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TMI Blog2016 (2) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... re granted adequately secures an interest of VLS pending adjudication of objections to the award, the pleadings in FAO (OS) No.295/2015 have not even attempted to make any reference to the value of the assets covered by the sweep of the interim measure against the Guptas, Jains and BMS. Thus, even FAO (OS) No.295/2015 is liable to be dismissed and the prayer that the Guptas and the Jains be directed to furnish a bank guarantee to secure the sum as per the award is rejected. - FAO(OS) 295/2015, FAO(OS) 503/2015 - - - Dated:- 1-2-2016 - MR. PRADEEP NANDRAJOG AND MS. MUKTA GUPTA, JJ. For The Appellant : Mr.Jayant K.Mehta, Advocate with Mr.Nikhil Rohtagi, Mr.Ashok K.Sharma and Mr.S.Khosla, Advocates For The Respondent : Mr.Anil Airi, Advocate with Mr.Ravi Krishan Chandna, Mr.Aman Madan, Mr.Ishan Khanna and Ms.Bindiya Airi, Advocates and Mr.Gurkamal Hera Arora, Advocate, Mr.Amit Saxena, Advocate PRADEEP NANDRAJOG, J. 1. We shall be referring to the parties as : (i) VLS, (ii) BMS, (iii) Gupta Group, (iv) Jain Group, (v) Navjeevan, (vi) NPMG, and (vii) Southend. 2. VLS is named VLS Finance Ltd. It was the petitioner in OMP (I) No.114/2015, filed under Section 9 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith its share (i.e. 47.5%) of constructed area in terms of the Conveyance Deed dated 10.06.2013 and appoint a Court Receiver for the said share of Southend under the Conveyance Deed dated 10.06.2013 pending the execution of the award dated 02.03.2015; (v) Restrain the Respondent No.1 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 44%) of constructed area in Property bearing no. C-20, 1A/10, Block 'C' Sector 62 NOIDA in terms of the Collaboration Agreement with Premia Structures Ltd. and appoint a Court Receiver for the said share of BMS; (vi) Extend and confirm the orders dated 27.04.2012 and 04.09.2012 passed in OMP No. 383/2012 and order dated 15.01.2015 passed in OMP Nos.570/2013 and 1197/2014; (vii) Pass ex-parte ad interim orders in terms of the above prayers and confirm the same upon return of notice; and (viii) Pass such other order or orders as this Hon'ble court may deem fit and proper in the facts and circumstances of the case. 4. BMS was respondent No.1. The Gupta Group and the Jain Group were impleaded as respondents No.2 to 9. Navjeevan was respondent No.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jain Group entered into two agreements on July 12, 2007 and September 24, 2007, as per which VLS invested ₹ 24.92 crores in the equity capital of BMS, having right to exit with obligation on the Gupta Group and the Jain Group to purchase the shares at a price as per the pre-determined formula for computing exit consideration. The equity injected in BMS was to be utilized for construction of a building on a plot of land bearing No.C-20, 1A/10, Block-C, Sector-62, Noida, UP, perpetual lease-hold rights whereof had been acquired by BMS. The Arbitral Tribunal has found, and during arguments in the appeals it was not disputed by learned counsel for the Gupta Group and the Jain Group that BMS advanced a loan, without any security, to NPMG in sum of ₹ 19,09,45,000/- (Rupees Nineteen Crores Nine Lacs and Forty Five Thousand only) in which Dinesh Kumar Gupta holds 4600 shares and there is no material before us regarding subscribed and paid up share capital of same company and names of other shareholders with percentage of shareholding. The allegation concerning shareholding of NPMG by VLS that it is a company owned and controlled by the Gupta Group and the Jain Group is therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271000 shares Neema Gupta(Allotted fresh shares) 2500 shares - Lalwani Holdings (P) Ltd.(Fresh shares allotted to third party) 45000 shares 45000 shares 45000 shares Chaurasia Holdings (P) Ltd. (Fresh shares allotted to third party) 45000 shares 45000 shares 45000 shares 10. In paragraph 68 of the award dated March 02, 2015, the Arbitral Tribunal has returned a finding of fact as under:- 68. Therefore these documents do not at all show any evidence of any activities of the respondents 2 to 10 towards the construction of the project. The respondents had received the money from the claimant and had routed it through their own companies and stripping off towards the investment in the company. Out of ₹ 24 crores the respondents 2 to 10 diverted ₹ 19 crores to NPNG ( Sic. Should read NPMG) which passed on ₹ 12 crores to R-2 D.K.Gupta and his wife. If the project was requiring funds it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. has entered into a collaboration agreement to construct a building on the plot of land at Noida and share of BMS being 44% in the built up space. 16. Since Premia Infrastructure Ltd. is not a party to the proceedings and there is no material to show any siphoning off funds in favour of said company, nor is there any material to show that said company is owned and controlled by Gupta Group and Jain Group, the direction by the learned Single Judge to maintain status quo with respect to title and possession qua the Noida property would obviously mean to maintain status quo with respect to 44% share of BMS in the built up space. So understood, the interim measure is fully justified because the Gupta Group and the Jain Group have in the past siphoned away the funds and diluted the assets of BMS and past conduct justifies a restraint order concerning said share of BMS because there is every likelihood of the Gupta Group and Jain Group continuing with their acts of misfeasance. 17. FAO (OS) No.503/2015 and FAO (OS) No.411/2015 are accordingly without any merit and are dismissed. 18. Concerning FAO (OS) No.295/2015, the target obviously is Southend and its property at Okhla In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Foster v. Green (1862) 7 H. N. 881. But the law imposes an obligation on the recipient of stolen money to pay an equivalent sum to the victim if the recipient has been unjustly enriched at the expense of the true owner. In Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32, 61, Lord Wright said: It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. 25. The ratio of the decision would therefore be that the law of restitution is not based upon implied or quasi contract theories but upon the principle that unjust enrichment must be restituted. 26. Section 18 of the Gaming Act, 1845, was noted in the decision as per which contracts by way of gaming or wagering are null and void but not illegal in England. It was thus held that the amount retained by the defendant club out of the stolen money of the solicitors firm cannot be retained and must be repaid to the solicitors. The decision reported as 1816 (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. A decision of the High Court of Australia reported as 1910 (12) C.L.R. 105 Black versus S. Freeman and Company was quoted with approval, in which case pertaining to money stolen by a husband and handed over to the wife as gift could be recovered by the victim. The High Court of Australia had held:- Where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person's hands. If, of course, that other person shows that it has come to him bona fide for valuable consideration, and without notice, it then may lose its character as trust money and cannot be recovered. But if it is handed over merely as a gift, it does not matter whether there is notice or not. 29. Opinion of Bankes, L.J. in the decision reported as (1921) 1 K.B. 321 Banque Beige Pour I Etranger vs Hambrouck was also approved, with the following observations in said case quoted:- To accept either of the two contentions with which I have been so far dealing would be to assent to the proposition that a thief who has stolen money, and who from fear of detection h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is well established that a legal owner is entitled to trace his property into its product, provided that the latter is indeed identifiable as the product of his property. Thus, in Taylor v. Plumer (1815) 3 M. S. 562, where Sir Thomas Plumer gave a draft to a stockbroker for the purpose of buying exchequer bills, and the stockbroker instead used the draft for buying American securities and doubloons for his own purposes, Sir Thomas was able to trace his property into the securities and doubloons in the hands of the stockbroker, and so defeat a claim made to them by the stockbroker's assignees in bankruptcy. Of course, tracing or following property into its product involves a decision by the owner of the original property to assert his title to the product in place of his original property. This is sometimes referred to as ratification. I myself would not so describe it; but it has, in my opinion, at least one feature in common with ratification, that it cannot be relied upon so as to render an innocent recipient a wrongdoer (cf. Bolton Partners v. Lambert (1889) 41 Ch.D. 295, 307, per Cotton L.J. - an act lawful at the time of its performance [cannot] be rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination (see especially at pp. 162 and 168, per curiam). The time for its recognition in this country is, in my opinion, long overdue. I am most anxious that, in recognising this defence to actions of restitution, nothing should be said at this stage to inhibit the development of the defence on a case by case basis, in the usual way. It is, of course, plain that the defence is not open to one who has changed his position in bad faith, as here he defendant has paid away the money with knowledge of the facts entitling the plaintiff to restitution; and it is commonly accepted that the defence should not be open to a wrongdoer. These are matters which can, in due course, be considered in depth in cases where they arise for consideration . At present I do not wish to state the principle any less broadly than this: that the defence is available to a person whose position has so changed that it would be inequitable in ail the circumstances to require him to make restitution, or alternatively to make restitution in full. I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he shou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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