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TMI Blog2016 (9) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed in 2014, the warrants were supposed to be issued. It was agreed earlier and even after execution of SPA. Further during hearing the respondents have time and again mentioned that they are helpless at the hand of BSE. Otherwise, they are ready for issuance of warrants. As per issue of non-compounding of offences under Section 276B of Income Tax Act is concerned, as per SPA, in case the amount is received by the respondents and after adjustment already paid, the respondent is liable to pay the remaining outstanding as per details of designated account No.1 and 2 subject to the final adjustment of the amount before the Arbitral Tribunal. In case at this stage if both parties are agreeable they may take the necessary steps for the purpose of compounding of offences with cooperation with each other once the amount in the designated account No.1 and 2 is cleared. Without expressing anything on merit, as all the disputes have to be decided by the Arbitral Tribunal the part prayers in both petitions are allowed. The said amount of ₹ 579 crores shall be deposited by the respondents without prejudice in five equal monthly installments by way of fixed deposit for twelve mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal airline services, etc. under the brand name Spicejet . 3. The relief claimed in OMP (I) (Comm) 71/2016 reads as under: a. pass an ad-interim ex-parte order restraining Respondent No.1 and Respondent No.2 from allotting/ transferring/issuing/ alienating and/or creating any third party interest and/or encumbrance on any shares of the Company; b. pass an ad-interim ex-parte order directing the Respondents to deposit a sum of ₹ 835,00,00,000/- (Rupees Eight Hundred and Thirty Five Crores only)in the Court i.e. the value of the shares due to the Petitioner against the Warrants and CRPS shares; c. pass an ad-interim ex-parte order attaching the bank accounts of the Respondents bearing Nos. 000705011602 held in ICICI Bank Ltd, 9A Phelps, Connaught Place, New Delhi-110001, 000381400002337 held in Yes Bank, 11/48, Shopping Centre, Malcha Market Chanakyapuri, New Delhi- 110021, 05860200001369 held in Bank of Baroda, Parliament Street, New Delhi-110001, 04852320000132 held in HDFC Bank Ltd, B-1, Vaniya Kunj, Enkay Tower, Udyog Vihar, Phase V, Gurgoan-122001, Haryana, 50000741832 held in Allahabad Bank, 2nd Floor, 37, B.S. Marg Fort, Industrial Finance Branch, Mumbai- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istress, due to which it was facing difficulties in maintaining its fleet, staff and operational integrity. The petitioner were therefore, keen and desirous of reviving the respondent No.1 company from the distress and in this regard. 7. Admittedly vide a Loan Agreement dated 18th December, 2013 (hereinafter First Loan Agreement ), an amount of ₹ 75,00,00,000/- (Rupees Seventy Five Crores only) was given by the petitioner to the respondent No.1. Further, a Loan Amendment Agreement dated 7th November, 2014 was executed between the petitioner and the respondent No.1 whereby the parties agreed to reduce the amount of ₹ 10,40,83,830/- (Rupees Ten Crore Forty lakh Eighty Three Thousand Eight Hundred and Thirty only) from the loan amount provided under the First Loan Agreement and utilize the same towards the payment of exercise of option attached to 191,69,000 warrants issued on preferential basis to the Petitioner by the Respondent No.1. Accordingly, the outstanding loan amount under the First Loan Agreement stood at ₹ 64,59,16,170/- (Sixty Four Crore Fifty Nine Lakh Sixteen Thousand One Hundred and Seventy only). Thereafter, another loan of ₹ 114,00,00,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s imposed by DIPP/FIPB on FDI, AIC 12/2013 dated 01-0ct 2013 and relevant regulations of SEBI on Substantial Acquisition of Shares and Takeovers. 12. Based on many discussions and in order to restore the operation and market position of the respondent No.1, the petitioners had agreed to transfer their shares and respondent No.2 agreed to acquire the same. The share Sale Purchase Agreement ( SPA ) was executed between both the petitioners and the respondents on 29th January, 2015. 13. By virtue of agreement, the respondent No.2 had acquired 35,04,28,753 equity shares in the respondent No.2 i.e. 58.46% share capital of both petitioners i.e. Kalanithi Maran and Kal Airways Pvt. Ltd. in the respondent No. 1 company by paying just ₹ 2 (two) when admittedly each share of the company itself was around ₹ 16.30/- at the time of entering into the SPA (admittedly the value of the said equity shares were atleast ₹ 765 crores at that time) subject to the terms that these payments also included the adjustments of the advances monies provided to Spicejet by the Petitioner and KAL Airways Pvt Ltd under the loan agreements dated 18th December, 2013 and 21st November, 2014 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before the Third Closing Date, the Sellers shall subscribe to, and the Company shall issue and allot on a preferential rights basis to the Seller 2, upon receipt of the Tranche 2 CRPS Amount to be delivered in a single tranche in immediately available funds to the Designated Account 1, the Tranche 2 CRPS Shares, the particulars of which are set forth in Schedule B, free and clear from all and any Encumbrance, together with all rights and advantages now and hereafter attaching or accruing thereto such that the Seller 2 shall, upon allotment of the Tranche2 CRPS Shares in his name, receive full legal and beneficial ownership and all shareholder rights relating thereto. 4. CONDITIONS PRECEDENT TO FIRST CLOSING 4.1 The obligation of the Acquirer to purchase the Sale Shares and pay the Purchase Consideration on the First Closing Date is conditional upon the achievement of, to the reasonable satisfaction. of the Acquirer (or where permissible under Law, waiver in writing by the Acquirer in its sole discretion), the conditions as set forth below within the time specified in this Clause 4.1 (the Conditions Precedent ). The processes for the fulfilment of the Conditions Precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall take place on February 15, 2015 or such other date as may be agreed between the Parties ( Second Closing Date'') subject to the achievement of the First Closing and the satisfaction of the Conditions Precedent specified in Clause 5.3.5 (d) and Clause 6.3. All transactions relating to the subscription of the Tranche I CRPS Shares by the Sellers shall be deemed to have occurred simultaneously. 7.2 Closing Agenda On the Second Closing Date, the following events shall take place: 7.2.1 The Sellers shall remit the Tranche 1 CRPS Amount (less ₹ 100,84, 06,170 (Rupees One Hundred Eighty Four Lakhs Six Thousand One Hundred and Seventy only) which shall be adjusted in the manner stated in Schedule D pursuant to the Amendment Agreements) and the Seller 1 shall remit the Balance Warrants Payment into Designated Account 1 and Designated Account 2 respectively, in such proportion and manner as set out under Schedule H, provided that the amount of : (a) ₹ 1,05,20,35,549.34(Rupees One Hundred and Five Crores Twenty Lakhs Thirty Five Thousand Five Hundred and Forty Nine and Paisa Thirty Four only) shall be deposited in Designated Account 2 on or before February ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited and post dated cheque no. 001452 drawn on City Union Bank dated June 1, 2015 for an amount of ₹ 50,00,00,000 (Rupees Fifty Crores only) for Tranche 2 CRPS Amount. 15. In terms of Clause 12.2 of the SPA, the parties ensured and procured amounts in a designated account to be utilized only for the settlement of the existing outstanding statutory dues of the respondent No.1 to the statutory authorities. The said clause is reproduced below: 12.2 The Sellers and the Acquirer shall ensure and shall procure that the amounts in Designated Account 2 is utilized only for the settlement of the existing outstanding statutory dues to the Governmental Authorities of the Company and towards release of Sellers Guarantees as per the order of priority set forth in Schedule H and the amounts in the Designated Account 1 shall be utilised by the Company for its operations in the Ordinary Course. 16. In terms of clause 12.3 of the SPA, the respondent No.2 indemnified, ensured and undertook to take all steps to defend and hold harmless the petitioner and KAL from any penal action, liability or claim due to non-payment of statutory dues in relation to respondent No.1. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,84,70,000/- (Rupees Forty Three Crore Eighty Four Lakh Seventy -Thousand -only) from the outstanding loan amount of ₹ 114,00,00,000/- (Rupees One Hundred and Fourteen Crore only) to be utilized for the subscription to 269,00,000 warrants to be issued by respondent No. 1 company and convertible in the financial year 2016-2017; iii) The balance loan amount ₹ 36,24,90,000/- (Rupees Thirty Six Crore Twenty Four Lakh Ninety Thousand only) to be utilized for the future subscription to the non-convertible redeemable cumulative preference shares of face value of ₹ 1,000/-(Rupees One Thousand only) per share of the respondent No.1 company. 19. By letter dated 14th February, 2015, the First Closing Date as per Clause 5.1 of the SPA was amended and the date was extended to 24th February, 2015. 20. By letter dated 17th February, 2015 the SPA was amended and the following extension of dates were agreed upon: i) the Second Closing Date as per Clause 1.1 of the SPA was extended to 23.02.2015; ii) in Clauses 3.1 and 3.2. of the SPA, the reference to 15.02.2015 was amended to 23.02.2015; iii) in Clause 5.1 of the S,.PA, the reference to 15.02.2015 was amended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituting 58.46% of the paid up equity share capital of the respondent No.1 Company and to issue warrants as agreed. 24. The respondent No. 2 is become the promoter, director and majority shareholder of respondent No.1 and is a signatory to the SPA including the arbitration agreement contained in Clause 16 thereof. The equity shares of the respondent No.1 company are listed and admitted to trading on the Bombay Stock Exchange. 25. Both petitioners claimed to have paid entire amount towards their contractual obligations under the binding SPA including the amounts which were dues of the respondent No.1 Company to the statutory authorities. The petitioners case is that admittedly the respondents have received the amount of ₹ 679 crores till 23rd February, 2015 who failed to honour any contractual commitments under the binding SPA. 26. The present petitions under Section 9 of the Arbitration and Conciliation Act, 1996 have been filed to preserve the subject matter of the disputes arising on failure of the Respondents to honour their contractual obligations under the Share Sale and Purchase Agreement dated 29th January, 2015 (hereinafter referred to as SPA ). 27. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings have been initiated by way of the Complaints, however, the respondents have failed in their obligation. 29. The petitioners issued a letter dated 24th September, 2015 demanding as under: a. To issue the Warrants in terms of the letter and spirit of clauses 3 .1 and 3 .2 of the SPA. b. To issue and allot the Tranche 1 CRPS Shares and Tranche 2 CRPS Shares in the names of the Petitioner and Mr.Kalanithi Maran, in terms of the letter and spirit of clauses 3.3, 3.4 and 7.2.2 and 8.1 of the SPA. c. To take all steps to utilize the amounts in the Designated Account 2 in order to pay the outstanding statutory dues, as claimed in the Complaints in terms of the letter and spirit of clause 12.2 of the SPA; d. To take all necessary steps for compounding the offence under Section 276B of the IT Act as alleged in the Complaints and relieve Mr. Kalanithi Maran from any penal action and/or liability. 30. In nut-shell, it is submitted by the petitioners that the respondents have received the amount of ₹ 679 Crores till 23rd February, 2015 who failed to honour even a single contractual commitment under the binding SPA and on the other hand, the Petitioners money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntil the conclusion of the issuance of the warrants and completion of the obligations of the Petitioner under the SPA, the respondent No.1 Company shall be in violation of applicable laws and the terms of the SPA, should the Respondent No.1 Company proceed with the issuance of CRPS Shares and any such issuance of CRPS Shares will be illegal and irregular. Accordingly, the respondent No.1 Company has not been able to proceed with the issuance of the CRPS Shares. 35. It is submitted that the subject matter of the present dispute does not concern the shares of the respondent No.1 Company as admittedly, due to non-compliance with certain regulations, the respondent No.1 Company is unable to issue Warrants. Since the shares of the Respondent No.1 Company to which the petitioner would have been entitled to upon conversion of the Warrants have not even come into existence, the petitioner cannot claim any interim relief in the nature of a restrain from allotting / transferring / issuing any shares of the Respondent No.1 Company. When ₹ 178 crores was brought in as loan by the petitioners, the respondent No.1 Company, the same was under the management and control of the Petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed (hereinafter Spicejet ) by paying just ₹ 2 (two) when the value of the said stake was atleast ₹ 765 crores as per the case of the petitioners. 40. Mr.Kapil Sibal, learned Senior Counsel submits that the entire payment for the warrants was made by Mr. Kalanithi Maran ₹ 777,510,000/- by KAL Airways Pvt. Ltd. ₹ 2,304,679,461/- i.e. Total sum of ₹ 3,082,189,461/- as consideration for Tranche 1 and Tranche 2 warrants by 23rd February, 2015 itself. It is submitted by him that his client was following the application dated 18th September, 2014 very strongly. However, when Company was taken over by respondent No.2 on 29th January, 2015. It was the duty of the respondents to do whatever was necessary for the purpose of ensuring the issuance and allotment of the warrants at the agreed price of ₹ 16.30/- per share. After 29th January, 2015, both petitioners have lost full control of respondent No.1, they could not have approached the BSE and SEBI directly, though they were always willing and agreeable to co-operate with the respondents to pursue the pending application dated 18th September, 2014. Learned Senior counsel submits that even when BSE s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company to provide a non-disposal undertaking/confirmation from the said Banks in compliance with the lock-in requirements under applicable laws. On 1st October, 2014, the BSE sent a reminder to the Respondent No.1 Company in regard to its earlier communication dated 25th September, 2014. The Respondent No. 1 Company again wrote to the BSE vide its letter dated 7th October, 2014 seeking time to provide the said non-disposal undertakings/confirmations from the said Banks (being Yes Bank and Allahabad Bank). One of the Banks with which pre-preferential allotment shareholding of the Petitioner was pledged Le. Yes Bank Limited, provided the said non-disposal undertaking/ confirmation vide its letter dated 10th October, 2014. (which was subsequently withdrawn by the said Bank due to financial distress of the Respondent No. 1 Company). This letter was forwarded by the Respondent No. 1 Company to the BSE under cover of its letter dated 10th October, 2014. From 14th October, 2014 to 25th October, 2014, BSE once again requested the Respondent No. 1 Company to provide said non-disposal undertaking/confirmation from the Banks. However, as a result of non-cooperation of the banks due to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is stated by the respondents that the only remedy lies with the petitioners to challenge the disposal of the application in wrongful manner. 47. In reply to the submission of the respondents, Mr.Sibal has refuted the argument that the warrants under the SPA had no value. Currently, warrants would be issued by the Bombay Stock Exchange. He argued that since the allotment of warrants at ₹ 16.30/- per share would have afforded the Petitioners 24% equity (approx.) in Spicejet Ltd.-respondent No.1 and the attendant rights flowing from such shareholding in terms of the applicable law, but, if a fresh application is made today, the same would be at the prevailing price (Rs. 82/- approx) and the Petitioners would not have more than 3% equity. 48. Mr.Sibal submits that it is the admitted position that once the SPA is executed, it was the respondent No.2 s obligation for the compliance. As there was no compliance on the part of the respondents, therefore, the application filed by the earlier dated 18th September, 2014 closed. 49. The respondents ought to have returned the amount to the Petitioners within 60 days of the closure of the in-principal application on 10th July, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2 read with 17.8 read with 17.11 of the SPA are read co-jointly it appears that parties agreed that the respondents were obligated under the SPA to undertake all actions to ensure that the petitioners are allotted the warrants at the agreed price. 52. Though, the said issue of non-compliance which is disputed by the respondents is to be finally decided by the arbitral tribunal as to whom should be blamed with, but prima facie there is a force in the submissions of Mr.Sibal that after execution of SPA the obligation was of the respondents qua the issuance of warrants because on the date of execution of agreement dated 29th January, 2015, the respondent No.2 was fully aware about the pendency of the application. Assuming for the sake of argument, the respondent No.2 is not to be blamed but at the same time, it cannot be denied by the respondent No.2 warrants as per SPA were to be allotted to the petitioners and amount thereto were in possession of the respondents. On one hand, the respondents are alleging that the warrants should have been issued and after prescribed period of time, the respondents were also supposed to issue share of CRPS. On other hand, it is being argued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had also relied upon various paras of the reply dated 9th October, 2015 to the notice. After small submissions, both the parties agreed that the resolution would be passed by the Board of the respondent No.1-Company, authorizing an Agent to appear and represent the Company before the Bombay Stock Exchange (BSE)/Securities and Exchange Board of India (SEBI) in the matter of issuance of warrants and place the same before the BSE to consider the application dated 18th September, 2014. Thereafter, the matter was adjourned for today for the purposes of drafting the resolution to be passed by the Board as well as authorization to appear and represent the respondent No.1-Company in the matter of issuance of warrants. 4. It is pertinent to mention here that on 24th August, 2014, the Board Resolution was passed for the issuance of (i) 81,680,629 and (ii) 107,410,749 Warrants. On 18th September, 2014, in-principle application for issuance of warrants was made by respondent No.1-Spicejet to BSE. On 24th September, 2014, the general meeting was held and thereafter, on 29th January, 2015, Share Purchase Agreement was executed between the parties. The entire shareholding of the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al action has not been launched due to any breach/default of the terms of the SPA thus there is no breach of the undertaking given under the SPA. As the penal action has been launched despite payment of the statutory dues stated in Schedule 1, and has in fact been initiated prior to the SPA, the matter is in the domain of a dispute and would have to be adjudicated in an appropriate proceedings. 8. In view of the entire gamut of the matter, I am of the view that at present, there is no impediment if the BSE may consider the application dated 18th September, 2014 in the light of change of circumstances, because of the reason that earlier the respondent No.1-Company did not provide clarification and now, since the clarification is available coupled with the subsequent events, the application dated 18th September, 2014 can be considered by the BSE and the said subsequent events can also be informed to SEBI who is dealing with the representation made by respondent No.1 for approval. 9. Accordingly, as agreed, the parties will file the fresh resolution along with the letter of authorities before the BSE within three days from today. In case of any further queries or any clarificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. At that time, they were also agreeable that once the warrants are issues, the compliance of CRPS was also offered by the respondents as per agreed terms of SPA. Their only plea was that if the warrants are not allotted by the BSE and SEBI, the respondents may be able to issue the CRPS, otherwise, their act would be considered as violation of Section 42 of the Companies Act CRPS, they may be prosecuted the same. 57. Later on, learned counsel appeared on behalf of Bombay Stock Exchange on 10th May, 2016 and informed the Court that the earlier application filed if proceeded further would amount to be contrary to the SEBI (ICDR) Regulations, 2009. Even Mr.Neeraj Malhotra, learned counsel appearing on behalf of SEBI took short adjournment to take the final instruction from his client and to inform the Court. However, on 18th May, 2016 he also informed that it was for the BSE to take the final call about the compliance of orders dated 14th March, 2016 and 7th April, 2016. Thereafter, the remaining submissions were made by the learned counsel for the parties on 31st May, 2016 and orders were reserved. 58. The respondents have admitted in reply as well as during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts as per SPA and on the other hand, the respondent is agreeable if fresh application is filed but the warrants are issued against the value of amount and not as per sum of warrants mentioned in SPA. In view of such situation coupled with the statement made by BSE and SEBI who refused to allot the warrants on the basis of old application in view of rules, it is clear that warrants as per old application cannot be allotted as even confirmed by the respondents. 62. The schedule D of the SPA depicts the details of amounts paid by the petitioners against the warrants as per agreements:- NAME TRANCHE 1 (FY 2015-I6) TRANCHE 2 (FY 2016-I7) No. of Warrants Total Consideration (NR) Advance/Loan Amount (Refer No.1) Amount payable for Tranche 1 after adjustment of Advance/loan Amount No. of Warrants Total Amount Payable (INR) Amount payable for Tranche 2 after adjustment of Advance/Loan Amount Total Amount to be Paid for Tranche 1 and Tranche 2 of Warrants ( Balance Warrant Payment ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,790,888,461 Payment details: Payment details of Mr.Kalanithi Maran and Kal Airways Pvt Ltd. Paid by Advance Rs. 504,972,500 Adjustment of loan Rs. 1,785,916,170 Warrant payment 24.02.2015 Rs. 1,000,000,000 Kal Airways Balance Warrant payment 24.02.2015 Rs. 799,706,961 Kal Airways CRPS on 24.02.2015 Rs. 200,293,039 Kal Airways T-2 CRPS on 24.02.2015 Rs. 947,964,451 Mr.Kalanithi Maran T-1 CRPS on 24.02.2015 Rs. 52,035,549 Mr.Kalanithi Maran T-2 CRPS on 02.06.2015 Rs. 500,000,000 Fixed Deposit Rs. 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.6 of the SPA is triggered and now it is to be decided at this stage as to what extent the petitioners can be secured in the petitions filed under Section 9 of the Act. 68. Section 56 of the Indian Contract Act, 1872 reads as follows: 56. Agreement to do impossible act.-An agreement to do an act impossible in itself is void. -An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful.-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.2 Compensation for loss through non-performance of act known to be impossible or unlawful. -Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company releasing the personal guarantees of Mr. Kalanithi Maran, Mr. Kalanithi Maran was to issue written instructions to City Union Bank to forthwith release the ₹ 100 crores in favour of the Respondent No. 1 Company towards the Tranche 1 CRPS Amount iii) The Second Closing Date was defined to mean the date on which the consent from Export Development Canada (EDC) was obtained for repayment of financing facility obtained by the Respondent No.1 Company and upon completion of aforesaid actions, i.e release of ₹ 100 crores to the Respondent No.1 Company towards the Tranche 1 CRPS Amount. Further, the Second Closing Date was extended to 24th February, 2015; iv) The details of Tranche 1 CRPS Shares and Tranche 2 CRPS Shares to be issued and allotted to the Petitioner and Mr. Kalanithi Maran were agreed as follows: Tranche 1 CRPS Shares: To Petitioner: 2,00,293 CRPS Shares To Mr. Kalanithi Maran: 30,08,406 CRPS Shares Tranche 2 CRPS Shares: To Mr. Kalanithi Maran: 500,000 CRPS Shares 72. As far as the dispute regarding ₹ 100 Crores for the Tranche 1 CRPS is concerned, it is alleged by the respondents that amount was not deposited in the Design ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents. Further, it is difficult to believe that if the said substantial amount was allegedly not paid to respondent No.1, they would not have kept quiet and demanded the same and raised. The issue for the first time in their reply dated 9th October, 2015 to the petitioner s letter dated 24th September, 2015. Therefore, it is submitted by Mr.Sibal that the petitioners were not in default in the remittance of the ₹ 100 Crores and are entitled to the shares for which the consideration stood paid and as the CRPS shares have not been issued. Even the petitioners would have paid Rs.One Hundred crores in time without any controversy, the position for non issuance of warrants and non convertible redeemable cumulative preference shares would remain the same as it is the case of the respondents that issuance of warrants is not possible and once it is not possible under Section 42(3) of the Companies Act, the respondent No.1 cannot make an invitation for issuance of CRPS shares otherwise such issuance of CRPS shares will be illegal and irregular and in violation of law. 75. Mr.Sibal has refuted the submission of the respondents that the alleged ₹ 100 Crores was due towards w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions. 79. With regard to issuance of CRPS shares are concerned, admittedly the respondents in para 48 of reply stated that under Section 42 (3) of the Companies Act, 2013, the respondent No.1 Company cannot make fresh offer of securities unless and until the offer or invitation for issue and allotment of securities made earlier have been completed. In case the Respondent No.1 Company proceed with the issuance of CRPS shares and any such issuance of CRPS shares will be illegal and irregular. Therefore, the respondent No.1 Company has not been unable to proceed with the issuance of the CRPS shares as the application dated 18.09.2014 was closed by BSE vide its letter dated 10th July, 2015, the offer of warrants was no longer open. It is the case of the petitioners that the CRPS shares ought to have been issued. Further, the offer of CRPS as opposed to issuance as agreed by the Respondents on 29th January, 2015 while the offer of allotment of warrants were pending is violation of Section 42(3) of Companies Act. 80. The above difficulty has also been explained by the BSE in its letter dated 18th May, 2016 wherefrom it is evident that Spicejet is in violation of the Company Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of arbitration are therefore, liable to be preserved by the respondents. Further, since Spicejet accepted the consideration for the CRPS in violation of Section 42(6) of Companies Act, 2013, it is statutorily liable to return the monies to the respondents in terms of Section 42(6) of Companies Act, 2013 is extracted below for convenience: Section 42(6) A company making an offer or invitation under this section shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the date of completion of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. per annum from the expiry of the sixtieth day: Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than- (a) for adjustment against allotment of securities; or (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present petitions as it appears prima facie to the Court that the petitioners had taken steps to pay the said amount. At this stage, they cannot be blamed. The said plea of the respondents is now to be determined by the Arbitral Tribunal. 88. Prima facie this Court is of the view that the justification given by the petitioners on the on the said amount of ₹ 100 crores plausible, the said issue is to be decided by the Arbitral Tribunal. Even otherwise once it is the stand of the respondents themselves that shares of CRPS could not be allotted in the absence of issuance of warrants by BSE otherwise there would be a breach under Section 42 of the Companies Act. Even the said issue at this stage becomes irrelevant because the respondents themselves, BSE and SEBI have made the statements before Court that it is not possible to allot the warrants on the basis of application of 2014. Even if the said amount of ₹ 100 crores would have been received by the respondents as per terms of the agreement, the position ought to have become the same. The petitioners themselves are agreeable for adjustment of the said amount and submitted that the said issue is an arbiterable issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned and to defend and hold harmless Seller 1 and Seller 2, from any penal action, liability or claim due to non-payment of statutory dues. 92. It is evident that it was the respondents to take all steps to defend the Petitioners from and penal action due to non-payment of the TDS dues. It is submitted on behalf of the petitioners that the complete payment was made in February, 2015, if the offence was compounded then the complaints would not have been filed in March, 2015. In case, if the entire money has been paid, the complaints wouldn t have been filed. It is the case of the petitioners that the respondents did not pay the interest and sought a waiver of the same only on 22nd July, 2015 i.e. after the complaints were filed. The respondent No.1 can still compound the offences. Only the respondent No.1 who can file an application for compounding, Mr. Kalanithi Maran has been arraigned for being the Chairman and allegedly the principal officer of respondent No.1 despite of having execution of MSA and fracturing of shareholders. 93. As per SPA CRPS Shares shall mean the non-convertible redeemable cumulative preference shares of face value of ₹ 1,000 (Rupees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96. Details of Sale Shares as per schedule A of SPA are Status of Shares Kal Airways Pvt.Ltd. Mr.Kalanithi Maran Unpledged shares 73,460,073 129,741,753 Pledged share 83,0570932 - Shares yet to be credited to depositor account (unpledged) 45,000,000 19,169,000 Total 201,518,005 148,910,753 97. Terms and Conditions of the CRPS Shares are mentioned in schedule B of SPA. The same read as under: (a) CRPS Shares shall be non-convertible redeemable cumulative preference shares of face value of ₹ 1000 (Rupees One Thousand only); (b) CRPS Shares shall be issued at a nominal coupon rate of 6%: (c) CRPS Shares shall be redeemed at the end of 8th year from its subscription; (d) Dividend on the CRPS Shares shall become payable only subject to availability of profit of the Company. In the event of non-availability of profits for dividend, the same shall get accumulated year on year until the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng outstanding statutory dues to the Governmental Authorities of the Company and other liabilities of the Company as mentioned below: a. ₹ 100 crores to be utilized towards repayment of the financing facility obtained by the Company from the City Union Bank. b. ₹ 891,682.799 shall be utilized towards payment of Income Tax liabilities (being the principal amount of Tax Deducted at source) as on January 31, 2015. c. ₹ 9,45,11,635.09 shall be utilized towards overdue installment of term loan facility availed from Yes Bank. d. The balance amount of ₹ 6,58,41,111.25 shall be utilized towards creation of margin with Yes Bank in form of fixed deposit. 101. Outstanding dues as on December 31, 2014 as per schedule-I are given in SPA: 1. TDS ₹ 99,30,15,695 2 Interest ₹ 27,57,72,835 Interest is calculated on the basis that the amount paid till now is against TDS liability only. 2. Service Tax ₹ 21 ,83,82,119 Interest on Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The amount was provided as unsecured loan to the Company and by letter dated February 29, 2015 was agreed to be utilised towards the payment to be made by Mr Kalanithi Maran towards the outstanding dues for warrants and the CRPS Shares. 24-Feb-15 94,79,64,450.66 Mr. Kalanithi Maran Utilised by the Respondent No. 1 (ordinary operations of the Company as per SSPA Performed by the Parties - the amount was paid for subscription of CRPS 24-Feb-15 100,00,00,000.00 KAL Airways Private Limited Utilised by the Respondent No. 1 for ordinary operations of the Company as per SSPA Performed by the Parties - the amount was paid for subscription of warrants. 24-Feb-15 79,97,06,961.00 KAL Airways Private Limited (a) ₹ 891,682,799 utilized towards payment of Income Tax liabilities (being the principal amount of Tax Deducted at source) as on January 31,2015 (b) ₹ 9,45,11,635,09 utilized towards overdue instalment of term loan facility availed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the petitioners who did not fulfil the terms of SPA, therefore, they are not entitled for any relief for refund of the amount. 105. It is also the admitted case of the respondents that both petitioners had transferred the equity shares of 35,04,28,478 constituting of 58.46% of respondent No.1 for just ₹ 2/-. The value of the said shares was ₹ 765 crores at that time in the market. Obviously, the respondent No.2 to clear the liabilities of respondent No.1 and in lieu thereof, the shares were transferred for ₹ 2/-. The respondents have not shown any cogent evidence before this Court that by this time they have spent more than ₹ 765 crores. The petitioners admittedly asked the respondents by letter dated 24th September, 2015 to take the steps to utilize the amount in the designated account No.2 in order to pay outstanding statutory dues and to take the necessary steps for compounding the offence under Section 276B of the Income Tax Act as alleged in the complaint. No doubt, certain details are provided to show that some dues were cleared. At the same time, it is not denied by the respondents if the BSE would have allowed the application filed in 2014, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the amount from the employer and it is avoiding to clear the due amount and is raising flimsy reasons and when it appears to the Court to be just and convenient, then the Court has ample power to exercise its discretion to secure the amount even when the condition of the company is solvent, under Sections 9(1)(ii)(b) and (e) of the Arbitration and Conciliation Act, 1996. The amount, under these circumstances, should be secured, once the dispute is of commercial in nature. The present case of the petitioner falls within the range of exceptional one where the amount is liable to be protected 60. The interim relief in the present case is sought on the respondent's admitted obligation under the contract. The interim relief claimed in the present case is nothing but an admitted obligation on the part of the respondent and such an obligation can be enforced under Section 9 of the Act by way of interim relief ii) The High Court of Bombay in the case of Nimbus Communications Limited v. BCCI; 2013(1) MHLJ 39 held: 22 The Division Bench noted that the power being of a drastic nature, a direction to secure the amount claimed in the arbitration petition should not be issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uide to the Court when it determines an application under Section 9 of the Arbitration and Conciliation Act, 1996. The underlying basis of Order 38 Rule 5 therefore has to be borne in mind while deciding an application under Section 9(ii)(b). iii) This Court in S. Harinder Singh v. S. Nirmal Singh Ors; 2009c (113) DRJ 784 (DB) has held: 28. We may note that repeated attempts to persuade the parties to settle their disputes amicably have failed. One of the primary reasons for the deadlock appears to be the unfair advantage being enjoyed by the respondents, who continue to hold the entire amount of US$ 550,000, even though, as per the agreement dated 29.08.2002 the amount of US$ 300,000 had to be transferred to the appellant and was to remain his custody till the resolution of the disputes. Where is the incentive for the respondents to settle their disputes with the appellant? The fact that the respondents are enjoying the custody, and possibly the gainful use and exploitation of the entire amount of US$ 500,000, in our view is a stumbling block to a fair and equitable resolution of the disputes between the parties who are brothers. 29. Section 9 of the Act (whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eft it open to be determined in an appropriate case. v) The High Court of Bombay in the case of National Shipping Company of Saudi Arabia v. Sentrans Industries Limited; AIR 2014 Bom 136 has held: 7. In Pushpa P. Mulchandani (Mrs.) and Ors. v. Admiral Radhakrishin Tahilani (Retd.) and Ors., (2001)1BOMLR169, the learned Single Judge of this Court held that the provision contained in Section 9 of the Act of 1996 was a self operative code and that the provisions of Civil Procedure Code are not applicable while considering the application under Section 9 of the Act of 1996. 10 ..In a special provisions of the nature like Section 9(ii)(b), we are afraid, exercise of power cannot be restricted by importing the provisions of Order 38, Rule 5 of the Code of Civil Procedure as it is. The legislature while enacting Section 9(ii)(b) does not seem to us to have intended to read into it the provisions of Order 38, Rule 5 of the Civil Procedure Code as it is. It is true and as has been held by the Supreme Court in ITI Ltd, (supra), that for want of specific exclusion of the Code of Civil Procedure in the Act of 1996, it cannot be inferred that the Code was not applicable but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 100 crores which is not received by the respondents as informed during the hearing, the respondents are in possession of ₹ 579 crores towards value of warrants and shares of CRPS. The amount was paid towards their contractual obligation under the SPA. The respondents agreed to comply the terms of Clause 3 of SPA. 112. Thus in the facts of the present cases, that if the respondents will dispose of the shares of respondent No.1 to the third party, award if passed in favour of the petitioners, the same will become merely paper decree. 113. Without expressing anything on merit, as all the disputes have to be decided by the Arbitral Tribunal the part prayers in both petitions are allowed. The said amount of ₹ 579 crores shall be deposited by the respondents without prejudice in five equal monthly installments by way of fixed deposit for twelve months in the name of Registrar General of this Court. The first installment amount shall be deposited by the respondents on or before 7th August, 2016. Thereafter, the remaining installments shall be deposited on every succeeding month. Till the time all five installments are deposited, the interim order shall continue. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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