Mohan Singh (contemnor nos. 10 and 13) both of whom have been arrayed twice separately in their capacities as Directors of Oscar Investments Limited and Directors of RHC Holding Private Limited. Contemnor Nos. 1 to 8 19. We shall first deal with the issue whether contemnor nos. 1 to 8 have violated the aforesaid orders. The stand of the contemnor nos.1 to 8 is that loan facilities had been granted by IHFL to various companies controlled by MMS and SMS. As per the loan agreements and other documents executed, the borrower(s) created encumbrances on their immovable and movable properties including shares. Some shares were pledged or charged for repayment of the loan and IHFL was given a right to sell these encumbered shares without reference to the borrower(s). The stand of contemnors nos.1 to 8 is that the borrower(s) had a demat account of their shares with IVL and a power of attorney dated 28.11.2016 was issued i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8, 17.09.2018 and 18.09.2018. On 24.09.2018, this Court was informed that IHFL had transferred 12,25,000 shares held by FHHPL in FHL in violation of the Court's orders. As on 29.09.2018, another transaction of 9,04,760 shares had taken place. The main issue is whether 12,25,000 shares were encumbered or not. 23. FHL is a public company and being a listed company, it has to disclose its shareholding patterns to the stock exchange. A chart showing share holding pattern of FHHPL in FHL will show the position of holdings at various stages: S. No. Quarter Ending Total Shares Encumbered Shares Unencumbered shareholding of FHHPL in FHL 1. September 2016 32,50,91,529 27,21,59,955 5,29,31,574 2. December 2016 32,50,91,529 25,22,63,248 7,28,28,281 3. 28th Jan 2017 32,50,91,529 25,19,23,248 7,31,68,281 4. March 2017 27,02,41,529 23,18,01,440 3,84,40,089 5. June 2017 22,22,11,701 18,38,96,484 3,83,15,217 6. September 2017 17,80,26,597 17,53,94,820 26,31,777 7. December 2017 17,80,26,597 17,53,94,820 26,31,777 8. March 2018 34,20,451 6,89,084 27,31,367 9. June 2018 32,82,851 5,51,484 27,31,367 10. September 2018 11,53,091 5,51,484 6,01,607....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en 01.07.2018 and 30.09.2018 because it is during this period that IHFL transferred the shares. According to IHFL these 12,25,000 shares stood pledged with them. Neither in I.A. No.109493 of 2017 nor in the reply filed by contemnor nos. 1-8, is there any clear-cut statement as to how and when the different pledges were created. Reference has been made to loan documents of 2016 and also to the pledge of 14.08.2017. According to alleged contemnor nos. 1 to 8, FHL was maintaining a demat account with IVL. The case set up is that when the value of the shares of IHFL fell in the market, to make the security equal to the outstanding due to IHFL, further shares were transferred by IVL to IHFL. It is urged that this was done in view of the instructions given prior to 11.08.2017 by FHHPL to IVL and IHFL. These transfers were done on the basis of the delivery instructions slips executed by IHFL as power of attorney holder of FHHPL. Even if this be true, the alleged contemnors are guilty of violating the orders of this Court. The order dated 11.08.2017 clearly debars FHHPL from changing its shareholding in IHFL. Vide order dated 31.08.2017, it was clarified that the order dated 11.08.2017 wou....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., flagrantly violated this Court's orders and made various transactions transferring even unencumbered shares. The best course available to IHFL would have been to approach this Court seeking a clarification before it made the transfers. This they did not do. We are, therefore, clearly of the view that IHFL and IVL and their officials i.e. contemnor nos. 1 to 8 knowing fully well that this Court had passed an order directing status quo to be maintained with regard to the holding of FHHPL in FHL, violated the order. There can be no manner of doubt that IHFL and IVL have violated these orders and, therefore, we find contemnor nos.1-8 who are active directors of IHFL and IVL guilty of knowingly and wilfully disobeying the orders of this Court and find them guilty of committing Contempt of Court. We will hear them on the question of sentence. 32. We afford an opportunity to contemnor nos.1-8 to purge themselves of the contempt by depositing the value of 12,25,000 shares as on 31.08.2017 in the BSE within eight weeks from today. In case, the said contemnors purge themselves of the contempt, we may take a lenient view while imposing sentence. Contemnors 9 & 10, 12 & 13 33. We shall no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IL filed applications before this Court on 21.08.2017 praying for modification of the order and for a direction that the order dated 11.08.2017 may be limited to the shares other than those which already stood pledged to banks and financial institutions. Though separate applications have been filed, Paragraph 25 of both the applications are identical and has been quoted hereinabove. 36. These applications were filed on affidavit and it has held out to this Court that if the order dated 11.08.2017 is limited to unencumbered shares it would have no impact on the availability of funds to protect the interest of the petitioner. On the basis of this statement, the order dated 31.08.2017 was passed and this Court took a lenient view on the matter and disposed of the contempt without taking any action. 37. Unfortunately, the actions of these contemnors clearly show that these statements were made without the least intention of complying with them. These contemnors had already prepared a well thought out scheme of diluting their shareholdings directly or indirectly in FHL to defeat the rights of the petitioner. 38. The explanations provided are not worth consideration. According to SMS ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... an undertaking given to the Court. Criminal contempt has been defined under Section 2(c) to include anything which scandalises or tends to scandalise or lower or tends to lower the authority of the Court. Criminal contempt also means any act which prejudices or interferes or tends to interfere with the due course of judicial proceedings. As far as the present case is concerned, the conduct of contemnor nos.9 and 10 definitely undermines the authority of the Court. We are dealing with an international arbitration which has fructified into an award but by misusing the legal process contemnor nos.9 and 10 have successfully avoided paying off the petitioner. In our view, action for committing criminal contempt could have been taken against contemnor nos. 9 and 10, but by taking a lenient view of the matter we are only treating it as a civil contempt. 41. The order passed by this Court on 11.08.2017 with a clarification on 31.08.2017, and modification made on 15.02.2018, is not to be read in isolation but along with the solemn undertakings and assurances given by the contemnors on as many as five occasions before the Delhi High Court, the last one being as late as on 21.06.2017. These....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed were in light of the fact that the contemnors always projected that the said assurances and undertakings were binding and adhered. 44. There can be no manner of doubt that contemnors 9 and 10 have changed the shareholding of FHHPL in FHL knowingly and wilfully. They have done this with a view to defeat the rights of the petitioner. They have also wilfully and contumaciously violated the orders of this Court dated 11.08.2017, 31.08.2017 and 15.02.2018. They are accordingly held guilty of committing contempt of court. We shall hear them on the question of sentence. We give one chance to the contemnors no.9 and 10 to purge themselves of the contempt. 45. On 21.06.2017, a statement was made on behalf of contemnor nos. 9 and 10 before the High Court of Delhi that in respect of any transaction that these respondents may enter into, a sum of Rs. 2341.90 crores i.e. Rs. 452.60 crores of OIL and Rs. 1889.30 crores of RHC would always be made available and realisable from the assets of the company. We, therefore, direct that in case each of the respondents deposits a sum of Rs. 1170.95 crores i.e. 50% of Rs. 2341.90 crores in this Court within eight weeks from today then we may cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in RHT when it was initially incorporated. The statistics of unit holding as on 20.06.2017 of RHT Trust, Singapore shows that SMS, MMS, their family members, FHHPL, FHL and RHC virtually owned the RHT trust. That situation has now changed and now the situation is such that the companies/associations of which MMS and SMS are partners are no longer visibly present and there are other persons who are there. When and how the holdings in RHT trust were transferred by various people is a matter which is required to be gone into. 50. We are prima facie of the view that these transactions were made by MMS, SMS, RHC, OIL and FHL to defeat the rights of the petitioner despite making undertakings to the High Court of Delhi that no action would be taken to prejudice petitioner's rights. We are prima facie of the view that these transactions are in wilful disobedience of the order of this Court dated 14.12.2018 read in conjunction with the earlier orders. We, therefore, issue suo moto notice of contempt and direct the Registry to register a fresh contempt petition with regard to the violation of the order dated 14.12.2018 in which RHC, OIL, MMS, SMS and FHL shall be arrayed as contemnors. FHL ....