2012 (10) TMI 1164 - HC - Companies Law

Summary

Issues Involved:
1. Furnishing security by Defendant No.1.
2. Default on repayment/redemption of bonds.
3. Misrepresentation and siphoning of sale proceeds.
4. Valuation of Cloud Computing Business.
5. Attachment before judgment.
6. Undertakings and status quo by Defendants.

Summary:

1. Furnishing Security by Defendant No.1:
The Plaintiff applied for ad-interim relief directing Defendant No.1 to furnish security of Rs. 500 crores to secure the Plaintiff's claim. Defendant No.1 had issued convertible bonds in 2006 and 2007, which matured in 2011 and 2012, respectively, but failed to make any payments upon maturity.

2. Default on Repayment/Redemption of Bonds:
Defendant No.1 did not repay or redeem the bonds when they matured. The Plaintiff, acting as trustee for the bondholders, issued demand notices and declared the 2012 bonds as due and payable. Despite these notices, Defendant No.1 did not make any payments.

3. Misrepresentation and Siphoning of Sale Proceeds:
The Plaintiff alleged that Defendant No.1 misrepresented to its shareholders and the Bombay Stock Exchange that the sale proceeds of its MSD business would be used to repay the bonds. However, the Plaintiff claimed that Defendant No.1 siphoned off the sale proceeds and did not pay any amount towards the redemption of the bonds.

4. Valuation of Cloud Computing Business:
The Court directed the valuation of Defendant No.1's Cloud Computing Business. Initially valued at Rs. 598 crores by M/s. Ernst & Young Pvt. Ltd., a subsequent valuation by Grant Thornton valued it between Rs. 198 crores and Rs. 239 crores. The Division Bench found the initial valuation unsatisfactory and directed a revaluation, which estimated the business between Rs. 194 crores and Rs. 211 crores.

5. Attachment Before Judgment:
The Plaintiff sought attachment of Defendant No.1's assets u/s Order 38 Rules 5 and 6 of the CPC, 1908. The Court considered the Plaintiff's claim and the Defendants' conduct before the suit, noting that the Defendants had not disposed of any properties post-filing of the suit. The Court referenced precedents, including the Supreme Court's decision in Sardar Govindrao Mahadik and Raman Tech. & Process Engg. Co., emphasizing that attachment before judgment is to ensure the Plaintiff's decree is satisfied.

6. Undertakings and Status Quo by Defendants:
Defendant Nos. 1, 5, and 6 undertook not to dispose of their Cloud Computing Business, fixed assets, investments, and money held in a joint escrow account. They also agreed to ensure the return of loans from subsidiaries amounting to Rs. 25 crores within six months, to be deposited in a fixed deposit and not utilized.

Conclusion:
The Court accepted the undertakings provided by the Defendants and disposed of the application for further ad-interim reliefs. The hearing of the suit was expedited, and the Chamber Summons for revocation of leave granted to the Plaintiff was scheduled for hearing on 30th October 2012.