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TMI Blog2019 (11) TMI 1844X X X X Extracts X X X X X X X X Extracts X X X X ..... and FHL to defeat the rights of the petitioner despite making undertakings to the High Court of Delhi that no action would be taken to prejudice petitioner s rights. These transactions are in wilful disobedience of the order of this Court dated 14.12.2018 read in conjunction with the earlier orders. Suo moto notice of contempt issued and the Registry directed to register a fresh contempt petition with regard to the violation of the order dated 14.12.2018 in which RHC, OIL, MMS, SMS and FHL shall be arrayed as contemnors. FHL is directed to disclose the list of directors/officials actively involved in the running of the company for the period 01.01.2018 to 31.01.2019. Sameer Gehlaut, Director of Indiabulls Housing Finance Limited and Director of Indiabulls Ventures Limited (Contemnor Nos.1 5), Gagan Banga, Director of Indiabulls Housing Finance Limited and Director of Indiabulls Ventures Limited (Contemnor Nos.2 6), Ashwini Kumar Hooda, Director of Indiabulls Housing Finance Limited (Contemnor No.3), Sachin Chaudhary, Director of Indiabulls Housing Finance Limited (Contemnor No.4), Divyesh Bharat Kumar Shah, Director of Indiabulls Ventures Limited (Contemnor No.7) and Pinank Jayant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held entitled to receive Rs. 3500 crores approximately from respondent no.1 to 15 in S.L.P.(C) No.20417 of 2017. This award was challenged both in Singapore and India. The objections have been dismissed and the award has become final. Though the respondents submit that in Singapore they have filed an appeal to the Court of Appeal, however they have not placed any stay order of the Court of Appeal on record. Admittedly, the award can be enforced. 2. The petitioner filed proceedings for the enforcement of the foreign award in Delhi High Court. The respondents no.1 to 15 in the SLP objected to the same and filed objections under Section 48 of the Arbitration and Conciliation Act, 1996 (for short 'the Act'). These objections were dismissed except insofar as respondents no. 5 and 9 to 12 before the High Court were concerned since these respondents were minors. The challenge to the judgment of the High Court has been rejected by this Court on 16.02.2018 in SLP (C) No. 4276 of 2018. 3. Before dealing with the issues in detail it would be helpful to lay out the following chart to explain the relation between various entities belonging to the respondents in the SLP as on 31.03.2017 as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter dated 24.05.2016. The second assurance 5. On 25.07.2016, the High Court of Delhi passed an order directing the respondents to disclose the details of their immovable assets and also to disclose the details of assets that have been alienated and encumbered to third parties. It appears that during this period reports appeared in various newspapers that the respondents were disposing their stakes in subsidiary companies and were also clandestinely disposing of their assets. Left with no alternative, the petitioner filed an Interlocutory Application being I. A. No. 618 of 2017 before the High Court of Delhi in which the following prayer was made:- a. "Urgently pass an order directing the Respondents to secure the Award amount by depositing it with the Registrar of the Delhi High Court or by providing adequate security or by bank guarantee or by any other means that this Hon'ble Court may deem fit; b. Pass an order directing the attachment of the movable and immovable assets and properties of the Respondents, and any assets and properties in which the Respondents have any beneficial interests until the disposal of the present petition, at least to the extent of the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in companies whose shares are listed and which of these shares have a condition of right of first refusal. (iii) a clarification as to how much of the borrowings reflected in the balance sheets are secured by way of pari passu charge on the present and future current assets of the companies." The Court again noted the statement of Dr. A. M. Singhvi and Mr. Rajiv Nayar to the following effect:- "12. Both Dr. Singhvi and Mr. Nayar state that if any change is proposed in the status of any of the unencumbered assets whose details are to be furnished as directed hereinbefore, the Respondents will first apply to the Court." This was the third assurance on behalf of the respondents. The fourth assurance 8. OIL and RHC filed the certificates disclosing the value of the unencumbered assets and investments. On 28.02.2017 OIL had unencumbered assets of a book value of 1953.70 crores and fair value of 1204.78 crores. The fair value of the unencumbered investments of OIL in listed entities including related/group entities was valued at 854.64 crores. As far as RHC is concerned, the book value of the unencumbered assets was shown as 6,346.69 crores and the fair value thereof at 3579.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in FHL. A newspaper report was published on 20.06.2017 one day after the order had been passed by the Court reporting that IHH Healthcare Bhd. (Malaysian Company) was set to acquire 26% stake in FHL. 12. Thereafter, the petitioner filed a contempt petition before the High Court of Delhi alleging that the orders dated 06.03.2017 and 19.06.2017 had been violated. The matter was taken up by the High Court of Delhi on 21.06.2017. The High Court again recorded the undertaking of the learned senior counsel appearing for respondents 14 and 19 therein by which the High Court of Delhi was assured that the value of the shares held by OIL and RHC which have been disclosed as 452.60 crores and 1889.30 crores would not be hampered or diminished in any manner. Relevant portion of the order is as follows:- "9. Learned Senior Counsel appearing for respondent no.14 and 19 submits that the value of the unencumbered asset comprising of equity share in Fortis Healthcare Holding Private Limited has been disclosed as Rs. 452.60 Crores by respondent no.14 and Rs. 1889.30 crores by respondent no.19. 10. Learned Senior Counsel appearing on behalf of respondent No.14 and 19 undertakes that, irrespecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btaining prior consent of the pledgee(s). 25. It is submitted that the said direction will not, in any event, have an impact on the potential creditors and that the availability of these funds will only help pare down the debt. This will only raise the value of the shares held by Respondents." Similar application being I.A. No.76959 of 2017 with identical paragraphs 24 and 25 was filed by RHC. 15. On 31.08.2017, this Court directed as follows:- "As the present Special Leave Petition is due to come up for a fuller consideration on 23rd October, 2017, we do not consider it necessary to delve into the issues raised at this stage as the time taken to answer the same would be the same as would be required to hear and decide the matter finally. We, therefore, decline to pass any order in the matter, save and except, to put on record that the interim order of this Court dated 11th August, 2017 was intended to be in respect of both the encumbered and unencumbered shares of Fortis Healthcare Limited held by Fortis Healthcare Holding Private Limited. Consequently, there will be no transfer of the shares to the extent indicated above. Parties may complete the pleadings in the meantime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the issue whether contemnor nos. 1 to 8 have violated the aforesaid orders. The stand of the contemnor nos.1 to 8 is that loan facilities had been granted by IHFL to various companies controlled by MMS and SMS. As per the loan agreements and other documents executed, the borrower(s) created encumbrances on their immovable and movable properties including shares. Some shares were pledged or charged for repayment of the loan and IHFL was given a right to sell these encumbered shares without reference to the borrower(s). The stand of contemnors nos.1 to 8 is that the borrower(s) had a demat account of their shares with IVL and a power of attorney dated 28.11.2016 was issued in favour of IHFL permitting it to transfer shares from the demat account so as to ensure that the value of the security matches the outstanding amount. There is another undated power of attorney pursuant to the loan agreement dated 30.11.2016 which appears to have been registered on 03.12.2016. According to IHFL, after 11.08.2017 no shares were credited into the designated demat account by the pledger. 20. It would be pertinent to mention that IHFL filed an application in October, 2017 for clarification of orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ldings at various stages: S. No. Quarter Ending Total Shares Encumbered Shares Unencumbered shareholding of FHHPL in FHL 1. September 2016 32,50,91,529 27,21,59,955 5,29,31,574 2. December 2016 32,50,91,529 25,22,63,248 7,28,28,281 3. 28th Jan 2017 32,50,91,529 25,19,23,248 7,31,68,281 4. March 2017 27,02,41,529 23,18,01,440 3,84,40,089 5. June 2017 22,22,11,701 18,38,96,484 3,83,15,217 6. September 2017 17,80,26,597 17,53,94,820 26,31,777 7. December 2017 17,80,26,597 17,53,94,820 26,31,777 8. March 2018 34,20,451 6,89,084 27,31,367 9. June 2018 32,82,851 5,51,484 27,31,367 10. September 2018 11,53,091 5,51,484 6,01,607 11. December 2018 11,53,091 5,51,484 6,01,607 It is true that we have to decide whether there is any disobedience of the orders of this Court, but while doing so we will make reference to the proceedings before the Delhi High Court and the above chart to show how both sets of respondents have violated the orders of the courts. As pointed above, on 19.06.2017 learned counsel for OIL and RHC had made a statement before the Delhi High Court that the status of unencumbered assets as disclosed to the court wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set up is that when the value of the shares of IHFL fell in the market, to make the security equal to the outstanding due to IHFL, further shares were transferred by IVL to IHFL. It is urged that this was done in view of the instructions given prior to 11.08.2017 by FHHPL to IVL and IHFL. These transfers were done on the basis of the delivery instructions slips executed by IHFL as power of attorney holder of FHHPL. Even if this be true, the alleged contemnors are guilty of violating the orders of this Court. The order dated 11.08.2017 clearly debars FHHPL from changing its shareholding in IHFL. Vide order dated 31.08.2017, it was clarified that the order dated 11.08.2017 would apply both to encumbered and unencumbered shares. It was only on 15.02.2018 that the order was clarified that it would not apply to shares encumbered prior to 11.08.2017 and 31.08.2017. A reading of the 3 orders makes it clear that no unencumbered shares could be charged after 31.08.2017 at least. Even if FHHPL had given power of attorney empowering IVL to transfer shares from its demat account to top up the security value, that power of attorney could not be used to violate the orders of this Court. What FHH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. There can be no manner of doubt that IHFL and IVL have violated these orders and, therefore, we find contemnor nos.1-8 who are active directors of IHFL and IVL guilty of knowingly and wilfully disobeying the orders of this Court and find them guilty of committing Contempt of Court. We will hear them on the question of sentence. 32. We afford an opportunity to contemnor nos.1-8 to purge themselves of the contempt by depositing the value of 12,25,000 shares as on 31.08.2017 in the BSE within eight weeks from today. In case, the said contemnors purge themselves of the contempt, we may take a lenient view while imposing sentence. Contemnors 9 & 10, 12 & 13 33. We shall now consider whether MMS, SMS have violated this Court's orders both in their individual capacity and as directors of OIL and RHC. We are dropping contempt proceedings against contemnor nos. 11, 14 and 15 because nothing has been placed on record to show that they were actively concerned with the running of the two companies. 34. We have given detailed facts of the shareholding of FHHPL in FHL during the period of quarter ending September 2016 to December 2018 hereinabove. As far as these contemnors are concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unencumbered shares it would have no impact on the availability of funds to protect the interest of the petitioner. On the basis of this statement, the order dated 31.08.2017 was passed and this Court took a lenient view on the matter and disposed of the contempt without taking any action. 37. Unfortunately, the actions of these contemnors clearly show that these statements were made without the least intention of complying with them. These contemnors had already prepared a well thought out scheme of diluting their shareholdings directly or indirectly in FHL to defeat the rights of the petitioner. 38. The explanations provided are not worth consideration. According to SMS he was not even taking part in the administration of these companies and had gone into religious service. This is belied from the fact that he has been attending most of the meetings of the Board of Directors. The next defence taken by both the contemnors is that they lost control over the companies because the encumbered shares were sold. As pointed out above it is not only the encumbered shares but also the unencumbered shares which have been transferred. In December 2017, the unencumbered shares of FHHPL in F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which has fructified into an award but by misusing the legal process contemnor nos.9 and 10 have successfully avoided paying off the petitioner. In our view, action for committing criminal contempt could have been taken against contemnor nos. 9 and 10, but by taking a lenient view of the matter we are only treating it as a civil contempt. 41. The order passed by this Court on 11.08.2017 with a clarification on 31.08.2017, and modification made on 15.02.2018, is not to be read in isolation but along with the solemn undertakings and assurances given by the contemnors on as many as five occasions before the Delhi High Court, the last one being as late as on 21.06.2017. These assurances were to the effect that even if the Court permits sale of encumbered shares for payment of debt, it would not have any impact on the (potential) creditors and availability of the funds would only pare down the debt and increase the value of the shares. Contrary to the aforesaid solemn assurances and undertakings, which were repeatedly reiterated to procure orders, the shareholding went into a downward spiral, as is apparent from the table in paragraph 23. There was a significant decline in the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of court. We shall hear them on the question of sentence. We give one chance to the contemnors no.9 and 10 to purge themselves of the contempt. 45. On 21.06.2017, a statement was made on behalf of contemnor nos. 9 and 10 before the High Court of Delhi that in respect of any transaction that these respondents may enter into, a sum of Rs. 2341.90 crores i.e. Rs. 452.60 crores of OIL and Rs. 1889.30 crores of RHC would always be made available and realisable from the assets of the company. We, therefore, direct that in case each of the respondents deposits a sum of Rs. 1170.95 crores i.e. 50% of Rs. 2341.90 crores in this Court within eight weeks from today then we may consider dealing with them in a lenient manner. Violation of order dated 14.12.2018 46. It was also argued that contemnor nos.9 and 10 have also violated the order dated 14.12.2018. Since this is not the subject matter of the main contempt petition and no notice has been issued to the concerned parties in this regard, we feel that this issue has to be segregated from the rest of the contempt petitions because the main pleadings and replies are in respect of the alleged contempt of orders dated 11.08.2017, 31.08.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gone into. 50. We are prima facie of the view that these transactions were made by MMS, SMS, RHC, OIL and FHL to defeat the rights of the petitioner despite making undertakings to the High Court of Delhi that no action would be taken to prejudice petitioner's rights. We are prima facie of the view that these transactions are in wilful disobedience of the order of this Court dated 14.12.2018 read in conjunction with the earlier orders. We, therefore, issue suo moto notice of contempt and direct the Registry to register a fresh contempt petition with regard to the violation of the order dated 14.12.2018 in which RHC, OIL, MMS, SMS and FHL shall be arrayed as contemnors. FHL is directed to disclose the list of directors/officials actively involved in the running of the company for the period 01.01.2018 to 31.01.2019. Directions 51. In view of the above discussion, we, dispose of this contempt petition in the following terms :- (i) We find Sameer Gehlaut, Director of Indiabulls Housing Finance Limited and Director of Indiabulls Ventures Limited (Contemnor Nos.1 & 5), Gagan Banga, Director of Indiabulls Housing Finance Limited and Director of Indiabulls Ventures Limited (Contemnor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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