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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 ..... was a Director and non-executive Chairman of Spicejet Limited- respondent No.1 (a company incorporated under the Companies Act, 1956 having its registered office at Indira Gandhi International Airport Terminal 1D, New Delhi-110037 and corporate office at 319, Udyog Vihar, Phase-IV, Gurgaon-122016, Haryana) (hereinafter referred to as the "Company") which is a public listed company engaged in the business of scheduled airline services, international 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of respondent No.1, they held 35,04,28, 758 Equity Shares of the company constituting 58.46% of the share capital of which 26,73,70,826 Equity Shares were free from all encumbrances and 8,30,57,932 equity shares were encumbered with various lenders (hereinafter both petitioners would be referred as petitioners). 6. During the years 2013-2015, the respondent No.1 company was in the midst of tremendous distress, 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 Rs. 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 Rs. 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Incoming Promoters; * The change in the management of the Company arising out of proposed changes in the equity holdings of the Company; * Grant permission to Mr. Ajay Singh to propose appointment of new directors on the Board of the Company. This is subject to the security clearance of the new promoters and directors by the Ministry of Home Affairs, restrictions 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 Rs. 2 (two) when admittedly each share of the company itself was around Rs. 16.30/- at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Sellers shall, upon allotment of the Tranche 1 CRPS Shares in their name, receive full legal and beneficial ownership and all shareholder rights relating thereto. 3.4 On 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Seller 2 shall issue irrevocable instructions to the City Union Bank to forthwith release the Fixed Deposit in favour of the Company towards Tranche] CRPS Amount, upon receipt of an instruction of the Company in this regard. 7. SECOND CLOSING 7.1 Second Closing Date The Second Closing 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 Rs. 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 manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 .... 8.2.3 The Parties agree and acknowledge that upon the payment of the Tranche 2 CRPS Amount, the Company shall issue the Release Notice to the Escrow Agent for the release the Collaterals being 41,77,699 equity shares of SUN DTH Private Limited and post dated cheque no. 001452 drawn on City Union Bank dated June 1, 2015 for an amount of Rs. 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 responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undred and Fourteen Crore only) to be utilized for the subscription to 208,00,000 warrants to be issued by respondent No. 1 company and convertible in the financial year 2015-2016; ii) Rs. 43,84,70,000/- (Rupees Forty Three Crore Eighty Four Lakh Seventy -Thousand -only) from the outstanding loan amount of Rs. 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 Rs. 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 Rs. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition Commission of India for the sale and purchase of 35,04,28,758 equity shares in the respondent No.1 Company constituting 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially towards the Income Tax liabilities, service tax with respect to which the criminal proceedings 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 Rs. 679 Crores till 23rd February, 2015 who failed to honour even a single contractual com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn or abandoned by the Respondent No.1 Company. Accordingly, until 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 Rs. 178 crores was brought in as loan by the petitioners, the respondent No.1 Company, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Spicejet Limited (hereinafter "Spicejet") by paying just Rs. 2 (two) when the value of the said stake was atleast Rs. 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 Rs. 777,510,000/- by KAL Airways Pvt. Ltd. Rs. 2,304,679,461/- i.e. Total sum of Rs. 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 Rs. 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 sought certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking/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 extreme financial distress faced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medy 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 Rs. 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, 2015 together with the statutory interest @ 12% p.a. The di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed 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 their behalf that the CRPS shares cannot be issued as the warrants could be allotted and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was transferred to Mr.Ajay Singh, respondent No.2 herein. The BSE thereafter on 27th March, 2015 sent a letter to respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 clarification required by the BSE, the parties are ready to cooperate with each other. In view of the same, the BSE will decide the application within two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of hearing that it is now not possible to issue the warrants to the petitioners. It means under no circumstances as per old application, the petitioners can get war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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") KAL AIRWAYS PVT. LTD 608,80,629 9923,54,253 5049,72,500 4873,81,753 805,10,749 13123,25,209 13123,25,209 17997,06,961 KALANITHI MARAN 208,00,000 3390,40,000 17859,16,170 14468,76,170 269,00,000 4384,70,000 10084,06,170 10084,06,170 TOTAL 816,80,629 13313,94,253 22908,88,670 9594,94,417 1074,10,749 17507,95,209 3039,19,039 7913,00,791 63. The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing manner: Petitioner- Rs. 777,510,000/-(Rupees Seventy Seven Crore Seventy Five Lakh and Ten Thousand only) KAL- Rs. 2,304,679,461/-(Rupees Two Hundred and Thirty Crore Forty Six Lakh Seventy Nine Thousand Four Hundred and Sixty One only) Total- Rs. 3,082,189,461/-(Rupees Three Hundred and Eight Crore Twenty One Lakh Eighty Nine Thousand Four Hundred and Sixty One only) 66. The total consideration for Tranche 1 and Tranche 2 warrants is Rs. 3,082,189,461/-. These payments also included the adjustments of the advances monies provided to Spicejet by the Petitioner and KAL under the loan agreements dated 18th December, 2013, and 21st November, 2014 and loan amendment agreements dated 7th November, 2014, 5th December, 2014 and letters dated 29th January, 2015 issued by the Petitioner to Spicejet. The said position is admitted by the Respondents in the reply filed to the petitions. 67. In view of submissions of SEBI/BSE, issuance and allotment of warrants is impossible under law, therefore, Section 56 of the Indian Contract Act, 1872 read with Clause 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 peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included the adjustments of the advances monies provided to Spicejet by the petitioner and KAL under the loan agreements dated 18th December, 2013, and 21st November, 2014 and loan amendment agreements dated 7th November, 2014, 5th December, 2014 and letters dated 29th January, 2015 issued by the petitioner to Spicejet. The said position is also admitted by the respondents in the Reply filed to the petitions and paras 19-20 by the respondent No.1. 71. It is contended by the respondents, the petitioners on their on 23rd February, 2015 another amendment letter was executed between the Petitioner, KAL Airways Private Limited and the Respondents whereby the SPA was amended and: i) Respondent No. 2 -Mr. Ajay Singh agreed to procure release of a personal guarantee issued by Mr. Kalanithi Maran on or before 24th February, 2015; and ii) Mr. Kalanithi Maran was to make a fixed deposit of Rs. 100 crores in City Union Bank and provide evidence to the Respondent No. 1 Company of the same. Upon the Respondent No. 1 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 Rs. 100 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company shall have the lien removed from the Fixed Deposit and provide alternate form of security acceptable to CUB. Immediately upon release of lien on the Fixed Deposit, Seller 2 agrees to forthwith remit Rs. 100,00,00,000 (Rupees One Hundred Crores only) to Designated Account 2......." 74. It is submitted by Mr.Sibal that upon reading of the aforesaid provision shows that firstly, the consent of EDC for the repayment of the financing facility was to be obtained. Secondly, if the said consent was not received within 90 days, the respondent No.1 was obligated to remove the said lien. The respondents do not disclose as to when the said consent from EDC was obtained by them. The two pre-requisites for Mr. Kalanithi Maran to remit Rs. 100 Crores to the Designated Account 2 were (a) removal of the lien and (b) provision of an alternate form of security by respondent No.1 to City Union Bank. Both the said acts were not accomplished due to lapse of the Respondents. 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 thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined in arbitration. But the fact remains that as per the case of the petitioners barring Rs. 1001 croers the respondents are paid of Rs. 579 Crores, which even in terms of Section 42(6) of the Companies Act, 2013 (hereinafter "CA13"), they are liable to have returned to the Petitioners within 60 days of the closure of the in-principal application i.e. on 10.07.2015, together with the statutory interest @ 12% p.a. 78. Mr.Sibal submits that the difference between Rs. 16.30/-(in terms of the SPA) and Rs. 66.30/-(price of the shares at the time of filing of the petitions) amounts to a total loss of Rs. 250 Crores to petitioners. The respondents are also liable to pay interest and they are required to be secured under Section 9(1)(ii) of the Act, 1996 as prayed for in the petitions. 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents in lieu of the said CRPS must be repaid to the Petitioners with the applicable interest in terms of Section 42(6) of Companies Act, 2013 and as the respondents having received the consideration in contravention of Section 42(3) of Company Act, 2013 are liable for penalties under Section 42(10) of Companies Act, 2013. 85. It is correctly alleged by Mr.Sibal on behalf of the petitioners that the amounts received/adjusted by the Respondents are lying with the Respondents, no warrants and CRPS shares have been allotted at the agreed terms of the SPA, therefore, the respondents are liable to refund the said amount to the petitioners. Such amount i.e. Rs. 579 Crores and the losses i.e. Rs. 403 Crores caused to the Petitioners being a subject matter 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 securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n allotted/issued even after receipt of the consideration even when the same is statutorily liable to be returned to the petitioners together with the loss caused to the petitioners, being the subject matter of arbitration, is required to be preserved. 87. Prima facie, this Court does not find any force in the submissions of the respondents that the petitioners were not ready and willing to perform their part of the obligations under the SPA who have failed to comply the obligation to pay Rs. 1,00,00,00,000 under the SPA and since they are having failed to perform their obligations under the SPA and thus they are now cannot claim any benefit under the same SPA by granting any interim relief as sought in 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 Rs. 100 crores plausible, the said issue is to be decided by the Arbitral Tribunal. Even otherwise once it is the stand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers as well as existing Directors on the Effective Date from any penal action, liability or claim due to non-payment of statutory dues stated in Schedule I in relation to the Company." 91. It also appears from record that the respondent No.1 also issued a letter dated 24th February, 2015 to the petitioners, indemnifying, ensuring and undertaking to take all steps to defend and hold harmless the Petitioners from any penal action, liability or claim due to non-payment of statutory dues in relation to it. The relevant extract of the letter dated 24.02.2015 are reproduced below: "The Company undertakes to pay all statutory liabilities to the satisfaction of the authorities 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res shall be issued to the Sellers in such numbers as may be required by the Sellers; 7.2.3 The Parties agree and acknowledge that upon the payment of the Balance Warrant Payment and the Tranche 1 CRPS Amount, the Company shall issue the Release Notice to the Escrow Agent for the release such portion of Collaterals, being 3,35,04,342 equity shares of SUN DTH Private Limited and post dated cheque nos. 001662, 001663 and 001457, all dated February 15, 2015 for an amount aggregating to Rs. 400,00,00,000 (Rupees Four Hundred Crores only}; and 7.2.4 The Company shall comply with the disclosure requirements under the Listing Agreement. 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 Rs. 1000 (Rupees One Thousand only); (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e utilized towards payment of Income Tax liabilities (being the principal amount of Tax Deducted at source) as on January 31, 2015. c. Rs. 9,45,11,635.09 shall be utilized towards overdue installment of term loan facility availed from Yes Bank. d. The balance amount of Rs. 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 Rs. 99,30,15,695 2 Interest Rs. 27,57,72,835 Interest is calculated on the basis that the amount paid till now is against TDS liability only. 2. Service Tax Rs. 21 ,83,82,119 Interest on Service Tax Rs. 66,04,653 For both the cases, the liability and interest are as on December 31, 2014. Any statutory dues which are disclosed to the Acquirer and have accrued and are payable after December 31, 2014 and until the receipt of funds on February 15, 2015 and June 1, 2015 from the Sellers should also be utilised for payment of statutory dues. 102. It is stated in the reply that the Respondents have paid off all substantial liabilities of the Respondent No.1 Company despite the failure of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies (being the principal amount of Tax Deducted at source) as on January 31,2015 (b) Rs. 9,45,11,635,09 utilized towards overdue instalment of term loan facility availed from Yes Bank. (c) Rs. 6,58,41,115.25 utilized towards creation of margin with Yes Bank in form of fixed deposit to enable release of personal guarantee of Mr. Kalanithi Maran Performed by the Parties - the amount was paid for subscription of warrants and CRPS, 24-Feb-15 20,02,93,039.00 KAL Airways Private Limited 24-Feb-15 5,20,35,549.34 Mr. Kalanithi Maran 24-Feb-15 100,00,00,000.00 Mr. Kalanithi Maran To be utilized towards repayment of the financing facility obtained by the Company from the City Union Bank Mr. Kalanithi has not deposited this amount till date in the Designated Account 2-the amount is still outstanding and payable towards subscription of CRPS. 03-Jun-15 50,00,00,000.00 Mr. Kalanithi Maran 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 CRPS 103. The counsel for the respondents had submits that had taken steps towards ensuring that the TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are helpless at the hand of BSE. Otherwise, they are ready for issuance of warrants. 106. 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. Relief 107. The petitioner in OMP (I) (Comm) 71/2016, inter alia, sought interim order directing the respondents to deposit a sum of Rs. 835,00,00,000/- in the Court i.e. the value of the shares due to the petitioner against the warrants and CRPS shares and also to attach the bank accounts of the Respondents and restraining the respondents from allotting/transferring and/or creating any third party interest on any shares of the respondent No.1 108. In OMP (I) (Comm) 72/2016, the relief sought again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direction is sought was regarded as being a material consideration. However, the view of the Division Bench of this Court that the exercise of power under Section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure 1908 cannot stand in view of the decision of the Supreme Court in Adhunik Steels." 23 ...The Delhi High Court observed that the provisions of Order 38, Rule 5 would serve as a guiding principle for the exercise of the jurisdiction while dealing with a petition under Section 9 requiring the respondent to furnish security and the basic consideration is that the Court should be satisfied that the furnishing of security is essential to safeguard the interest of the petitioner." 24. A close reading of the judgment of the Supreme Court in Adhunik Steels would indicate that while the Court held that the basic principles governing the grant of interim injunction would stand attracted to a petition under Section 9, the Court was of the view that the power under Section 9 is not totally independent of those principles. In other words, the power which is exercised by the Court under Section 9 is guided by the underlying principles which govern the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...of' the subject matter of the arbitration agreement' and to secure 'the amount in dispute in arbitration', but also goes on to say 'and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.' The power of the Court to suo moto pass orders in terms of Section 9 of the Act is therefore, preserved. Section 94 read with Section 151 C.P.C also invests the Court with inherent power to pass interlocutory orders as may appear to the Court to be just and convenient to prevent the ends of justice from being defeated. (See Vareed Jacob v. Sosamma Geevarghese and Ors. AIR 2004 SC 3992.) In the interest of justice, and to bring the parties to an even keel, as we were seized of the appeal. We had the jurisdiction to pass the order dated 12.01.2009 as jurisdiction to pass the order dated 12.01.2009 as corrected on 6.2.2009. We, therefore, reject this submission as well." iv) The Supreme Court in Arvind Constructions Co. (P) Ltd. v. Kalinga (2007) 6 SCC 798 the Supreme Court held "the power under Section 9 cannot be read as independent of the Specific Relief Act and it could not be contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant considerations for the Court to consider the application under Section 9(ii)(b). The party seeking protection order under Section 9(ii)(b) ordinarily must place some material before the Court, besides the merits of the claim that order under Section 9(ii)(b) is eminently needed to be passed as there is likelihood or an attempt to defeat the Award, though as indicated above, the provisions of Order 38, Rule 5, CPC are not required to be satisfied. The statutory discretion given to the Court under Section 9(ii)(b) must be exercised judicially in accordance with established legal principles and having regard only to relevant considerations. In our view, this is the proper approach for consideration of the application for interim relief under Section 9(ii)(b) and we hold that the provisions of Order 38, Rule 5 of the Civil Procedure Code cannot be read as it is and imported in Section 9 of the Act of 1996." vi) The High Court of Bombay in the case of Delta Construction Systems Ltd. Hyderabad v. Narmada Cement Company Ltd.; 2002(1) MH.L.J. 684 has held at para 13 that "The language used in Section 9(ii) is an interim measure of protection, if it is money then to secure the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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