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TMI Blog2021 (4) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... n Investment Advisors Pvt. Ltd. ("Zon") entered into agreements on 31st March 2017 to secure repayment of an earlier loan that Respondent No. 3 ("Champion Agro World") took in the amount of Rs. 40 crores from IFIN. There was a previous loan agreement of 17th May 2014 (to be read with an offer letter dated 15th May 2014). By this, IFIN gave a finance facility of Rs. 40 crores to Champion Agro World. This facility was secured by a pledge of 52,86,679 shares--60.7% of the share capital of Champion Agro Ltd. ("Champion Agro"), Respondent No. 4--held by its promoters, a first charge of mortgage of land at Palitana, an exclusive charge on the current assets of Champion Agro World, a pledge of the entire equity shares of Champion Agro World by its shareholders, and various personal guarantees. There was also a Comfort Letter of 19th May 2013 from Bay Capital undertaking to provide the necessary funds should there be any payment default by Champion Agro World. 4. In 2015, Champion Agro World defaulted. In 2016, IFIN filed Commercial Suit No. 469 of 2016 in this Court against Champion Agro World and the personal guarantors. 5. Meanwhile IFIN approached Bay Capital on the basis of this Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not seem to have been registered and, as I noted, the actual pledge has never been effected. 10. I am leaving aside for the moment the other narrative in the plaint. I come immediately to the EoD notice of 23rd July 2019, a copy of which is at Exhibit 'A' from page 39. This is addressed to Bay Capital, Mehta and Zon Software. It briefly sets out the background in paragraphs 1 to 3, with reference to the subscription agreement of 31st March 2017. Paragraph 4 sets out the distinct events of default that IFIN invoked. It claimed that, on 1st July 2019, an aggregate amount of Rs. 3,46,81,650/- was overdue and unpaid. It said that Bay Capital had failed to take IFIN's approval for a merger of the 1st Respondent with another entity. Certain necessary documents, including audited financial and statutory auditor certificates for the financial year 2018 were not produced. Lastly, it said that the hypothecation charge that was agreed to be created was not registered. In paragraph 5, IFIN then said that since Bay Capital had continuously failed and neglected to cure all events of default within the cure period, in accordance with clause 33 of the annexure to the subscription ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Bank Ltd. & Ors. (1983) 4 SCC 625 Section 41 of the Specific Relief Act reads thus: "41. Injunction when refused.--An injunction cannot be granted-- (a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings; (b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought; (c) to restrain any person from applying to any legislative body; (d) To restrain any person from instituting or prosecuting any proceeding in a criminal matter; (e) to prevent the breach of a contract the performance of which would not be specifically enforced; (f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance; (g) to prevent a continuing breach in which the plaintiff has acquiesced; (h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust; (i) when the conduct of the plaintiff or his agents has been such as to disentit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... temporary injunctions. That submission was also negative by the Supreme Court in these words: "10. Mr. Sen, learned counsel for the respondent-Bank, contended that Section 41 (b) is not at all attracted because it deals with perpetual injunction and the temporary or interim injunction is regulated by the Code of Civil Procedure specially so provided in Section 37 of the Act. Expression 'injunction' in Section 41 (b) is not qualified by an adjective and therefore, it would comprehend both interim and perpetual injunction. It is, however, true that Section 37 specifically provides that temporary injunctions which have to continue until a specified time or until further order of the court are regulated by the Code of Civil Procedure, But if a dichotomy is introduced by confining Section 41 to perpetual injunction only and Section 37 read with Order 39 of the Code of Civil procedure being confined to temporary injunction, an unnecessary grey area will develop. It is indisputable that temporary injunction is granted during the pendency of the proceeding so that while granting final relief the court is not faced with a situation that the relief becomes infructuous or that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter. (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter: Provided that the applications under this sub-section, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would justify the making a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks ft. (2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for-- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. (6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered. (7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same. (8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms to me plain that when the NCLAT passed such an order it did something it could not possibly have done. When it used the words 'any court of law' this could conceivably mean the High Court as well. The NCLAT has absolutely no jurisdiction over this Court, even on its Original Side, given that this is a Chartered High Court. The High Court is in no way subject to the NCLAT's jurisdiction or superintendence. I do not see how the words 'court of law' can be 'read down', because other than the NCLT, there is no other judicial authority over which the NCLAT exercises such superintending power. But if we leave that aside and focus on the words 'arbitration panel and arbitration authority', and even assuming for a moment that the NCLAT has the power to stay arbitrations, it certainly does not have the authority to stay the hands of this Court in hearing a petition under Section 9 or any other petition that properly comes before this Court under the Arbitration and Conciliation Act 1996. Indeed, I do not even see how the NCLAT has such control over arbitral tribunals. The NCLAT can make no order under Section 9, Section 11, Section 34, Section 37 or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f further interest of Rs. 16,63,562/-. 25. What Mr. Sakhardande in essence seeks, and I do not think there is any other way to look at it, is virtually a re-writing of the terms of the commercial contract between the parties at the time of Section 9 Petition. I am asked to waive or ignore a breach of the obligation to pay interest on schedule. I am asked to turn a blind eye to the failure to create a hypothecation and the pledge of shares. All these breaches and defaults are to count for nothing; and in the meantime, IL & FS is to be restrained from enforcing its contractual obligations against Bay Capital. I do not see why Bay Capital should not be held to the bargain that it struck. This agreement has never been avoided. Nobody has ever said that any of its terms are fraudulent or barred by any of the provisions of the Contract Act. 26. In a commercial Court these pleas are of very little persuasive value. They will only carry heft if it is shown that there is no breach on the part of the Petitioner, and the invocation by the Respondent is totally unlawful. Merely claiming it to be undesirable is useless. Section 9 is not meant to aid parties clearly in breach of their contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being sought from me today. As I said earlier, I do not see Section 28(2) as constraining or limiting the power of a Section 9 Court. But it must certainly inform the nature of the relief that the Section 9 Court moulds. The relief must be one that the arbitral tribunal can legitimately confirm if and when called upon to do so. 28. I do not see any merit in the case presented by Bay Capital. Its offer made today to deposit certain amounts and for Mehta to pledge his shareholding in Bay Capital is, I think, far too little too late. 29. There is no merit in the Petition. It is dismissed. 30. In view of the provisions of Section 35 of the Code of Civil Procedure 1908 as amended by the Commercial Courts Act 2015 there will have be an order of costs. The mandate is that costs follow the event, unless the Court decides otherwise for the reasons to be recorded. Dr Saraf submits that the costs payable to the 1st Respondent are in the amount of Rs. 7.5 lakhs. I find the figure reasonable. There will be an order of costs against the Petitioner in the amount of Rs. 7.5 lakhs. The amount is payable within two weeks from today. If not paid, it will carry interest at the rate of 9% per annum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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