Bombay High Court
Neelkanath Devansh Developers ... vs Urban Infrastructure Venture ... on 9 March, 2016
Bench: V.M. Kanade
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app.100.15.group.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 100 OF 2015
IN
COMPANY PETITION NO. 38 OF 2013
NEELKANTH DEVANSH DEVELOPERS)
PRIVATE LIMITED, )
a private limited company incorporated )
under the Companies Act, 1956 )
having its registered office at "Fine
House", 5th floor, Anandji Lane,
)
)
Opposite Dena Bank, M.G. Road, )
Ghatkopar (East), Mumbai - 400 077 )
and registered with the Registrar of )
Companies under Registration No.CIN )
No.U45200MH2007PTC168264 )...Appellant
(Orig. Respondent)
V/s
URBAN INFRASTRUCTURE VENTURE )
CAPITAL LIMITED, )
a company incorporated under the )
provisions of the Companies Act, 1956, )
having its registered office at 121-123, )
Free Press House, Free Press Journal )
Marg, Nariman Point, Mumbai-400021 )...Respondents.
(Orig. Petitioners)
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WITH
APPEAL NO. 102 OF 2015
IN
COMPANY PETITION NO. 31 OF 2013
NEELKANTH SOHAM DEVELOPERS )
PRIVATE LIMITED, )
a private limited company incorporated )
under the Companies Act, 1956 )
having its registered office at "Fine )
House", 5th floor, Anandji Lane,
ig )
Opposite Dena Bank, M.G. Road, )
Ghatkopar (East), Mumbai - 400 077 )
and registered with the Registrar of )
Companies under Registration No.CIN )
No.U45200MH2007PTC168264 )...Appellant
(Orig. Respondent)
V/s
URBAN INFRASTRUCTURE VENTURE )
CAPITAL LIMITED, )
a company incorporated under the )
provisions of the Companies Act, 1956, )
having its registered office at 121-123, )
Free Press House, Free Press Journal )
Marg, Nariman Point, Mumbai-400021 )...Respondents.
(Orig. Petitioners)
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WITH
APPEAL NO. 109 OF 2015
IN
COMPANY PETITION NO. 33 OF 2013
NEELKANTH KALINDI REALTORS )
PRIVATE LIMITED, )
a private limited company incorporated )
under the Companies Act, 1956 )
having its registered office at "Fine )
House", 5th floor, Anandji Lane, )
Opposite Dena Bank, M.G. Road,
Ghatkopar (East), Mumbai - 400 077
)
)
and registered with the Registrar of )
Companies under Registration No.CIN )
No.U45200MH2007PTC168264 )...Appellant
(Orig. Respondent)
V/s.
URBAN INFRASTRUCTURE VENTURE )
CAPITAL LIMITED, )
a company incorporated under the )
provisions of the Companies Act, 1956, )
having its registered office at 121-123, )
Free Press House, Free Press Journal )
Marg, Nariman Point, Mumbai-400021 )...Respondents.
(Orig. Petitioners)
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---
Mr. Janak Dwarkadas, Senior Counsel alongwith Mr. Parimal
Shroff, Mr. D.V. Deokar, Mr. Sachin Pandey, Mr. Dhruvesh
Parikh, Mr. Jehaan Mehta, Ms. Priyanka Rathore, Ms. Nidhi
Chheda i/b M/s. Parimal K. Shroff & Co. for the Appellant in
Appeal No.109 of 2015.
Mr. D.D. Madon, Senior Counsel alongwith Mr. Gaurav Joshi,
Senior Counsel, Mr. Parimal K. Shroff, Mr. D.V. Deokar, Mr.
Sachin Pandey, Mr. Dhruvesh Parikh, Mr. Jehaan Mehta, Ms.
Priyanka Rathore, Ms. Nidhi Chheda i/b M/s Parimal K. Shroff
& Co. for the Appellant in Appeal No.100/15.
Mr. S.U. Kamdar, Senior Counsel alongwith Mr. Riyaz Chagla,
Mr. Chirag Balsara, Mr. Parimal Shroff, Mr. D.V. Deokar, Mr.
Sachin Pandey, Mr. Dhruvesh Parikh, Mr. Jehaan Mehta Ms.
Priyanka Rathore, Ms. Nidhi Chheda i/b M/s Parimal K. Shroff
& Co. for the Appellant in Appeal No.102 of 2015.
Dr. Virendra Tulzapurkar Senior Counsel alongwith Mr. Arif
Doctor i/b Junnarkar & Associates for the Respondents.
----
CORAM : V. M. KANADE &
REVATI MOHITE DERE, JJ.
RESERVED ON : 10/12/2015
PLACED FOR DIRECTIONS ON: 29/02/2016
PRONOUNCED ON: 09/03/2016
JUDGMENT (Per V. M. Kanade, J.) :
1. Appellants are the original Respondents and are
challenging the order passed by the learned Single Judge in
the Company Petitions filed by the Respondents/original
Petitioners. By the said impugned order, the learned Single
Judge was pleased to pass an order of winding up of the
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Appellants/Company subject to the Appellants depositing the
amount which was due and payable under the Inter
Corporate Deposits made by the Respondents/original
Petitioners.
2. Few facts as are necessary to decide the aforesaid
appeals are as under :
At the outset, it may be noted that the facts in the
aforesaid three appeals are substantially similar and that
only the amounts in each appeal differs. The learned Single
Judge, in the impugned order, has referred to the facts in
Company Petition No. 31 of 2013, which is appeal No. 102 of
2015.
3. The respondents/original petitioners' case as
disclosed in the company petitions broadly is as under :
According to the respondents/original petitioners,
the appellant companies were incorporated under the
Companies Act, 1956 as Private Companies Ltd. by shares
on 1st March, 2007, and that the main objects for which the
said Companies were incorporated, were set out in the
Memorandum of Association, in particular clauses (1) and (2)
thereof. It is further stated that the said Companies were
indebted to the respondents/original petitioners for various
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amounts i.e. Rs. 14,84,00,000/-, Rs. 24,80,00,000/- and Rs.
19,80,00,000/-, together with interest at the rate of 15% per
annum from the period mentioned in the company petitions.
According to the respondents/petitioners, at the request of
the said appellant companies, short term loans by way of
inter corporate deposits (ICDs) of Rs. 14,84,00,000/-, Rs.
24,80,00,000/- and Rs. 19,80,00,000/- were granted to the
said companies. The respondents/petitioners have relied on
the demand promissory note dated 31 st March, 2010
executed by the appellant companies, towards the grant and
repayment of the loan and the Board resolution accepting
the proposal of the said ICDs. According to the
respondents/petitioners, the terms on which the short term
loan by way of ICDs have been granted, have been set-out in
the ICD agreement, executed between the appellant
companies and them. It is stated that the agreement
requires the appellant companies to pay the entire principal
amount of the short term loan in one instalment before the
stipulated date mentioned therein, and also provides for
interest at the rate of 15% per annum and delayed rate of
interest of 18% per annum.
According to them, as the appellant companies
failed and neglected to pay the aforesaid amounts and
interest despite several requests, the respondents/petitioners
vide letter dated 14th March, 2012, recorded the appellant
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companies' default and called upon the appellant companies
to pay the aforesaid principal amounts along with interest.
Since the Appellants did not pay the amount, the
respondents herein sent a statutory notice to the appellant
companies at their registered offices and called upon the
appellant companies to pay the respondents/petitioners the
aforesaid amounts along with interest within three weeks,
failing which, they would initiate winding up proceedings
against the appellant companies.
The appellant companies replied to the said statutory
notice but the said reply was not satisfactory and that, the
repayment of the short term loan and payment of the
accrued interest was wrongly disputed by them. A reply was
sent by the respondents/petitioners to the reply sent by the
appellant companies to the statutory notice. The
respondents/petitioners in the said letter contended that the
appellant companies were trying to confuse the matter with a
view to avoid their liability, by referring to unconnected and
unrelated transactions. The Respondents filed three
Company Petitions.
4. The appellants case, in brief, is as under :
According to the appellants, Neelkanth Soham
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Developers Private Limited ("Neelkanth Soham") - appellant
in Appeal No. 102 of 2015; Neelkanth Kalindi Realtors
Private Limited ("Neelkanth Kalindi") - appellant in Appeal
No. 109 of 2015; and Neelkanth Devansh Developers Private
Limited ("Neelkanth Devansh") - appellant in Appeal No. 100
of 2015 are, companies of the Neelkanth Group. The said
Neelkanth Group is stated to comprise of certain companies
and entities, engaged in particular, in real estate
development all over India. The said Neelkanth Group is
stated to be controlled by Mohan V. Patel and his family.
5. On the other hand, the Urban Infrastructure
Venture Capital Limited ("UIVCL"), one of the several
companies and entities, is described by the appellants as the
"Urban Group". We may note here, that the said
description of the "Urban Group" is not accepted by the
respondents. The said Urban Group is stated to be controlled
by Anand J. Jain and his associates. Since the appellants
have used the terms "Urban Group" and "Neelkanth Group"
to propound their case and to show that the respondent
company is part of the "Urban Group", the same terms are
being used in the present Judgment. As noted earlier, the
reference to "Urban Group" are not accepted by the
respondents and hence using the said terms in the Judgment
will not, in any way, indicate that we have accepted the
contention of the appellants with regard to the same.
app.100.15.group.doc
6. According to the appellants, UIVCL was
incorporated in the year 2005 and was providing estate
management and financial advisory services. In March,
2006, the UIVCL was appointed as an Investment Manager to
the Urban Infrastructure Opportunities Fund ("UIOF"). UIOF
was a Scheme, which was established by the Urban
Infrastructure Venture Capital Fund ("UIVCF"), a domestic
venture capital fund and UIOF was to raise money for
deployment in different real estate projects. In February,
2007, UIVCL was also appointed investment adviser to the
investment manager of another fund, the Urban
Infrastructure Real Estate Fund ("UIREF"), which was a
foreign private equity firm.
7. On 31st January, 2006, an Indenture of Trust was
executed between UIVCL and Urban Infrastructure Trustee
Limited ("UITL"). According to the appellants, from 2006-
2007, there were extensive financial dealings and
commonality of business interests between one or more
entities of the Urban Group and entities in the Neelkanth
Group. According to the appellants, the Urban Group had
agreed to invest in the Neelkanth Group's special purpose
vehicles by subscribing to equity shares/debentures.
Accordingly, the Urban Group is stated to have nominated
UIVCL as a lead company with Parag Parekh as its
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representative, while the Neelkanth Group was represented
by Mohan Patel. According to the appellants, it is not in
dispute that in 2007, a supplemental agreement was drawn
up, and that the said document was never formally executed.
Although the appellants have relied upon the supplemental
agreement of 2007, the validity of the said document is
denied by the respondents - UIVCL.
8. Appellants have further stated that in 2006-2007,
four deposit agreements were executed between the entities
of the said two groups i.e. Neelkanth Group and Urban
Group. The Urban Group company named Dharti
Investments and Holdings Limited, advanced a loan of Rs.
20.75 crores to NMIPL. In February, 2007, a further inter-
corporate deposit (`ICD') of Rs. 50 crores was placed by
Dharti with NMIPL and between September, 2007 and
November, 2007, Rs. 84 crores were placed on ICDs with
NMIPL by one Vinamra Universal Traders Private Limited
(`Vinamra'), another Urban Group entity. The ICDs placed
by Dharti were completely repaid by NMIPL. Out of the
amount of Rs. 84 crores, NMIPL repaid Vinamra Rs. 20 crores
in February, 2007 and the balance amount of Rs. 60 crores
which was due to Vinamra was repaid in February/March,
2010. In February and March, 2010, respondents-UIVCL,
placed two ICDs of Rs. 36 crores and Rs. 23.44 crores
(totalling to Rs. 59.44 crores) with NMIPL.
app.100.15.group.doc
9. The fact that in March, 2010, NMIPL had an ICD of
Rs. 59.44 crores from UIVCL, is not disputed. However, the
appellants and the respondents have given different
interpretation to the events and circumstances that have led
to giving of these ICDs. The appellants' contention is that the
investments of the so-called Urban Group were being
recycled through various joint ventures or Neelkanth Group
companies to suit the Urban Group. Whereas, the Urban
and had nothing
Group contended that the ICDs were completely independent
to do with the share subscription
commitments or realty investments. According to the
respondents, the ICDs were unrelated to any investments
made by the Urban Group's domestic and foreign funds and
that the inter-corporate deposit agreements (`ICDAs') were
stand alone documents, having no nexus between the
deposits and the investments of the two funds. The
respondents have contended that with the execution of the
ICDA, a promissory note in the same amount was also
executed by each of the three appellant companies; and that
each ICDA is stated to be only between the company in
question and UIVCL; and the amount is described as a loan,
which was repayable on 7th April, 2011 at an interest rate of
15% per annum, payable quarterly.
10. No doubt, there is some inter-locking relationship
app.100.15.group.doc
between the various entities in the Neelkanth Group, NMIPL
is the lead or flagship company of the Neelkanth Group,
having three subsidiaries; Neelkanth Somnath Private Limited
("Neelkanth Somnath"); Neelkanth Ricelands Private Limited
("Neelkanth Ricelands"); and Nilayami Realtors Private
Limited ("Nilayami Realtors"). The inter-locking relationship
is of some relevance because around the same time, when
the respondents were asked to place the ICDs with three
respondent companies, the Neelkanth Group restructured its
investment in
internal holdings of the group companies i.e. NMIPL's
Neelkanth Somnath was transferred to
Neelkanth Devansh; its investment in Neelkanth Ricelands
was transferred to Neelkanth Kalindi; its investment in
Nilayami Realtors was transferred to Neelkanth Soham. It is
thus evident, that Neelkanth Devansh held the majority
equity in Neelkanth Soham and Neelkanth Devansh was
entirely held by the Neelkanth Group and so on. It may be
noted that NMIPL had repaid the entire ICD of Rs. 59.44
crores to UIVCL, after which, UIVCL placed the three ICDs in
question with Neelkanth Devansh (Rs.19.80 crores);
Neelkanth Kalindi (Rs. 24.80 crores); and Neelkanth Soham
(Rs. 14.34 crores). It may also be noted that corresponding
to each of these three ICDs in the three appellant companies,
separate ICDA's were executed and that these ICDAs
deposits stated the principal amounts and their due dates. It
may also be noted that these are the only contractual
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documents between UIVCL and the aforesaid companies i.e.
Neelkanth Soham, Neelkanth Devansh and Neelkanth Kalindi
and that there is no supplemental agreement between these
parties nor is there any joint venture.
11. The disputes between Mohan Patel, the Neelkanth
Group and the Urban Group in relation to the investments
made by the UIOF (the domestic fund) in NUDPL, Neelkanth
Somnath, Neelkanth Ricelands, and Nilayami Realtors; and
Ricelands and
investments made by UIREF (the foreign fund) in Neelkanth
Nilayami Realtors were going on
simultaneously. However, according to the appellants, these
disputes were related to the ICDAs, whereas, according to
the respondents, the disputes were completely independent
and unrelated in any way to the ICDAs.
12. The learned Single Judge by the impugned order
held that the defence of the Appellants herein/original
Respondents was neither bonafide nor substantial and came
to the conclusion that the Company was under an obligation
to pay its debts and ordered winding-up. He, however, gave a
further opportunity to the Appellants to pay the amount due
within fourteen weeks, failing which directed admission of
Company Petitions.
13. . Following questions fall for consideration before
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this Court:-
(i) Whether, ICD Agreement is a subject
matter of Arbitration in view of the Order
dated 25/08/2015 passed by the Apex Court
and the procedural order passed by the
learned Single Arbitrator in the arbitration
proceedings?
(ii)
Whether ICDs form part of the larger
transaction of investment by the Urban
Group in the joint venture business and
therefore amounts under ICDs are payable
only out of the profits earned by the joint
venture business or whether it is a
standalone transaction?
(iii) Whether the impugned order directing
the Company to pay a sum of Rs
23,04,59,942/- amounts to a decree when
the Company Court was not justified in
passing the said Order?
(iv) Whether any interference is called for
with the order passed by the learned Single
Judge in an appeal filed under Clause 15 of
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the Letters Patent Act?
REASONING:
14. The first question which falls for consideration
before this Court is as under:-
(i) Whether, ICD Agreement is a subject
matter of Arbitration in view of the
Order dated 25/08/2015 passed by the
Apex Court and the procedural order
passed by the learned Single Arbitrator
in the arbitration proceedings?
15. In our view, the contention of the Appellants that in
view of the order of the Apex Court dated 25/08/2015 and
the procedural order passed by the learned Single Arbitrator,
ICD is a subject matter of arbitration is without any
substance for the following reasons.
16. It is necessary to examine brief chronology of events
in respect of arbitration proceedings:-
(A) After the impugned order was passed
by the learned Single Judge, the Appellants
alongwith NMIPL, Neelkanth Devansh
Developers Pvt. Ltd., Neelkanth Kalindi
Realtors Pvt. Ltd. issued notice for
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Arbitration dated 08/09/2014.
(B) Thereafter, an application was filed in
the Apex Court vide Arbitration Application
No.12 of 2015 on 09/12/2015 under Section
11 of the Arbitration and Conciliation Act,
1996 seeking reference to arbitration.
(C) The prayers in the application under
section 11 of the said Act, 1996 are as
under:-
"(a) Appoint and confirm the
appointment of Mr. Justice F.I. Rebello
(Retd) as Arbitrator on behalf of the
Applicants representing Neelkanth
Group in accordance with Clause 19 of
the Six Subscription cum Shareholders
Agreements.
(b) Appoint the Arbitrator on behalf
of the Respondents in accordance with
Clause 19 of the Six Subscription cum
Shareholders Agreements.
(c) In the alternative to Prayer (a) and
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(b), appoint the said Mr. Justice F.I.
Rebello (Retd) as sole Arbitrator in
accordance with Clause 19 of the said
Six Subscription cum Shareholders
Agreements.
(d) Costs of this Application and the
order to be made thereon be provided
for; and
(e)
ig Pass any such other or further
orders and directions which this
Hon'ble Court may deem just, fit and
proper in the circumstances of the
case and in the interests of justice and
equity."
(D) In the said application, initially,
Respondents were not parties. Three
months after the application was filed, on
04/02/2015 an application was taken out for
impleadment of Respondents as proposed
Respondent No.7.
(E) Respondents filed affidavit-in-reply
opposing the said impleadment on the
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ground that there was no arbitration
agreement between the
Respondents/original Petitioners and any of
the applicants and, secondly, that the ICD
Agreement was a separate, distinct and
independent Inter Corporate Deposit
Agreement which does not have the
arbitration clause. The contention that the
Respondents/Petitioners are members of the
Urban Group was denied.
(F) No order was passed on the
impleadment application filed by the
Appellants.
(G) Respondent Nos. 1 and 2 in
Arbitration Application No.12 of 2015 gave
their consent for appointing Mr. Justice R.M.
Lodha, a former Chief Justice of India as a
sole arbitrator in respect of all agreements
and in view of that statement, the
Applicants which included the Company,
withdrew the application/petition filed under
Section 11. The impleadment application
was not pressed and, therefore did not
survive.
app.100.15.group.doc
17. In view of the said chronology of events in respect
of arbitration application file under Section 11, it can be seen
that the Respondents herein were not impleaded as party to
the arbitration application and had not accepted that there
was arbitration agreement between the Appellants herein
and the Respondents and further had not accepted that the
claim of the original Petitioners that the winding up Petition
was required to be adjudicated upon by the Arbitrator. No
decision was given by the Apex Court in the said application
since it was withdrawn and, therefore, it cannot be said that
the Apex Court had given any ruling on the basis of the
judgment in Chloro Controls (India) Pvt. Ltd. vs. Severn Trent
Water Purification Incorporated and Others1. The contention
of Mr. Dwarkadas, the learned Senior Counsel appearing on
behalf of the Appellants therefore cannot be accepted. The
question No.(i) is therefore answered in the negative.
18. The second question which falls for consideration
before this Court is as under:-
(ii) Whether ICDs form part of the larger
transaction of investment by the Urban
Group in the joint venture business and
therefore amounts under ICDs are payable
only out of the profits earned by the joint
venture business or whether it is a
standalone transaction?
1 (2013) 1 SCC 641
app.100.15.group.doc
19. Taking into consideration the documents on which
reliance was placed by both sides, we are of the view that
the learned Single Judge has correctly held that ICDs do not
form part of the larger transaction of investment or that ICD
are payable only out of profits earned by the joint venture
business. ICDs, in our view, are independent transactions,
not governed by the supplemental agreement.
20. For deciding this question, it will be necessary to
consider
the rival contentions. On the one hand Mr.
Dwarkadas, the learned Senior Counsel for the Appellants
has contended that Appellants are the part of the Neelkanth
Group of Companies viz (1) Neelkanth Mansion Infrastructure
Pvt. Ltd. (NMIPL), (2) Neelkanth Soham Developers Pvt. Ltd.
(NSDPL), (3) Neelkanth Kalindi Realtors Pvt. Ltd. (NKRPL) and
(4) Neelkanth Devansh Developers Private Limited (NDDPL).
The contention of the learned Senior Counsel for the
Appellants is that the Respondents viz Urban Infrastructure
Ventures Capital Ltd. (UIVCL) is a lead Company of the group
which is known as Urban Group. According to him
Respondents are part of the following Companies, Trusts,
Funds and Entities viz.
1) Urban Infrastructure Real Estate Fund
("UIREF")
2) Urban Infrastructure Trustees Ltd. ("UITL")
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3) Urban Infrastructure Venture Capital Fund
("UIVCF")
4) Urban Infrastructure Ventures Capital Ltd
("UIVCL") i.e. the Respondents herein.
5) Jai Corp. Ltd., ("Jai Corp")
6) Sharanya Trading Pvt. Ltd. ("Sharanya")
7) Dharti Investments and Holdings Pvt. Ltd.
("Dharti Investments")
8) Vinamra Universal Traders Pvt. Ltd.
("Vinamra Universal")
21. The case of the Appellants is that the Urban Group and
Neelkanth Group are associated with one another since
2006-2007 for the purpose of carrying on the Real Estate
Business through Special Purpose Vehicles (SPVs)/Joint
Vehicles (JVs). According to the Appellants, Neelkanth Group
was to bring the know-how at no cost and properties without
revaluation and the Urban Group was to bring the capital.
Secondly, according to the Appellants, Neelkanth Group was
to set up projects for development through SPVs/JVs and the
Urban Group would invest in such SPVs/JVs by subscribing
the equity shares and the profit sharing ratio between the
two would be 60% by the Neelkanth Group and 40% by the
Urban Group. According to the Appellants, SPVs/JVs of
Neelkanth Group were as under:-
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(i) Asim Realty Pvt. Ltd., a Group Company
floated into SPV/JV and upon becoming an
SPV/JV was called Neelkanth Urban
Developers Pvt. Ltd. ("NUDPL")
(ii) Nilayami Realtors Pvt. Ltd.
(iii) Neelkanth Riceland Pvt. Ltd.
(iv) Neelkanth Somnath Realtors Pvt. Ltd.
22. Mr. Dwarkadas, the learned Senior Counsel for the
Appellants submitted that the understanding between the
Groups was that the UG would invest funds in excess of their
profit sharing ratio which excess amount would command
interest at the rate of 12% per annum which would be borne
by NG and this excess capital investment by UG would be
repayable from such surplus capital of SPV/JV which was not
required for Joint Venture business. It is the case of the
Appellants that the understanding was recorded in the
Supplemental Agreement to the Shareholders Agreement of
the Joint Venture Companies though it was not executed but
was implemented and acted upon by both the parties.
23. Mr. Dwarkadas, the learned Senior Counsel for the
Appellants submitted that on the basis of the said
understanding, the Urban Group through its various
Companies made investments by way of Inter Corporate
Deposits ("ICDs") and although these Agreements were
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purported to be deposit agreements with NMIPL, the UG was
given credit for the same as and by way of investment in
SPV/JVs. He submitted that ICDs form part of an integral part
of the web of transactions between the two Groups.
24. Reliance was placed by the learned Senior Counsel
appearing on behalf of the Appellants on number of
judgments of the Apex Court and High Courts and reliance
was also placed on compilation of documents in respect of
conduct of parties through E-mail, which, according to him,
showed that they acted as a Group. Reliance was also
placed on the proceedings of mediation of Mr. K.G.
Kirshnamurthy. He also submitted that there was a gross
suppression of facts by the original Petitioners in the Petition.
In support of the said submission, he relied on E-mails
dated 24/03/2010, 25/03/2010, 26/03/2010 and 27/03/2010.
He also relied on various additional affidavits filed by the
Appellants, which showed that Respondents/Petitioners had
knowledge of the said facts and had admitted the same. He
took us through synopsis-cum-note which he tendered. He
also showed various documents resulting in final appoint of
Mr. Justice R.M. Lodha, a former Chief Justice of India as a
sole arbitrator.
25. On the other hand, Dr. Tulzapurkar, the learned
Counsel for the Respondents submitted that the contention
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of the Appellants that the ICDs form part of an integral part
of the web of transactions is not borne out by any document.
He submitted that this agreement of understanding was
supposedly oral. He pointed out the entire history as to how
ICDs came to be executed from paragraph 15 of the
affidavit-in-rejoinder which is found at pages 391 to 394 of
Vol-III of Appeal No.102/2015. He submitted that no reliance
could be placed on the supplemental agreement since it was
unexecuted and bears the endorsement "draft for discussion
purposes only". Though it was stated that it was executed
on 14/01/2012, in fact, it was not executed between the
alleged Neelkanth Group and Urban Group. He submitted
that the original Petitioners i.e. Respondents herein in all
three appeals acted in its individual capacity in placing the
ICD with the Appellant Company and other two Appellants
Companies. He submitted that its role as Investment
Manager to the domestic Fund Urban Infrastructure Venture
Capital Fund (UIVCF) and as Indian Investment Advisor to the
Investment Manager of the foreign Fund Urban Infrastructure
Real Estate Fund (UIREF) is entirely distinct and separate.
He submitted that UIVCF has separate set of domestic
beneficiaries/investors and UIREF has separate set of foreign
beneficiaries/investors and both are separate and distinct.
He submitted that if ICDs were to be part of the investment
in the joint venture business, then there would have been a
proper agreement recording the same. Secondly, there was
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no need to repay ICDs by accepting fresh ICDs and the
original ICDs would have continued to remain in operation.
Lastly, he submitted that mediation proceedings started only
in respect of disputes pertaining to the investments made in
the joint venture business of the two Funds and therefore
ICDs were never part of the mediation proceedings. He
submitted that the original Petitioners were not parties to
any of the Shareholders Agreement/Subscription-cum-
Shareholders Agreement to which UITL and UIREF are party
and which contain independent provisions of arbitration (Vol-
III pages 391 to 394 of Appeal No.102/2015).
26. Dr. Tulzapurkar, the learned Senior Counsel
appearing on behalf of the Respondents/original Petitioners
took us through the Inter Corporate Deposit Agreement and
the Promissory Note executed by the Company in favour of
the Respondents/Petitioners. He submitted that the
execution of documents was admitted by the Company but
the liabilities were denied. He also relied on various
Judgments of the Apex Court and High Courts.
CONCLUSION:
27. In our view, the learned Single Judge has rightly
not accepted the contention of the Appellants that ICDs form
an integral part of web of transactions between the two
groups. The Inter Corporate Deposits by the
app.100.15.group.doc
Respondents/original Petitioners are independent
transactions unrelated to five Subscription/Share Holders
Agreements and one Shareholder Agreement which were
executed on 24/08/2007 and 18/10/2008 though in these
Shareholders Agreements there is a reference to parties,
which, in turn, includes the definition of the term "Affiliate'.
It is obvious that the term 'Affiliate' is a defined term in
relevant Shareholders Agreement and it cannot be read in
isolation and, secondly, it has to be noted that Shareholders
Agreement is not signed by the original Petitioners. In our
view, therefore, there is no material on record to indicate
that the ICDs were part of the larger web of transactions
between the parties. Thirdly, the supplemental agreement is
admittedly not executed. The agreement itself shows that it
is only a draft for approval. There is no material on record to
show that Respondents/original Petitioners were accepted as
part of the Urban Group or as part of dispute resolution
process. No reliance therefore can ever be placed on the
supplemental agreement since it was not executed and
signed by the Respondents/original Petitioners. The
mediation proceedings before the Mediator do not make any
reference to the ICDs.
28. Dr. Tulzapurkar, the learned Senior Counsel
appearing on behalf of the Respondents/original Petitioners
has relied upon two judgments of this Court; one in J.K.
app.100.15.group.doc
Corporation Ltd. vs. Ensource Finance Ltd. 1 and the other in
Marine Container Services (India) Pvt. Ltd. vs. Shaheel
Bearings Pvt. Ltd.2 In the said two cases also, a defence was
set up that the ICDs in both the cases were part of a larger
interconnected transactions. In both these cases, the
learned Single Judges of this Court came to the conclusion
that the contention of the Company that they were part of
the complex web of interconnected transactions could not be
accepted and defence could not be set up that would have
an effect of allowing them to lead evidence in variance of
the terms of the written contract.
29. In the present case also, ICDs were distinct written
agreements which indicated that it was a loan simpliciter
which was given by the Respondents/original Petitioners to
the Appellants and there was no other written
material/agreement/contract to show that it was supposed to
be part of the arrangement which was specifically averred by
the Appellants in their affidavit-in-reply. It is well settled that
if there is a written contract, reliance will have to be placed
on the written contract and no oral evidence could be led
which is in variance of the written contract.
30. At no point of time, the contention of the
Appellants that this was a part of the larger transaction was
1 [2001] 33 SCL 143 (BOM)
2 1999(4) Bom. C.R. 453
app.100.15.group.doc
accepted by the Respondents/original Petitioners and was
promptly denied after reply to the show cause notice was
given by the Appellants, alleging the said fact. The fact,
that supplemental agreement which contained all these
clauses of there being a web of transactions which was
delivered by the Appellants to the Respondents was, in fact,
not signed, which fact indicates that from the beginning
understanding between the parties was that the ICDs were to
be treated as separate and distinct transaction. Moreover, if
the contention of the Appellants was to be accepted then
there was no need to enter into new ICDs. The flow chart
and the correspondence between the parties does not
establish the case of the Appellants.
31. We therefore confirm the finding of the learned
Single Judge and are of the view that defence of the
Appellants is neither bonafide nor substantial defence. We
are of the view that finding given by the learned Single
Judge on this issue is neither perverse nor unreasonable and,
therefore, we do not propose to interfere with the said
finding while exercising our appellate jurisdiction under
Clause 15 of the Letters Patent Act. In our view, there was
no suppression of fact by the Respondents/original
Petitioners since the ICDs were separate and independent
agreements. There was no occasion the
Respondents/original Petitioners to mention the facts which,
app.100.15.group.doc
according to the Appellants, were allegedly suppressed. The
question No.(ii) is therefore answered in the negative.
32. The third question which falls for consideration
before this Court is as under:-
(iii) Whether the impugned order directing
the Company to pay a sum of Rs
23,04,59,942/- amounts to a decree when
the Company Court was not justified in
passing the said Order?
33. The said submission of the Appellants is without
any substance. The learned Single Judge in his order has
clearly observed that he is not deciding the case on merits
but having held that the defence of the Company is sham
and bogus has given an opportunity to the Company to pay
the amount, failing which the Company Petition would stand
admitted. The learned Single Judge therefore has not passed
any decree in favour of the Respondents/original Petitioners.
It is now well settled that such an order could be passed by
the Company Court directing the Company to make payment
of money to the petitioning creditor. This Court in Enarai
Finance Ltd.1 and also in Videocon Industries Ltd. vs. Itesa
Sanpaolo S.P.A in Appeal (L) No.29 of 2014 in Company
Petition No.528 of 2012 has also upheld the similar order
passed by the Company Judge. The question No.(iii) is
1 2002(1) ALL MR 443
app.100.15.group.doc
therefore answered in the negative.
34. The last question which falls for consideration
before this Court is as under:-
(iv) Whether any interference is called for
with the order passed by the learned Single
Judge in an appeal filed under Clause 15 of
the Letters Patent Act?
35. The Apex
ig Court in Wander Ltd and Another vs.
Antox India P. Ltd.1 has observed in para 14 as under:-
"14. The appeals before the Division Bench
were against the exercise of discretion by
the Single Judge. In such appeals, the
appellate court will not interfere with the
exercise of discretion of the court of first
instance and substitute its own discretion
except where the discretion has been
shown to have been exercised arbitrarily, or
capriciously or perversely or where the
court had ignored the settled principles of
law regulating grant or refusal of
interlocutory injunctions. An appeal against
exercise of discretion is said to be an
appeal on principle. Appellate court will not
reassess the material and seek to reach a
conclusion different from the one reached
by the court below if the one reached by
that court was reasonably possible on the
material. The appellate court would
normally not be justified in interfering with
1 1990(Supp) SCC 727
app.100.15.group.doc
the exercise of discretion under appeal
solely on the ground that if it had
considered the matter at the trial stage it
would have come to a contrary conclusion.
If the discretion has been exercised by the
trial court reasonably and in a judicial
manner the fact that the appellate court
would have taken a different view may not
justify interference with the trial court's
exercise of discretion. After referring to
these principles Gajendragadkar, J. in
Printers (Mysore) Private Ltd vs. Pothan
Joseph (1960) 3 SCR 713 : AIR 1960 SC
1156 : (SCR 721).
"...... These principles are well
established, but as has been
observed by Viscount Simon in
Charles Osenton & Co. v. Jhanaton
[1942 AC 130) '....the law as to the
reversal by a court of appeal of an
order made by a judge below in the
exercise of his discretion is well
established, and any difficulty that
arises is due only to the application
of well settled principles in an
individual case."
The appellate judgment does not seem to
defer to this principle."
36. This Court therefore while exercising its appellate
jurisdiction under Clause 15 of the Letters Patent Act is not
expected to interfere with the order passed by the learned
Single Judge, unless it comes to the conclusion that the
finding is perverse or is based on material which is not part
of the record. As mentioned hereinabove we are of the view
app.100.15.group.doc
that finding of the learned Single Judge is neither perverse
nor is based on the material which is not there on record.
The question No.(iv) is therefore answered in the negative.
37. Consequently, appeals are dismissed. Time to
make payment is extended by six weeks.
(REVATI MOHITE DERE, J.) (V.M. KANADE, J.)
bdpps
