9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (8) TMI 875 - HC - Indian LawsSeeking pre-arbitration interim relief - Sinister sequence of events - Section 9 of the Arbitration and Conciliation Act 1996 - HELD THAT - Section 9 of the 1996 Act contemplates interim measures etc. by the Court. The expression etc. used at the end of a definition clause has been held in several decisions to be required to be interpreted noscitur a sociis and ejusdem generis (the latter principle applying where the words preceding the word etc. constituted a genus and the former principle applying more universally in all cases) the words preceding it. The Court while exercising its power under Section 9 of the 1996 Act has to be acutely conscious of the power vested in the arbitrator/arbitral tribunal by Section 17 of the same Act. A reading of Section 9 and Section 17 of the 1996 Act reveals that they are identically worded. The interim measures which can be ordered by the arbitral tribunal under Section 17 are the very same as those which can be ordered by the Court under Section 9. It is for this reason that sub-section (3) of Section 9 proscribes grant of interim measures by the Court consequent on constitution of the arbitral tribunal save and except where the Court finds that circumstances exist which may not render the remedy under Section 17 to be efficacious. The Court while exercising jurisdiction under Section 9 even at a pre-arbitration stage cannot therefore usurp the jurisdiction which would otherwise be vested in the arbitrator or the arbitral tribunal yet to be constituted. There is no whisper of any denial in the aforesaid response dated 8th July 2020 from the petitioner to the Respondent of the allegations that the petitioner had failed to maintain the Required Security Cover and to liquidate all Outstanding Amounts by the final Redemption Date i.e. 10th July 2019. The fact of failure on the part of the petitioner to pay the Outstanding Amounts by the cutoff date of 10th July 2019 stands in fact expressly acknowledged and admitted by the petitioner in its letter dated 30th June 2020. The approach of the petitioner in its response dated 8th July 2020 was to maintain a studied silence thereon and instead to allege market manipulation by KKR and its confederates. Even in the present petition before this Court the petitioner has remained completely silent regarding the allegation of non-maintenance of the Required Security Cover and of failing to repay all Outstanding Amounts to the Debenture Holders on or before 10th July 2019. Prima facie therefore Events of Default had taken place within the meaning of Clause 1.1.41 of the Debenture Trust Deeds read with Clause 3.4 and S. No. 2 and 14 of the Events of Default enumerated in Schedule 3 to the Debenture Trust Deed. The very contention of the petitioner that the price of the CGP shares had fallen owing to a misleading report by Vaish Co. too is entirely presumptuous in nature amounting to nothing more than speculation. There are myriad and manifold considerations which operate to raise or lower the prices of stocks in the stock market. Fluctuation of the stock market as is axiomatic in macroeconomic theory is one of the most unpredictable of all unpredictable sciences - the dispute is entirely foreign to the issue of default by the petitioner to honour its obligations under the Debenture Trust Deeds and the resultant right of the Respondent to invoke the pledged shares and sell them in the stock market for realisation of the outstanding amounts. The dispute between the petitioner and the respondent which could legitimately form the basis of an arbitral proceeding and consequently of the present proceedings under Section 9 of the 1996 Act is the alleged infraction by the petitioner of the covenants of the Debenture Trust Deeds and the right of the respondents on that basis to proceed against the shares pledged by the petitioner by way of security. That dispute has nothing to do with good faith or bad faith. The want of good faith on the part of the respondents-as alleged by the petitioner-is in the manner in which the respondents allegedly depressed artificially the price of the CGP shares before purchasing them in the open market - the prayers of the petitioner in the present petition cannot therefore be granted in exercise of the power conferred on this Court by Section 9 of the 1996 Act. Petition dismissed.
Issues Involved
1. Pre-arbitration interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. 2. Alleged breach of Debenture Trust Deeds by the petitioner. 3. Invocation and sale of pledged shares by the respondent. 4. Alleged market manipulation by the respondent. 5. Petitioner's claim for restoration of pledged shares and prevention of further sales. 6. Jurisdiction and scope of the court under Section 9 of the 1996 Act. Detailed Analysis 1. Pre-arbitration interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 The petitioner sought pre-arbitration interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, to prevent the respondent from selling pledged shares and to restore the shares already sold. The court noted that Section 9 allows for interim measures to protect the subject matter of arbitration from being frustrated. However, the court emphasized that such relief must be granted sparingly and only in appropriate cases where there is a clear necessity to prevent irreparable harm. 2. Alleged breach of Debenture Trust Deeds by the petitioner The petitioner had borrowed Rs. 1265 crores through debentures and pledged shares as security. The petitioner failed to maintain the Required Security Cover and did not repay the Outstanding Amounts by the Final Redemption Date (10th July 2019). The court observed that these failures constituted "Events of Default" under the Debenture Trust Deeds. Despite multiple notices from the respondent, the petitioner did not rectify these breaches, leading to the invocation of the pledged shares. 3. Invocation and sale of pledged shares by the respondent The respondent invoked the pledged shares of CGP and BILT due to the petitioner's defaults. The court noted that the invocation and subsequent sale of these shares were in accordance with the terms of the Debenture Trust Deeds. The petitioner had acknowledged the breach in its communication dated 6th March 2019, where it requested the respondent not to sell the shares at that time, acknowledging the respondent's right to do so. 4. Alleged market manipulation by the respondent The petitioner alleged that the respondent, in collusion with KKR, artificially depressed the value of CGP shares to purchase them at a lower price. The court found these allegations speculative and not supported by concrete evidence. The court also noted that stock market fluctuations are influenced by multiple factors, and it was not possible to attribute the fall in share prices solely to the respondent's actions. 5. Petitioner's claim for restoration of pledged shares and prevention of further sales The petitioner sought the restoration of CGP shares to its DEMAT account and an injunction against the sale of BILT shares. The court held that since the shares had already been invoked and sold in the open market, it was not feasible to set the clock back. The court also found no basis to prevent the respondent from invoking and selling the BILT shares, given the petitioner's acknowledged defaults. 6. Jurisdiction and scope of the court under Section 9 of the 1996 Act The court emphasized that while it has the power to grant interim measures under Section 9, such power must be exercised with caution and only in cases of emergent necessity. The court must ensure that the relief sought cannot await the constitution of the arbitral tribunal. In this case, the court found no such emergent necessity and held that the petitioner's claims did not warrant interim relief under Section 9. Conclusion The court dismissed the petition, stating that the petitioner had no prima facie case and that the respondent was entitled to invoke the pledged shares due to the petitioner's defaults. The court also noted that the petitioner's allegations of market manipulation were speculative and not supported by evidence. The court reiterated that its observations were limited to the context of the Section 9 petition and did not prejudice any future arbitral proceedings.
|
