9911796707
TMI Blog2017 (7) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... SpiceJet") owning 35,04,28, 758 equity shares, 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 different lenders. In 2013-2015, SpiceJet faced acute financial crisis that caused it difficulties in maintenance of its fleet, staff and operational integrity. The petitioners wished to revive the company and bring it back to the path of financial health. By a Loan Agreement dated 18.12.2013 (hereinafter "First Agreement"), Rs. 75,00,00,000/- (Rupees Seventy Five Crores only) was given by the petitioner to the company. This amount was later reduced by another agreement (dated 07.11.2014) by which 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 Agreement and utilize that sum towards the payment of exercise of option attached to 1,91,69,000 warrants issued on preferential basis to the Petitioner by the company. Accordingly, the outstanding loan amount under the First Agreement stood at Rs. 64,59,16,170/- (Sixty Four Crore Fifty Nine Lakh Sixtee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle judge, as noted in the impugned judgment. 5. The SPA contained stipulations whereby the parties agreed that the 8,16,80,629 and 10,74110,749 warrants of the Company issued to the Sellers (the petitioners) in terms of details set forth in Schedule D ("Warrants''), were convertible into Equity Shares in the Financial Year 2015-16 and Financial Year 2016-17, respectively. The Warrants were to be converted at a conversion price of Rs. 16.30 per Equity share, as per the price arrived in accordance with SEBI Disclosure Regulations, for which the Sellers were required to pay to the Company, a sum of Rs. 3,08,21,89,461 (Rupees Three Hundred and Eight Crores Twenty One Lakhs Eighty Nine Thousand Four Hundred and Sixty One only) in aggregate of which the amount payable on or before 15.02.2015, has been set out in Schedule D ("Balance Warrants Payment''). The petitioner/sellers agreed to make the Balance Warrants Payment on or before 15.02.2015. The Parties acknowledged that the company "shall issue the Warrants within fifteen (15) Business Days of receipt of all the necessary approvals including the Governmental Approvals required for the same." Clause 3.3 of the SPA s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant 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. " By letter dated 29.01.2015, Kalanithi Maran, one of the petitioners waived the outstanding interest on the outstanding loan amount of Rs. 64,59,16,170/- (Rupees Sixty Four Crore Fifty Nine Lakh Sixteen Thousand One Hundred and Seventy only) and discharged the company from payment. It was also agreed that the said outstanding loan amount of Rs. 64,59,16,170/- (Rupees Sixty Four Crore Fifty Nine Lakh Sixteen Thousand One Hundred and Seventy only) shall be utilized for the future subscription to the non-convertible redeemable cumulative preference shares of the company. 7. The petitioner, in terms of the arrangement, by another letter dated 29th January 2015 (with respect to the outstanding amounts as per the Second Loan Agreement) stated the following: i) Rs. 33,90,40,000/- (Rupees Thirty Three Crore Ninety Lakh Forty Thousand only) from the outstanding loan amount of Rs. 114 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieu of the release of collaterals on 24.02.2015; Tranche 2 CRPS Amount payment of Rs. 50,00,00,000/- (Rupees Fifty Crore only) into the Designated accounts on 03.06.2015. 9. The appellants were obliged to seek approval of the Competition Commission of India for the sale and purchase of the equity shares in the company. On 19.02.2015, the appellant - Mr. Ajay Singh received the approval of the Competition Commission of India for the sale and purchase of 35,04,28,758 equity shares in the company constituting 58.46% of the paid up equity share capital of the company and to issue warrants as agreed. He became the promoter, director and majority shareholder of the company and is a signatory to the SPA including the arbitration agreement contained in Clause 16 thereof. The equity shares of the company are listed and admitted to trading on the Bombay Stock Exchange. 10. The petitioners contended that they paid the entire amount towards their contractual obligations under the binding SPA including the amounts which were dues of the company to the statutory authorities. They claimed that the appellants received the amount of Rs. 679 crores till 23.02.2015 but failed to honour any contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The petitioners alleged that the appellants received Rs. 679 Crores till 23.02.2015 but failed to honour even a single contractual commitment under the binding SPA and on the other hand, the Petitioners' money was used to run the company and pay the statutory dues. 11. The respondent/appellant denied liability and stated, inter alia that the petitioners were aware that the application made to the BSE may not fructify. They relied on the condition in the SPA executed between the parties that warrants would be issued within 15 days "of receipt of all the necessary approvals including the Governmental Approvals" required for the purpose. It was urged that the appellants not only complied with the terms of the SPA but went beyond their obligations by utilizing the amounts in Designated Accounts for the prescribed purposes only and have in addition to releasing the mortgage and personal guarantee of the Petitioner, also paid the entire outstanding Income Tax liabilities including the interest thereon. 12. It was also urged that the subject matter of the dispute, was the issue of allotment of Warrants, Tranche 1 CRPS and Tranche 2 CRPS. However, the BSE and the SEBI have made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by a tribunal in arbitration proceedings because issue of warrants was rendered impossible. The appellants stated that if the petitioners were to abandon the application for warrants and the bar of Section 43 of the Companies Act was removed, they could also offer to issue CRPS shares for the value for which warrants were to be issued to the petitioners thereby settling the entire dispute between the Parties. As such, no cause for grant of interim relief to the petitioner has arisen, therefore, the present petition should be dismissed and the interim relief granted by this Court should be vacated. 15. The learned single judge noted that the principal disputes raised on behalf of the petitioner in the present matters are about (i) non issuance of warrants and (ii) non-convertible redeemable cumulative preference shares ("CRPS") (iii) failure to compound the offences under the Income Tax Act. The impugned order dealt with each issue separately, having regard to the materials, pleadings and parties' contentions. Each head was to be dealt with separately in view of point-wise submissions made by the parties. On the first, the impugned order noted that though the appellant got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere are some disputed facts. Therefore, this Court is not inclined to secure the entire amount as prayed for while deciding the petition under Section 9 of the Act. 111. Barring Rs. 100 crores which is not received by the respondents as informed during the hearing, the respondents are in possession of Rs. 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 Rs. 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. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract Act, 1872 is not attracted in the present case. The learned single Judge, it is urged, erroneously placed reliance on the said provision to hold that "under these circumstances, the petitioners are entitled to protect the said amount". 18. It is submitted that firstly, in the present facts and circumstances, Clause 17.6 of the SPA is attracted and, therefore, no occasion for the invocation of Section 56 has arisen and secondly, without prejudice, it is submitted that there was no promise from the Appellant or the company to do an act that they knew to be impossible or might have known to become impossible. On the contrary, it is the Respondents No. 1 and 2 who made the offer dated 13.01.2015 to the Appellant by which he undertook all the liabilities of the company on the promise that the petitioners would pay an amount of Rs. 450 crores and on the premise that in consideration of having paid that amount for effectuating the revival of the company the petitioners would be issued warrants and CRPS in terms of the SPA. Therefore, it is on the said promise of the petitioners that the Appellant agreed to the terms of the offer which also stated that an application based on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable the appellant to furnish adequate security, in the form of a block of shares, to cover liability and the balance of the amount, to be secured through bank guarantee. The court had granted time to the respondent/petitioners who were willing to accommodate the appellant to the extent of grant of time, but insisted that at least about 50% of the amount directed should be deposited in court, in accordance with the impugned order, to enable its withdrawal subject to furnishing security, by the petitioners. 22. Dr. A.M. Singhvi, learned senior counsel on behalf of the petitioners argued that that after execution of SPA the appellant and the company were obliged to issue the warrants because on the date of execution of agreement dated 29.01.2015, they were fully aware of the pendency of the application. It is contended that arguendo the company is blameless, yet at the same time, it cannot be denied that the warrants were to be allotted to the petitioners and the petitioners paid amounts towards such allotment. On one hand, the appellants allege that the warrants should have been issued and after the prescribed period of time, they were also supposed to issue shares of CRPS. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is conferred under a special statute and it is conferred on an ordinary court of the land, without laying down any special condition for exercise of that power, the general rules of procedure of that court would apply. The Act does not prima facie purport to keep out the provisions of the Specific Relief Act from consideration. No doubt, a view that exercise of power under Section 9 of the Act is not controlled by the Specific Relief Act has been taken by the Madhya Pradesh High Court. The power under Section 9 of the Act is not controlled by Order XVIII Rule 5 of the Code of Civil Procedure is a view taken by the High Court of Bombay. But, how far these decisions are correct, requires to be considered in an appropriate case. Suffice it to say that on the basis of the submissions made in this case, we are not inclined to answer that question finally. But, we may indicate that we are prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on well recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver." 25. Interestingly, in a previous decision, Firm Ashok Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment that: "The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term 'mandatory' to describe the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a 'high degree of assurance' about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction." 28. The question then is was the discretion exercised appropriately by the learned single judge, in the facts of this case? The facts are fairly straightforward, in the opinion of the court. The appellant was able to get hold of a substantial shareholding in the company (58% to be exact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on any balance sheet, nor even the income and expenditure statement of the company, to say that compliance with the impugned order would irreparably injure it. The court notices that the nearly 18 month pendency of this appeal, and the non-compliance with the impugned order, has aggrandized the appellant, which was to have the benefit of the amounts. If there were any difficulties, this interregnum period would have helped it considerably tide over its affairs and certainly afforded time to organize it better and in a more orderly fashion to comply with the order. 30. During the hearings, the petitioners had alluded to press reports (in the Hindu and Business Times, both 21st April 2016 edition) to say that the appellant had announced capacity expansion of the company's aircraft fleet through wet lease by close to 20-25 % and that the company would also place orders for new aircrafts. The appellants' counsel did not deny that, but countered the argument by saying that the wet lease arrangement payments were not through bank or own funding, but rather based on projected increased earnings. The petitioners had urged that the profit before tax for the year ending 31.03.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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