Bombay High Court
Vinay Jain And 3 Ors vs Cerestra Infrastructure Trust ... on 12 May, 2021
Bench: G.S. Patel
Cerestra Infrastructure Ltd v Pratiksha Foundation Charitable Trust & Ors
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Atul
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION PETITION (L) NO. 9051 OF 2021
Cerestra Infrastructure Trust,
A trust established under the Indian Trusts Act
1882, Having its registered office at N-226,
Lower Ground Floor, Greater Kailash I, New
Delhi 110 048, India, Represented through its
investment manager Cerestra Advisors Pvt Ltd ...Petitioner
~ versus ~
1. Pratiksha Foundation
Charitable Trust,
A public charitable trust registered under
Bombay Public Trust Act 1950, Having its
registered office at: 5, Yogi Cottage, Near
Laxmi Hall, Kisan Road, Malad (West),
Mumbai - 400 064.
2. VJTF Infraschool Services
(Mumbai) Pvt Ltd.,
A company incorporated under
Companies Act, 1956 Formerly known as
VJTF Infrastructure Pvt Ltd, B-1203, 12th
Floor, Venus Tower, Veera Desai Road,
Azad Nagar, Andheri (West), Mumbai
400 058, India.
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3. Punjab National Bank
Housing Ltd,
9th Floor, Antriksh Bhawan, 22, KG
Marg, New Delhi 110 001
4. VJTF Eduservices Ltd,
A company incorporated under the
Companies Act 1956, B-3, Witty
International School, Pawan Baug Road,
Malad (West), Mumbai 400 064,
Maharashtra
5. Dr Vinay Jain,
91, Kalpataru Regalia, Wing 2, Goregaon
Mulunk Link Road, Opp Inorbit Mall,
Malad (West), Mumbai 400 064,
Maharashtra
6. Mrs Raina Jain,
91/92, 9th Floor, Kalpataru Regalia, Wing
2, Goregaon Mulunk Link Road, Opp
Inorbit Mall, Malad (West), Mumbai 400
064, Maharashtra.
7. HDFC Bank Ltd,
Lodha -I, Think Techno Campus, Office
Floor 3, Kanjurmarg (East), Mumbai 400
042 ...Respondents
WITH
COMM ARBITRATION PETITION (L) NO. 10202 OF 2021
1. Dr Vinay Jain,
Indian Inhabitant, residing at 91/92,
Kalpataru Regalia Wing 2 Goregaon
Mulunk Link Road, Opp Inorbit Mall,
Malad (West), Mumbai 400 064,
Maharashtra
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2. VJTF Eduservices Ltd.,
A company incorporated under the
Companies Act 1956, Witty
International School, Pawan Baug Road,
Malad (West), Mumbai 400 064,
Maharashtra
3. Pratiksha Foundation
Charitable Trust,
(Through the Trustees, Vinay Jain and
Raina Jain), A public charitable trust
registered under Bombay Public Trust
Act 1950, having its registered office at:
5, Yogi Cottage, Near Laxmi Hall,
Kisan Road, Malad (West), Mumbai -
400 064.
4. Mrs Raina Jain,
Indian Inhabitant, residing at 91/92,
Kalpataru Regalia, Wing 2, Goregaon
Mulunk Link Road Opp Inorbit Mall,
Malad (West), Mumbai 400 064,
Maharashtra. ...Petitioners
~ versus ~
1. Cerestra Infrastructure
Trust,
A trust established under the Indian
Trusts Act 1882, Having its registered
office at N-226, Lower Ground Floor,
Greater Kailash I, New Delhi 110 048,
India Represented through its
investment manager Cerestra Advisors
Pvt Ltd
2. Amrendra Pratap Singh,
Director of Respondent No. 4 company
Indian Inhabitant, residing at Plot No.
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289, Prajay Water Frong, Murahari
Pally, Shammerpet, Turkapalle, KV
Rangareddy, Turkapalliyandaram,
Telangana - 500 078
3. Anurag Jhunjhunwala,
Director of Respondent No. 4 company,
Indian Inhabitant, residing at 1-8-138/A,
PG Road, Near Shama Apts., Patigadda
Begumpet, Secunderabad, Hyderabad,
Andhra Pradesh 500 003
4. VJTF Infraschool Services
(Mumbai) Pvt Ltd.,
A company incorporated under
Companies Act, 1956, Witty
International School, Pawan Baug Road,
Malad (West), Mumbai 400 064,
Maharashtra Formerly known as VJTF
Infrastructure Pvt Ltd.
5. Virender Sobti,
Indian Inhabitant, residing at I-81,
Naraina Vihar, New Delhi 110 028
6. IL&FS Trust Co Ltd.,
Having its registered office at the
IL&FS Centre, Plot C-22, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai 400 051 ...Respondents
appearances
FOR THE PETITIONER IN Mr Aspi Chinoy, Sr Adv
CARBPL 9051/2021 &
Malcolm Siganporia, Adv
FOR THE 1ST
Ativ Patel, Adv
RESPONDENT IN CARBPL
Darshit Dave, Adv
10202/2021
"CERESTRA" i/b AVP Partners
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FOR RESPONDENTS NOS.
1, 2, 4, 5 & 6 IN CARBPL- Mr Haresh Jagtiani, Sr Adv
9051/2021 & FOR THE Yashpal Jain, Adv
PETITIONERS IN CARBPL Suprabh Jain, Adv
10202/2021 i/b Vandana Mehta Kumawat
"THE JAIN GROUP"
FOR RESPONDENT NO. 2
IN CARBPL-9051/2021 &
Mr Karl Tamboly, Adv
FOR RESPONDENTS NOS.
Sujit Lahoti, Adv
2 & 4 IN CARBPL
i/b Sujit Lahoti & Associates
10202/2021
"VJTF INFRA"
CORAM : G.S.Patel, J.
JUDGMENT RESERVED ON : 28th April 2021
JUDGMENT PRONOUNCED ON : 12th May 2021
JUDGMENT:
TABLE OF SECTIONS IN THIS JUDGMENT
A. THE PARTIES TO THE TWO PETITIONS...................... 6
B. THE DISPUTE IN BRIEF; RELIEF SOUGHT .................. 7
C. SUMMARY OF ORDER .................................................... 17
D. RIVAL SUBMISSIONS AND FINDINGS .........................19
E. ARBITRATION & JURISDICTION PROVISIONS ......... 47
F. FINAL ORDER.................................................................. 48
G. COSTS ............................................................................... 52
H. MISCELLANEOUS ...........................................................53
(For convenience on digital devices, the online PDF version is bookmarked.)
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A. THE PARTIES TO THE TWO PETITIONS
1. These are two competing Petitions seeking relief under Section
9 of the Arbitration & Conciliation Act, 1996. Commercial
Arbitration Petition (L) No. 9051 of 2021 is by Cerestra
Infrastructure Trust ("Cerestra"; the Petition is "the Cerestra
Petition"). The Respondents to the Cerestra Petition are (1)
Pratiksha Foundation Charitable Trust ("Pratiksha"), (2) VJTF
Infraschool Services (Mumbai) Pvt Ltd ("VJTF Infra"); (3) Punjab
National Bank Housing Finance Ltd ("PNBHFL");1 (4) VJTF
Eduservices Ltd ("VJTF Edu"); (5) Dr Vinay Jain; (6) Mrs Raina
Jain; and (7) HDFC Bank Ltd.
2. HDFC Bank Ltd is a formal party. As to PNBHFL, I made a
separate order on 21st April 2021 in the Cerestra Petition. PNBHFL
is no longer concerned with either of these Section 9 petitions.
3. Pratiksha, VJTF Edu, Dr Vinay Jain and Mrs Raina Jain are the
main opponents in the Cerestra Petition (collectively, "the Jain
Group"; "the Jains"). VJTF Infra is an entity held by Cerestra and
the Jain Group. Cerestra has the majority stake. VJTF Infra aligns
with Cerestra.
1 Wrongly described in the cause title as "Punjab National Bank Housing
Ltd"
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4. The parties in the Jain Group are the Petitioners in
Commercial Arbitration Petition (L) No. 10202 of 2021 ("the Jain
Group Petition"; "the Jain Petition").
5. Thus, Cerestra and VJFT Infra are on one side, and the Jain
Group on the other.
B. THE DISPUTE IN BRIEF; RELIEF SOUGHT
6. The Jains operate and mange a number of educational
institutions across India, in Goregaon, Malad, Udaipur, Bhilwara and
elsewhere, under the brand or name "Witty International School".
Before 2016, Vinay and Raina Jain entirely controlled VJTF Infra.
The enterprise had (or has) more than 4000 students and 800
teaching and other staff. VJTF Infra itself held, as the owner and
developer, a tract of land of just under 4300 sq mts at Pawan Baug,
Malad. There are school buildings on this land, and it is here that the
'Witty International School', Malad was (and is) being run. Before
early 2016, VJTF Edu held the entire equity of VJTF Infra. The Jains
were the only directors of VJTF Infra. From 2012, by a series of
documents, VJTF Infra long-leased the Malad land and building to
Pratiksha.
7. Cerestra entered the frame sometime in late 2015. There were
discussions about it investing in VJTF Infra, which needed funds to
pay off sundry creditors, expand the school building by adding five
floors and so on. Cerestra would take up a majority stake in VJTF
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Infra through a mechanism of optionally convertible debentures and
equity subscription. There is no dispute about the amount of the
inflow: Rs 101 crores. This investment, the Jains say, was just over
50% of the market value of the Malad property; and, therefore,
Cerestra would ultimately have a 51% interest in VJTF Infra. The
Jains, through VJTF Edu, would hold the rest. Cerestra was arrange
a loan from Religare Finance Ltd ("RFL") -- Cerestra was part of
the Religare group -- for part of the inflow, and this was to be secured
by a mortgage of the land and buildings at Malad. For the rest,
Cerestra would, for part of the inflow, directly purchase shares in
VJTF Infra from VJTF Edu and, for the rest of its inflow, would
subscribe to Optionally Convertible Debentures (Series I). Cerestra
would also bring in enough to cover the RFL loan.
8. According to the Jains, Cerestra thus committed to a total
investment of Rs. 101 crores. Cerestra's agreed inflow had three
components:
Sr Head / Component Amount (Rs)
No
1 Subscription by Cerestra in Series-I 44,88,47,510
Optionally Convertible Debentures
of VJTF Infra
2 Direct purchase by Cerestra of 5,11,52,490
17,05,083 equity shares of VJTF Infra
3 Further infusion by Cerestra 51,00,00,000
(including Rs 50 crores to repay RFL
Loan)
TOTAL 1,010,000,000
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9. There is no dispute about the direct purchase Cerestra made
for Rs 5,11,52,490. There is also no dispute about the fact that there
was a secured loan from RFL in the amount of Rs 50 crores. Cerestra
brought in an amount of Rs 44,59,19,710 against its commitment in
item 1 of the table above.
10. The heart of the dispute is this. Cerestra maintains, and this is
explicitly stated in its Petition, that on account of regulatory
restrictions, it was not permitted to invest the remaining Rs 51 crores.
There was, Cerestra says, a resultant amendment restricting its
investment to Rs 46.53 crores (excluding the direct equity purchase),2
"instead of the Rs.101 crores", and the RFL loan would be repaid by
VJTF Infra raising a loan from PNBHFL against a lease rent
discounting facility.3 The PNBHFL loan substituted the RFL loan,
which was paid off; and the PNBHFL loan was secured by (i) a
mortgage of the Malad property; and (2) a pledge of Cerestra's shares
in VJTF Infra. Thus, according to Cerestra, its total financial
commitment was no longer Rs 101 crores. It stood reduced to
Rs.46.53 crores. Yet it would hold 51% of VJTF Infra's equity. VJTF
Infra itself would assume the liability to pay off PNBHFL. An escrow
mechanism was in place, and this ensured that Pratiksha's collections
from running the school were deployed, at least in part, to meet the
PNBHFL loan repayment. The Jains (including Pratiksha) have,
Cerestra says, (a) paid only a fraction of the collections into the
escrow account; and (b) have recently stopped making any payment
at all, citing, inter alia a force majeure clause. Therefore, the Jains
2 At this stage, many of the numbers are discrepant, but this does not affect
the issue at hand.
3 Cerestra Petition, paragraph 9(e), pp. 7-8.
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should be ordered to bring in the deficit amounts until the disputes
are decided.
11. The Jains say this is all wrong. The transactional documents
are many, and, even after the so-called reduction or change regarding
Cerestra's direct inflow commitment of Rs.51 crores, Cerestra has
signed document after document and given repeated undertakings to
bring in the additional Rs 51 crores. It simply makes no commercial
sense -- or any sense at all, for that matter -- to say that a Rs 101
crore investment commitment was cut to less than half but that the
equity holding of Cerestra in VJTF Infra remained at 51%. The
amount of Rs 101 crores was just over half the market value of the
Malad property. No one in his right mind would deliver operational
control of the holding entity, VJTF Infra, and more than half its
equity for only one-quarter of the market value. In its Petition,
Cerestra does not, the Jains claim, explain why or how it gave these
repeated written undertakings and commitments or what they are
supposed to mean. Accepting Cerestra's case about its commitment
being reduced to Rs 46.53 crores requires one of two things: either
the contract is to be entirely rewritten to suit Cerestra's purposes, or
an explicit term of the contract is to be read out of it and entirely
ignored. Neither is permissible.
12. VJTF Infra -- almost literally the bone of contention -- owns
the Malad property. It has recently brought suit in the Small Causes
Court claiming possession from Pratiksha.
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13. There are other submissions, including on jurisdiction and
force majeure, but the issue I have outlined above lies at the core; and
it is on this that the battle lines are drawn between the warring
factions.
14. The rival claims are clear from the relief each side seeks.
Cerestra's prayers are:
"(a) That pending the hearing and final disposal of the
Arbitral proceedings or at any time after making of the
Arbitral award but before it is enforced under Section 36 of
the Arbitration and Conciliation Act, 1996:
i) Respondent No. 1 be ordered and directed to
pay over to Respondent No. 2 the sum of Rs.
3,39,00,000/- (Rupees Three Crores Thirty
Nine Lakhs Only) i.e. 36% of Rs. 9,40,00,000/-
(Rupees Nine Crores Forty Lakhs Only)
admittedly received by them as School
Receivables / Fees (for the period January
2020 - December 2020), in order that the
same may be paid by Respondent No. 2 to
Respondent No. 3 towards the LRD Loan
EMIs;
ii) Respondent Nos. 1, 4 and 5 be required to
deposit in Court the sum of Rs. 10,40,000/-
(Rupees Ten Crores Forty Lakhs Only) being
the rental shortfall for the period January 2020
till December 2020;
iii) Respondent Nos. 1, 4 and 5 be required to
deposit in Court the sum of Rs. 3,30,00,000/-
(Rupees Three Crores Thirty Lakhs Only)
being the rental shortfall for the period January
2021 till March 2021;
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iv) Respondent No. 1 be directed to make a full
disclosure on oath of the number of students
enrolled and the quantum of fees or other
amounts received by Respondent No. 1 during
the period January 2020 to December 2020 as
well as for the period January 2021 till the date
of filing of the present Petition or such other
period as this Hon'ble Court may deem fit;
v) Respondent No. 1 be directed to deposit / pay
over to Respondent No. 2.36% of all such
amounts received as School Receivables / Fees
from and after January 2021, into Account
number 57500000004477 maintained with the
HDFC Bank, Malad West - Orlem Branch;
vi) this Hon'ble Court be pleased to order and
direct Respondent Nods. 1,4,5 & 6 to disclose
on oath (i) assets held in their name either
solely or jointly (ii) their personal bank
accounts, either solely held in their name or
jointly, and (iii) the statement of accounts of
such personal bank accounts from the period
26th February 2016 till the date of filling the
present Petition or such period as this Hon'ble
Court may deem fit;
vii) this Hon'ble Court be pleased to pass
necessary orders and directions restraining
Respondent Nos.1 and 4 to 6 by themselves
and/or through their servants, agents and/or
representatives, including Respondent No.2
from directly or indirectly dealing with /
disposing off or creating any Third Party
Rights in respect of the assets as disclosed by
the Respondent No. 1,4,5 & 6, directly or
indirectly;
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b) That pending the hearing and final disposal of the
Arbitration proceedings or at any time after making of the
Arbitral aware but before it is enforced under Section 36 of
the Arbitration and Conciliation Act, 1996, this Hon'ble
Court be pleased to pass an order restraining Respondent
No. 3 from acting upon and / or giving effect to and / or
implementing directly or indirectly, in any manner
whatsoever, the Default Cum Demand Notice dated 23rd
March 2021, and from enforcing the pledge of the
Petitioner's 51% shares in Respondent No. 2 and from selling
them or any part thereof under the Sanction Letters and the
Share Pledge Agreement;
c) That pending the hearing and final disposal of the
Arbitration proceedings or at any time after making of the
Arbitral aware but before it is enforced under Section 36 of
the Arbitration and Conciliation Act, 1996, this Hon'ble
Court be pleased to pass an order directing Respondent Nos.
1, 4, 5 and 6 to:
i) To disclose on oath the bank accounts of
Respondent No. 1 and also furnish certified
copies of the statements of such bank accounts
of Respondent No. 1 from the period 26th
February 2016 till the date of filing the present
Petition or for such period as this Hon'ble
Court may deem fit;
ii) To disclose on oath the 'School Receivables'
as defined in Master Escrow Account
Agreement dated 25th April 2017, as well as
the details of the students making such
deposits and also refunds made, if any, from
the period 26th February 2016 ill date of filing
the present Petition or for such period as this
Hon'ble Court may deem fit.
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iii) To disclose on oath the details of the fees,
charges and other consideration received by
Respondent No. 1 or its trustees on behalf of
Respondent No.1 from third parties from the
period 26th February 2016 till date of filing the
present Petition or for such period as this
Hon'ble Court may deem fit;
iv) To give inspection to the Petitioner of all
relevant documents including agreements,
demands / notices including from any
Government Authorities and/or banks, bank
accounts, investments, revenues in respect of
Respondent No. 1;
(d) That pending the hearing and final disposal of the
Arbitration proceedings or at any time after making of the
Arbitral aware but before it is enforced under Section 36 of
the Arbitration and Conciliation Act, 1996, this Hon'ble
Court be pleased to pass an order and direct Respondent
Nos. 5 and 6 to disclose on oath (i) assets held in their name
either solely or jointly (ii) their personal bank accounts,
either solely held in their name or jointly, and (iii) the
statement of accounts of such personal bank accounts from
the period 26th February 2016 till the date of filing the
present Petition or such period as this Hon'ble Court may
deem fit;
(e) That pending the hearing and final disposal of the
Arbitration proceedings or at any time after making of the
Arbitral award but before it is enforced under Section 36 of
the Arbitration and Conciliation Act, 1996, this Hon'ble
Court be pleased to pass necessary orders and directions to
carry a forensic audit of the accounts and affairs of
Respondent No. 1 Trust, for the period 29th February 2016
till date or for another other period that this Hon'ble Court
deems fit;"
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Prayer (a)(i) is covered in prayer (a)(ii) -- the periods overlap.
15. For its part, the Jain Group claims these reliefs:
"(i) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondent No. 1 to 3, their employees, servants and/or
agents or otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, from in any manner dealing
with, selling, transferring, disposing of, alienating,
encumbering, mortgaging, pledging or charging the said
property (i.e. all that part and parcel of land admeasuring
4294.74 sq. mtrs. and structure thereof of Witty
International School Pawan Baug, Malad, Mumbai);
(ii) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondents, their employees, servants and/or agents or
otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, from acting in furtherance
of the Transaction Documents to the prejudice / detriment
of the rights of the Petitioners;
(iii) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondents, their employees, servants and/or agents or
otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, from acting in furtherance
of the purported termination of Supplemental Lease Deed
dated 31st March 2016 along with its Addendums dated 19th
May 2016 and 1st July 2018;
(iv) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondents, their employees, servants and/or agents or
otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, from
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a. removing Petitioner No. 1 from the
directorship of Respondent No. 4 company;
b. taking over signatory authorities of Petitioner
No. 1 in Respondent No. 4 company;
c. changing the registered address of Respondent
No. 4 company;
d. acting upon the board meeting of 27th March
2021 and the subsequent resolutions passed
therein;
e. calling general meeting EOGM and/or board
meeting to take any decision with respect to
the shares of directorship of the Petitioners
which would be in contravention of the
Transaction Documents;
(v) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondents, their employees, servants and/or agents or
otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, to:
a. Reinstate Petitioner No. 1 as authorized
signatory with all powers and authority in
Respondent No. 4 company;
b. Change the registered address of Respondent
No. 4 company to its original address.
(vi) In the alternative, pending the Arbitral proceedings,
making of the Arbitral Award and until execution of the
Arbitral Award, this Hon'ble Court direct the parties to
maintain status quo, as it was, before 27th March 2021.
(vii) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondents, their employees, servants and/or agents or
otherwise howsoever, be restrained by an order and
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injunction of this Hon'ble Court, from issuing any statement
to the press to the purported effect that the Petitioners are in
breach of their obligations under Supplemental Lease Deed
dated 31st march 2016 along with its Addendums dated 19th
May 2016 and 1st July 2018 and are wilfully not paying
rentals to Respondent No. 4 company;"
C. SUMMARY OF ORDER
16. I have heard Mr Chinoy for Cerestra and Mr Jagtiani for the
Jain Group at some length. The entire hearing was conducted online.
The question, for the purposes of Section 9, is to assess which of the
two sides has been able to make out a prima facie case. After that
come the questions of balance of convenience and irreparable
prejudice. The view must be prima facie, restricted to these Section
9 Petitions; and, indeed, should rightly be an order limited in time
until an arbitral tribunal considers the matter under Section 17 of the
Arbitration Act.
17. I am not at all convinced of the correctness of Mr Chinoy's
submission, i.e., that Cerestra's equity stake in VJTF Infra remained
at 51%, even if the Cerestra inflow was slashed to half and that it
carried no further obligation. Mr Jagtiani makes a compelling
counter-argument. While there was indeed a documented
amendment reducing Cerestra's inflow requirement from Rs 51
crores to Rs 1.53 crores, Cerestra executed document after document,
apparently reaffirming -- at least prima facie -- its commitment to
bring in the rest.
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18. Mr Jagtiani says this more or less a binary divide -- that one or
the other Petition must fail, or both may fail, but both cannot succeed.
I believe he is correct. I have returned a finding for the Jain Group
and against Cerestra. I have granted the Jain Group the limited relief
I think is necessary and dismissed the Cerestra Petition with costs.
19. I have not made an order of reference to arbitration as there
seems to be no agreement between the parties for that. But I have
given both sides liberty to apply if they do reach a consensus on the
composition of an arbitral tribunal without needing rival applications
under Section 11.
20. I have also made it clear that this order is entirely without
prejudice to the competing claims being made in any litigation in the
Small Causes Court, keeping open all contentions in any such
proceedings.
21. I proceed now to consider the rival submissions. To avoid
repetition, I am not separately setting out a chronological narrative.
Everything turns on documentary material, and therefore I will turn
to the documents and the rival submissions together. To the extent
possible, I have also summarised and compressed the many
amendments and supplemental documents, taking them together.
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D. RIVAL SUBMISSIONS AND FINDINGS
22. After a meeting of 12th January 2016 between the two sides4
and a sanction letter dated 12th February 2016 by RFL in the amount
of Rs. 50 crores,5 the parties entered into a series of documents on
29th February 2016:
22.1 A Share Purchase Agreement or "SPA";6
22.2 An Investment and Security Holders' Agreement or
"ISHA";7
22.3 A Master Agreement or "MA";8 and
22.4 An Escrow Agreement or "EA".9
23. There is no dispute about the execution of any of these
documents.
24. Under the SPA, VJTF Edu was to sell to Cerestra 17,05,0873
equity shares of VJTF Infra for a consideration of Rs.5,11,52,490.
The SPA defines 'transaction documents' to mean the SPA, the
ISHA, the MA, Debenture Documents, the EA, the Lease Deed and
4 Jain Petition, Ex C, p. 207. This said, inter alia, that within 12 months
from the initial investment, Cerestra would replace the RFL bridge loan.
5 Jain Petition, Ex D, p. 210. Pratiksha was to be released from the loan
obligation upon Cerestra bringing in its stake.
6 Jain Petition, Ex E, p. 216.
7 Jain Petition, Ex F, p. 240.
8 Jain Petition, Ex G, p. 308.
9 Jain Petition, Ex H, p. 327.
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all other documents, agreements and various undertakings
executed in connection with the transaction contemplated
inter alia herein or therein.
This definition repeatedly occurs in other and later documents. Mr
Jagtiani has laid great emphasis on it.
25. The ISHA required that, in addition to the equity subscription
under the SHA, Cerestra was to subscribe to 9.70 crores Series 1
Debentures for a total consideration of Rs 97 crores.10 This amount
was split in Debenture Subscription Amount A and Debenture
Subscription Amount B.11 Debenture Subscription Amount A meant
an amount of up to Rs 47 crores.12 Debenture Subscription Amount
B meant an amount of up to Rs 50 crores.13 Again, we have the same
-- or substantially similar -- definition of 'transaction documents'.14
26. Clause 2.2 of the ISHA dealt with Cerestra's investment.
Clause 2.2(b) set out a table of the total investment schedule.15 This
totals Rs 91 crores. The last item (e) is of up to Rs 51 crores, due
within 400 days of 'the First Closing Date' (the completion of all
activities in clause 4.2). Presently, this is not an area of dispute.
Clause 2.2(b)F then said an amount of up to Rs 51 crores would be
10 ISHA Recital E, Jain Petition, p. 245.
11 ISHA, Definitions clause 1.1(aa), definition of 'Debenture Subscription
Amount', Jain Petition, p. 247. The definition cross-references Recital E.
12 ISHA, Definitions clause 1.1(bb), Jain Petition, p. 247.
13 ISHA, Definitions clause 1.1(cc), Jain Petition, p. 247. We are not
concerned with the 'Debenture Subscription Amount C' (ISHA clause 1.1(dd))
of up to Rs 30 crores as this was not a component of the 'Debenture Subscription
Amount' in clause 1.1(aa) of the ISHA.
14 ISHA Definitions Clause 1.1(ooo), Jain Petition, p. 250.
15 ISHA, Jain Petition, p. 251.
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deposited by Cerestra in the Company Bank Account A, to be used to
repay the RFL Loan. Cerestra would be given a proportionate number
of Series 1 Debentures against this deposit. If VJTF Infra did not pay
off the RFL Loan from the Debenture Subscription Amount B in 400
days from the first closing date, then the rent payable by Pratiksha
(the 'Operating Entity') to VJTF Infra was not to exceed the amount
VJTF needed to service and repay the RFL loan.16 Annex 3 set out
the terms of the Series 1 Debentures. Part I said clearly that the
Debenture Subscription Amount B was to be used to repay the RFL
loan. Debenture Subscription Amount A was to be deployed for other
purposes. The bank account numbering (A, C etc.) appears to be
immaterial for our purposes. What is important is that the Debenture
Subscription Amount B -- defined as Rs 50 crores -- was to be used
to pay off RFL; and it was Cerestra which had to bring in this amount
(plus another Rs 1 crore) under Clause 2.2(b)F of the ISHA.
27. The Master Agreement said that Pratiksha's revenue inflows
(from school fees, etc) were to be deposited via an escrow mechanism
in a 'school fees collection account' and were to be used (i) for paying
lease rentals to VJTF Infra; and (2) meeting the school's operational
costs and expenses.
28. On 1st March 2016, Cerestra issued an undertaking to VJTF
Infra and Pratiksha to repay the RFL credit facility in 400 days, and
saying that if it did not, the lease rent payable by Pratiksha to VJFT
would stand halved.17 A few days later, on 11th March 2016, Cerestra
16 ISHA, Jain Petition, p. 252.
17 Jain Petition, Ex I, p. 353.
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executed a more formal undertaking.18 It reiterated its commitment
to infuse Rs 101 crores. Recital A confirmed this and also said that of
the Rs 101 crores, Rs 51 crores would be paid directly to RFL to repay
the loan facility. Then clause 2.4 said that if Cerestra could not
arrange for these funds, all 'Transaction Documents' would stand
cancelled, with VJFT Infra being required to refund, without interest,
only the principal amount in six months.
29. There then followed a Debenture Trust Deed of 17th March
2016 with Axis Trustee Services Ltd as the Debenture Trustee.19
This repeats the definitions of Debenture Subscription Amount, the
Debenture Subscription Amount A, and the Debenture Subscription
Amount B with the same figures. Schedule 2 to the Debenture Trust
Deed corresponds to Annex 3 to the ISHA.
30. On 31st March 2016, VJTF Infra and Pratiksha entered into a
Supplemental Lease Deed. This was for 28 years at a monthly lease
rental of Rs.88.5 lakhs, with an 8% escalation every 36 months. The
rent was to be routed through the escrow mechanism.
31. It is at this point, according to Cerestra, that it found that, due
to regulatory restrictions, it could not invest more than 25% of its
investable funds in a single target entity. When it committed to the
Rs.101 crores investment, it had expected to raise about Rs.500 crores
as investible funds. That did not materialize.
18 Jain Petition, Ex J, p. 354.
19 Jain Petition, Ex K, p. 358.
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32. And this brings us to the heart of the issue, the point at which
there is a sharp divergence. Mr Chinoy says that it is on account of
this that the parties agreed to modify the ISHA, reducing Cerestra's
commitment to an aggregate of Rs.46.53 crores (instead of Rs.101
crores envisaged under the ISHA). This is the express assertion in
paragraph 9(e) of the Cerestra Petition.20 On any reading of it, this
means -- according to Cerestra -- that it was no longer solely
required to pay off the RFL loan.
33. Both sides agree that there was indeed a First Supplementary
Agreement dated 19th May 2016 to the ISHA.21 This amended the
definition of 'Transaction Documents' to included the First
Supplementary Agreement (evidently). More importantly, it did not
remove the reference to other documents or the undertakings. That
portion, quoted above, was retained intact. Clause 2.2(b) of the
principal ISHA was changed. Item (e) of the table was now reduced
from Rs. 51 crores to Rs. 1.53 crores and was allocated to additional
work on a playground plot, including a swimming pool. Clause
2.2(b)F stood altered too. It now showed the amount of Rs.1.53 crores
(not Rs 51 crores). This was to be used to pay sundry creditors. Annex
3 of the main ISHA was replaced by Annex 1 to the First
Supplementary Agreement to the ISHA; and this is decidedly odd.
For Annex 1, the annexure substituted on 19th May 2016, continued to
speak of a Cerestra Investment of Rs 97 crores and that the Debenture
Subscription Amount B would be used to pay off the RFL facility.
Notably, the 19th May 2016 First Supplementary Agreement did not
20 Cerestra Petition, pp. 7-8.
21 Jain Petition, Ex L, p. 418.
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change or delete the definitions of the Debenture Subscription
Amount A, the Debenture Subscription Amount B or even
"Debenture Subscription Amount".
34. This is why Mr Jagtiani maintains that the Jain Group agreed
to this amendment because it was assured that the remaining Rs. 51
crores would be provided though under other documents. Mr Chinoy
says this -- so pleaded in the Jain Petition22 -- pleads 'an oral
agreement varying the terms of a written contract'. But that, actually,
is not Mr Jagtiani's case, nor his cause of action, and he seeks no relief
on that basis. What he does contend is that the understanding he
propounds is reflected not only in the First Supplementary
Agreement to the ISHA (because of the failure to delete the
definitions of the 'Debenture Subscription Amount', the 'Debenture
Subscription Amount A' and the 'Debenture Subscription Amount
B'; and the explicit commitment reflected in a substituted Annex-1),
but in a series of later documents too. This is a compelling argument.
If what Mr Chinoy says is correct, i.e., Cerestra's total commitment
was brought down from Rs. 101 crores to Rs 46.53 crores, then there
is simply no explanation for the wording of Annex-1.23 Clause 2.26 of
the First Supplementary Agreement to the ISHA specifically
substituted the original Annex-3 with a new Annex-1.24 And it is not
as if the original Annex-3 remained unchanged: there are indeed
differences between the two annexures when juxtaposed.25 The
22 Jain Petition, paragraph 11.9, p. 34.
23 Jain Petition, Ex L, p. 418 at p. 425.
24 Jain Petition, Ex L, p. 418 at p. 423.
25 ISHA Annex 3, Jain Petition, p. 281 and First Supplementary to the
ISHA, Annex 1, Jain Petition, p. 425.
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coupon rate is different. Annex 1 of 19th May 2016 specifies a
conversion ratio, which Annex-3 of the 29th February 2016 ISHA did
not. The coupon payment dates differ. It follows, therefore, that the
substituted Annex-1 in the First Supplementary to the ISHA was not
inadvertent or accidental. Prima facie, it had to have been a studied
and deliberate change. Why then it did not reflect Cerestra's present
contention -- of a massive reduction in its commitment from Rs 101
crores to Rs 46.53 crores is entirely unexplained.
35. Thus, we have the original ISHA of 29th February 2016. It has
a definition of 'transaction documents' that includes undertakings,
etc. That portion is unchanged in the First Supplementary
Agreement that followed on 19th May 2016. The definitions of the
'Debenture Subscription Amount', the 'Debenture Subscription
Amount A' and the 'Debenture Subscription Amount B' remained
unaltered. And the commitment to infuse Rs 97 crores and to use
'Debenture Subscription Amount B' to pay of the RFL facility
remained unchanged in the substituted (though changed) Annex-1.
What, except for Mr Jagtiani's submission, is to be made of this?
36. It did not end there either. On 24th October 2016, Cerestra
issued another undertaking.26 It referred to the 1st March 2016
undertaking. It then said:
"The parties hereby mutually agree to amend and extend the
time for repayment of the credit facility as below:
"... If the credit facility availed from RFL/any other
banks/NBFCs is not repaid by Cerestra by 31st March,
26 Jain Petition, Ex N, p. 434.
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2020, the Lease Rentals (as defined in the Transaction
Documents) payable by Pratiksha Foundation Charitable
Trust to VJTF Infra shall be reduced by 50% until the
repayment of the said facility."
37. This is a direct amendment of the 1st March 2016 undertaking
by Cerestra.27 But if, as it now contends, Cerestra was not to infuse
Rs.51 crores to pay off RFL, then no question could have arisen of any
such undertaking being 'amended' or the time for performance being
extended. The undertaking would simply have had to be cancelled or
withdrawn. This must be noted in the context of even the First
Supplementary to the ISHA including 'undertakings' as part of the
'Transaction Documents', as Mr Jagtiani points out.
38. In March 2017, there was a significant alteration. PNBHFL
sanctioned a Lease Rent Discounting ("LRD") of Rs.51 crores to
VJTF Infra (not Cerestra).28 The specific purpose was to pay off the
RFL loan (then about Rs. 48 crores). The rest was a general-purpose
loan. The entire loan was secured by a mortgage of the Malad land
(which belongs to VJTF Infra), a hypothecation of the rental
receivables, and a pledge of Cerestra's 51% equity holding in VJTF
Infra. Following this, on 25th April 2017, there was a share pledge
agreement between Cerestra and PNBHFL,29 a Deed of Mortgage
between VJTF Infra and PNBHFL,30 and an Escrow Agreement
between VJTF Infra, PNBHFL and HDFC Bank (with which the
27 Jain Petition, Ex I, p. 353.
28 Jain Petition, Ex 'O', p. 435.
29 Cerestra Petition, Ex J, p. 255.
30 Cerestra Compilation, p. 419.
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PNBHFL rent escrow account was to be established).31 Then there
was a Master Escrow Account Agreement of the same date to which
Cerestra, Pratiksha, VJTF Infra, PNBHFL and HDFC Bank were
parties.32 This required (including after a small amendment) that the
entirety of Pratiksha's receivables (including school fees and all other
income) would go into the School Fee Collection Account. Of this,
36% would go into the Rent Escrow Account and 64% to Pratiksha's
bank account.
39. There is no dispute that the RFL loan was indeed paid off.33
Mr Jagtiani says this as good as makes no difference. One lender,
RFL, was substituted by another, PNBHFL. The Malad land
remained mortgaged. According to him, Cerestra was still obliged to
clear the loan, and it made no difference at all whether this was from
RFL or PNBHFL.
40. Between March 2017 and May 2018, there followed a series of
supplementary documents. There was a First Supplementary
Debenture Trust Deed of 20th March 2017, to which Cerestra was a
party.34 This altered Clause 1.1 of Part A of the original Debenture
Trust Deed. The replaced clause said that 'Debenture Subscription
Amount B' meant an amount of Rs 50 crores to be paid by Cerestra
towards subscription of the Series 1 Debentures. The original
31 Cerestra Compilation, p. 603.
32 Cerestra Petition, Ex K, p. 268; Jain Petition, Ex T, p. 494.
33 Cerestra Petition, letter dated 8th May 2017, Ex H, p. 250.
34 Jain Petition, Ex P, p. 442
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Schedule 2 was replaced with a Schedule 1.35 That schedule was in
line with Annex-1 referred to above; and it also said 'Debenture
Subscription Amount B' would be used to pay the facility taken from
'the Lender', which now meant, obviously, PNBHFL.
41. Then there was a Second Supplementary Master Agreement
dated 13th April 2017. This defined 'Lender' to mean any bank,
financial institution of NBFC.36 On 25th October 2017, there
followed a Second Supplementary Debenture Trust Deed.37 This
again substituted the schedule, but that substituted page also spoke
of the 'Debenture Subscription Amount B' being used to pay off the
lender. Finally, there was a Second Supplementary Agreement to the
ISHA of 15th May 2018.38 Again, this substituted an annexure, and,
again, the substituted annexure was in the same terms.
42. But before that, between 17th and 22nd May 2017, there was
email correspondence between VJTF Edu and Cerestra, in which
Cerestra confirmed that it undertook to repay the PNBHFL loan
within a revised time frame of three years.39
43. Up to this point, therefore, there is repeated documentation
that prima facie binds Cerestra and reaffirms its commitment to bring
in an additional Rs 51 crores to pay off the PNBHFL loan. The
35 First Supplementary Debenture Trust Deed, Clause 2.4, Jain Petition, Ex
P, p. 442 at p. 446.
36 Jain Petition, Ex Q, p. 450, clause 2.1, p. 452.
37 Jain Petition, Ex W, p. 520.
38 Jain Petition, Ex X, p. 529.
39 Jain Petition, Ex U, p. 517; Ex V, p. 518 at p. 519.
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argument that Cerestra could not invest in VJTF Infra for regulatory
reasons seems to me to be something of misdirection. Perhaps it was
so, i.e., that Cerestra could not directly put money into a VJTF Infra
bank account given the state then of its investible funds. But these
documents, including the various undertakings, the replaced
schedules and the emails prima facie indicate that Cerestra had
merely switched out its direct-investment strategy for a commitment
to itself pay off the PNBHFL loan. Indeed, it seems to me that Mr
Jagtiani is absolutely correct in saying that nothing else makes the
slightest commercial sense. VJTF Infra already had a loan liability of
Rs 51 crores to RFL; this was replaced by a loan liability to PNBHFL.
It made no sense at all to leave VJTF Infra to continue to bear that
liability without any commitment from Cerestra. In other words,
Cerestra claims to have halved its commitment without any
corresponding reduction in its entitlement. The reasoning from
Cerestra does not begin to explain the replaced schedules,
undertakings and emails. The only plausible answer, Mr Jagtiani says,
and I think correctly, is that Cerestra had indeed reduced its direct
investment commitment to Rs. 1.53 crores, but not its overall infusion
commitment. The rest, Rs. 51 crores, was to be brought in by Cerestra
paying off PNBHFL directly instead of through VJTF Infra. I agree
with Mr Jagtiani when he says this is the only interpretation that
explains all this documentation. Cerestra's interpretation, on the
other hand, only creates one unexplained void after the other.
44. All of Pratiksha's collections, whether fees or otherwise, went
into a School Fee Collection Escrow Account, also called the Master
Escrow Account. From this, 36% was to be transferred to the 'Escrow
Account'. The remaining 64% would go to the Operating Entity
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(Pratiksha) Bank Account.40 PNBHFL's loan repayments in equated
monthly instalments (called a 'step-up EMI' schedule) were to be
defrayed from the Escrow Account. So too were rent payments and
interest on the debentures.
45. Paragraphs 9(j) to 9(m) of the Cerestra Petition say that from
September 2017 to December 2020, Pratiksha deposited into the
Master Escrow Account only a fraction of the disclosed fee collection.
It only partly met the shortfall. These are the averments:41
(j) For the period September 2017 to March 2018,
although Respondent No 1 disclosed a fee collection of Rs
19.02 crores, it deposited only Rs 4.90 crores [and not the
balance Rs 14.12 crores] in the Master Escrow Account. For
this period, the Rent payable was Rs 5.68 crores plus overdue
rent of Rs .80 crores. 36% of the amount of Rs 4.90 crores
deposited in the Master Escrow Account i.e. Rs 1.76 crores
was transferred to the rent Escrow Account. However, the
shortfall of Rs 4.79 crores [Rs 5.68 crores less 1.76 crores]
was partially met by Respondent No.1 infusing 2.71 crores
resulting in total rent payment of Rs 4.47 crores and an
outstanding rent payable of Rs 2.01 crores. From the
Amount of Rs 4.47 crores received, Rs 3.36 crores was paid
towards EMI payments and the balance 1.11 crores went
towards interest payments on the Debentures.
(k) For the period April 2018 to March 2019, although
Respondent No 1 disclosed a fee collection of Rs 21.05
crores, but deposited only Rs 11.69 crores [and not the
balance Rs 9.36 crores] in the Master Escrow Account. For
this period, the Rent payable was Rs 12.89 crores [ apart from
40 Master Escrow Account Agreement dated 25th April 2017, Jain Petition,
Ex T, p. 494, Schedule I, p. 516, read with clause 4(g), p. 504.
41 Cerestra Petition, pp. 11-13.
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the outstanding of Rs 2.01 crores]. 36% of the amount of Rs
11.69 crores deposited in the Master Escrow Account i.e. Rs
4.21 crores was transferred to the Escrow Account.
However, of the shortfall of Rs 10.69 crores, Rs 9.19 crores
was brought in by Respondent No. 1; leaving a balance rent
payable of Rs 1.50 crores. From the total amount received
towards rent i.e. Rs 13.40 crores [4.21 crores + 9.19 crores]
an amount of Rs 5.76 crores was paid towards EMI payments
of the LRD Loan and of the balance 3.69 crores went towards
interest payments on the Debentures and Rs 3.95 crores
towards other expenses including TDS, GST payments of
Respondent No.2.
(l) For the period April 2019 to December 2019,
although Respondent No 1 disclosed a fee collection of Rs
30.17 crores, it deposited only Rs 15.27 crores in the Master
Escrow account and not the balance Rs 14.99 crores. For this
period the Rent payable was approximately Rs 10.34 crores
plus the outstanding of Rs 1.50 crores. 36% of the amount of
Rs 15.27 crores deposited in the Master Escrow Account i.e.
Rs 5.50 crores was transferred to the Rent Escrow Account.
However, against the shortfall of Rs 6.34 crores, only an
amount of Rs 5.27 crores was made good by the Respondent
No 1 , thus leaving an amount of Rs 1.07 crores outstanding.
From the rent amount of Rs 10.77 crores [i.e., Rs 5.50 crores
+ Rs 5.27 crores] , Rs 4.32 crores was paid towards EMI , Rs
4.64 crores was paid towards interest and payments on the
debentures and Rs 1.81 crores was used for other purposes of
Respondent No 2's business.
(m) In January 2020, Respondent No.1 brought in a sum
of Rs. 1.48 crores towards the balance / outstanding rent of
Rs. 1.07 crores as on 31st December 2019. This amount was
utilized towards payment of the interest on the debentures,
although only partly. Thereafter, for the period January
2020 to 31st December 2020, although Respondent No.1
disclosed a fee collection of Rs 17.28 crores, it deposited only
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Rs 7.88 crores in the Master Escrow account and not the
balance Rs 9.40 crores. For this period, the Rent payable was
Rs 13.64 crores plus the outstanding Rs 1.07 crores. As stated
above Rs 1.48 crores had been received in Jan 2020. 36% of
the amount of Rs 7.88 crores deposited in the Master Escrow
Account i.e. Rs2.84 crores was transferred to the Rent
Escrow Account. Accordingly, there was a shortfall of Rs
10.40 crores [i.e. Rs 13.64 crores + Rs 1.07 crores less Rs 1.48
crores + Rs 2.84 crores]. From the rent amount of Rs 4.32
crores received by Respondent No.2, an amount of Rs 1.88
crores was paid towards EMIs of January, February and
September 2020. The period of 1st March 2020 to 31st
August 2020 was declared as a period of moratorium by
Respondent No.3, in respect of the LRD Loan.
46. There is no specific traverse in the Jain Group's Affidavit in
Reply with reference to these assertions. Paragraph 14 of the Reply
refers to Cerestra's assertions compendiously and claims that there
was no default by the Jain Group.42 In paragraph 15, the Jain Group
claims that there was a delay in opening the Master Escrow Account
(it was made operational only in January 2018), and, by then, cheques
had been collected in other school accounts. There was no intentional
breach; the school admission process started in September of each
year, and most parents sent the school post-dated cheques against
invoices raised for the next academic year. Once the Master Escrow
Account started, Pratiksha transferred all amounts from that account
to the Master Escrow Account except school fee cheques that went
into another account. The Jain Group also denies that it had to
deposit any other amount (activity fees, transport fees, canteen fees)
etc, but only had to deposit admission and tuition fees. It also took
42 Cerestra Petition, Affidavit in Reply, p. 841.
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short term advances, and these, though shown inward, were not
'collections' liable to be remitted.
47. I cannot possibly engage in an assessment of this nitty-gritty.
But Mr Jagtiani is right in pointing out that if there was such a series
of defaults from September 2017, it is curious that Cerestra never
once treated any of these shortfalls as a breach or an event of default
until the present disputes arose. It also seems clear that at least until
February 2020, all amounts due as lease rental and interest on
debentures has been paid.
48. There may be something to be said about Cerestra's assertions,
extracted above, but that will have to be left to an arbitral panel.
Certainly, it seems clear that Pratiksha did make up some amount of
the shortfall. Whether or not PNBHFL is actually unpaid to any
extent (it would seem not, at least until March 2021) is unclear. Its
grievance, like Cerestra's, may only about Pratiksha making a
remittance less than the collection disclosed. But it is equally clear
that Cerestra has taken out the interest on its debentures, that VJTF
Infra has made appropriations towards rent, and that EMI payments
have indeed been made to PNBHFL.
49. The events of 2020 tilted the balance. By this time, Cerestra's
stake in VJTF Infra had gone up to 54% and VJTF Edu's reduced to
46%. These are still the only two shareholders of VJTF Infra. As we
know, from late March 2020, there was a lockdown for many months.
The Jain Group claims that the Malad school, too, was affected. On
15th May 2020, Pratiksha wrote to VJTF Infra claiming a force
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majeure event under clause 16.1 of the Supplementary Lease Deed of
31st March 2016 and asking for a waiver of rental payments from
April 2020 onwards until further notice.43 Cerestra says this letter is
backdated. That seems doubtful: there is a VJTF Infra
acknowledgement stamp on it. A second letter followed on 30th June
2020.44 Then, on 26th October 2020, the Jain Group emailed
Cerestra saying that school operations had totally ceased, that online
learning was problematic, that the school had waived fees for the year,
that there were cancellations and trouble with new admissions and so
on, all of which had reduced revenues by over 50%. However, no
staff's employment had been terminated. They had received part
payments. The Jain Group had not been able to meet loan
instalments. Therefore, the Jain Group said, it was not in a position
to pay monthly rentals and would therefore not be depositing any
collection in the Escrow Account. It claimed to have suspended the
Escrow Account until school operations resumed in normal physical
form.45
50. On 30th October 2020, Vinay Jain, through his Constituted
Attorney, wrote to Cerestra. The letter was on behalf of VJTF Infra.
Here, the Jain Group now said Cerestra was obliged to infuse
'additional equity' to the tune of Rs.50 crores in VJTF Infra (and a
sum of Rs. 15 crores in another entity). Instead of infusing equity,
Cerestra had raised a loan from PNBHFL, and, at Cerestra's request,
VJTF Infra had agreed to mortgage its property. The Jain Group
claimed that Cerestra had cited difficulties and asked for an extension
43 Jain Petition, Ex Z1, p. 544.
44 Jain Petition, Ex Z1, p. 545.
45 Jain Petition, Ex AA, p. 546.
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of time to raise equity; yet nothing had been infused. The Jain Group
demanded that Cerestra pay off and clear the PNBHFL loan, and
cited the failure to do so as a breach.46
51. There then followed a legal notice dated 12th November 2020
from Cerestra addressed to the Jain Group (and some others).47 This
was a notice of default under the ISHA and the Master Agreement of
29th February 2016 and the Master Escrow Agreement of 25th April
2017. The 'event of default' cited was the failure by the Jain Group to
deposit the entire collection in the School Fee Receivables account.
Cerestra demanded a deposit of Rs.20.56 crores, closure of any other
accounts for depositing receivables, and complete data. The Jain
Group's solicitors sent a holding reply on 21st November 2020.48
52. Then, on 14th December 2020, VJTF Infra sent a notice to
Pratiksha, Vinay Jain, Raina Jain and others.49 This was a default
notice under the Lease Deed dated 31st March 2016. In paragraph 5,
VJTF Infra said rentals were unpaid for March to November 2020,
aggregating to Rs.9,98,48,269. A failure to deposit (and restore a
security deposit) would, VJTF Infra said, be deemed to be a material
breach under the Lease Deed.
53. Pratiksha replied on 16th December 2020, denying liability and
refuting VJTF Infra's claim.50 It cited the force majeure clause. It
46 Jain Petition, EX AA1, p. 547.
47 Jain Petition, Ex BB, p. 549.
48 Jain Petition, Ex CC, p. 558.
49 Jain Petition, Ex DD, p. 559.
50 Jain Petition, Ex EE, p. 563.
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referenced its previous communications of 15th May 2020 and 30th
June 2020. Mr Chinoy says this is the first invocation of the force
majeure clause but, as I have said, prima facie that seems doubtful. In
any case, that fact (the delivery of the letters of 15th May 2020 and
30th June 2020) are matters of evidence in arbitration. On 23rd
December 2020, the Jain Group's solicitors responded at length to
VJTF Infra's lease default notice of 14th December 2020.51
54. The next day, 24th December 2020, VJTF Infra and VJTF Edu
terminated the ISHA with its supplementary agreements citing
Cerestra's failure to clear the PNBHFL loan and infuse a further Rs.
51 crores in equity. It demanded that Cerestra surrender its stake in
VJTF Infra.52
55. On 24th December 2020, sent a notice to VJTF Infra and
Cerestra demanding a refund of Rs.18.32 crores as rent allegedly paid
in excess.53
56. On 2nd February 2021, Cerestra sent another notice to the Jain
Group and VJTF Infra reiterating its demand for a deposit into the
escrow account.54
51 Jain Petition, Ex FF, p. 566.
52 Jain Petition, Ex GG, p. 569.
53 Cerestra Compilation, p. 770.
54 Jain Petition, Ex HH, p. 571.
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57. On the same day, VJTF Infra replied to the Jain Group denying
there was an excess rent paid and repeating the demand for deposits
into the escrow account.55
58. On 23rd March 2021, PNBHFL sent Cerestra a notice
claiming that an event of default had occurred (by VJTF Infra) and
threatening to exercise its right as a pledgee of Cerestra's equity in
VJTF Infra. This was actually the principal cause for Cerestra initially
moving this Court. Cerestra replied on 26th March 2021, saying it
had initiated steps for recovery; that there was a mortgage; that the
Jain Group had in place undertakings to bring in the shortfall, and
therefore there was no cause to move against the pledged shares.56 It
also offered to pay PNBHFL Rs 2.14 crores to avoid the pledge being
invoked. On 27th March 2021, Vinay Jain emailed PNBHFL with a
copy to Cerestra, saying all guarantees had been withdrawn and all
transaction documents terminated. Vinay Jain supported PNBHFL
in its move to invoke Cerestra's pledge of its shares in VJTF Infra.57
59. Also on 27th March 2021, VJTF Infra terminated the lease of
the Malad property to Pratiksha. It demanded possession and
payment of all arrears of lease rentals.58
60. It seems Cerestra paid an amount of Rs.2.15 crores to
PNBHFL towards outstanding EMI dues.
55 Jain Petition, Ex II, p. 578.
56 Cerestra Petition, Ex W, p. 340.
57 Cerestra Petition, Ex Y, p. 348.
58 Cerestra Petition, Ex X, p. 344.
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61. Cerestra filed its petition on 31st March 2021. The Jain Group
petition followed on 15th April 2021. On 21st April 2021, I made an
order in the Cerestra Petition as regards PNBHFL, which effectively
went out of the picture.
62. The correspondence after 2020 adds very little to Mr Jagtiani's
fundamental point regarding Cerestra's ongoing and continued
obligation to bring in an additional Rs 51 crores either directly or by
paying off PNBHFL. As I noted, I believe he is correct in saying that
it makes no commercial sense to accept Cerestra's argument. That
would result in Cerestra's hold over VJTF Infra (and therefore the
principal asset, viz., the Malad property) remaining intact, while
slashing Cerestra's infusion to half -- to only about a quarter of the
asset value. As we have seen, the original ISHA's Annex-3 prescribed
the application of Debenture Subscription Amount B as being to pay
off the loan. This annexure was repeatedly substituted even after the
ISHA was amended on 19th May 2016 (ostensibly to halve Cerestra's
buy-in). Every one of those later documents reaffirmed the
requirement to bring in Rs 97 crores and that Debenture Subscription
Amount B was to be applied to repayment of the loan. The reference
to Annex-3 in the original ISHA is in clause 1.1(ggg):59 this says that
the Series 1 Debenture means a secured optionally convertible
debenture of the face value of Rs.10 each issued by VJTF Infra to
Cerestra or its affiliates or transferees having the terms set out in Annex-
3 and the Debenture Documents. Thus, the application of Debenture
Subscription Amount B was part of the terms on which Cerestra held
the debentures. If it continued to hold them -- and the more so if it
59 Cerestra Petition, Ex F, p. 240 at p. 249.
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continued to enjoy the benefits of them, such as paying itself interest
on those debentures at the coupon rate, which it admittedly did --
then Cerestra cannot possibly be heard to say that one of those
debenture terms had fallen by the wayside and was no longer binding.
In addition, the original ISHA contains an important recital E.60 This
said that, in addition to its equity purchase under the SPA, Cerestra
proposed to take up 9.70 lakh Series 1 Debentures for an aggregate
consideration of Rs. 97 crores. This recital was never deleted or
amended in a single one of the documents on and after 19th May
2016. Therefore: the recital was unchanged. The definition and
reference to Annex-3 were unchanged. Annex-3 was part of the terms
of the Debenture issue. Its provision requiring Debenture
Subscription Amount B to be used to pay off the loan remained
unchanged.
63. If it is now suggested that all this was inadvertent, then that is
an unconvincing expression of twenty/twenty hindsight (and
hindsight, as we know, is usually the lack of foresight). It is impossible
to believe that an entity like Cerestra, evidently not lacking in top-end
legal resources, could have let all this pass through inadvertence. But
in the Affidavit in Reply by Cerestra to the Jain Group petition, there
is no explanation at all for these undertakings after 19th May 2016 or
the repeated substitution of the annexures and schedules that speak
of Debentures Subscription Amount B being required to be brought
in to pay off the loan. Cerestra maintains that the loan repayment
liability was entirely and only that of VJTF Infra, without any infusion
or debenture subscription required from Cerestra. This is in the teeth
60 Cerestra Petition, Ex F, p. 240 at p. 245.
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of the agreements, the definitions, the annexures, the schedules and
the undertakings. We have also seen that the definitions of Debenture
Subscription Amount, Debenture Subscription Amount A and
Debenture Subscription Amount B also remained unchanged
throughout. No process of interpretation allows me to simply ignore
all these continued statements. And this is apart from the numerous
undertakings and commitments post-May 2016, and which I have
already noted.
64. There is an interesting annexure to Cerestra's Affidavit in
Rejoinder in its petition.61 This is a communication from SEBI to
Cerestra following a routine inspection. What is furnished is
incomplete, just a few pages. SEBI's inspection seems to have noted
a marginal discrepancy, an excess investment by Cerestra in VJTF
Infra by 0.79%. Nothing on the present record shows that this was
ever brought to the Jain Group's attention. But what is more curious
is the date. This SEBI communication is of 24th November 2017, i.e.,
more than one year after the 19th May 2016 First Supplementary
Agreement to the ISHA that Mr Chinoy says was necessitated by this
discrepancy. SEBI's covering letter also speaks of an inspection on
23rd and 24th October 2017.
65. Prima facie, therefore, this argument is something of a red
herring. Cerestra cannot suggest, and it does not, that there was a
blanket embargo on investing a rupee more. The regulation is in
percentage terms. It restricts Cerestra from investing more than 25%
61 Cerestra Petition, Affidavit in Rejoinder, Ex C, p. 907. Averment in
paragraph 9(a), pp. 892-893.
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of its investible funds in a single entity. Obviously, this is cautionary.
But this does not mean that Cerestra was prohibited from raising its
overall investible capital to facilitate the required larger investment in
VJTF Infra. For Cerestra to use the SEBI regulation to escape its
commitment to bring in another Rs. 51 crores seems to me rather like
making a virtue of its own sins of omission. What Cerestra needed to
do, quite clearly, was raise another approximately Rs 200 crores as
investible funds, and then put Rs. 51 crores into VJTF Infra. If not,
commercial rationality demanded a mutual rollback, i.e. a scaling
down of Cerestra's debentures, interest and equity. The one thing
that seemed to me to be totally impractical is what Cerestra suggests:
to reduce its commitment from Rs 51 crores to Rs.1.53 crores with no
consequence whatsoever to Cerestra's equity holdings and debentures.
66. What makes matters worse, in my view, is Cerestra's insistence
that it had totally bypassed its Rs.51 crores commitment, and that,
once RFL had been paid off with the PNBHFL loan, the repayment
of that substituted loan was no longer its concern. This makes even
less sense, for this debt was essentially being serviced by Pratiksha
and the Jain Group. It is pointless for Cerestra to pretend that the
Jain Group had a pre-existing loan from RFL, or that RFL was a
completely independent entity, or that Cerestra had done what was
needed by paying off the RFL loan. RFL was one of the promoters of
Cerestra, and it seems to me that Mr Jagtiani is right in saying that
the RFL loan was part of Cerestra's involvement. In paying off RFL
with the PNBHFL loan, all that happened was that one secured
lender was swapped for another.
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67. I confess I am unable to comprehend what it is Cerestra thinks
it is doing in its Petition. I understand its anxiety to stave off
PNBHFL. But with that out of the way by my 21st April 2021 order,
it is difficult to see how it can sustain or maintain this action against
the Jain Group at all. Cerestra is not VJTF Infra. If it is, then it hits
the roadblock of a fusion of entities and the jurisdictional point Mr
Jagtiani raises (and which I address a little later). Cerestra is not
PNBHFL's debtor; VJTF Infra is. When Mr Chinoy says, therefore,
that Cerestra is seeking to 'enforce the loan repayment', I cannot but
help ask in what capacity? By what authority? With what standing?
Each side seems to want to treat VJTF Infra as its personal fiefdom.
Certainly, Cerestra now has majority control over it. But VJTF Infra
is a distinct legal entity. If amounts are owed to it from Pratiksha, then
it is VJTF Infra that must seek relief, not one of its constituent
shareholders. As I said, that shareholders' action (by Cerestra) is
understandable vis-à-vis PNBHFL; but not against the Jain Group.
Nothing is due from the Jain Group or Pratiksha to Cerestra. Its
prayers clearly seek relief for VJTF Infra. Why has VJTF Infra not
sought this relief?
68. What VJTF Infra has done is to file a suit in the Court of Small
Causes against Pratiksha seeking its eviction and recovery of arrears
of lease rentals. I am equally unclear about what this (or the lease
termination) is intended to achieve; this distancing of VJTF Infra
from the Jain Group is prima facie contrived and downright fantastic.
VJTF Infra was always part of the Jain Group. It holds the major asset
the Malad school needs. How evicting Pratiksha, the school's
operating entity, from this property assists VJTF Infra in any way is a
gigantic question mark. Pratiksha's operations are VJTF Infra's only
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source of revenue. Pratiksha is very much VJTF Infra's golden-egg
laying goose. In fact, Pratiksha is VJTF Infra's only goose. VJTF Infra
continues to have a debt to repay in terms of its loan agreement with
PNBHFL. The escrow account amounts are also being used to pay
Cerestra's debenture interest -- and the only funding for that is,
again, the goose formally known as Pratiksha. At the end of the day,
terminating the lease and trying to evict Pratiksha may well turn out
to be an utterly spectacular self-goal or hit-wicket. There will be no
instant answers. There is a trial ahead in VJTF Infra's lawsuit, and
appeals and all the rest of it. At this stage, the strategy, if indeed there
is one, is baffling.
69. There is also no doubt that the so-called termination of the
lease and the ejectment and rent-recovery suit is driven by Cerestra,
not VJTF Edu or the Jain Group. This conflation of interests between
Cerestra and VJTF Infra is the reason Mr Jagtiani says Cerestra's
petition is jurisdictionally barred. It is, he says, nothing but an action
for recovery of rent and possession. The fact that it is done by
Cerestra and not VJTF Infra is immaterial, in his submission. In its
Section 9 Petition, Cerestra is doing nothing but championing VJTF
Infra's cause. The reason it does so, he says, is because such a petition
by VJTF Infra itself would be barred by the exclusive jurisdiction
conferred on the Small Causes Court under the Presidency Towns
Small Causes Court Act and the Maharashtra Rent Control Act.
Cerestra's petition is, therefore, in his submission, jurisdictionally
barred.
70. I agree, prima facie, that there is indeed a confusion of interests
between Cerestra and VJTF Infra. But that does not mean, per se,
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that Cerestra's Petition is jurisdictionally barred. There is no
relationship of landlord and tenant between Cerestra and Pratiksha.
There is no letting or lease by Cerestra itself. It is true that Cerestra
seeks amounts from Pratiksha, and these are lease rentals, and seeks
that these be paid to VJTF Infra, the lessor, but the cause of action is
not for recovery of rent but for amounts that, according to Cerestra,
are needed to pay off the PNBHFL Loan and meet VJTF Infra's other
obligations (including, presumably, paying Cerestra interest on its
debentures). A jurisdiction ouster clause demands strict
construction. It cannot be applied inferentially like this. While I will
leave the question of jurisdiction open to arbitration, when it can be
more fully considered, I do believe the submission on commonality of
interests works against Cerestra for a more fundamental reason:
Cerestra itself has no direct interest in this recovery. It is not
PNBHFL's debtor. VJTF Infra is, and VJTF Infra has brought suit
for precisely that reason. Since there are other reasons to reject the
Cerestra petition, I do not think it necessary to consider the law on
the jurisdiction ouster. Equally, this order will not affect the
contentions on either side in VJTF Infra's suit in the Small Causes
Court. The rival contentions there and in arbitration are at large.
71. Moreover, if Mr Jagtiani is correct, as I believe he is, that
Cerestra was bound to infuse another Rs 51 crores and had the
responsibility to clear the PNBHFL loan, then there is simply nothing
that remains in Cerestra's petition. I cannot possibly simultaneously
find for Mr Jagtiani on this and also accept Mr Chinoy's argument
that Pratiksha must continue making deposits. Mr Jagtiani is right
that both petitions cannot succeed, though both may fail. If the Jain
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Group's petition succeeds, and I have so ordered, then the Cerestra
Petition must necessarily fail.
72. Was Pratiksha correct in invoking force majeure? Clause 16 of
the Supplemental Lease Deed of 31st March 2016 says this:
16. Force Majeure
16.1 If the performance of either Party of any of its
obligations under this Lease Deed is prevented, restricted or
interfered with by reason of fire or other casualty or accident,
strike or other violence (not due to any act, neglect or default
of the Lessee or Lessor), war or other violence, any Law, or
regulation of any Governmental Authority, or any act or
condition whatsoever beyond the reasonable control of such
Party which results in the Party of the Second part being
unable to operate its business entirely (each such event
shall be called a "Force Majeure" event), then such Party
shall give prompt notice within a period of 30 (thirty) days
from the date of the Force Majeure occurrence and
providing a description to the other Party of such Force
Majeure in such notice, including a description, in
reasonable specificity, of the cause of the Force Majeure
occurrence; and provided further that such Party shall use
reasonable efforts to avoid or remove such cause of non-
performance and shall continue performance hereunder
whenever such causes are removed.
16.2 The Lessee shall not be required to pay the Rent in
the event of Force Majeure as provided in Clause 16.1
hereinabove, and the Parties will take reasonable steps to
restore the Premises to the condition prior to the happening
of the Force Majeure event as soon as reasonably practicable
The Lessee agrees and confirms that the entire claim
proceeds received from the insurance coverage shall be
utilized towards restoration of the said Demised
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Premises/Building and the Lessor shall bear the shortfall, if
any.
(Emphasis added)
73. The short point is this. Mr Chinoy would have it that the
Covid-19 pandemic did not result in the cessation of Pratiksha's
school operations 'entirely'. He relies on electricity bills to show that
there was work being done from the school. Mr Jagtiani says that the
bills are a small fraction of the norm.
74. I see no reason to address this at all. I cannot render a final
determination, and I do not see how it is possible to arrive at merely
a 'prima facie' view of the rightness or wrongness of the force
majeure invocation. That is something that must be left to arbitration.
It is especially so the minute Mr Chinoy claims that the Jain Group's
letters of 15th May 2020 and 30th June 2020 are 'backdated' and
'bogus' and all this is a 'tissue of lies'.
75. The force majeure claim is also to be seen in context: the Jain
Group's reply that there was no complaint about short-funding from
2017, and these complaints have come up only when disputes arose;
more specifically, after the Jain Group invoked the force majeure
clause; that Pratiksha has made a demand for excess rent paid; and
that until March 2020, there was no complaint about non-payment of
rent, and indeed all rent was fully paid. To this extent, Mr Jagtiani is
correct again when he says that these are highly contentious issues.
These require evidence. Several questions will be raised -- including
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about the manner in which Cerestra through VJTF Infra made
appropriations of inflows from Pratiksha.62
E. ARBITRATION & JURISDICTION
PROVISIONS
76. This is one of the few things not in dispute. The ISHA provides
for a Mumbai-based arbitration before a three-member Tribunal.63 It
is to be in accordance with the rules of the London Court of
International Arbitration ("LCIA"). An attempt at an amicable
settlement is first required. If that fails, the arbitration provision
operates. VJTF Edu and Vinay Jain are to nominate their arbitrator.
Cerestra and VJTF Infra are to appoint their arbitrator. The two
arbitrators are to nominate a presiding arbitrator.
77. Indian law governs the ISHA, and courts in Mumbai have
jurisdiction.64
78. PNBHFL is not a party to the Jain Group Petition. Under the
ISHA, therefore, the arbitration would be only between the Jain
Group on one side and Cerestra/VJTF Infra on the other.
62 As an aside, the first sentence of paragraph 9(m) of Cerestra's petition
will need some explaining: Pratiksha brought in Rs.1.48 crores to cover an
overdue rent of Rs.1.07 crores, but, on its own showing, Cerestra used this to pay
itself interest on debentures (although it says 'only partly').
63 Cerestra Petition, Ex F, p. 240 at pp. 274-275, Cl. 18.
64 Cerestra Petition, Ex F, p. 240 at p. 276, Cl. 20.3.
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79. The situation is different under the Master Escrow Agreement
of 25th April 2017. PNBHFL is a party to this. The Agreement also
has an dispute resolution provision in clause 12.65 This also envisions
a reference to a Mumbai-based three-member arbitral panel with
LCIA rules being applicable.
80. It is not possible, therefore, to make any order of reference to
arbitration, and the Jain Group and Cerestra cannot agree to a
substitution of the three-member arbitral panel under the Master
Escrow Agreement by a sole arbitrator without PNBHFL's consent.
It is entirely possible that there will be two separate arbitral
references, one under the ISHA and the other under the Master
Escrow Agreement. Whether the latter subsumes the former is a
question for another day, possibly in some Section 11 application.
F. FINAL ORDER
81. For the reasons I have set out, in my judgment Cerestra has
made out no prima facie case. It has no answer to its repeated
undertakings, nor to the commitments it made in various documents
regarding the repayment of the loan facility. From 2017, it has never
complained about short-funding. As to requiring a deposit in Court
from the Jain Group, I can see no reason for it. Pratiksha is not going
anywhere. Neither is the Malad school. A school is more than a
building or cluster of buildings and a playground, with or without a
swimming pool. There are still students. And, however bleak things
65 Jain Petition, Ex T, p. 494 at pp. 512-514.
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may now seem, one day this pandemic will end. One day, we will
return to life as we used to know it. VJTF Infra's possession and rent
recovery suit will wend its way through the law courts.
82. Is Pratiksha's failure to deposit the receivables something that
Cerestra can demand be secured or made good? I think not. It is only
a shareholder in VJTF Infra, one of two; and VJTF Infra has already
filed its own proceeding for precisely that relief.
83. The Jain Group, on the other hand, does have a prima facie
case. As to its specific prayers, the Jain Group says in paragraphs 11.53
to 11.5566 that Cerestra and its nominee attempted to strip Vinay Jain
of his signing and other powers, designed to eject him from VJTF
Infra's board. As I have noted, both sides claim to be able to act in
VJTF Infra's name. Now VJTF Infra holds the principal asset in
question, the Malad property. This necessitates an injunction against
Cerestra from removing the Jains from the board -- otherwise, there
is a virtually irredeemable alteration in the board structure and almost
complete and unchecked control over VJTF Infra, and consequently
the Malad property, would pass to Cerestra. The balance of
convenience lies with the Jain Group and I have no doubt that the
relative prejudice to the Jain Group is far greater than any conceivable
prejudice to Cerestra.
84. I will grant the Jain Group relief in terms of prayer clauses (i)
(except the words 'dealing with', which are bracketed out and struck
through below) and (iv). I cannot grant prayer (ii) -- that is too widely
66 Cerestra Petition, pp. 50-53.
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worded and may mean anything or nothing. Prayer (iii) defeats itself
on Mr Jagtiani's own argument. If there is a jurisdictional bar, then I
cannot grant such an injunction, for it would amount to staying a
lessor's rights and actions. There can be no such injunction against
VJTF Infra. Its proceedings in the Small Causes Court are unaffected
by this order. Prayer (v) is in the form of a mandatory injunction and
obviously cannot be granted. It is a final relief.
85. For completeness, prayers clauses (i) and (iv) are once again
set out below.
"(i) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondent No. 1 to 3, their employees, servants and/or
agents or otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, from in any manner
[dealing with,] selling, transferring, disposing of, alienating,
encumbering, mortgaging, pledging or charging the said
property (i.e. all that part and parcel of land admeasuring
4294.74 sq. mtrs. and structure thereof of Witty
International School Pawan Baug, Malad, Mumbai);
(iv) that pending the Arbitral proceedings, making of the
Arbitral Award and until execution of the Arbitral Award,
Respondents, their employees, servants and/or agents or
otherwise howsoever, be restrained by an order and
injunction of this Hon'ble Court, from
a. removing Petitioner No. 1 from the
directorship of Respondent No. 4 company;
b. taking over signatory authorities of Petitioner
No. 1 in Respondent No. 4 company;
c. changing the registered address of Respondent
No. 4 company;
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d. acting upon the board meeting of 27th March
2021 and the subsequent resolutions passed
therein;
e. calling general meeting EOGM and/or board
meeting to take any decision with respect to
the shares of directorship of the Petitioners
which would be in contravention of the
Transaction Documents;
86. This order will continue until the disposal of an appropriate
Section 17 Application by the arbitral tribunal. Cerestra may seek a
variation, modification or vacating of this order. The Jain Group is
entitled to seek its confirmation.
87. Mr Jagtiani also argued -- again, I think correctly -- that the
Cerestra Petition is fundamentally flawed. Cerestra is a Trust. The
law and the Code of Civil Procedure, 1908 require that its trustees be
joined. But this is not a reason to dismiss the Cerestra Petition. The
defect is curable; and, had I been of a mind to grant Cerestra relief, I
would have allowed an appropriate amendment. This is only noted.
...contd./-
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G. COSTS
88. This being a matter in the commercial division of this High
Court, it is controlled by the Commercial Courts Act, 2015. That
includes the amendment to Section 35 of the Code of Civil
Procedure, 1908, regarding costs. The amended sections requires me
to award costs to the successful party unless there are reasons not to,
in which case these must be recorded. There is no reason not to award
costs.
89. Ms Vandana Mehta Kumawat submits a statement of
estimated costs in the amount of Rs. 30 lakhs. This is, I believe, a high
figure at this stgage. Having regard to the time taken in arguments
and the voluminous pleadings, and that these were put together in a
very short time, I believe an amount of Rs 10 lakhs is reasonable.
There will be an order of costs in favour of the Jain Group against
Cerestra (but not VJTF Infra) in this amount. These costs are to be
paid within three weeks from today. If not paid by then, the costs will
carry interest at 9% per annum, interest on costs also being permitted
by amended Section 35.
90. The order of costs is enforceable as an order of this Court. I
dispense with the requirement of a drawn up order.
12th May 2021
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H. MISCELLANEOUS
91. Finally, the usual refrain: all findings and observations are
prima facie and are for the purposes of these Section 9 Petitions
alone. All contentions in arbitration, including for interim relief, are
kept open. I have only refused Cerestra interim relief under Section
9, not finally determined any of the competing claims.
92. All contentions regarding jurisdiction, whether under the
Presidency Towns Small Causes Courts Act or the Maharashtra Rent
Control Act, are left open for determination either by the arbitral
tribunal under Section 16 of the Arbitration Act or the competent
court, or both. Those proceedings are to be decided on merits,
entirely uninfluenced by any observations or findings in this
judgment. Similarly, the rival contentions on Mr Tamboly's
submission that the Jain Group petition is barred under Section 430
of the Companies Act, 2013 are also left open.
93. Both petitions must be finally numbered within three weeks,
for statistical purposes.
94. The Petitions are disposed of in these terms.
(G.S. PATEL, J.)
12th May 2021
