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(s) Mr. C.S. Vaidyanathan, Sr. Adv., Mr. 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 objection....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ears that the respondents had urged before the Court that their assurance 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 Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the respondents made a statement that the complete details/particulars of all unencumbered assets would be filed 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 19.06.2017 reads as follows:- "5. Learned Senior Counsel for respondent no.14 and 19 submits that they are not seeking to change the status of any unencumbered 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in creating a pledge on 14.08.2017 is violative of the order dated 11.08.2017 In the meantime on 21.08.2017, OIL filed an application being I.A. 77497 of 2017 for directions permitting sale of encumbered shares to pay its debts 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 direct....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of shares was in contempt of the orders dated 11.08.2017, 31.08.2017, 15.02.2018 and 23.02.2018. 18. We can divide the contemnors into two sets. One set being contemnors 1 to 8 and the second set of contemnors is 9 to 15. Contemnors 1 and 5 & 2 and 6 are the same namely Sameer Gehlaut and Gagan 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld by FHHPL. When RHC came to know about these transfers, it immediately informed IHFL that transfers were in violation of the orders passed by this Court on 11.09.2017. Despite the communication dated 11.09.2018, IHFL continued to transfer shares of FHL held by FHHPL on 11.09.2018, 12.09.2018, 14.09.2018, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o how these unencumbered shares were encumbered or transferred in total violation of the orders of the courts. 27. We shall now deal with the issue as to whether IHFL and IVL had violated the orders of this Court or not? To decide this issue, it would be appropriate to determine whether IHFL transferred any shares which were not encumbered up to 14.08.2017. 28. This brings us to the shareholding pattern of FHL for the period between 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... below 12,25,000. 30. We are not entering into the dispute whether the shares were transferred on the basis of pre-signed slips or delivery instruction slips based on the power of attorney but the fact remains that the official record shows that these shares were not encumbered and the contemnors have failed to place any cogent material on record to show that these 12,25,000 shares were pledged on or before 31.08.2017. 31. IHFL, in fact, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and finally in December 2018 to 11,53,091. The undertaking given to the High Court of Delhi was that the shareholding as on 19.06.2017 and 21.06.2017 would be maintained. On 11.08.2017, this Court injuncted the respondents from changing the shareholding. On 11.08.2017, this Court passed the order of status quo referred to above. Despite that specific order, on 14.08.2017 a pledge was created. This was a violation of the orders of this Court. RHC and OIL 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onclusion which we can draw is that this was a well thought out plan to deprive the petitioner from the amounts due to it. 40. No person or institution howsoever powerful, can be permitted to misuse the process of the Court. Contempt of court can be committed in various ways. Civil contempt is defined under the Contempt of Courts Act, 1971 under Section 2(b) to mean wilful disobedience of any judgment, decree, direction, order of the Court of wilful breach of 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iggest unitholders in the trust. It is obvious that the respondents being debtors are manoeuvring, transferring and converting the assets of value, with the desire and intent that the petitioners would not be able to recover the decretal amount as per the award. 43. We would, therefore, not read the orders of this Court in isolation but along with the five solemn assurances and undertakings given before the High Court. Directions given by this Court and the orders 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 contem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. (Malaysian Company)] to RHT Health Trust, Singapore (RHT). Petitioner prayed for restraining this transfer of funds and compliance of order dated 14.12.2018. FHL filed a reply to this I.A., which made it apparent that on 15.01.2019 itself FHL had completed the transaction involving acquisition of assets from Singapore based RHT even though it was fully aware that this Court was seized of the matter. 49. Interestingly, the main promoters of RHC and OIL i.e. MMS and SMS were the biggest unit holders 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 undert....