9911796707
TMI Blog2012 (10) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.1 herein Zenith Infotech Limited on 15th September 2006, offered US $ 33 million 3.0 % convertible bonds 2011 due for repayment or redemption in August 2011. Similarly on 14th August 2007 it also offered US $ 50 million 3.0 % convertible bonds 2012 due for repayment or redemption in August 2012. The bonds were issued at 100 per cent of the principal amount. The Plaintiff is the trustee holding the aforesaid bonds in trust for the bondholders, who subscribed to the said bonds. 3. When the 2011 bonds matured for repayment/redemption in August/September 2011, Defendant No.1 did not make any payment. In view of the default, the Plaintiff issued a demand notice as contemplated by the Agreements and also addressed notices in October 2011 to Defendant No.1, being notice of acceleration and declaring the 2012 bonds as due and payable. The Defendant No.1 also did not make any payment when the 2012 bonds actually became due and payable in August 2012. 4. According to the Plaintiff, the share of the Remote Monitoring and Management Business ( the MSD Business ) was approximately 65% in the total profits of Defendant No.1. The said MSD business of Defendant No.1 was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of Defendant No.1. 9. In the above Notices of Motion, the Plaintiff moved this Court for ad interim reliefs i.e. seeking a direction against Defendant No.1 to furnish security of ₹ 450 crores with interest thereon. This Court by its order dated 23rd December 2011 directed the valuation to be made of the Cloud Computing Business of Defendant No.1 and also directed Defendant No.1 to place on affidavit all the particulars of payments made to various parties from the sale consideration of MSD business i.e. the business which was already sold off by the Plaintiff prior to the filing of the above suit. The said Cloud Computing Business was valued by the Valuers M/s. Ernst Young Pvt. Ltd. at ₹ 598 crores. Since the Plaintiff's claim on the date of the filing of suit is approximately ₹ 450 crores, this Court by its order dated 14th February 2012 noted that M/s. Ernst Young had valued the Cloud Computing Business of Defendant No. 1 at ₹ 598 crores, and did not pass any further ad interim orders beyond the injunction against disposal, alienation, transfer, creation of third party interests in respect of the Cloud Computing Business. This Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliefs. 12. Mr. Janak Dwarkadas, the Learned Senior Advocate appearing for the Plaintiff, tendered a table setting out the cash and cash equivalents of Defendant No.1 as on 31st March 2011; proceeds received from sale of MSD business; cash and cash equivalent as on 30th September 2011, and the purported payments/investments made from the sale proceeds of the MSD business by Defendant No.1, and submitted that the Defendant No.1 after representing to its shareholders, the Bombay Stock Exchange and the City Civil Court at Mumbai, that the sale proceeds of the MSD business will be applied towards buy back/redemption of FCCBs, dishonestly siphoned away the sale proceeds and has admittedly not paid any amount whatsoever towards buy back/redemption of FCCBs 2011 as well as 2012. Mr. Dwarkadas submitted that Defendant Nos. 1, 5 and 6 have no intentions whatsoever to pay the amounts due and payable by Defendant No.1 to the Plaintiff towards buy back/redemption of the said FCCB series, aggregating to ₹ 500 crores as of date. He submitted that the action on the part of Defendant Nos. 1, 5 and 6 viz. disposing of the MSD business and siphoning of the sale proceeds in the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit cannot be taken into consideration but the effect of attachment before judgment must be to prevent future transfer or alienation. The Court has further held that it is open to the Court to look to the conduct of the parties immediately before suit and to examine the surrounding circumstances and to draw an inference as to whether the defendant is about to dispose of the property and if so, with what intention. In the said decision, the Court has also held that where the defendant starts disposing of the properties one by one, immediately upon getting a notice of the Plaintiff's claim, and/or where he had transferred the major portion of his properties shortly prior to the institution of the suit and was in an embarrassed financial condition, the same would constitute grounds from which an inference could be legitimately drawn that the object of the defendant was to delay and defeat the Plaintiffs' claim. The learned judge has also held that where the removal of the property is to a foreign country, the inference is greatly strengthened. 15. Mr. F.E. De'vetre, the Learned Senior Counsel appearing for Defendant Nos. 1, 5 and 6 submitted before me that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 7.50 crores have been utilised by the Company in July, 2012. He has submitted that the Company be allowed to use the cash and bank balances and the amount received from the sundry debtors of the Company from time to time, for the day to day working of the Company, including payment of wages of the said employees. Mr. De'vetre has stated that Defendant No.1 has received ₹ 21 crores out of the loans advanced to its subsidiaries, aggregating to ₹ 71 crores. He has submitted that any further amount received from its subsidiaries towards return of loan shall be invested in a fixed deposit account and not utilised by Defendant Nos. 1, 5 and 6 until further orders. On a suggestion made by the Court, Mr. De'vetre, after taking instructions, has undertaken that Defendant Nos. 1, 5 and 6 will arrange to get repayment of loans by its subsidiaries at least to the extent of ₹ 25 crores within six months from today and will deposit the said amount in a fixed deposit account and not utilise the same until further orders from this Court. Mr. De'vetre has relied on a decision of the Hon'ble Supreme Court in the case of Raman Tech. Process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.1 did not make any payment. In view of the default, the plaintiff issued notice of demand as contemplated by the agreements and also addressed notices in October 2011 to defendant No1. being Notice of Acceleration and declaring the 2012 Bonds as due and payable . I am also prima facie satisfied that the Defendant Nos. 1, 5 and 6, despite representing to their shareholders, Stock Exchange and the City Civil Court that the consideration received from the sale of the MSD business or at least part thereof would be applied towards buy back/redemption of FCCBs, have after the sale of the MSD business, not paid any amount whatsoever towards buy back/redemption of FCCB series. 17. Order 38 Rules 5 to 13 of the CPC,1908 pertains to attachment of properties of a party before judgment. Rule 5 provides that where, at any stage of a suit, the Court is satisfied by affidavit or otherwise, that the Defendant, with intent to obstruct or delay the execution of any decree that may be passed against him, (a) is about to dispose of the whole or any part of his property, or (b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass an order of attachment against the assets of the Defendant No.1. However, in the instant case, the Defendant Nos. 1, 5 and 6 have themselves without prejudice to their rights and contentions expressed their willingness to undertake to the Court not to dispose of any of their assets disclosed on oath save and except the cash and bank balances and the amounts received by them from their sundry creditors from time to time to enable them to carry on their business which would include payment of wages to 1000 workmen. Attaching the Bank balances of approximately ₹ 28 crores and the amounts to be received from sundry creditors is bound to stop the day to day business of the Company affecting the lives of 1000 workmen and their family members. This will not be in the interest of anyone including the Plaintiff. Even otherwise, I am also not inclined to pass such a drastic order of stopping the entire business of the Defendant No.1 at the ad interim stage. In view thereof, until further orders, I pass the following order: (i) The undertaking given by Defendant Nos. 1, 5 and 6 viz. that the Defendants shall until further orders not dispose of, sell, transfer, ali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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