TaxTMI 
TaxTMI 
2026 (9) TMI 207
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....ith JD-1 in person. Mr. Rajiv Nayar, Sr. Adv., Mr. Abhinav Vashisht, Sr. Adv., Mr. Sanjeev Kumar Sharma, Mr. Vaibhav Kakkar, Mr. Sahil Arora, Ms. Sanya Sud, Ms. Vaishali Goyal, Mr. Raahul Sharma, Ms. Manjira Dasgupta, Ms. Akshita Sachdeva, Mr. Kaveesh Nair, Mr. Arnav Chopra, Mr. Shreyas Maheshwari, Mr. Gauhar Mirza, Advs. for Fortis Healthcare Limited Ms. Sayobani Basu, Ms. Durga Priya Manda, Ms. Dhriti Batra, Mr. Jitesh Lakra, Advs. for R-25 Mr. Rahul Sangwan, Adv. for Respondent No. 29 and 34 Ms. Aditi Mohan and Ms. Palak Bhargava, Advs. for non-applicant - Luxury Farms Pvt. Ltd. Mr. Shiven Varma and Mr. Rudraksh Mathur, Advs. for Non-applicant - RC Nursery Mr. Prateek Yadav and Ms. Jyotsna Punshi, Advs. for R-21 & 23 Mr. Jayant Mehta, Senior Counsel with Mr. Aman Gandhi, Mr. Parthasarathy Bose, Ms. Lavina Bhargava, Advocates for R26- EA No.3763 of 2022 Mr Balbir Singh, Senior Advocate along with Mr. Aditya Dewan, Mr. Naman Tondon and Ms. Shivali Shah, Ms. Ramneet Kaur, Advocates for JD 6& 8 Mr. Dayan Krishnan, Sr. Adv. with Mr. Sunjoy Ghose, Sr. Adv. with Mr. Rishi Agrawala and Mr. Tarini Khurana, Advs., for Respondent No. 28 (Indiabulls). ....
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....re that the decrees are executed not only for the satisfaction of the Decree Holder, but to also hold the majesty of the Courts and administration of justice. The Apex Court in Marshall Sons & Co. (I) Ltd. v. Sahi Oretrans (P) Ltd. (1999) 2 SCC 325, has observed that "it is true that proceedings are dragged for a long time on one count or the other and, on occasion, become highly technical accompanied by unending prolixity at every stage providing a legal trap to the unwary. Because of the delay, unscrupulous parties to the proceedings take undue advantage and a person who is in wrongful possession draws delight in delay in disposal of the cases by taking undue advantage of procedural complications. It is also a known fact that after obtaining a decree for possession of immovable property, its execution takes a long time." FACTS OF THE CASE 3. The disputes between the Decree Holder and the Judgment Debtors was referred to arbitration and an Award dated 29.04.2016 was passed in Singapore. Under the said Award, the Judgment Debtors were directed to pay Rs. 2,562 crore with pre-Award interest @ 4.44% and post-Award interest @ 5.33%. It is the case of the Decree Holder that as on....
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....ty which is wholly owned by JD No. 1 and JD No. 6, whether directly in their own capacities or indirectly through their other affiliated entities. 8. The chart depicting the shareholding of JD No. 1 and 6 in the downstream entities completely controller by them have been succinctly described in a tabular form by the Apex Court in Vinay Prakash Singh v. Sameer Gehlaut & Ors., (2021) 16 SCC 319. The said table is reproduced hereunder:- 9. It is pertinent to mention that on the date when the chart was prepared, i.e., 31.03.2017, which is within one year of the date of passing of the Award, 71.7% shareholding of FHHPL in FHL has come down to 52% shareholding, meaning thereby that the Judgment Debtors had already started dissipating their shares in FHL right from the date of the passing of the Award. 10. In the execution proceedings which were filed immediately after the passing of the Award when the Decree Holder expressed apprehension that the Judgment Debtors would fritter away their assets and would make the Award unenforceable. The Decree Holder filed IA No. 6558 of 2016 in the execution proceedings praying that the Judgment Debtors be restrained from alienating or encumbe....
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....isted having shares listed in the stock market. This undertaking by the Senior Counsel for the Judgment Debtors was the first assurance. 12. When it was found that the asset base of the Judgment Debtors in FHL and other assets were being reduced despite the afore mentioned assurance, the Decree Holder filed I.A. No. 618 of 2017 for an order directing the Judgment Debtors to secure the awarded amount by depositing the same with the Registry of this Court or by providing adequate security or bank guarantee or by other means and also for an order directing attachment of the movable and immovable assets and properties of the Judgment Debtors and other properties in which the Judgment Debtors have beneficial interest to the extent of the awarded amount. The application came up for hearing on 23.01.2017. The relevant portion of the Order dated 23.01.2017 reads as under:- "1. Mr. Harish N. Salve, learned Senior counsel appearing for Respondent Nos. 1 to 4 and 13 reiterates the assurance given to the Court as recorded in the letter dated 24th May, 2016 addressed by counsel for the Petitioner to the counsel for the Respondents. Mr. Salve further states that within two weeks and,....
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....and 7,05,000 equity shares of SRL Limited held by Malav Holding Private Limited (Respondent No. 15) to external investors in the near future. These shares of SRL Limited are encumbered and thus not included in the value of unencumbered assets mentioned at paras (4) & (5) above. Obviously this will have to be after obtaining the consents of the security holders. The proceeds of such sale will have to be utilized to pare down the debt the net assets of the Respondents will thus remain unchanged. The shares being sold [36,00,000] which are below 5% of the share capital of SRL will be sold to an external investor. The further proposal under consideration is to merge SRL with another listed group company at a later point of time. Even if this does take place, this will have no implications on the net assets of the Respondents. " (emphasis supplied) 15. The Judgment Debtors through this affidavit clearly provided another undertaking to not sell any of the unencumbered investments held by them by way of shares. This Court construes the said undertaking as the third assurance. 16. The affidavit of assets filed by the Judgment Debtors on 08.02.2017 did not provide the requisite det....
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....ered and available for being realised towards satisfaction of the decretal amount. 7. In response to the present application an affidavit has been filed by Respondent No. 19 in which it is stated in para 6 as under: "Without prejudice to the foregoing, it is stated that in terms of the Order dated 23 January 2017, the Respondents, as understood by its counsels, were not directed by this Hon'ble Court to furnish details/particulars of the unencumbered assets held by them. The Counsel's (sic) and the Respondents understanding of the said order was that the Respondents were required to establish that they held unencumbered assets, sufficient to meet the Majority Award, if the same was held enforceable in India." 8. The Court would like to clarify that the above understanding by Respondent No. 19 of what was required to be furnished in terms of the order dated 23rd January 2017 is not correct. The Respondents were in fact required to furnish the information relating to all the unencumbered assets, both moveable and immoveable, and not merely investments and loans and advances. 9. At this stage both Dr. Abhishek Manu Singhvi and Mr. Rajiv Naya....
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....ursuance to the said Order, certificates and affidavits disclosing the value of unencumbered assets, investments etc. were filed before this Court. Certificates had been filed by Oscar Investments Limited being JD No.14 and RHC Holding Private Limited being JD No.19, disclosing the value of unencumbered assets and investments. 19. The said certificates and affidavits dated 14.03.2017 disclosed the assets of JD No. 14 and 19 as on 28.02.2017. As per the affidavit, JD No. 14 had unencumbered value of a value of 1953.70 crores having fair value of Rs. 1204.78 crores. The fair value of unencumbered investments of JD No. 14 including related/group entities was valued at Rs.854.64 crores and as far as JD No. 19 is concerned, the book value of unencumbered assets was shown as Rs. 6,346.69 crores having the fair value of Rs.3579.26 crores and the value of unencumbered investments was shown as Rs.3246.76 crores. By way of these affidavits, a picture was projected before this Court that the asset base of the companies was strong enough to cover the entire decretal amount. In retrospect, in the opinion of this Court, this was only a method to prevent this Court from passing any order direc....
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....ure Pte. Ltd. ('NTK') was set to acquire 26% stake in FHL. As such, a contempt petition was filed before this Court alleging that the Order dated 06.03.2017 and 19.06.2017 was being violated. 24. The controversy surrounding the IHH-NTK transaction concerns the acquisition of the controlling stake in FHL by IHH Healthcare Berhad during the pendency of proceedings before the Apex Court relating to the enforcement of the Award against the Judgment Debtors. It was alleged that the transaction resulted in a substantial dilution of the shareholding of JD No. 1 and 6, and involved an infusion of approximately Rs. 4,000 crores into FHL. The sale consideration was thereafter proposed to be utilised by FHL for the acquisition of healthcare assets from RHT Health Trust, Singapore. The Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641, made an observation that the board members of RHT Health Trust, at that time, consisted of family members of JD No. 1 and 6. 25. The matter was taken up by this Court on 21.06.2017 wherein the Counsel for the JD No. 14 and 19 again provided an undertaking to this Court. The Order dated 21.06.2017 reflects th....
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....nts Limited & Others, directed that status quo as on date with regard to shareholding of M/s Fortis Healthcare Holding Private Limited, one of the Promoter Group Entity in the Company be maintained." (emphasis supplied) 28. The Apex Court vide its Order dated 31.08.2017 clarified that the Order dated 11.08.2017 was passed in regards to both encumbered and unencumbered shares of FHL held by FHHPL, by passing the following order:- "We, therefore, decline to pass any order in the matter, save and except, to put on record that the interim order of this Court dated 11th August, 2017 was intended to be in respect of both the encumbered and unencumbered shares of Fortis Healthcare Limited held by Fortis Healthcare Holding Private Limited. Consequently, there will be no transfer of the shares to the extent indicated above." (emphasis supplied) 29. The slow dissipation of FHHPL shareholding in FHL has been noted by the Apex Court in Vinay Prakash Singh v. Sameer Gehlaut & Ors., (2021) 16 SCC 319. The relevant portion of the said Judgment reads as under:- "27. FHL is a public company and being a listed company, it has to disclose its shareholding patterns to the....
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....endered before this Court. The entirety of the share capital in FHHPL is beneficially held by JD No. 1 and 6, through their affiliate corporate entities, granting them absolute control over the functions of FHHPL. Furthermore, undertakings through sworn affidavits have been submitted by JD No. 14 and JD No. 19. Legally, these undertakings are exclusively attributable to JD No. 1 and 6, by virtue of their absolute 100% shareholding and control over both JD No. 14 and JD No. 19 which in turn held 100% shareholding in FHHPL. 32. The Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641 has produced a table to demonstrate the loans taken by the downstream entities of JD No. 1 and 6. A bare perusal of the table demonstrates that several loans were taken by these downstream entities against the shares of FHL held by FHHPL even after the assurances of JD No. 1 and 6. The said table is reproduced hereunder:- 29-4-2016 Arbitral Award in favour of Daiichi Vol.5, 6, p. 8 18-5-2016 Sections 47/49 Arbitration and Conciliation Act, 1996 preferred before the Delhi High Court by Daiichi being OMP (FEA) (Comm.) No. 06/2016 Vol. 1, p.....
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....016 10,00,000 FHL shares additionally pledged in favour of ABL w.r.t. standby letter of credit for USD 72.5 million executed between RCMIML and ABL Vol. 169, p. 424 30-9-2016 2,00,000 FHL shares additionally pledged in favour of ABL w.r.t. standby letter of credit for USD 72.5 million executed between RCMIML and ABL. Vol. 169, p. 424 30-9-2016 Total 40,75,000 FHL shares stood encumbered in favour of RBL Vol. 201, p. 4 4-10-2016 Release of 20,00,000 FHL shares by ABL [w.r.t. 29-9-2015] Vol. 197, pp. 4, 44 7-10-2016 OIL paid back Rs 161 crores to YBL against loan sanctioned on 20-2- 2015 Vol. 224, p. 6 31-10-2016 38,95,000 FHL shares pledged in favour of LVB against 26-10-2016 facility Vol. 202, p. 2 2-12-2016 Affidavit of assets preferred by Singh Brothers, OIL, RHC before the Delhi High Court Vol. 54, pp. 31, 39, 46, 51 9-12-2016 LVB released 18,00,000 FHL shares against reduction of loan facility of 26-10-2016 from Rs 150 crores to Rs 100 crores Vol. 202, p. 3 15-12-2016 Total of 2,58,50,000 FHL shares stood encumbered in favour of YBL Vol. 228, p. 4 23-12-2016 YBL sanctioned a loan amount of....
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.... Dion (Rs 130 crores), OIL (565 crores), FSSPL (Rs 250 crores) Vol. 177, pp. 815, 828 9-3-2017 Cross-collateral by YBL [w.r.t. 27-10-2015] over 2,37,35,000 FHL shares to secure Put Option w.r.t. RHC (Rs 300 crores), LAL (Rs 100 crores), HTL (Rs 200 crores), LVL (Rs 304.5 crores), Dion (Rs 130 crores), OIL (565 crores), FSSPL (Rs 250 crores) Vol. 177, p. 832 9-3-2017 Cross-collateral by YBL [w.r.t. 30-3-2016, 27-7-2016] over 3,56,46,406 FHL shares to secure Put Option w.r.t. RHC (Rs 300 crores), LAL (Rs 100 crores), HTL (Rs 200 crores), LVL (Rs 304.5 crores), Dion (Rs 130 crores), OIL (565 crores), FSSPL (Rs 250 crores) Vol. 175, p. 463 15-3-2017 14-3-2016 Credit facility between CSFIPL and RHC Holdings Ltd. closed. CSFIPL released all pledges over shares of FHL. Vol. 203, p. 2 22-3-2017 20-5-2016 Credit facility between CSFIPL and RHC Holdings Ltd. closed. CSFIPL released all pledges over shares of FHL. Vol. 203, p. 2 March' 2017 YBL released Rs 340 crores to Oscar against loan sanctioned on 23- 12-2016 Vol. 224, p. 6 3-5-2017 Loan of Rs 150 crores sanctioned by YBL to LAL. Vol. 200, p. 14 Vol. 175, p....
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....to RHC and called upon RHC to repay entire loan amount with interest Vol. 159, p. 97 17-7-2017 RBL issued a loan recall notice w.r.t. 29-11-2012 facility Vol. 201, p. 7 18-7-2017 Pledge agreement to create a cross-collateral over 45,83,333 FHL shares already pledged [w.r.t. 19-5-2017 ABL] to secure RHC holding facility Vol. 167, p. 155 18-7-2017 Pledge agreement to create a cross-collateral over 64,16,667 FHL shares already pledged [w.r.t. 19-5-2017 ABL] to secure RHC holding facility Vol. 167, p. 180 18-7-2017 Pledge agreement to create a cross-collateral over 10,00,000 FHL shares already pledged [w.r.t. 30-6-2014 & 28-7-2016 ABL] to secure RHC holding facility Vol. 168, p. 204 18-7-2017 Pledge agreement to create a cross-collateral over 45,83,833 FHL shares already pledged [w.r.t. 19-5-2017 ABL] to secure Ligare facility Vol. 168, p. 319 18-7-2017 Pledge agreement to create a cross-collateral over 64,16,667 FHL shares already pledged [w.r.t. 19-5-2017 ABL] to secure Ligare facility Vol. 168, p. 344 18-7-2017 Pledge agreement to create a cross-collateral over 10,00,000 FHL shares already pledged [w.r.t. 30-6-2014 & 28-....
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....ed Rs 3.20 crores [w.r.t. 29-11-2012] Vol. 201, p. 8 11-8- 2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] Order by this Court directing status quo w.r.t. shareholding of FHHPL in FHL 11-8-2017 Total FHL shares that stood encumbered in favour of ABL were 1,83,75,000 Vol. 228, p. 4 14-8-2017 Loan recall notice issued by RBL w.r.t. 27-7-2012 facility Vol. 201, p. 8 Vol. 23, p. 42 14-8-2017 LVB sold 1,00,000 FHL shares and realised Rs 1,49,79,271 Vol. 202, p. 4 14-8-2017 LVB sold 4,00,000 FHL shares and realised Rs 6,06,50,588 Vol. 202, p. 4 14-8-2017 LVB sold 3,34,350 FHL shares and realised Rs 5,02,68,887.26 Vol. 202, p. 5 14-8-2017 LVB sold 65,000 FHL shares and realised Rs 98,60,578 Vol. 202, p. 5 14-8-2017 LVB sold 1,50,650 FHL shares and realised Rs 2,28,54,809 Vol. 202, p. 5 14-8-2017 LVB sold 2,00,000 FHL shares and realised Rs 2,99,49,031 Vol. 202, p. 5 14-8-2017 Pledge created by Indiabulls Vol. 1, LOD filed by Kunal Chhaterji p. 20 31-8- 2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1974] Order by thi....
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....nt under Sections 210, 212 and 447 of Companies Act, 2013 against Singh Brothers and known associates Vol. 67 @ p. 62 18-12-2018 RFL preferred complaint against Singh Brothers and their associates before Economic Offences Wing, Delhi Police - FIR 50/2019 Vol.67 @ p. 98 14-3-2019 SEBI passed an order consequent to an independent investigation which found large scale diversion of funds from the REL and its subsidiaries at the behest of promoters. REL and RFL directed to recall the loans and take recovery steps for entities belonging to promoter group Vol.67 @ p. 145 22-3-2019 Complaint preferred by REL against erstwhile promoters and their entities including Oscar Investments Ltd. with EOW, Delhi Police for misappropriation to the tune of Rs 525 crores Vol. 227 @ p. 29 27-3-2019 NCLT reserved order in the Daiichi matter Vol. 119 @ p. 106 5-4-2019 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2019 SCC OnLine SC 2226] IA No. 58004/2019 mentioned before SCI and interim stay was granted against NCLT proceedings in favour of Daiichi Vol. 67 @ p. 28 10-4-2019 Application for vacation of interim stay dated 5-4-2019 [Dai....
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....ld by JD No. 1 and 6 through their various subsidiaries, were being reduced contrary to the assurances given to this Court. This is also evident from Paragraph 27 of the Apex Court's Judgment in Vinay Prakash Singh (supra). The chart shows that 5,29,31,574 unencumbered shares were brought down to 26,31,777 shares even after the status quo orders passed by the Apex Court. 34. This Court is firmly of the view that it refrained from issuing attachment orders against the Judgment Debtors solely in reliance upon the assurances of the Learned Senior Counsels of JDs that FHHPL's unencumbered shares would be preserved to satisfy the decree. Had it not been the case, this Court would have definitely passed attachment orders directing the Judgment Debtors to deposit the money. This Court has, therefore, been taken for a complete ride. The Judgment Debtors have successfully pulled the wool over the eyes of this Court by engaging in a calculated and systematic dissipation of assets over a period of time, as is unequivocally borne out from the chart reproduced hereinabove. 35. It came to the knowledge of the Apex Court that even after the imposition of status quo order, unencumbered s....
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.... 31. However, the figures of September 2017 show a totally different situation. The total shareholding has fallen to 17,80,26,597 and the unencumbered shares to 26,31,777. This means that in addition to 30,59,260 shares pledged on 14-8-2017, 3,26,24,180 number of shares were encumbered or transferred during this period. There is no explanation by OIL, RHC, MMS or SMS, as to how these unencumbered shares were encumbered or transferred in total violation of the orders of the Courts. 32. 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 14-8-2017. 33. This brings us to the shareholding pattern of FHL for the period between 1-7-2018 and 30-9-2018 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 IA No. 109493 of 2017 nor in the reply filed by Contemnors 1 to 8, is there any clear-cut statement as to how and when the different pledges were created. Reference has been made to loan documents o....
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....he securities held by the creditors. 34. To make this position clear, we may refer to the disclosures made by FHL to BSE. The above chart shows that in the quarter ending 30-6-2018, Fhhpl held 32,82,851 shares in FHL out of which only 5,51,484 were encumbered, meaning that the balance 27,31,367 were unencumbered shares. The disclosure of 30-9-2018 and 31-12-2018 both reflect that the number of encumbered shares have not changed but the total shareholding of Fhhpl in FHL has reduced from 32,82,851 to 11,53,091. This means that what was transferred were 21,29,760 unencumbered shares and not encumbered shares. The transaction of 12,25,000 shares therefore is out of the unencumbered shares because after 31-3-2018, the encumbered shares were much below 12,25,000. 35. 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 31-8-2017. ....
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....ered shares were encumbered or transferred as is apparent from the above table. 40. The petitioner came to this Court when the order dated 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973] was passed and clarified by order dated 31-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1974] . During this period also the total shareholding of Fhhpl in FHL fell from 22,22,11,701 to 17,80,26,597 by 4,41,85,104 shares. MMS and SMS have not furnished any explanation as to how this happened. The contemnors were the best persons to disclose how this happened. They have not done so. The only explanation we have before us is about the pledge of 30,59,260 shares on 14-8-2018. It is difficult to ignore this huge drop in shareholding but even if we were to ignore this, we do not understand how in March 2018, the shareholding fell to 34,20,451 and finally in December 2018 to 11,53,091. The undertaking given to the High Court of Delhi was that the shareholding as on 19-6-2017 and 21-6-2017 would be maintained. On 11-8-2017 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2017 SCC OnLine SC 1973], this Court injuncted the re....
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....bt that there has been wilful violation of the orders of this Court. It is apparent that the contemnors knowingly and willingly lost control of FHL. 44. A litigant should always be truthful and honest in court. One who seeks equity must not hide any relevant material. In the present case, the petitioner has violated the undertakings given to the Delhi High Court as also the orders of this Court. The Delhi High Court will deal with the issue insofar as the undertakings made before it are concerned. We have no doubt in our mind that Contemnors 9 and 10 have also wilfully and contumaciously disobeyed the orders of this Court. What has happened during the period when this matter has been pending in this Court is that the shareholdings of Fhhpl, which is wholly owned by OIL and RHC which in turn are controlled by SMS and MMS, have virtually vanished in FHL. Fhhpl owns no shares in FHL now. It may be true that IHH Healthcare Bhd. (Malaysian Company) through its actually owned subsidiary Northern TK Venture Pte Ltd. is now the majority stakeholder but that is due to allotment of preferential shares. In addition to the preferential shares allotted to them, the shares which were ow....
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....olding went into a downward spiral, as is apparent from the table in para 27. There was a significant decline in the total number of shares held by Fhhpl, both encumbered and unencumbered, which fell down from 27,21,59,955 and 5,29,31,574 in September 2016 to 5,51,484 and 6,01,607 in December 2018. The aforesaid fact with the impact on valuation was never brought to the notice of the Court and was concealed with the knowledge that these facts, if brought to the notice, would have substantial bearing on the orders that would be passed to protect the interest of the petitioner. 48. What is even more shocking and clearly contemptuous is the manner in which, in a well thought out plan, the authorised capital of FHL was increased with the objective and purpose to transfer controlling interest in the company. Consequently, the controlling interest of MMS and SMS came down in FHL, as the company changed hands. Controlling interest held by the majority shareholders has considerable market value. Further, the amount brought in by a foreign shareholder, who now has the controlling interest in FHL, has been transferred in a dubious and clandestine manner without full facts being brou....
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....lso filed various affidavits to show that they had not violated the undertaking given to this Court and the Apex Court. The Apex Court thereafter summarised the questions that arose for consideration. The JD No. 1 and 6 were given a chance to purge themselves of contempt, however, on failure to do so, they were sent to six months of imprisonment. The relevant portion of the Judgment passed by the Apex Court in Daiichi Sankyo Company Limited v. Oscar Investments Limited & Ors., (2023) 7 SCC 641, reads as under:- "31. In the backdrop of these submissions, following questions arise for our consideration: 31.1. Whether the acts of commission or omission on part of Contemnors 9 and 10 and the entities controlled by them, were calculated to put the assets of the companies under their control beyond the reach of Daiichi? 31.2. Having given clear assurances to the High Court and this Court, whether such acts of commission and omission on part of Contemnors 9 and 10 amount to contempt of the orders passed by the High Court and this Court? 31.3. Whether the banks and financial institutions sold the shares which were pledged with them, purely as a matter of....
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....keep on converting large quantity of shares from the compartment of "unencumbered shares" to that of "encumbered shares" and thereafter keep disposing of said shares. 34. We are also unable to come to a clear conclusion whether all those actions were protected by the order dated 15-2-2018 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2018 SCC OnLine SC 3571] passed by this Court enabling the banks and financial institutions to sell encumbered shares. This exercise will require going into issues of fact, comparing of the documents and accounts as well as considering the expediency whether the shares were required to be sold in order to keep affording comfort and sufficient security to said banks and financial institutions. 35. It is true that it is possible for a court, while exercising jurisdiction in contempt, to pass consequential orders in the nature of sequestration orders to secure the properties which the contemnor had put beyond the reach of the court or which were acquired by the contemnor for himself or for any other person or entity by his wrongful acts. But there are two difficulties to undertake such exercise in contempt jurisdiction in the prese....
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....alyse the transactions entered into between FHL and RHT and other related transactions. 37.4. The amount of Rs 17,93,40,000 which stands deposited in the Registry of this Court shall be transmitted to the executing court along with interest accrued thereon. The said amount shall be available to the executing court while considering execution of the instant foreign arbitral award. 37.5. Certain shares which are still lying with the noticee banks and financial institutions, for example, the shares of FHL pledged with and continued to be held by RBL Bank which were dealt with in the order dated 15-4-2021 [Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., 2021 SCC OnLine SC 3371] passed by this Court, shall be available to the executing court and shall abide by such order as the executing court may deem appropriate to pass. 37.6. All the properties offered by Contemnors 9 and 10 in their attempt to partially purge themselves of contempt shall also be available to the executing court and shall abide by such directions as the executing court may deem appropriate to pass. Consequently, there shall be attachment of all those assets which may await the decision o....
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....the Orders of the Apex Court. 45. It is stated by the Learned Senior Counsel for the Decree Holder that the present execution proceedings instituted by the Decree Holder has been pending for almost a decade. Notably, when the Decree Holder initiated the present proceedings in 2016, the Judgment Debtors had a significant net worth which was much more than the decretal amount. The decretal sum due to the Decree Holder was a principal sum of Rs. 2,562 crores, with further additional pre-award interest (4.44%) and post-award interest (5.33%), aggregating to more than Rs. 5200 crores as on date. However, even though 9 years have passed, the Decree Holder has only been able to recover approximately Rs. 250 crores; and in a stunning and extremely frustrating turn of events, the entire net worth of the Judgment Debtors has vanished into thin air in contemptuous disregard of undertakings proffered to this Court. 46. He states that the major bulk of the net worth of the Judgment Debtors were the unencumbered shares indirectly owned by the Judgment Debtors in two listed entities, namely FHL and M/s. Religare Enterprises Limited ("REL"). It is stated that in September 2016, the Judg....
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.... shares was in apparent violation of the sequestration orders. Any claims which could have been possibly asserted by any third party thus stood eclipsed by virtue of those orders. Those orders were essentially aimed at tackling the looming threat of dissipation of assets by the JD's and for ensuring that these assets do not fall outside the reach of Daiichi during the pendency of the enforcement proceedings relating to the foreign award." (emphasis supplied) 50. It is stated that FHL was fully aware of the fact that the Singh Brothers, who were indirectly holding the controlling equity of FHL, had suffered a decree for recovery of an amount, aggregating to over Rs. 5200 crores (including interest) as on date. The Learned Senior Counsel states that it is noteworthy that the Judgment Debtor No. 1 was the Managing Director and Chairman, while his brother, Judgment Debtor No. 6, was the Director and Vice- Chairman of FHL till February 2018. Therefore, FHL had knowledge of all the undertakings given to this Court by its directors. 51. He states that FHL is a company which is listed on both the National Stock Exchange ('NSE') and the Bombay Stock Exchange ('BSE'). The underlying....
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....on 10 November 2023. The PIT Regulations further require that the listed company formulating a code of conduct must identify and designate a compliance officer to administer the code of conduct and other requirements under these regulations. It is stated that FHL has appointed the Company Secretary of FHL as the Compliance Officer. 54. He states that in the present case, notably, as per Clause 6 of Schedule B of the PIT Regulations read with paragraph 3.2.5 of the FHL Policy, any transfer or trading of securities by designated persons, including promoters, requires prior approval from the company. In other words, Judgment Debtors could not have sold/transferred/pledged/alienated FHL shares owned by them, without obtaining express pre-clearance from FHL, the company in which they held shares. It is submitted that the policy laid down by FHL has not been followed and FHL. 55. Learned Senior Counsel further submits that the Code of Conduct framed by FHL under the PIT Regulations establishes a structured mechanism for monitoring trades undertaken by designated persons. It was submitted that the Company Secretary, or such other person as may be designated by the Board of Directors....
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....hand the Judgment Debtors were giving assurances to this Court and whereas on the other hand they were transacting shares in violation of the undertakings. 57. Learned Senior Counsel for the Decree Holder further submitted that the sale, pledge, invocation of pledge and other dealings in the promoter shareholding of FHL are not matters of speculation but are borne out from statutory disclosures mandated under the SEBI regulatory framework and the depository mechanism. According to the learned Senior Counsel, these disclosures emanate from four independent statutory and regulatory sources, each of which captures different facets of the transactions undertaken by the Judgment Debtors through FHHPL. 58. First, reliance was placed on Regulation 29(2) of the SAST Regulations, which mandates every promoter or member of the promoter group to disclose any change in its shareholding amounting to two per cent or more of the total shareholding or voting rights. It was submitted that every creation of pledge, invocation of pledge, creation of top-up security or sale of shares crossing the prescribed threshold was disclosed by FHHPL to FHL and the stock exchanges in accordance with the sa....
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....e Register of Members with the records maintained by the depositories. According to the learned Senior Counsel, these records constitute an additional and independent source for tracing the movement of the promoter shareholding during the relevant period. 62. The Learned Senior Counsel states that in order to ascertain the conduct of JD No. 1 and 6, the Decree Holder has analysed the SAST disclosures; the PIT disclosures and correlated the same to paragraph 27 of the 2019 Apex Court Judgment in Vinay Prakash Singh (supra). 63. He states that the JD No. 1 and 6 had a total of 32,50,91,529 shares in FHL through FHHPL in September 2016. This entire 32.5 crore shareholding has vanished. These shares can be further divided into encumbered shares and unencumbered shares. The encumbered shares were sold by the Financial Institutions and the unencumbered shares were sold by JD No. 1 and 6. He states that out of 32.5 Crore total shares of FHL held by FHHPL; the banks have sold around 18 crore by invoking pledges and the JD No. 1 and 6 have sold around 14 crore shares. 64. He states that there are different and specific disclosures for the creation of a pledge of shares, for sale by....
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....ed. 11 10.08.2017 Disposal 54,62,411 DH: A4, Disclosure reported to exchange on 14.08.2017 @Pg. 83 DH: A4, Disclosure dated 14.08.2017 @Pg. 130- 133 TOTAL 3,25,25,774 [representing 99% of the SC identified number of 3,26,24,180 missing unencumbered shares] 66. He states that as per the PIT disclosures JD No. 1 and 6 have sold a total of 13.99 Crore unencumbered shares since the first assurance. As per the SAST disclosures JD No. 1 and 6 have sold a total of 6.92 Crore unencumbered shares since the first assurance. He states that this 6.92 Crore shares is a part of/ included within the 13.99 crore unencumbered shares. The Learned Senior Counsel for the Decree Holder then asserts that JD No. 1 and 6 have brazenly violated all assurances tendered to this Court and sold their unencumbered shares in FHL held through FHHPL with connivance of FHL being the directors of FHL. 67. The Learned Senior Counsel states that a forensic audit would be necessary to uncover the transactions undertaken by the JDs in connivance with FHL. It is also stated by the learned Senior Counsel for the Decree Holder that these audits would be necessary to enable the executing court ....
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.... the attachment. 74. He states that the shares of FHL held by JD No. 1 and 6 through FHHPL were the subject matter of undertakings given to this Court. That being the case, the shares stood injuncted for the benefit of the Decree Holder. An injunction in an execution proceeding is equivalent to an attachment and in this case, the undertaking/injunction was in execution proceedings. Therefore, pursuant to the six undertakings, the shares were not only injuncted but also attached in favour of the Decree Holder. He thus states that Section 64 of the CPC would come into effect and any private alienation would be void unless the said alienation was protected by Section 64(2) of the CPC. 75. In the present case, the sequestered shares are today held by many retail investors who have purchased shares from the stock exchange following the contemptuous acts of the Judgment Debtors who were in turn aided and abetted by FHL. The forensic audit could, therefore, establish the role played by FHL in aiding and assisting the Judgment Debtors to consciously violate the undertakings offered to this Court, based on which the Court can then issue consequential directions such as disgorgement, i....
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....kla vs. Tamil Nadu Olympic Association 1991 SCC OnLine Mad 3, Satyabrata Biswas and Ors vs. Kalyan Kumar Kisku (1994) 2 SCC 266. 81. It is stated by the Learned Senior Counsel for the Decree Holder that while the Court has the power to restore the exact status quo ante, the 5.29 crore unencumbered FHL shares are now held by unsuspecting members of the general public; therefore, to protect these innocent third parties, the Court should instead facilitate restitution by directing FHL to remit the current market value of the said 5.29 crore shares. 82. He states that the inherent equitable power of restitution aims to achieve complete justice at the end of litigation, wherein Section 144 of the CPC serves as an illustration rather than a limitation of the Court's authority, as established in Gangadhar vs. Raghubar Dayal 1974 SCC OnLine AII 148, Kavita Trehan vs. Balsara Hygeine Products Limited (1994) 5 SCC 380, and South Eastern Coalfields Ltd. vs. State of Madhya Pradesh and Ors. (2003) 8 SCC 648. 83. He states that applying the threefold test of restitution outlined in DTC vs. M/s. International Avenues 2009 SCC OnLine Del 1794, the present matter falls squarely within....
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.... a top-up. Meaning thereby, since the value of the shares pledged had gone below the value mentioned in the arrangements, the Judgment Debtors had to pledge in further shares to cover up the margins. These shares had been sold by the banks, for which FHL is not responsible. It is stated that this volte face cannot be permitted to be advanced in the absence of an affidavit by a competent person on behalf of the Decree Holder and this argument cannot be permitted to be raised only on the basis of certain notes. 89. It is submitted that in the absence of any allegation of any kind in the affidavits filed by the Decree Holder, allegations against FHL cannot be permitted to be levelled only by filing some application. It is further contended that neither FHL nor FHHPL was a Judgment Debtor. He states that the shares owned by FHHPL were never attached. He further states that they could not have been the part of any undertakings, as the Judgment Debtors could not have given any undertaking on behalf of the FHHPL which was a separate legal entity. He further asserts that undertakings were given by the Counsels for the Judgment Debtors without there being any specific inclusion of the sh....
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....ings had already fallen materially. Public shareholding stood at about 64%. The majority of the unencumbered shares as pointed out by the Decree Holder had already been sold by then. He states that FHL had no involvement in those sales. 95. The Learned Senior Counsel states that FHL was not involved in any manner in the movement of these shares. It is the case of FHL that it is a listed company. Accordingly, the factum of FHL being majorly owned by JD No. 1 and 6 through FHHPL at that time was irrelevant given that under applicable law, a listed company has no role in share transfers as the shares of any listed company are freely transferable. 96. It is stated by the Learned Senior Counsel that the Apex Court in Daiichi Sankyo Company Limited (supra) restricted the enquiry in relation to the dissipation of FHHPL's shares only to the banks and financial institutions. FHL was, rightly so, nowhere sought to be covered in relation to the dissipation of FHL shares held by FHHPL. 97. Attention of this Court has been drawn to the affidavits filed by JD No. 14 and JD No. 19 to substantiate the contentions that there is no specific reference given to the shares of FHL held by FHHPL....
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....loped by the courts is typically applicable in criminal and tortious liability cases. [...]" 99. The Learned Senior Counsel furthers places reliance on the Apex Court judgment in Bacha F. Guzdar v CIT, AIR 1955 SC 74, where it was held that a shareholder's interest in a company is limited to their shareholding and does not extend to the assets of the company. The relevant portion is reproduced as follows: "9. [...] That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. 10. The interest of a shareholder vis-à-vis the company was explained in the case of C....
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....e Holder was aware of these disclosures and took no steps to dispute them. 101. The Learned Senior Counsel for FHL states that FHL is a public company. Under Section 58(2) of the Companies Act, 2013, the securities of a public company are explicitly declared to be freely transferable, depriving FHL of any power to restrict the transfer of shares owned by FHHPL. 102. It is stated that under the Depositories Act, 1996 (specifically Sections 7(1), 9, 10(1), and 11), share transfers occur electronically via book-entry. The depository serves as the registered owner for effecting transfers, while the actual owner (FHHPL) acts as the beneficial owner. He states that the listed company merely receives post-facto intimation of completed transfers and inherently lacks the power to refuse registration. 103. It is stated that per the NSDL Business Rules (Rules 12.2 and 12.3), both market and off-market transfers are executed exclusively at the depository level. The Depository Participant ('DP') processes these transfers based solely on the authorization and instructions of the beneficial owner. Hence, as a listed company, FHL was neither required nor able to be involved in the transfe....
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....le and function. Regulation 9 stated as follows: "Code of Conduct. 9. (1) The board of directors of every listed company and market intermediary shall formulate a code of conduct to regulate, monitor and report trading by its employees and other connected persons towards achieving compliance with these regulations, adopting the minimum standards set out in Schedule B to these regulations, without diluting the provisions of these regulations in any manner." 108. Further, Paragraph 3 of Schedule B of the Insider Trading Regulations provides: "3. Employees and connected persons designated on the basis of their functional role ("designated persons") in the organisation shall be governed by an internal code of conduct governing dealing in securities. The board of directors shall in consultation with the compliance officer specify the designated persons to be covered by such code on the basis of their role and function in the organisation. Due regard shall be had to the access that such role and function would provide to unpublished price sensitive information in addition to seniority and professional designation." 109. The submission of FHL is that the r....
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.... governed by the Code of Conduct. This can result in confusion as to the coverage of the Code of Conduct. Further, a listed company or market intermediary cannot enforce the code on persons other than employees and their relatives. Including all connected persons under coverage of the code may be impractical, considering the wide definition of connected persons. Recommendation The Committee recommends that the code of conduct may be made applicable to "designated person(s)" and immediate relatives of the "designated person(s)" only. The term "designated person(s)" should be defined by means of an explanation to regulation 9(2). "Designated person(s)" for listed company should at least include Promoter, CEO and upto two levels below CEO of such listed company and its material subsidiaries irrespective of their functional role in the company or ability to have access to UPSI.[...]" 111. Attention of this Court is drawn to Regulation 9(4)(iii) of the amended Insider Trading Regulations states that as follows: "Code of Conduct. 9. (1) The board of directors of every listed company and [the board of directors or head(s) of the organisation....
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.... a 'designated person' under the law and the FHL Code of Conduct during the relevant period (2017-2018). Therefore, the transaction of FHHPL did not require approval from FHL's Compliance Officer. 114. He states that the Decree Holder's reliance on the definition of 'connected person' is misplaced. Even if FHHPL was a connected person (since connected person includes a holding company or associate company or subsidiary company), Paragraph 6, Schedule B of the PIT Regulations only requires 'designated persons' to obtain pre-clearance for trades. 115. He states that the Decree Holder's reliance on FHHPL being an 'insider', and consequently being subject to a mandatory pre-clearance, is misplaced. He states that the Decree Holder incorrectly assumed that once an entity is classified as an 'insider' under the PIT Regulations, all obligations, including pre-clearance, apply conflating two distinct concepts. Under Regulation 2(1)(g) of the PIT Regulations, "insider" is a broad category that includes connected persons and those in possession of Unpublished Price Sensitive Information ("UPSI"). However, the requirement to seek pre-clearance applies only to designated persons, a narro....
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....nce with the applicable securities law. 119. He states that the Compliance officer cannot be held liable in case the relevant designated employee does not seek a pre-clearance, and the Company cannot be held liable for lapses on the part of the compliance officer. 120. The Learned Senior Counsel states that the allegations made by the Decree Holder regarding violations of SAST Regulations is unsustainable. The disclosures were made post-facto, meaning FHL had no prior knowledge of the trades. In any event, FHL's knowledge is irrelevant since it could not have prevented the transfers which were executed through the depository. 121. Reliance is placed on Regulation 29 of the SAST Regulations which provides as follows: "Disclosure of acquisition and disposal. 29.(1) Any acquirer, together with persons acting in concert with him acquiring shares or voting rights in a target company, which taken together aggregates to five per cent or more of the shares of such target company, shall disclose their aggregate shareholding and voting rights in such target company in such form as may be specified:" (2) Any person together with persons acting in concert wi....
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....se disclosures were to be made within 7 working days, by the promoters, to the company as well as the stock exchanges, simultaneously on a post-facto basis. 125. He states that in terms of Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('LODR Regulations'), a listed company is required to disclose its shareholding pattern on a quarterly basis, in the format prescribed by SEBI. The format inter alia includes details regarding any pledge or encumbrances created on the shareholding by the promoters. The information provided by the listed company under the quarterly shareholding pattern, in relation to details of encumbrances of promoters, is based solely on the disclosures made by the promoters to the company under Regulation 31 of the SAST Regulations. 126. He states that since the requirement under the SAST Regulations for making disclosures regarding creation, invocation or release of any encumbrance is solely on the promoters at all times, and the company is only made aware of this encumbrance on a post-facto basis, it is unequivocally established that the information on encumbered versus unencumbered shares contained in the per....
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.... follows: "It may be noted that BSE has made available the 'Listing Centre', an online [sic] web portal to all listed entities for filing their various compliances / submissions with the Exchange. 'Listing Centre' provides a single point resource for filing compliances /submissions and tracking past filings as well. It also provides an instant confirmation of the filings done by the Listed Entities." 129. He states that from the aforesaid circulars issued by BSE, it is clear that the listed entity (i.e., FHL) was neither authorized nor mandated to make disclosures in respect of trades made by of its erstwhile promoter (i.e., FHHPL). On the contrary, BSE itself has explicitly recognized that individuals/entities other than the listed entity are also mandated to make certain disclosures/filings under applicable SEBI laws, and in this context, BSE has provided a mechanism through which such disclosures/filings may be made by them (i.e., that filings by non-listed persons/entities, such as FHHPL, must be made via the designated BSE email ID). Accordingly, the allegations raised by the Decree Holder regarding FHL being responsible for the disclosures made by FHHPL are comple....
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....tates that an alleged breach of an undertaking furnished before a Court is enforceable only through contempt jurisdiction and cannot be employed as a basis to impose substantive monetary liability upon a third party who neither furnished such undertaking nor was bound thereby. 134. Learned Senior Counsel further argues that the allegation of conspiracy is legally unsustainable. He states that the Decree Holder seeks to attribute the acts and intentions of the JD No. 1 and 6 to FHL on the footing that they constituted the directing mind and will of the company while simultaneously alleging that the company conspired with the very same individuals. According to the learned Senior Counsel, these two propositions are mutually destructive in law and cannot coexist. It is contended that once the acts of the promoters are sought to be attributed to the company, the question of a conspiracy between the company and those very individuals does not arise. 135. Learned Senior Counsel also submits that no duty of care was owed by FHL to the Decree Holder so as to find a claim in negligence. Reliance was placed on the decisions in Customs and Excise Commissioners v. Barclays Bank Plc. (200....
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....s specific order established a 'value preservation regime' which JD No.1 interpreted in good faith to mean that asset modifications, debt paring measures and restructuring operations were legally permissible, provided that the overall net asset value originally disclosed to the Court was not diminished. Learned Senior Counsel states that all corporate manoeuvres executed during this window were measures targeted solely at preventing systematic corporate insolvency and saving the entities from liquidation without any intent of any contempt to evade the decree. 140. In regards to the share reductions, the learned Senior Counsel for JD No.1 strongly refutes the Decree Holder's characterisation of the events of July, 2017. It is submitted that the downward trend in shareholding was not a Promoter driven exercise but an involuntary liquidation done by third party financial institutions during a severe market crash. Learned Senior Counsel points out that on 20.07.2017, Yes Bank Limited unilaterally perfected its security interests under the ATP, absorbing 2,98,15,406 shares. It is stated that the single automated action constitutes approximately 91% of the total unencumbered reduction....
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....t impossible for JD No. 1 to possess the voting power or corporate control required to either facilitate or halt these transactions. 145. Learned Senior Counsel for JD No.1 then raises a fundamental constitutional objection based on the judicial record. He points out that this chronological narrative or share reductions, pledge top-ups or alleged breaches of interim orders have already been scrutinized by the Apex Court in its Judgment dated 15.11.2019 and 22.09.2022. It is submitted that the Apex Court has already inflicted the maximum statutory penalty permitted under the law sentencing JD No.1 of six months of civil imprisonment and a fine of Rs.5,000/-. 146. Learned Senior Counsel states that JD No.1 was continuously incarcerated for over 3.5 years spanning from 11.10.2019 to 08.06.2023 and has fully served the maximum contempt sentence imposed upon him. It is argued that parallel punitive execution and contempt proceedings before this Court on the exact same factual base constitutes a violation of the Fundamental Rights against double jeopardy guaranteed under Article 20(2) of the Constitution of India. He states that the State's coercive power cannot be utilized to repe....
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.... JD No. 6 aligns with JD No.1 in asserting that FHHPL executed valid Agreement to Pledge with Yes Bank Limited long before any injunctions were passed, specifically on 30.03.2016 to secure 2,65,02,852 shares and on 27.07.2016 to secure a further 91,00,000 shares. Supporting JD No.1's case regarding July, 2017 liquidations, it is submitted that YBL unilaterally exercised its contractual rights to perfect the pledge on 20.07.2017 converting 2,98,15,406 'agreed to be pledged' shares into an actual crystallized pledge completely outside the volition of the JDs. Further aligning with JD No.1's stand that the Apex Court has already scrutinized these facts, the learned Senior Counsel for JD No. 6 points out that Paragraph 26 of the Apex Court's Order dated 22.09.2022 explicitly confirms and accepts the explanation provided by YBL regarding the mechanics and validity of these two ATPs. 151. The learned Senior Counsel for JD No. 6 further asserts specific mathematical submissions to address the exact scope of the present inquiry. It is stated that the current execution proceedings as strictly bound by the queries set up by the Apex Court in Paragraph 27 of its Judgment dated 15.11.2019 i....
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....x Court, the resulting 3.56 crore shares gap is legally insulated entirely lender driven and cannot constitute any violation of court orders by JD No.6. 156. The categorical stand of the Judgment Debtor No.1 and 6 is that the shares which had been released is that when the value of the shares came below the prescribed limit under the Agreement to Pledge entered into by FHHPL and the banks on the basis of the pre-executed agreements, the banks perfected their pledge on the unencumbered shares as encumbered and has sold the shares. It was also stated that certain shares which were released were sold on the basis of pre-existing power of attorneys executed by FHHPL to satisfy the loans. SUBMISSIONS OF MR. SANJEEV KAKRA, LEARNED SENIOR ADVOCATE ON BEHALF OF AXIS BANK LIMITED 157. The contention of the Axis Bank is that it entered into facility agreements with certain companies controlled by JD No.1 and 6 between November, 2010 and May, 2017 and to secure these facilities, around 2.58 crore shares of FHL were pledged by FHHPL in favour of Axis Bank Limited between 28.03.2014 and 19.05.2017. 158. On the date when the status quo orders were passed by the Apex Court, i.e., on 1....
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.... with companies owned and controlled by Malvinder Mohan Singh (MMS) and Shivinder Mohan Singh (SMS) since 2009. Between August 2013 and May 2017, YBL extended loans and lines of credit totaling approximately Rs. 1,830 Crore through several facility agreements. To secure these facilities. several pledge agreements, including agreements to pledge (ATPs), in relation to FHHPL shares held by Fortis Healthcare Holdings Private Limited (FHHPL) were executed in favor of YBL from 2014 onwards. 163. He states that of the total 8,97,81,906 FHL shares encumbered in favor of YBL, 5,41,35,500 shares were encumbered prior to March 2016 and are not in dispute. The remaining 3,56,46,406 shares were encumbered vide ATPs dated 30 March 2016 and 27 July 2016. Despite invoking the pledges, YBL was required to institute recovery proceedings to recover their dues demonstrating that the security taken was insufficient to discharge the outstanding liabilities. 164. He further states that the ATPs dated 30 March 2016 and 27 July 2016 themselves created an encumbrance over the FHL shares in favour of YBL from the dates of their execution, not merely from the dates when pledges were formally recorded w....
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....rsuant to the order dated 15 February 2018 passed by the Apex Court, which permitted banks to enforce pledges created prior to 11 August 2017. 170. The Apex Court in its judgment dated 22 September 2022 did not direct a mandatory forensic audit into the banks. YBL has placed all material facts on record before the Apex Court including loans extended, creation of pledges, defaults, invocation and sale of shares and has complied with all directions issued. Apart from FHL shares, YBL enforced its rights over all other secured assets, including fixed deposits, immovable properties, shares of other companies, and monetization of aircraft. No security was left unenforced once the loans were recalled, demonstrating that YBL acted as a bonafide secured creditor. 171. Attention of this Court has also been drawn to the Frequently Asked Question (FAQs) on SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The relevant FAQ, which was deleted on 03.09.2019, prior to its omission read as under:- "Whether furnishing of a Non Disposal Undertaking (NDU) by promoters to the lenders would be covered under disclosures of "Encumbered shares" by promoters of the Tar....
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....itory participant M/s Indiabulls Ventures Limited (now known as Indiabulls Limited) were encumbered shares. 178. It is stated that 2,27,10,980 shares of FHL were pledged vide pledge agreements dated 03.12.2016 and 28.04.2017. It is stated that 30,59,260 shares were encumbered by pledge which was created on 14.08.2017 over shares held in lien and 21,29,760 shares were sold by using the Power of Attorney. It is stated that no other shares other than the shares which were specifically held in the demat account have been sold and requisite information has been made in the depositories. It is stated that the Apex Court vide Order dated 15.11.2019 held Indiabulls Housing Finance Limited for contempt and directed to deposit an amount of Rs.17.93 crore which were deposited by Indiabulls Limited, therefore, nothing else survives against the bank. SUBMISSIONS OF MR. ASHIM VACHHER, LEARNED SENIOR ADVOCATE ON BEHALF OF ECL FINANCE LIMITED 179. Learned Senior Counsel for the ECL Finance Limited submits that the Agreement for Pledge shows an intention to create pledge which provides a contractual right in favour of the pledgee and an obligation to create a pledge on behalf of the Pledgo....
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....es that Regulation 28(3) of the above SAST Regulations, gives a wide and inclusive definition of 'encumbrance as, "it shall include pledge, lien, or any such transaction, by whatever name called." 186. It is submitted that the creation and maintenance of the pledge over the shares of FHL was governed by the respective Pledge Agreements, which obligated the pledgor to create and maintain the pledge in favour of ECL as security for the loan facilities. The agreements further required the pledgor to maintain the stipulated security cover of 1.75x, 1.70x or 2x, as applicable, in terms of Clause 2.8 read with Schedule I. Consequently, where the security cover fell below the prescribed threshold, the pledgor was contractually obliged to provide additional shares by way of top-up security, while pledged shares were released upon restoration of the requisite margin or repayment of the underlying facilities. 187. It is further submitted that the pledge over the dematerialised shares was created in accordance with the prescribed statutory and depository framework, thereby resulting in a valid and legally enforceable encumbrance in favour of ECL. It is contended that all such pledge....
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....Award and the proceedings for execution commenced in the year 2016 itself. Since then, almost a decade has elapsed and the execution proceedings are still pending. 194. At the time when the Award was passed, the Judgment Debtors had substantial assets to satisfy the decretal amount. The principal sum awarded under the Award was roughly about Rs. 2,500 Crores. As of now, according to the Judgment Debtors, there are hardly any assets left to fulfil the decree, meaning thereby, the amount available for satisfying the decree has been dissipated consistently, leading to the present application, which is one for conduct of a forensic audit to unearth as to how the assets of the Judgment Debtors have consistently being eroded despite repeated undertakings and Stay Orders. The forensic audit would help in unearthing as to how, and who all have aided and abetted, the constant erosion of the assets of the Judgment Debtors, and in what manner the assets have been eroded, and how the orders of the Court have been flouted. In these peculiar situations, the Courts cannot be mere silent spectator and throw out their hands in vain and say nothing can be done. This would actually be the death kn....
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....l be freely transferable: Provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract." 198. A bare perusal of the provision, and the proviso itself shows that if a Contract is made for the transfer of certain securities, the freely tradeable nature of the shares would go away. Certainly, an assurance or undertaking to a Constitutional Court of this Country must be kept on a higher pedestal than a contract between the parties, and would alter the status of the shares to be ones which ought not to be transferred. 199. In this scenario, this Court reminds itself of the observations made by the Apex Court in State of U.P. v. Renusagar Power Co., (1988) 4 SCC 59, where the Apex Court has observed "It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding". 200. The Apex Court in ArcelorMittal....
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....nce been held that the corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for who they are in certain exceptional circumstances. Pennington in his Company Law (4th Edn.) states: 'Four inroads have been made by the law on the principle of the separate legal personality of companies. By far the most extensive of these has been made by legislation imposing taxation. The government, naturally enough, does not willingly suffer schemes for the avoidance of taxation which depend for their success on the employment of the principle of separate legal personality, and in fact legislation has gone so far that in certain circumstances taxation can be heavier if companies are employed by the taxpayer in an attempt to minimise his tax liability than if he uses other means to give effect to his wishes. Taxation of companies is a complex subject, and is outside the scope of this book. The reader who wishes to pursue the subject is referred to the many standard textbooks on corporation tax, income tax, capital gains tax and capital transfer tax. The other inroads on the principle of separate corporate personality have been ....
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.... who may be affected, etc." (emphasis supplied) 34. This statement of the law was followed in Union of India v. ABN Amro Bank [Union of India v. ABN Amro Bank, (2013) 16 SCC 490], at paras 43 and 44 as follows : (SCC pp. 519-20) "43. We are of the view that in a given situation the authorities functioning under FERA find that there are attempts to overreach the provision of Section 29(1)(a), the authority can always lift the veil and examine whether the parties have entered into any fraudulent, sham, circuitous device so as to overcome statutory provisions like Section 29(1)(a). It is trite law that any approval/permission obtained by non-disclosure of all necessary information or making a false representation tantamount to approval/permission obtained by practising fraud and hence a nullity. Reference may be made to the judgment of this Court in Union of India v. Ramesh Gandhi [Union of India v. Ramesh Gandhi, (2012) 1 SCC 476 : (2012) 1 SCC (Civ) 295 : (2012) 1 SCC (Cri) 467 : (2012) 2 SCC (L&S) 508] . 44. Even in Escorts case [LIC v. Escorts Ltd., (1986) 1 SCC 264], this Court has taken the view that it is neither necessary nor desirable to enumerate t....
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....ound the six principles formulated by Munby, J. in Ben Hashem v. Ali Shayif [Ben Hashem v. Ali Shayif, 2008 EWHC 2380 (Fam) : (2009) 1 FLR 115] . The six principles, as found at paras 159-64 of the case are as follows: (i) Ownership and control of a company were not enough to justify piercing the corporate veil; (ii) The court cannot pierce the corporate veil, even in the absence of third-party interests in the company, merely because it is thought to be necessary in the interests of justice; (iii) The corporate veil can be pierced only if there is some impropriety; (iv) The impropriety in question must be linked to the use of the company structure to avoid or conceal liability; (v) To justify piercing the corporate veil, there must be both control of the company by the wrongdoer(s) and impropriety, that is use or misuse of the company by them as a device or facade to conceal their wrongdoing; and (vi) The company may be a "façade" even though it was not originally incorporated with any deceptive intent, provided that it is being used for the purpose of deception at the time of the relevant transactions. The court would, ....
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....uct, the involvement of the element of the public interest, the effect on parties who may be affected, etc.'" 36. Similarly in DDA v. Skipper Construction Company (P) Ltd. [DDA v. Skipper Construction Company (P) Ltd., (1996) 4 SCC 622], this Court held : (SCC pp. 637-39, paras 24-28) "24. In Salomon v. A. Salomon & Co. Ltd. [Salomon v. A. Salomon & Co. Ltd., 1897 AC 22 (HL)] the House of Lords had observed : (AC p. 51) '[the] company is at law a different person altogether from the subscribers ...; and, though it may be that after incorporation the business is precisely the same as it was before, the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by that Act.' Since then, however, the courts have come to recognise several exceptions to the said rule. While it is not necessary to refer to all of them, the one relevant to us is "when the corporate personality is being blatantly used as a cloak for fraud or improper conduct". [Gower : Modern C....
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....r some illegal or improper purpose.... Where a vendor of land sought to avoid the action for specific performance by transferring the land in breach of contract to a company he had formed for the purpose, the court treated the company as a mere "sham" and made an order for specific performance against both the vendor and the company.' Similar views have been expressed by all the commentators on the Company Law which we do not think necessary to refer to. 26. The law as stated by Palmer and Gower has been approved by this Court in Telco Ltd. v. State of Bihar [Telco Ltd. v. State of Bihar, (1964) 6 SCR 885 : AIR 1965 SC 40] . The following passage from the decision is apposite : (AIR p. 47, para 27) '27. ... Gower has classified seven categories of cases where the veil of a corporate body has been lifted. But, it would not be possible to evolve a rational, consistent and inflexible principle which can be invoked in determining the question as to whether the veil of the corporation should be lifted or not. Broadly stated, where fraud is intended to be prevented, or trading with an enemy is sought to be defeated, the veil of a corporation is lifted by judici....
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....ale of the shares, and that it was wholly unaware of the actions of Judgment Debtors No. 1 and 6, who, at the relevant time, exercised complete control over the promoter holding structure and indirectly held more than 70% of the shareholding in FHL. This submission, however, cannot be accepted at this stage. The very purpose of piercing the corporate veil is to ascertain whether the corporate personality was merely a legal facade concealing the acts of those who were, in reality, directing and controlling the affairs of the company. If FHL functioned as the alter ego or instrumentality of Judgment Debtors No. 1 and 6, its plea of complete ignorance cannot be accepted at face value without first undertaking a factual enquiry. The question is not whether FHL has, at this stage, been complicit in the impugned transactions, but whether the corporate structure was utilised to facilitate the systematic dissipation of the promoter shareholding which constituted one of the principal assets available for satisfaction of the Award. The unencumbered promoter shareholding, which was capable of being proceeded against in execution, stood progressively alienated through a series of transactions ....
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....ing transparent disclosure of the policy formulated in sub-regulation (1)." "9.(4) For the purpose of sub regulation (1) and (2), the board of directors or such other analogous authority shall in consultation with the compliance officer specify the designated persons to be covered by the code of conduct on the basis of their role and function in the organisation and the access that such role and function would provide to unpublished price sensitive information in addition to seniority and professional designation and shall include:- ***** (iv) All promoters of listed companies and promoters who are individuals or investment companies for intermediaries or fiduciaries;" 204. Material on record discloses that there were analogous provisions mentioned in the old PIT Regulations which were applicable at the time of transactions that led to dissipation of shares. The relevant provisions are reproduced hereunder: "Code of Fair Disclosure. 8. (1) The board of directors of every company, whose securities are listed on a stock exchange, shall formulate and publish on its official website, a code of practices and procedures for fair disclosure ....
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....and market intermediaries that are required to handle unpublished price sensitive information to formulate a code of conduct governing trading in securities by their employees. These entities include professional firms such as auditors, accountancy firms, law firms, analysts, consultants etc., assisting or advising listed companies, market intermediaries and other capital market participants. Even entities that normally operate outside the capital market may handle unpublished price sensitive information. This provision would mandate all of them to formulate a code of conduct. (3) Every listed company, market intermediary and other persons formulating a code of conduct shall identify and designate a compliance officer to administer the code of conduct and other requirements under these regulations. NOTE: This provision is intended to designate a senior officer as the compliance officer with the responsibility to administer the code of conduct and monitor compliance with these regulations." 205. In compliance of these Regulations, FHL has brought out a policy/code of conduct. The code of conduct as brought out by the FHL shows that the objective of the code of c....
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....his immediate relative or banker of the company, has more than ten per cent of the holding or interest; (iii) Employees and other persons as notified by the Promoter Group Companies from time to time. This definition is also intended to bring into its ambit persons who may not seemingly occupy any position in a company but are in regular touch with the company and its officers and are involved in the know of the company's operations. It is intended to bring within its ambit those who would have access to or could access unpublished price sensitive information about any company or class of companies by virtue of any connection that would put them in possession of unpublished price sensitive information." (emphasis supplied) 206. The Judgment Debtors No.1 and 6 at the relevant time when the assurances were given till February, 2018 were Connected Persons being the Chairman and Vice-Chairman, and also the Managing Director and Director of FHL respectively. 207. Clause (e) of the 'Definitions' defines 'Designated Employees' to reads as under:- "(e) "Designated Employees" in relation to Company shall include - i. Managing Director and Whole-t....
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....ndia (Issue of Capital and Disclosure Requirements) Regulations, 2009 or any modification thereof; xxx (p) "Trading" / Dealing in Securities means and includes subscribing, buying, selling, dealing, or agreeing to subscribe, buy, sell, deal in any securities, and "trade" shall be construed accordingly; Under the parliamentary mandate, since the Section 12A(e) and Section 15G of the Act employs the term 'dealing in securities', it is intended to widely define the term "trading" to include dealing. Such a construction is intended to curb the activities based on unpublished price sensitive information which are strictly not buying, selling or subscribing, such as pledging etc. when in possession of unpublished price sensitive information. xxx (r) "Unpublished Price Sensitive Information" ('UPSI') means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following:- (i) financial results; ....
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....yees and also an obligation to maintain a list of securities which were not allowed to be traded. The relevant extract of the Regulations is reproduced hereunder: "3.1 Trading Window 3.1.1 The Company shall specify a trading period, to be called "Trading Window", for trading in the Company's securities. When the Trading Window is closed, all Designated Employees (including their immediate relatives) shall not trade in the Company's securities in such period. The trading window shall be closed during the time the information referred to in para 3.1.3 is unpublished. 3.1.2 The Trading Window is also applicable to any person having contractual or fiduciary relation with the Company, such as auditors, accountancy firms, law firms, analysts, consultants etc., assisting or advising the Company. 3.1.3 The trading window shall be, inter alia, closed:" (a) From the date of announcement of Board Meeting for Declaration of financial results; (b) From the date of announcement of Board Meeting for Declaration of Dividends; (c) From the date of announcement of Board Meeting held to approve change in Capital Structure or further issua....
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....arance should be submitted to Compliance Officer at least two trading days prior to the trade and Compliance Officer to dispose-off / clear the application within 1 trading day from the receipt of the application. However, if no communication is received from the Compliance Officer within 1 trading day, the application for pre-clearance shall be deemed to be rejected. In case, the applicant is not satisfied with the decision of the Compliance Officer or no communication received within 1 trading day of submitting the application, he may appeal to the Chairman of the Company immediately, who shall dispose-off such appeal within 1 trading day of the receipt of such application and the Chairman's decision shall be final and binding on the applicant. 3.2.4 The Compliance Officer shall have a right to revoke any clearance granted to any transaction or add further additional restrictions to any clearance, before the relevant transaction has been executed. 3.2.5 Trades of the Compliance Officer which requires pre-clearance in terms of the above shall be approved by the Chairman of the Company and the responsibilities with regard to Compliance Officer shall lie on the Cha....
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....red by the Compliance Officer before the execution of any transaction. On the other hand, FHL contends that JD No. 1 and 6 fall outside these definitions because the shares were technically held by FHHPL, making FHHPL the statutory promoter entity. According to FHL, at the time the shares were sold, they were held exclusively by this promoter entity rather than the Judgment Debtors personally. FHL further argues that promoter entities did not fall within the ambit of Designated Employees at the time of these transactions, rendering the regulations inapplicable to the sale. This contention though very attractive does not merit acceptance keeping in mind the shareholding and control of JD No.1, JD No.6 and other Judgment Debtors in FHHPL. 214. Moreover, the contention of FHL overlooks the wider statutory conception of a "Promoter" under the SEBI regulatory framework. Regulation 2(1)(oo) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, defines a "promoter" to include, inter alia, any person who is in control of the issuer, whether such control is exercised directly or indirectly. The said Regulation reads as under:- "2(1) (oo)"promoter" shall i....
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....m or for the mutual fund sponsored by them;" (emphasis supplied) 216. The regulatory framework, therefore, recognises not merely the immediate shareholder or promoter entity but also the natural persons who ultimately exercise control over the issuer company through intermediate corporate vehicles. It is an admitted position that FHHPL was wholly controlled by Judgment Debtors Nos. 1 and 6 through their downstream entities and functioned merely as the promoter holding entity of FHL. Consequently, Judgment Debtors Nos. 1 and 6 continued to remain within the ambit of the promoter framework recognised under the SEBI regulations notwithstanding that the shares stood registered in the name of FHHPL. 217. The expression 'control' is defined in Section 2(27) of the Companies Act, 2013. The relevant extract is reproduced hereunder: "(27)"control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other ....
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....d that the FHL Policy lays down the requirements and procedure to be followed by Designated Persons to receive the prior approval of FHL before trading in securities which would include 'creation of pledge', 'invocation of pledge' and 'revocation of pledge' of shares. It is stated that the Compliance Officer is responsible for pre-clearance and has to report to the Board and provide reports on the pre-clearances. The pre-clearance is required where one transaction or a series of transactions exceeds Rs. 10,00,000/- cumulatively in any calendar quarter. The Designated Employees have to submit to the Compliance Officer an application under Form-II and that application has to be disposed of by the Compliance Officer whereafter, the Compliance Officer proceeds to issue pre-clearance order under Form-II agreeing or rejecting the request of the Designated Employees. Only after the clearance of the Compliance Officer, the Designated Persons can execute the transaction. On the other hand, Ld. Senior Counsels for FHL have stated that FHHPL was not a designated employee and therefore, was not required to undergo any of these steps, on the date of the transactions. 222. The aforesaid conte....
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....ore not responsible, such an argument does not merit acceptance. The JDs were essentially the company itself, acting as the majority shareholders and holding the position of Managing Director and Director, which precludes the company from hiding behind a corporate veil. The Company cannot simply throw off its hands and evade liability by claiming that it is an independent juristic person. 224. In order to ascertain the exact role and complicity of the Compliance Officer, or other officer(s) of FHL in the sale of FHL shares of JD No. 1 and 6 held by them through FHHPL, a forensic audit is warranted. 225. It has specifically been pleaded by FHL that the company, being a separate entity from the JDs, did not have any knowledge of the assurances given by these JDs. This argument does not merit acceptance. JD No. 1 and JD No. 6 served as the Managing Director and Director of the company, and were also its majority stakeholders, and therefore, the heart, soul and brain and the decision makers of FHL. Their personal knowledge is directly attributable to the knowledge of the company. In the opinion of this Court, the facade and charade of distinct bodies has been played for evading t....
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....losed to the stock exchange(s) and as well as on the listed entity's website. (6) The listed entity shall first disclose to stock exchange(s) of all events, as specified in Part A of Schedule III, or information as soon as reasonably possible and not later than twenty four hours from the occurrence of event or information: Provided that in case the disclosure is made after twenty four hours of occurrence of the event or information, the listed entity shall, along with such disclosures provide explanation for delay: Provided further that disclosure with respect to events specified in sub-para 4 of Para A of Part A of Schedule III shall be made within thirty minutes of the conclusion of the board meeting. (7) The listed entity shall, with respect to disclosures referred to in this regulation, make disclosures updating material developments on a regular basis, till such time the event is resolved/closed, with relevant explanations. (8) The listed entity shall disclose on its website all such events or information which has been disclosed to stock exchange(s) under this regulation, and such disclosures shall be hosted on the website of the listed....
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....it or consolidation of shares, buyback of securities, any restriction on transferability of securities or alteration in terms or structure of existing securities including forfeiture, reissue of forfeited securities, alteration of calls, redemption of securities etc. 3. Revision in Rating(s). 4. Outcome of Meetings of the board of directors: The listed entity shall disclose to the Exchange(s), within 30 minutes of the closure of the meeting, held to consider the following: a) dividends and/or cash bonuses recommended or declared or the decision to pass any dividend and the date on which dividend shall be paid/dispatched; b) any cancellation of dividend with reasons thereof; c) the decision on buyback of securities; d) the decision with respect to fund raising proposed to be undertaken e) increase in capital by issue of bonus shares through capitalization including the date on which such bonus shares shall be credited/dispatched; f) reissue of forfeited shares or securities, or the issue of shares or securities held in reserve for future issue or the creation in any form or manner of new shares or securities or ....
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....mination of awarded/bagged orders/contracts not in the normal course of business. 5. Agreements (viz. loan agreement(s) (as a borrower) or any other agreement(s) which are binding and not in normal course of business) and revision(s) or amendment(s) or termination(s) thereof. 6. Disruption of operations of any one or more units or division of the listed entity due to natural calamity (earthquake, flood, fire etc.), force majeure or events such as strikes, lockouts etc. 7. Effect(s) arising out of change in the regulatory framework applicable to the listed entity 8. Litigation(s) / dispute(s) / regulatory action(s) with impact. 9. Fraud/defaults etc. by directors (other than key managerial personnel) or employees of listed entity. 10. Options to purchase securities including any ESOP/ESPS Scheme. 11. Giving of guarantees or indemnity or becoming a surety for any third party. 12. Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals. C. Any other information/event viz. major development that is likely to affect business, e.g. emergence of new technologies, ex....
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.... amount and failure to create a charge on the assets; (5) any change in the form or nature of any of its non-convertible debt securities or non-convertible redeemable preference shares that are listed on the stock exchange(s) or in the rights or privileges of the holders thereof and make an application for listing of the securities as changed, if the stock exchange(s) so require; (6) any changes in the general character or nature of business / activities, disruption of operation due to natural calamity, and commencement of commercial production / commercial operations; (7) any events such as strikes and lock outs. which have a bearing on the interest payment/ dividend payment / principal repayment capacity; (8) details of any letter or comments made by debenture trustees regarding payment/non-payment of interest on due dates, payment/non-payment of principal on the due dates or any other matter concerning the security, listed entity and /or the assets along with its comments thereon, if any; (9) delay/ default in payment of interest or dividend / principal amount /redemption for a period of more than three months from the due date; ....
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....r other jurisdictions where its securities may be listed or other stock exchange(s) in its home country or other jurisdictions where its securities may be listed including: (1) any action or investigations initiated by any regulatory or statutory authority and the purpose for which it was initiated. (2) any attachment or prohibitory orders restraining the listed entity from transferring securities out of the names of the registered holders and particulars of the registered holders thereof. (3) the meeting of the board of directors which has been held to consider or decide on the following : (a) all dividends and/or cash bonuses recommended or declared or the decision to pass any dividend or cash bonus; (b) the total turnover, gross profit/loss, provision for depreciation, tax provisions and net profits for the year (with comparison with the previous year) and the amounts appropriated from reserves, capital profits, accumulated profits of past years or other special source to provide wholly or partly for any dividend, even if this calls for qualification that such information is provisional or subject to audit; (c) the recommenda....
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....r any class of them and proceedings at all such meetings; (11) any other information necessary to enable the IDR Holders to appraise the listed entity's position and to avoid the establishment of a false market in IDRs; B. The listed entity shall, apart from complying with all specific requirements as above, intimate the stock exchange(s) immediately of events such as strikes, lock outs, closure on account of power cuts, etc. and other material events or price sensitive information or events which shall have a material bearing on the performance / operations of the listed entity both at the time of occurrence of the event and subsequently after the cessation of the event at the same time and as to the extent that it discloses to holders of securities in its home country or in other jurisdictions where such securities are listed; C. In addition to above, the listed entity shall disclose to the stock exchange(s), any information which is disclosed to any other overseas stock exchange(s) or made public in any other overseas securities market, on which its securities may be listed or quoted, simultaneously with such disclosure or publication, or as soon there....
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....uch listed securities or any other information having bearing on the operation/performance of the listed entity as well as price sensitive information." (emphasis supplied) 227. The aforesaid Regulation requires disclosures to be made by a listed company. The disclosures are broadly classified into two categories: those disclosures which must compulsorily be made, and other disclosures that are to be made in the event they are material to the operations of the company. Regulation 30 has to be read in tandem with Schedule III of the PIT Regulations, which provides for a variety of situations in which disclosures have to be made by the company to the stock exchange. A bare cursory glance over Schedule III indicates several instances that would have required the company to actively make disclosures to the stock exchange about the change in shareholdings of JD No. 1 and JD No. 6 through their various holding companies. If the company has made disclosures they were obviously fully aware of the transactions that took place. This Court takes judicial notice of the fact that the present dispute is one of the most high profile foreign arbitrations that has come to India, and the same ....
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....sclosure reported to exchange on 20.07.2017 @Pg. 85 Disclosure not available as threshold not triggered. 5. 18.07.2017 Disposal 54,00,000 DH: A4, Disclosure reported to exchange on 11.08.2017 @Pg. 83 Disclosure not available even though the threshold was triggered 6. 18.07.2017 Disposal 1,31,50,000 DH: A4, Disclosure reported to exchange on 21.07.2017 @Pg. 84 DH: A4, Disclosure dated 20.07.2017 @Pg. 126-129 NOTE: The disclosure states that the number of shares transferred is 1,35,09,330. 7. 25.07.2017 Disposal 17,25,000 DH: A4, Disclosure reported to exchange on 27.07.2017 @Pg. 84 Disclosure not available as threshold not triggered. 8. 26.07.2017 Disposal 18,08,000 DH: A4, Disclosure reported to exchange on 31.07.2017 @Pg. 83 Disclosure not available as threshold not triggered. 9. 27.07.2017 Disposal 20,00,000 DH: A4, Disclosure reported to exchange on 31.07.2017 @Pg. 84 Disclosure not available as threshold not triggered. 10. 08.08.2017 Disposal 1,95,000 DH: A4, Disclosure reported to exchange on 11.08.2017 @Pg. 83 Disclosure not available as threshold not triggered....
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....rly, according to Judgment Debtor No.1, the transaction mentioned at Serial No. 6 for 1,31,50,000 shares have been disposed of at the behest of financial institutions of two lenders i.e., Edelweiss and Birla Sun Mutual Fund. According to Judgment Debtor No.1, out of 1,35,09,330 shares, 86,00,000 shares were disposed of by Edelweiss and 49,09,330 shares were disposed of by Birla Sun Mutual Fund. 233. Further, during the course of hearing, JD No. 1 has attempted to demonstrate from contemporaneous disclosures and records that the lion's share of the reduction of Apex Court identified figure of 3.26 Crores is on account of fresh pledge creation on 20.07.2017 by Yes Bank Limited on 2,98,15,406 unencumbered shares. It is the contention of the Judgment Debtors that these transactions by themselves materially undermine the Decree Holder's assertion that the entire reduction pertained to allegedly unencumbered shares disposed of through the alleged 11 transactions. 234. It is stated by the Judgment Debtors that the assertions made by the Decree Holder are wholly misconceived, speculative and based on conjectures rather than verified facts and are contrary to the contemporaneous recor....
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....ld more than 70 percent of the shares of FHL. JD No. 1 and 6 retired in March 2018, by which time the shares of FHHPL in FHL were reduced to 27,31,367, dwindling the 70 percent shareholding to less than 1 percent in the wake of solemn assurances given to this Court. 238. Further, in face of the contrary stance of the Banks and the Judgment Debtors regarding the status of encumbrance over the shareholding of FHHPL in FHL, it is necessary to direct a Forensic Audit to find out the real quantum of shares that were encumbered. Such exercise will assist in determining whether the JD No. 1 and 6 actually ever held 5.26 Crore unencumbered shares, or was that submission only a deceit, to pull wool over the eyes of this Court in order to evade the Decree. 239. The Apex Court in Daiichi Sankyo Co. Ltd. v. Oscar Investments Ltd., (2023) 7 SCC 641 has desired the conduct of forensic audit for a factual analysis of the situation. The relevant portion reads as under: "33. That takes us to the next set of questions regarding the role played by the noticee banks and financial institutions. With the assistance of the learned counsel appearing for the parties we made an attempt to go ....
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....ion of proprietary interests in hospitals and diagnostics centres at a price of Rs 4666 crores by FHL is concerned, facts on record are not quite adequate to enter into such arena. Prima facie, it appears to be acquisition of proprietary interest to subserve the business structure of FHL as suggested by IHH/NTK. But again, that is a matter to be enquired into and facts to be assessed in the light of any forensic analysis, if the court so deems appropriate." 240. It is necessary to bear in mind the distinction between directing a forensic audit and adjudicating civil liability. A direction for forensic audit is purely investigative in nature and is intended to facilitate the discovery and reconstruction of facts which may not otherwise be available on the existing record. Such a direction neither enlarges the scope of the decree nor results in the fastening of liability upon the entity whose affairs are directed to be examined. The opinion of the Auditor is expert evidence in terms of Section 39 of Bharatiya Sakshya Adhiniyam, 2023, which will enable the executing court to take appropriate steps to undo the wrongs committed, if any, by persons who have aided and abetted and indul....
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....e market value of FHL. This Court did not attach the shares, or pass any orders because of the value of the shares of FHL would have been adversely affected. It is to be borne in mind that the underlying assets of JD No. 1 and 6 were actually the shares of FHL held by the Judgment Debtors themselves and through FHHPL as all other companies did not have any value of their own. Till now this Court has not been informed about the businesses of any of the Judgment Debtor's downstream companies. The very same argument now raised by FHL that ordering a forensic audit will adversely affect FHL cannot be accepted. FHL cannot create an artificial distinction between its old Avatar and new Avatar. Only the management has changed, but the company remains the same. This Court takes judicial notice of the fact that at the time when the new management took over FHL they would be aware of the high profile litigation and its likely adverse impact on the value of FHL at a later point of time. In any case it is settled that the change of management of the company does not affect its rights and liabilities, and liabilities incurred by the old management are inherited by the new management. 244. Th....
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....y arising in the present proceedings. 248. Even if the Court accepts the argument that FHL was in fact a third party to the present execution proceedings, even such third party is bound by the orders of the Court in case such third party assisted in aiding and abetting the Judgement Debtors in flouting Court Orders. 249. The Apex Court in Sita Ram v. Balbir, 2017 (2) SCC 456, has held as under:- "32. From the record and the Enquiry Report as stated above, it is clear that soon after the order dated 24-10-2013 [Sita Ram v. Balbir, (2014) 13 SCC 489 : (2014) 5 SCC (Cri) 722] passed by this Court, the respondent remained admitted in the hospital for a total of 527 days. Nothing has been placed on record, nor any medical condition or reasons have been adverted to why such admission was required in the first place. As found in the enquiry, no laboratory test was conducted during the period of admission from 25-2-2014 to 12-4-2014 and from 12-4-2014 to 1-5-2015. This shows that the illness as projected was not serious at all and no intensive treatment as indoor patient was required or called for. This prolonged admission without any justifiable medical reason was essential....
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....the period from 15-2-2014 to 1-5-2015. The papers produced on record do not in any way suggest any medical emergency which could justify continued admission of the respondent as an indoor patient. Further, during the third admission of the respondent from 12-4-2014 the first payment to the hospital was made only on 10-1-2015 i.e. nearly after 247 days. It is inconceivable that in normal circumstances a man, who has no ailment or a medical condition requiring emergency treatment would be kept as indoor patient without any laboratory test and without recovering a single paisa for more than 247 days. Moreover, the record indicates that on as many as 47 occasions during his admission the respondent was allowed to move out of the hospital without even an endorsement by any medical professional justifying such movement. The Enquiry Report further shows that there used to be regular stream of visitors during the stay of the respondent in the hospital. These features clearly show that the respondent was in perfect condition of health and never really required admission in the hospital as an indoor patient. The role of the hospital was certainly not as innocent as is sought to be projected ....
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.... opportunity i.e. when requisition was made by the police on 13-2-2015, the hospital would have responded immediately. The requisition dated 13-2-2015 had informed the hospital that the respondent was a proclaimed offender and that his custody was required. This requisition was close on the heels of the medical certificate dated 7-2-2015 and if that certificate was a correct one, the time was ripe for discharge of the respondent. However, as stated by Shashank Anand in his affidavit dated 2-7-2015, the hospital refused to discharge the respondent. The theory that the hospital was trapped by the designs of the respondent is a mere eyewash and we reject the same. Thus, the inescapable conclusion is that the hospital extended protection and asylum to the respondent to defeat the order passed by this Court as well as those passed by the trial court and thereby obstructed administration of justice. 38. Dr Munish Prabhakar has been Medical Director of the hospital and as submitted by the learned Senior Counsel on his behalf, he receives salary and some percentage of consultation charges recovered from the patients. Dr K.S. Sachdev, on the other hand, has been the Managing Direct....
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....who is not bound by a direction issued by the court could be held guilty for committing contempt of court for his conduct in either directly aiding and abetting violation on the part of the person who is bound by such direction; and (2) what is the extent of liability of such person. 42. In Seaward v. Paterson [Seaward v. Paterson, (1895-99) All ER Rep 1127 : (1897) 1 Ch 545 (CA)] the landlord of the premises concerned had obtained an injunction against Paterson i.e. his tenant restraining him from doing or allowing to be done anything on the premises which would be a nuisance to the landlord and from using the premises otherwise than for the purposes of a private club. Alleging that the tenant had committed contempt of the court by allowing the premises to be used for boxing matches, the landlord applied for committal of two other persons, namely, Sheppard and Murray on the ground that they had aided and assisted the tenant in his disobedience to the injunction. The following passages from the judgment of Lindley, L.J. are quite instructive : (All ER pp. 1130 F-G & 1131 B-D) Now, Let us consider what jurisdiction the court has to make an order against Murray. The....
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.... third party will also be liable if he knowingly assists in the breach, that is to say if knowing the terms of the injunction he wilfully assists the person to whom it was directed to disobey it. This will be so whether or not the person enjoined has had notice of the injunction. *** I will give my reasons for the second proposition and take first the question of prior notice to the defendant. It was argued that the liability of the third person arose because he was treated as aiding and abetting the defendant (i.e. was an accessory) and as the defendant could himself not be in breach unless he had notice it followed that there was no offence to which the third party could be an accessory. In my opinion this argument misunderstands the true nature of the liability of the third party. He is liable for contempt of court committed by himself. It is true that his conduct may very often be seen as possessing a dual character of contempt of court by himself and aiding and abetting the contempt by another, but the conduct will always amount to contempt by himself. It will be conduct which knowingly interferes with the administration of justice by causing the order of the....
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.... should not be applied to the situation in this case. I do not accept the proposition that to apply established principles in the foregoing circumstances would effectively be to convert every injunction from an order in personam to an order contra mundum. That proposition ignores the distinction between the breach of an order by the person named therein and interference with the course of justice resulting from a frustration of the order by the third party." 46. In our view, the medical professionals, namely, Dr Munish Prabhakar and Dr K.S. Sachdev extended medical asylum to the respondent without there being any reason or medical condition justifying prolonged admission of the respondent as an indoor patient as a cover to defeat the orders passed by this Court and the trial court, as stated above and thereby aided and assisted the respondent in violating the order of this Court. By such conduct these medical professionals have obstructed administration of justice. 47. We thus hold that the respondent is guilty of having violated the order dated 24-10-2013 [Sita Ram v. Balbir, (2014) 13 SCC 489 : (2014) 5 SCC (Cri) 722] passed by this Court and for having obstruct....
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.... Court in the past. We need only cite the leading judgment on the point. 22. Without verbiage, we straightaway refer to the dicta enunciated by a learned 3-Judge Bench in Sita Ram v. Balbir @ Bali, (2017) 2 SCC 456 : (2017) 2 SCC (Cri) 88: '40. Wilful disobedience to a direction issued by this Court on 24-10-2013 [Sita Ram v. Balbir, (2014) 13 SCC 489 : (2014) 5 SCC (Cri) 722] on the part of the respondent is quite evident. He was party to the proceedings and bound by the order and as such his liability on that court stands established. Further, by his defiance of the direction so issued, he also obstructed administration of justice. He is thus liable for committing civil contempt as well as criminal contempt. But the medical professionals, namely, Dr Munish Prabhakar and Dr K.S. Sachdev were not parties to the matter where the direction in question was passed. 41. As regards the liability of the aforesaid medical professionals, questions that arise are : (1) whether a person, who is not bound by a direction issued by the court could be held guilty for committing contempt of court for his conduct in either directly aiding and abett....
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..... In the other case, the court will not allow its process to be set at naught and treated with contempt. 43. In Z Ltd. v. A-Z and AA-LL [Z Ltd. v. A-Z and AA-LL, [1982] 1 All ER 556 : [1982] Q.B. 558 : [1982] 2 WLR 288 (CA)] the plaintiff had obtained injunction against certain defendants and the assets of one such defendant against whom the injunction was granted, were held by a bank. The bank was served with a copy of the injunction but the defendant concerned had not yet been served. While considering the question whether any disposal of assets belonging to the defendant by the bank would make it liable for committing contempt of court, it was stated as under : (All ER pp. 566g-j & 567a-b) "I think that the following propositions may be stated as to the consequences which ensue when there are acts or omissions which are contrary to the terms of injunction : (1) The person against whom the order is made will be liable for contempt of court if he acts in breach of the order after having notice of it. (2) A third party will also be liable if he knowingly assists in the breach, that is to say if knowing the terms of the injunction he wilfully assists the person to ....
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....llett injunctions was to prevent the publication of any such material pending the trial of the confidentiality actions. The consequence of the publication of Spycatcher material by the publishers and editor of The Sunday Times before the trial of the confidentiality actions was to nullify, in part at least, the purpose of such trial, because it put into the public domain, part of the material which it was claimed by the Attorney General in the confidentiality actions ought to remain confidential. It follows that the conduct of the publishers and editor of The Sunday Times constituted the actus reus of impeding or interfering with the administration of justice by the court in the confidentiality actions." 45. In a separate concurring opinion Lord Jauncey of Tullichettle stated as under: (Attorney General case [Attorney General v. Times Newspapers Ltd., [1991] 2 All ER 398 : [1992] 1 A.C. 191 : [1991] 2 WLR 994 (HL)], All ER p. 426j) "I turn to consider whether there is any reason why established principle should not be applied to the situation in this case. I do not accept the proposition that to apply established principles in the foregoing circumstances would eff....
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....ires to be stated on the factual matrix. In any event, we are bound by Sita Ram (supra), which squarely applies herein." (emphasis supplied) 251. As stated earlier, the Court cannot throw up its hands in despair and state that even if its Orders have been flouted, it cannot remedy the wrong other than by punishing the wrongdoers with imprisonment. If such a situation were to take place, the Courts would lose their standing, and the common man would not believe in the efficacy of the justice system. The present case concerns the execution of a foreign award, and India cannot be made to look like a country where Courts of law can be taken for a ride by clever judgment debtors relying upon complex corporate structures and feigning ignorance, especially when they were fully aware of making calculated decisions to defeat the interests of the Decree Holder. 252. Either way, though these cases are of contempt and not in execution, the complicity of FHL would be a relevant factor for this Court to decide to proceed for contempt against FHL. Though The Apex Court in Pallav Sheth v. Custodian & Ors., (2001) 7 SCC 549 has held that contempt cannot be initiated beyond the period of on....
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....aw. This Court in the case of Kartick Chandra Das [(1996) 5 SCC 342] has held that by virtue of Section 29(2) read with Section 3 of the Limitation Act, limitation stands prescribed as a special law under Section 19 of the Contempt of Courts Act, 1971 and in consequence thereof the provisions of Sections 4 to 24 of the Limitation Act stand attracted. 47. Section 17 of the Limitation Act, inter alia, provides that where, in the case of any suit or application for which a period of limitation is prescribed by the Act, the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of the defendant or his agent [Section 17(1)(b)] or where any document necessary to establish the right of the plaintiff or the applicant has been fraudulently concealed from him [Section 17(1)(d)], the period of limitation shall not begin to run until the plaintiff or the applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it; or in the case of a concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production. These provisions embo....
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....k note of the application filed by FHL stating that the transaction had been completed on 13.11.2018 and seeking modification of the order dated 14.12.2018 insofar as it related to the sale of the controlling stake. 256. The Apex Court further took note of the submissions that FHL proposed to transfer approximately Rs. 4,000 crores, stated to have been received pursuant to the transaction, to RHT Health Trust, Singapore. It was also noticed that the acquisition of assets from RHT had been completed while the matter was pending before the Apex Court. In view of these developments, the Apex Court considered it appropriate to direct that the issue relating to the alleged violation of the Order dated 14.12.2018 be examined in separate contempt proceedings and issued notice accordingly. 257. The aforesaid sequence of events indicates that the implementation of the IHH-NTK transaction, the transfer of the sale consideration and the movement of the underlying assets formed the subject matter of consideration before the Apex Court. In the opinion of this Court, these aspects require a detailed examination of the relevant transactions and records. A forensic audit would assist this Co....
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....e enforced. In such circumstances, the doctrine enables the Court, upon a proper factual foundation being established, to examine whether the assets held by the company ought to be treated as available for satisfaction of the decree, notwithstanding the separate corporate personality of the entity. 260. The application of the doctrine, however, is necessarily fact-specific and constitutes an exception to the general principle of corporate separateness. Before such a course can be adopted, the Court must be satisfied, on the basis of cogent material, that the corporate structure has been employed to defeat the rights of the Decree Holder or to evade compliance with judicial orders. It is for this reason that a detailed forensic examination assumes importance in the present case. The audit would assist the Court in tracing the movement of assets, identifying the entities and individuals responsible for the impugned transactions, and determining whether the factual circumstances justify an examination of the applicability of the doctrine of reverse corporate veil piercing. 261. The outcome of such an exercise would also have a bearing on the legal consequences that may ultimatel....
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....imate enforcement of pre-existing security interests or whether unencumbered assets progressively came to be alienated, as alleged by the Decree Holder. 264. Equally, the audit would assist the Court in determining the role, if any, played by the directors, officers and key managerial personnel of the companies concerned in the implementation of these transactions. The question whether any particular transaction was approved, facilitated or carried into effect with knowledge of the undertakings recorded before this Court and the orders passed from time to time is necessarily a factual enquiry. Such determination would require examination of board resolutions, committee approvals, correspondence, banking records, demat statements, pledge documentation and other contemporaneous corporate records, which cannot effectively be undertaken without a forensic examination. In cases involving allegations of fraud, concealment or diversion of assets, the factual foundation must precede the legal conclusion. 265. The purpose of the forensic audit is to provide the Court with an objective reconstruction of the continuous movement of shares and funds, identify the persons and entities invo....
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....subordinate to contractual mechanisms devised between private parties. Consequently, if the forensic audit reveals that fresh encumbrances or top-up transactions were effected after the status quo orders of the Apex Court, the legality of such transactions would necessarily require close judicial scrutiny and cannot be presumed to be insulated merely because they arose under pre-existing contractual arrangements. 269. Should the forensic audit reveal that any bank or financial institution, despite being aware of the subsisting judicial orders, knowingly participated in, facilitated or acted in furtherance of transactions having the effect of violating or circumventing those orders, this Court would not be powerless to examine the legal consequences flowing therefrom. The Court, in exercise of its jurisdiction to protect the sanctity of judicial proceedings and to ensure the effective enforcement of its decree, would be competent to determine the liability, if any, of such institutions in accordance with law, and to pass such consequential directions as may be warranted, including directions intended to neutralise the effect of transactions undertaken in breach of binding judicia....
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....he power to order for forensic audit, with or without the application, and their change or softening in stance towards these banks and financial institutions, does not take away from the fact that, these organisations may have knowingly assisted in the flouting of the orders of this Court, as well as the Apex Court. 272. In the opinion of this Court, directing a forensic audit in the present case would be consistent with the aforesaid objective. Hence, all the three applications being EX.APPL.(OS) 3764/2022, EX.APPL.(OS) 1615/2025, EX.APPL.(OS) 3763/2022 are allowed. 273. In view of the above, S Ramanand Aiyar & Co., Chartered Accountants, 708 Surya Kiran Building, 19 Kasturba Gandhi Marg, New Delhi, Delhi - 110001, is appointed as the Forensic Auditor to conduct the forensic audit. The purpose of the forensic audit is to identify and re-construct the entire chain of events so as to enable the court to identify the persons and the companies involved in the dissipation of shares. 274. The Forensic Auditor appointed by this Court would, therefore, be required to: i. Examine and reconstruct the complete evolution of the shareholding of FHHPL in FHL after 24.05.2016 (....
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....of the consideration received from the transfer or sale of FHL shares and trace the destination and utilisation of such funds. viii. Examine the complete transaction relating to the acquisition of the controlling stake in FHL by IHH Healthcare Berhad through Northern TK Venture Pte. Ltd., including the approvals obtained, regulatory filings made, the flow of consideration, the role of the concerned parties and intermediaries, and all consequential transactions affecting the shareholding of FHHPL in FHL. ix. Identify every company, partnership, trust or other entity, directly or indirectly owned, controlled or beneficially held by the Judgment Debtors, which received the benefit of loans secured by FHL shares, and examine the purpose for which such borrowings were availed and utilised after the decree. x. Examine the books of account, bank statements, demat statements, board and committee minutes, shareholder's resolutions, statutory registers, internal correspondence, emails, legal opinions, compliance memoranda, depository instructions, Registrar and Transfer Agent records, SEBI and stock exchange filings, and such other records as may be necessary to de....