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TMI Blog2023 (2) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... io Thailand" is a public listed company, incorporated under the laws of Thailand. "Aapico Singapore" is incorporated under the laws of Singapore. 3.2 Aapico Thailand holds 100% shares of Aapico Singapore and hence, Aapico Thailand and Aapico Singapore are collectively referred to as "Aapico Group" and its Founder and the President is one Mr.Yeap Swee Chuan (Mr.Yeap). "SGAH" is incorporated under the laws of England and Wales. In 2017-18, Aapico Group invested in SGAH which was then part of the Sakthi Group of Companies ("Sakthi Group"). As on date, as Aapico holds 100% of the shareholding in SGAH, Aapico and SGAH are hereinafter collectively referred to as 'petitioners'. 3.3 SACL/respondent is a public unlisted company incorporated in Coimbatore, Tamil Nadu (India), which is among the Sakthi Group, controlled by Dr. Mahalingam. 3.4 The genesis of the entire dispute between the parties originates from the dealings of two groups, one being "Sakthi Group" and the other being "Aapico Group". 3.5 Initially, in about 2000, the automative foundry part of Sakthi Group's business was hived off into a separate company, i.e Sakthi Auto Components Limited, viz., SACL, the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in SGAH dated 01.10.2018, to secure the amounts due both under the 2017 and 2018 loan agreements. 4.3 Alleging defaults under the Loan agreements, on 04.06.2019, Aapico appears to have taken complete control of the Board of SGAH. Subsequently, on 15.08.2019, by enforcing the charged shares, Aapico appropriated 50.01% shares of ABT UK therby becoming 100% equity holder of SGAH, which position is not disputed and is also reflected in the UK Companies House and through SGAH, a 77.04% holder of SACL, indirectly. The value of appropriated shares, based on a valuation report dated July 31, 2019 tendered by an internationally renowed firm namely, FIZ Consulting LLP, was around USD 27 million. 4.4 As sole shareholder and the majority shareholder of SACL, Aapico is entitled to control and manage SACL pusuant to its rights under the 2018 SHA. As Aapico has been prevented from exercising those rights by the entities of Sakthi group, Aapico and SGAH invoked the terms of arbitration agreement and issued a notice of arbitration on 11.10.2019 to ABT UK and SACL. Accordingly, Aapico commenced the SIAC Arbitration with regard to: (i) Control and management rights including proportionate represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SACL, Aapico now became holder of 77.04% shares in SACL through its 100% shareholding in SGAH. However, despite Aapico's shareholders of SACL having 77.04% shares, the petitioners have been prevented from exercising their rights management/control of SACL under the SHA by the entities of Sakthi Group in breach of the SHA. Therefore, due to breaches under the SHA, the petitioners initiated arbitral proceedings and conducted before the SIAC Arbirtal Tribunal, which, after giving the parties a full opportunity to be heard and after applying its mind to the facts and circumstances and after considering all the relevant aspects of the dispute and all the evidence adduced by the parties, has passed a detailed and comprehensive Award, which requires no interference and therefore, enforcement of the Award cannot be refused under Section 48(1)(b) of the Act. He would also submit that the Arbitration Clause contained in the 2018 SHA is valid and the composition of the SIAC Arbitral Tribunal was also as per the choice of the parties under the law of Singapore, which is the seat of arbitration. 6. It is further case of the petitioners that the Award is a foreign Award within the meaning o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 2 SCC 433, and in "Vijay Karia v. Prysmian" reported in (2020) 11 SCC 1 (hereinafter called as "Vijay Karia case law") 8. The learned counsel submits that though the respondent filed additional counter and brought on certain new documents and raised supplementaty grounds, those documents were not formed part of the records of the Tribunal SIAC for passing the final Award. He contended that the alleged non-production of documents/supression of documents as contended by the respondent is not a fraud that can be attributed against the petitioners and further, it is baseless, erroneous and falls outside the purview of Section 48 of the Act and in this regard, he relies upon the decisions in "Sleepwell industries Co.Ltd v. LMJ International Ltd" reported in 2017 SCC Online Cal 12109; in "LMJ International Ltd v. Sleepwell industries Co.Ltd" reported in 2019 (5) SCC 302]. Therefore, he pointed out that there is no obligation on the part of the petitioners to produce the alleged documents before the Tribunal and hence, the Award shall be held enforceable. Further non-production of irrelevant documents in a foreign seated arbitration, cannot be termed as breach of fundamental policy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co's appropriation of SGAH shares has been outrightly rejected. Further, as regards the proceedings before the NCLT pertaining to the oppression and mismanagement under Section 241 of the Companies Act, 2013 he would submit that it has no relevance to the arbitration which dealt with the breach of the SHA. The above position has been confirmed in the Award by the Tribunal, which observed that- "......the Tribunal accepts the Respondents' submission that a number of claims raised in the SSL NCLT Proceedings pertain to factual and legal aspects which are not matters to be determined in this arbitration". These concerns the claims relating to the allegedly oppressive conduct of SGAH (through Aapico) as the majority shareholder of SACL and the complaints relating to the takeover of Sakthi Services S.A. and Sakthi Portugal S.A.". 11. The learned counsel would further submit that the allegation of the fraudulent conduct of the petitioners is baseless and irrelevant since in the present proceedings 'fraud' as contemplated under section 48 of the Act is not a 'fraud' or 'corruption' in making of the Award , hence it is enforceable. He also submits that with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents have no relevance at all for making of the Award by the Tribunal. Therefore, the learned counsel contends that the objections/grounds taken by the Respondent and filing of the above documents is an abuse of the process of law and intended to confuse the issues and delay the enforcement of the Award. It is one the several frivolous tactics deployed by the respondent to prevent the petitioners from exercising their rights as 77.04% majority shareholder. The learned counsel would submit that non-enforcement of the Award will cause grave prejudice to the petitioners, who had invested more than INR 1000 crores, as the respondent continues to be run by the nominees of its minority shareholder, contrary to the terms of the SHA and the Articles of Association of the respondent. The learned counsel submits that the petitioners and their nominees do not have any access to the office/factory premises of the respondent. There is absolute lack of visibility on the financial health vis-a-vis state of affairs of the company, despite the Award recognising the petitioners information rights under the SHA. 13. With these contentions, the learned counsel for the petitioners would urge this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal. However, during the course of the trial before the High Court of England and Wales CL-2020-000398, discovery was ordered and in that process, access to entire e-mail domain of the petitioners was taken and during the discovery process which took place between 2021 and February 2022, discovery of vital documents and e-mails concealed by the Petitioners from the respondents were unearthed and in one of such e-mails would show how the Petitioners had orchestrated a fraud on the respondent through Mr.Yeap, the founder of Aapico and Mr. Venkat Ramasamy of Shrinidhi investment and advisers in January 2019. Therefore, he would contend that since the Award has been obtained by fraud by suppression of vital documents, this Court is empowered to refuse the enforcement of the foreign Award in terms of Sec.48(2)(b) of the Act as fraud is clarified under said provision as conflict with public policy of India. He also submitted that fraud initiates all solemn acts and it has been repeatedly held by the Apex Court and the High Courts held that if Award is obtained by reason of commission of fraud, even the principles of natural justice are not required to be complied with for setting asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SA is a Wholly owned subsidiary of SACL involved in the manufacture auto components. Portugal operations were supported by a loan from Oxy Captial, which debt Aapico promised to take over by substituting itself as a lender and thereby providing financial gain to SGAH. However contrary to such representation, Aapico behind the back of SGAH, colluded with Portugal Executives and usurped the entire Portugal operations. Further not stopping with usurping the subsidiary, the value created by the Aapico for such takeover was grossly undervalued and caused wrongful loss to the tune of several crores to SACL. In fact, this was exhaustively pleaded before the SIAC tribunal, but for want of evidence the respondent was constrained to withdraw the same. However subsequent discovery of the memo before UK Court would have enabled the respondent to vehemently agitate the issue as regards the loss of Portugal operations before SIAC. 17. The learned counsel would further submit that the respondent/SACL discovered an Email exchange between Aapico and Oxy Capital in June, 2019, wherein, a step by step action plan was deployed by Aapico behind the back of respondent/SACL to usurp control over Portuga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 48 of the Act, which read as follows: "48. Conditions for enforcement of Foreign Awards.- (1) Enforcement of a Foreign Award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that- (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the Award was made; or (b) the party against whom the Award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) the Award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the Award which contains decisions on matters submitted to arbitration may be enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n authority or the arbitral procedure are not in accordance with the agreement of the parties or failing such agreement was not in accordance with the law of the Country where the arbitration took place. e) The Award has not yet become binding on the parties or has been set aside by the Super-seated competent Authority of the Country under law, which the Award was made. f) The subject matter of the difference is not capable of settlement by arbitration under the law of India. g) The enforcement of the Award would be contrary to the public policy of India. The conflict of Public policy refers to the following situations: i) The making of the Award was induced or affected by fraud or corruption or was in violation of Section 75 and 81 of the Act, or ii) If it is in contravention of fundamental policy of Indian law or iii) If it is in contravention with the most basic notions and morality or justice. 24. Except the grounds mentioned above, the Court, in general, will not entertain any other objections to refuse the enforcement of the Foreign Award. 25. Though, the learned counsel made very many submissions on various aspects, this Court captured only the relevant, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Award, but before filing the present original petition. The KMB's sanction letter was approved by the respondent company's Board, which is much prior to the execution of SHA dated 29.09.2018. Thus, both parties had knowledge about KMB's letter dated 11.09.2018. Therefore, the parties to the SHA are well aware of the fact that the enforcement of terms and conditions of SHA will be always subject to the loan sanction letter of KMB. Hence, any attempt to change the shareholding, directorship, management, etc., without prior approval of KMB, would be contrary to the terms and conditions of loan sanction letter of KMB. Hence, suppressing the above facts, the petitioner obtained the award from SIAC. SHA will be always subject to loan sanction letter of KMB. 29. Further in the said Board meeting, it had also resolved to authorise the Managing Director and CFO to execute all undertakings and documents as required by the Bank. In the same meeting, the SHA to be entered into between the parties was placed as subject No.5 and the Board has approved the same. At the very same Board meeting, subject No.7, the terms and conditions of the sanction letter issued by the KMB were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersuade the Tribunal to revisit what they have already found. The respondents accepted that under the interim order, the Tribunal had already found that the respondents are obliged to procure that SACL's Articles of Association are amended to incorporate the rights of Aapico under the SHA. Since SACL's Articles of Association had been amended to provide at Article 119 that all rights under the original SHA were entrenched in the Articles of Association, there was no basis for them not to be updated to reflect the rights under the SHA. The respondents also acknowledged that in the order on the stay application dated 8 October 2020, the Tribunal had held that the Claimants had attempted to put into effect the amendments to SACL's Articles of Association, but were unsucessful as the SACL Board did not call an EGM, and the respondents' representatives on the SACL Board have not acted in any way to put into effect (1) and (6) of the interim order. Tribunal's findings and decision 185. In light of the confirmation and acknowledgment by the respondents as discussed above, the Tribunal considers it appropriate to make a final order in terms of the prayer for relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and necessary documents were also executed. 35. No doubt that the KMB has lent the respondent out of the public money i.e., KMB lent the money to the respondent, which was mobilised through public deposit. Hence, in this way larger public interest is involved in the process of lending money to the respondent by KMB. Only to protect the interest of the public, the Bank has put up conditions that no change in shareholding and Directorship shall be made without prior permission of the KMB. However, while passing the Award, though all these facts were brought to the knowledge of the Tribunal SIAC, it has not given any finding except merely recording the submissions of the respective parties. Virtually it is a non-speaking Award with respect to the present issue is concerned. Thus any change of shareholder, directorship, management, etc., as prayed by the petitioners in the claim statement, without prior approval of the KMB, it will clearly amount to making an attempt to loot the public money, which is clearly against the public policy of India. For this acts of the petitioners, this Court either wittingly or unwittingly cannot be a party by allowing the enforcement of the subject for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public interest. Therefore, this Court is of the considered view that enforcement of the present Award is against the public interest and breach of undertaking given to the Bank, while borrowing money by the respondent from the bank. Under the ground of public interest, even something is not pleaded and the same is brought to the knowledge before this Court, when the petition is filed for enforcement of foreign Award, this Court certainly can entertain the submissions and examine the aspects of the public interest and thereafter, decide about the enforcement of foreign Award. 39. In the written arguments, the learned counsel for the petitioner has stated that the following prayer as stated in the counter statement filed before SIAC was withdrawn by the respondent: "declaring that the claimants are bound by the undertaking given to KMB of SACL not to effect change of management or ownership of SACL without the prior permission of the said Bank and grand a consequential permanent injunction restraining the claimants from effecting any change of management or ownership of SACL without the prior permission of the KMB" According to the petitioner, this prayer was withdrawn. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also against the public policy of India. Therefore, this Arbitration award is liable to be rejected on this ground and for this reason, this Court is not inclined to grant any approval for enforcement of the subject foreign Award. II. RESPONDENT UNABLE TO PRESENT ITS CASE BEFORE SIAC: 40. The next point for consideration is, whether the respondent was unable to present its case on the ground under Section 48(1)(b) of the Act. The respondent has filed a reply statement cum counter claim, wherein the stand taken by the respondent at paragraph Nos.III and IV, are as follows: "III. The claimants abused their position, and orchestrated actions with the motive of engineering an alleged event of default to usurp control of the automotive group from the existing promoters, and the claimants are answerable in counter-claim; consequently, claimants are not entitled to any relief 3.1. Aapico is aware that, under the Amended and Restated Loan Agreement ("the 2018 Loan Agreement"), there was an obligation for SGAH as the Borrower to make the March 2019 Repayment (in the amount of USD 14 million plus interest) by 31st March 2019 (pursuant to Clause 6.1). There is also an obligation to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s position of influence given by the provisions of the 2018 Shareholders' Agreement, Aapico itself owed fiduciary duties to SGAH. 3.5. Acting with an intent to cause a default to both trigger security enforcement and a takeover: A. Under Aapico's effective operational and financial control, SAGUSA (a 100% owned subsidiary of SGAH) has been deliberately mismanaged in order, among other ends, to strategically ensure that SAGUSA did not have cash available to honour its commitments. This was done with a view to ultimately try to render SGAH unable to meet its March 2019 Repayment obligation. B. By way of example only, from January 2018 to June 2018, SAGUSA's audited accounts demonstrate that its profit before tax was USD 2.5 million, and this is evidenced by Exhibit R-3. In contrast, in the period from July 2018 to December 2018, under Aapico's effective operational and financial control, SAGUSA suffered catastrophic losses of USD 21.4 million (loss for the year USD 18.9 million after adjusting the profit made up to June 2018 amounting to USD 2.5 million) and this is evidenced by Exhibit R-4. The causes of these losses include: i. Non-payment to critical suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not in SAGUSA's interest and was contrary to usual business practice and more importantly contrary to the fiduciary position that Aapico and particularly Mr Yeap owed to SAGUSA. c) As a direct result, and as would have been obvious to Aapico, critical suppliers to SAGUSA such as Cadillac Castings, Rio Tinto, CTR, and WSBSSS, if they had not done so already, changed their terms of trade to include much more stringent and protective payment terms: thereby serving to exacerbate SAGUSA's difficulties. iii. Meetings with customers; a) From about October 2018 onwards, at Mr Yeap's instigation, separate meetings were held with major customers of SAGUSA including General Motors, Ford and Volkswagen. b) At these meetings, and contrary to accepted business practice in the automotive industry, Aapico attempted to destroy the long- term trust and confidence that SAGUSA had established with those customers over many years, through ABT UK, Dr Manickam Mahalingam and Mr Lalit Kumar. c) This was done by informing the customers (1) of the cash flow difficulties in which SAGUSA had found itself (without admitting that these difficulties had occurred while SAGUSA was under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o inter alia address the WBSSS situation. Aapico subsequently denied the nature of the MOU, and requested a further definitive document with onerous clauses and defaulted on the MOU. e) Notwithstanding all of the foregoing and when ABT UK was supportive of the solution by providing contractual lien, incontrast, and without any reasonable basis, Aapico was not supportive of this solution and accordingly neither were the Directors appointed by Aapico on the boards of SGAH and SAGUSA Aapico even went so far as to send a legal letter to SAGUSA to stop it, claiming the subject to be falling within reserved subject under the transaction documents with Aapico, and thereby stalled passing of the resolution in this regard. In the circumstance, the contractual lien could not be perfected in favour of WBSSS, leading to supplies to SAGUSA getting severely affected. The material communications in this regard are Exhibit R-5 series. v. Binding MOU dated 22nd January 2019 and its breach: a) Aapico showed great urgency and exerted significant influence on General Motors, to cause a binding MOU dated 22nd January 2019 to be executed, inter alia committing to certain funds to SGAH/SAGUSA by 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to formally acknowledge the mail from Dr Manickam and also failed to confirm formally his acceptance by way of reply to the email c) To further derail the progress made, Aapico supported a motion initiated by Huntington National Bank for a preliminary injunction and appointment of a receiver to SAGUSA, thereby not only escalating but also hampering the honouring of the commitment. Aapico was clearly therefore and at every stage, taking malafide steps to trigger a default. 3.6. Proceedings initiated by Huntington National Bank and action of Aapico, against the interest of SGAH and SAGUSA: A. Even while having caused the aforesaid significant actions having a negative impact on SGAH and SAGUSA, and with a view to prevent ABT UK averting an event of default from occurring to SGAH under 2017 Loan Agreement and/or the 2018 Loan Agreement with Aapico, and even while remaining a significant shareholder in SGAH, Aapico went as far as to support a notice of motion for preliminary injunction and appointment of Receiver moved by Huntington National Bank in the US District Court, at the hearing on 28th March 2019. Such course of action, as is reflected in the transcript of proceedings (E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led hereinafter in this Defence including the appropriation of charged shares at a low valuation, the manner in which the entire investment of SACL in the Portugal operation has been usurped by Aapico through clandestine dealings; the manner in which Aapico has breached the trust, abused the fiduciary position, acted behind the back of the Promoters and other stakeholders, deceived the Promoters and other stakeholders are all actions motivated by the sole objective of making wrongful gain for Aapico and Aapico is fully answerable in counter claim and liable to status quo ante and/or liable to ABT UK for compensation. 3.10. It is submitted therefore, that it is Aapico which has usurped wrongful control of SGAH. It is false to allege that there has been a wrongful attempt by ABT UK and its affiliates to retain control of SGAH, in breach of clause 4 and 22 of SHA. IV. Aapico wrongfully usurped control of Wholly owned Step- Down Subsidiary of SACL in Portugal and unjustly enriched themselves for which again Aapico is answerable in counter claim. 4.1. Sakthi Portugal SA is a wholly owned step-down subsidiary of SACL engaged in manufacture of automotive components having a signific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the deal are produced before the Tribunal. 4.5. It is submitted that, Aapico is liable to answer in counter-claim for this unconscionable loss caused to SACL, and hence to SGAH and ABT UK. Significantly, it is to be borne in mind that Aapico caused such a clandestine transaction to be carried out, at the cost of SACL. even without being in control of SACL." 41. To substantiate the above claim made by the respondent, the Tribunal SIAC had passed a procedural Order No.2, dated 20th June 2020. In the aforesaid procedural order, the Tribunal directed the parties to the proceedings to produce inter alia the following documents: "7............... i. All documents from 1st September 2018 and 31st March 2010 exchanged inter se: a. Mr. SC Yeap, b. Mr. Jet Lian, c. Mr. Shuro Matsubara, d. Mr. Joginder Singh, and/or e. Any Aapico representative or agent or one or more of them and General Motors, (or) Ford (or) Volkswagen on the Other Part in respect of SAGUSA, concerning the a. financial status of SAGUSA; b. ability of SAGUSA to meet its obligations; c. ability of Sakthi Group to manage SAGUSA. ii. All documents, correspondence, emails, meeting minutes, notes or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 (Exhibit R-6) x.Minutes of Meeting of Board of Directors (or) any Committee of claimants, or recording of any Board or Directors Committee level discussion concerning Email of Mr. Mahalingam dt. 11 March 2019 (Exhibit R7) xi. All documents, noting(s) of Meetings (or) Minutes of Meetings or Record of Meetings inter se representative(s) of Aapico and representative of Oxy Capital. xii. The transaction documents between Aapico and Oxy Capital in connection with the acquisition of Portugal Operations. xiii. Valuation report (and drafts thereof or other analysis which formed the basis for Aapico disclosing the cost of acquisition of the Portugal Operations to be USD 24.5 million." 42. However, in response to the said procedural order, the petitioners/claimants did not come forward to produce any material documents. Eventually, in the absence and non availability of tangible evidence to substantiate the defence as pleaded in paragraph Nos.III and IV of the reply statement at the hearing before the Tribunal on 25.01.2020, the respondent had conceded not to press its counter claim and sought permission to amend its statement of defence by deleting paragraph Nos.III and IV of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to the petitioners/Aapico, titled "Strategic Financial Advise on consolidation of Aapico's position in Sakthi Global Auto Holdings ("SAGH") and its subsidiaries". The relevant portion of the memo, which incorporates an executive summary and detailed action plan is as follows: "Executive Summary: 1. ENHANCE MAJORITY CONTROL: a. Aapico to get a majority stake in SGAH from current 49.99% to 90% or higher and also take charge of the operations globally to prevent any further lapse in operations. b. SGAH to own at least 80% (ideally higher closer to 90%) directly in Sakthi Auto Component Limited ("SACL")to have a substantial hold on Indian operations. 2. CHINA DEJURE and DE-FACTO JV CONTROL: a. Aapico to take immediate steps to infuse funds to pay all dues to China so that there is no case for the Chinese JV partner to "lien" the shares. b. Detailed documentation related points listed in the detailed section of report. c. Reduce dependency on China for rough castingsthink strategically of develop alternatives. (Venkat to discuss on ability ot source alternative sources for Aluminum castings elsewhere); 3. CUSTOMER MEET AND TAKEOVER OF RELATIONSHIPS: a. It is he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit committees of all these Boards j. To consider appointing a strong internal auditor for review of all operations until they are streamlined. (This includes all jurisdictions). k. And set up weekly, monthly and in some cases daily meetings with all the staff globally. l. Call for a CEO/ CFO summit at the next opportune moment in which full authority ofAapico to be asserted. m. To start the consolidation of accounts process and roll out AAPICO group policies and procedures to the entire Sakthi Group. (For example:Expenses management, accounting policies etc.) 6. To conduct a forensic audit asap to determine the quantity of loss in SAGUSA and to use the evidence found ni the forensic audit of frame the "thieves" and realize the lost funds through proper legal and police action. Detailed Action Plan: 1. Increase the Aapico Stake in SGAH to 90% and SGAH stake in SACL to 80%: i. Aapico shall invest USD 7MN into SGAH at such price that the stake increases from the current 49.99% to 90%. This detail on the number of shares will be worked with Jordan and we will advise you of the exact numbers. However, based on the share math we see in the last balance sheet we believe U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AH shareholding in SACL will be greater than 90%. b. SACL will invest the Euro 29 Million into OFBV and then it will be given as a loan onto Sakthi Portugal to buy out Oxy. Sakthi Portugal can service this loan over a 5-year period. 3 .Legal battle in case of claim on oppression and mismanagement: In case of dispute as per Indian Companies ACT 2013 any shareholders who hold not less than 10% of the share capital can only make an application to National Company Law Tribunal ("NCLT") for oppression and mismanagement However, provided that the Tribunal may, on an application made to it in this behalf, waive this requirement and still admit this case in NCLT. Is it oppression and mismanagement? 1. Analysis of recent judgment clearly lays that "a petitioners approaching the Tribunal under section 241 alleging mismanagement, will now have to meet the twin conditions of (i) mismanagement and (ii) the existence of just and equitable ground for winding-up the company." 2. Minority shareholders are bound by the rule of majority mere unfairness of the action complained of is not enough to invoke application for oppression and mismanagement. Hence it is clear that in case of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat we can reduce the dependence on the Chinese JV partner. iii. To fix all documentation issues with the Chinese JV partner- for example there are supposed to be two companies one marketing company and one production company and there is supposed to be an exclusivity arrangement between the production company and the marketing entity such that the production entity will only sell through the marketing entity. Marketing entity is 51% owned by SAGUSA whereas the production entity is 49% owned by SAGUSA. Appoint a local Chinese CFO for these JV operations asap." 44. Though, all those documents as mentioned were very much available with the Aapico consequent to the procedural order passed by SIAC, they have failed to produce them before the Tribunal. These are all the documents pertaining to the plans orchestrated by the said Venkat Ramaswamy joining with Mr.Yeap, who is the representative of the petitioners and proceeded to take over the SGAH and other its subsidiaries, where the petitioners' representatives were appointed as CEO, CFO and other top position to make losses and thereby to reduce the value of shares and making the company to default all the loans against terms an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. However, in the present case, the submission of the learned counsel for the respondent was that some of the vital documents was not at all available. In the event, the original documents are not available and if the respondent provide only the photocopy, the Tribunal can take adverse inference. However in the present case, no such document is available and only they have heard about the commission of fraud and therefore, the Tribunal directed the petitioners by way of second procedural order to submit the relevant documents. However, the petitioners had not submitted the same and ultimately in the discovery proceedings before the UK Court, all the documents came to light. Under these circumstances, as contended by the learned counsel for the respondent, this Court is also of the view that even in the absence of photocopy of the documents, it is very difficult for the tribunal to take any adverse inference. Accordingly, no adverse inference can be taken. 46. On the other hand, prima facie it appears in the instances narrated above, that Mr.Yeap, who is the representative of the petitioners in collusion with Venkat Ramaswamy, had worked to damage the SGAH and its step do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to the knowledge of the respondent, only on the discovery proceedings initiated before the UK Court, which is subsequent to the passing of the Award. Though, these documents were directed to be produced to the respondent by the petitioners through the second procedural order, the petitioner failed to produce the same, but the petitioner concealed these documents deliberately without complying the second procedural order of SIAC. Therefore, the respondent was unable to present its case due to the failure of provision of these documents, by the petitioners as directed in the second procedural order passed by the SIAC and under these circumstances, in violation of the principles of natural justice, the Award came to be passed. Had the petitioners been complied with the above order and produced all the documents, the respondent would have obtained the fair opportunities to present its case. Therefore, the present Arbitration Award is liable to be suffered under the grounds mentioned in Section 48(1)(b) of the Act. 50. In Vijay Karia case, the Hon'ble Apex Court had dealt with the situation in which the parties are unable to present their case on the grounds mentioned under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that does not produce the document in question in compliance with an order. The tribunal will of course consider all the relevant facts and circumstances, and the submissions by the parties before the tribunal decides whether or not to draw an adverse inference for the non-production. Dongwoo also had the liberty to apply to the High Court to compel production of the documents under s 13 and 14 of the IAA, if it was not content with merely arguing on the question of adverse inference and if it desperately needed the production by M+H of those documents for its inspection so that it could properly argue the point on drawing an adverse inference. However, Dongwoo chose not to do so. 146. Further, the present case was not one where a party hides even the existence of the damning document and then dishonestly denies its very existence so that the opposing party does not even have the chance to submit that an adverse inference ought to be drawn for non-production. M+H in fact disclosed the existence of the documents but gave reasons why it could not disclose them. Here, Dongwoo had the full opportunity to submit that an adverse inference ought to be drawn, but it failed to persuade th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby Sakthi Porugal SA was acquired by the Aapico. The Aapico originally informed Dr.Manickam, that they are going to lend money and purchase the loan only to the extend of 25 Million USD, so as nearly 15 million would be profit to Sakthi Portugal SA. When the Aapico is one of the Joint Venture partners of entire business and behind the back they are not supposed to have purchased the shares of one of the step down subsidiary of SGAH i.e., Shakti Portugal SA, hence there appears that they have played fraud in purchasing the loan of Oxy and thereby made Sakthi Portugal SA into loss, which is contrary to the SHA dated 29.09.2018. The intention of the Aapico was that to make all the step down subsidiaries of SGAH into loss and thereafter to acquire all the entities of SGAH at throw away price by taking advantage of the positions of managing the company in the capacity as CEO and CFO etc., and ultimately, the losses made to these subsidiaries of the SGAH would reflect in the valuations. All these frauds orchestrated by the Aapico, which acts are against the terms and conditions of the SHA entered on 29.09.2018. The Hon'ble Supreme Court in Venture Global Engg. v. Satyam Compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents is accepted, then a party, who has suffered an Award against another party who has concealed facts and obtained an Award, cannot rely on facts which have surfaced subsequently even if those facts have a bearing on the facts constituting the Award. Concealed facts in the very nature of things surface subsequently. Such a construction would defeat the principle of due process and would be opposed to the concept of public policy incorporated in the explanation." 54. In regard to the fraud played by the petitioners, the respondent had initiated and filed a criminal complaint before the Court of law in India and also filed oppression and mismanagement petition, which is pending before the NCLT, Chennai. 55. As contended by the respondent, all these aspects of fraud came to the knowledge of the respondent only when the discovery proceedings was ordered during the course of trial in the UK Court. Therefore, when the commission of fraud by the petitioners brought into the knowledge of this Court against the terms and conditions of SHA dated 29.09.2018 and taking advantage of said fraud, filing claim before SIAC and obtained the Award by concealing the material facts and doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its rights of transfer of shares by virtue of invocation of pledge, in the respondent holding company namely Sakthi Global Auto Holdings Limited (SGAH). In the said company originally, ABT Auto holds 50.01% shares and 80% of the share of the said ABT Auto held by the ABT investment (India) Private Limited, which means SGAH is a step down subsidiary of Indian company. At this juncture, it would be appropriate to extract the group holding structure, as below: Group Holding Structure pursuant to 2017, 2018 Investment: 60. In the present case, ABT Auto pledged its 50.01% of the shares in favour of the petitioner. It is the requirement under the Regulation 18 of FEMA (Transfer or Issue of any Foreign Security) Regulation, 2004 as amended by its office circular dated 29.12.2014, a pledge is possible in favour of a overseas lender, only if such lender is regulated and supervised as a Bank. Admittedly, in the present case, Aapico is not a Bank. Therefore, the respondent submitted that since the pledge was made without approval from RBI, there is no valid pledge. In the present case, according to the respondent, there is no requirement for obtaining any permission to pledge the shares, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been argued by the Appellants, based on the Non-Debt Instrument Rules, that a foreign Award by which shares have to be purchased at a discounted value, would violate the aforesaid Rules, and therefore, would amount to a violation of the fundamental policy of Indian law. Resultantly, the Appellants contended that as a result of this, the Award in the present case would not be enforceable in India. 85. The relevant provisions of the aforesaid rules are set out hereinbelow: "2. Definitions: (ac) "investment" means to subscribe, acquire, hold or transfer any security or unit issued by a person resident in India; Explanation:- (i) Investment shall include to acquire, hold or transfer depository receipts issued outside India, the underlying of which is a security issued by a person resident in India; (ii) for the purpose of LLP, investment shall mean capital contribution or acquisition or transfer of profit shares; 3. Restriction on investment in India by a person resident outside India.- Save as otherwise provided in the Act or rules or regulations made thereunder, no person resident outside India shall make any investment in India : Provided that an investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the transfer of shares from the Karias, who are persons resident in India, to the Respondent No.1, who is a person resident outside India, cannot be less than the valuation of such shares as done by a duly certified Chartered Accountant, Merchant Banker or Cost Accountant, and, as the sale of such shares at a discount of 10% would violate Rule 21(2)(b)(iii), the fundamental policy of Indian law contained in the aforesaid Rules would be breached; as a result of which the Award cannot be enforced. 87. Before answering this question, it is important to first advert to the decision of the Delhi High Court in Cruz (supra). The learned Single Judge was faced with a similar problem of a foreign Award violating the provisions of FEMA. In an exhaustive analysis, the learned Single Judge referred to Renusagar (supra) and then held: "97.It plainly follows from the above that a contravention of a provision of law is insufficient to invoke the defence of public policy when it comes to enforcement of a foreign Award. Contravention of any provision of an enactment is not synonymous to contravention of fundamental policy of Indian law. The expression fundamental Policy of Indian law refers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employment of foreigners in India etc. 110. The contention that enforcement of the Award against Unitech must be refused on the ground that it violates any one or the other provision of FEMA, cannot be accepted; but, any remittance of the money recovered from Unitech in enforcement of the Award would necessarily require compliance of regulatory provisions and/or permissions." 88. This reasoning commends itself to us. First and foremost, FEMA - unlike FERA - refers to the nation's policy of managing foreign exchange instead of policing foreign exchange, the policeman being the Reserve Bank of India under FERA. It is important to remember that Section 47 of FERA no longer exists in FEMA, so that transactions that violate FEMA cannot be held to be void. Also, if a particular act violates any provision of FEMA or the Rules framed thereunder, permission of the Reserve Bank of India may be obtained post-facto if such violation can be condoned. Neither the Award, nor the agreement being enforced by the Award, can, therefore, be held to be of no effect in law. This being the case, a rectifiable breach under FEMA can never be held to be a violation of the fundamental policy of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s permitted only through authorised person. While its aim is to promote the orderly development and maintenance of foreign exchange markets in India, the Government's control in matters of foreign exchange has not been diluted. The conservation and augmentation of foreign exchange continues to be as important as it was under FERA. The restrictions on the dealings in foreign exchange continue to be as rigorous in FEMA as they were in FERA and the control of the Government over foreign exchange continues to be as complete and full as it was in FERA. 67. The importance of foreign exchange in the development of a country needs no emphasis. FEMA regulates the foreign exchange. The conservation and augmentation of foreign exchange continue to be its important theme. Although contravention of its provisions is not regarded as a criminal offence, yet it is an illegal activity jeopardising the very economic fabric of the country. For violation of foreign exchange regulations, penalty can be levied and its non-compliance results in civil imprisonment of the defaulter. The whole intent and idea behind Cofeposa is to prevent violation of foreign exchange regulations or smuggling activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fair market price or value. In the present case, the petitioners valued on its own through the FTI Consulting. It has valued the shares of SGAH for its holding company, who holds 50.01% as 27 Million USD. The total valuation of SGAH by the FTI was 55 Million USD. In the valuation report, the FTI has stated that they have relied on Multiple Analysis as: 1. This is a approach commonly used to value the assets in the Sector 2. Appropriate forecast to prepare Discounted Cash Flow (DCF) analysis are not available. 64. A perusal of the said report shows that the relevant information has not been furnished by the applicant, who was in-charge as CEO and CFO of SGAH and to that extent fraud has been played on the part of the petitioner's representatives in SGAH. There was a request from the respondent to value the shares based on the Discounted Cash Flow (DCF) method. They made opposition stating that since the value arrived at multiple analysis method is much lower than the value to be arrived in the DCF method. Therefore, they wanted to go by DCF method, that is the method approved by RBI and referred as fair value in the Regulation of FEMA. As stated above, as per the Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place environment or underlying synergies into the analysis. All other things being equal, the more recent the transaction, the more reliable the value arrived at using this technique." 66. Since the basic information, which are required for arriving at the valuation in the Market Multiple Method were not available, the Think Capital adopted DCF method and valued SGAH as on May 2019 at 274.42 Million USD, whereas the total value arrived at by the FTI based on the multiple method is about 55 Million USD. The total difference between the DCF and multiple method is 219.42 Million USD. If the dollar rate in the year 2019 is considered as 75 Rupees, the loss of foreign exchange through the step down subsidiary for India, is as follows: 219.42 Crores INR * 75 = Rs.1645.65 crores INR. Out of the said amount, the entitlement of Indian step down subsidiary is a sum of Rs.822.98 crores INR. 67. In the Indian Accounting Standard (IND AS) 113, it is stated that Fair value is market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transaction or market information might be available. For other assets and liabilities, observable market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, for the reasons stated above, the valuation adopted by the petitioners is not in accordance with the RBI Regulations, which are applicable for the step down subsidiary to value the investment while transferring the shares to other foreign entities. Though, all these aspects have been brought into the knowledge of the Tribunal SIAC by way of appropriate pleadings, unfortunately, the said aspects have not been considered and only they have referred the parties to proceed before this Court as no way. The Tribunal SIAC, depend on the said findings, recorded as follows: "177. Having carefully considered the submissions of the parties, the Tribunal does not accept that it should determine Issue 2.a.(i) only after conclusion of the Share Charge Proceedings. The Tribunal is of the view that its ability to do so is not dependent on any findings of the English Courts in the Share Charge Proceedings. 178. As the Tribunal held in its order dated 8 October 2020 on the Respondents' stay application, there are in fact no issues before the Tribunal is to make any observations on the respective claims of the parties in the share Charge Proceedings, including the potential share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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