Bombay High Court
Siddharth Infra Tech Pvt. Ltd vs Bnc Power Project Ltd And The ... on 11 March, 2022
Bench: S.J. Kathawalla, Milind N. Jadhav
Kanchan P Dhuri 1 / 42 IAL-24923-2021.odt
KANCHAN
PRASHANT IN THE HIGH COURT OF JUDICATURE AT BOMBAY
DHURI
Digitally signed by
KANCHAN ORDINARY ORIGINAL CIVIL JURISDICTION
PRASHANT DHURI
Date: 2022.03.11
20:03:41 +0530
INTERIM APPLICATION (L) NO. 24923 OF 2021
IN
APPEAL (L) NO. 23597 OF 2021
IN
COMPANY PETITION NO.708 OF 2016
Siddharth Infra Tech Pvt. Ltd. ... Applicant
Versus
The Jalgaon Peoples Co-op Bank Ltd. and others ... Respondents
In the matter between:
BNC Power Project Ltd. ... Appellant
Versus
M/s. Siddharth Infra Tech Pvt. Ltd. ... Respondent
.........
Mr. Anuj Desai alongwith Mr. Vinod Kothari, Ms. Sonal Sanap and Mr. Priyansh Jain
instructed by Apex Law Partners for the Appellant.
Mr. Karl Shroff alongwith Mr. Kunal Chheda for the Applicant in IAL-24923-2021.
Ms. Jyoti Chavan alongwith Ms. Simantini Mohite instructed by Adv. Kamlesh Y.
Mali and Adv. Niranjan P. Bhavake, for Respondent No. 1 and 2 - The Jalgaon Peoples
Co-op. Bank in IAL-24923-2021.
Mr. Venkatesh Dhond, Senior Advocate alongwith Mr. Rashmin Khandekar and Ms.
Karishni Khanna instructed by Mr. Amit Tungare, Ms. Jill Rodricks and Mr. Vineet
Jain for Respondent No.3.
Mr. Nikhil Kulkarni instructed by Mr. Chandrakant B. Sonawane for the Intervener.
.........
Kanchan P Dhuri 2 / 42 IAL-24923-2021.odt
CORAM : S.J. KATHAWALLA AND
MILIND N. JADHAV, JJ.
RESERVED ON : 12th JANUARY, 2022 &
7th MARCH, 2022
PRONOUNCED ON : 11th MARCH, 2022
ORAL ORDER (PER S.J. KATHAWALLA AND MILIND N. JADHAV, JJ.) :
1. The Applicant has filed the present Interim Application seeking the
following reliefs:
"(a) This Hon'ble Court may direct Respondent No.1 and
Respondent No.2 to deposit the amount Rs. 13,80,72,861/- in the
separate account of the Applicant;
(b) This Hon'ble Court may direct Respondent No.3 to bring
back the amount withdrawn from the account over and above of its
share of 37%.
(c) This Hon'ble Court may direct the Ministry of Corporate
Affairs to update the status of the Applicant's company on the
official website.
(d) Any other order or relief as this Hon'ble Court may deem fit
and proper."
2. The Appellant is the original creditor who had filed Company Petition
No. 708 of 2016 ("the Company Petition") for winding up against the Applicant.
3. The Applicant, Respondent No. 3 and one SPML Infra Ltd. ("SPML")
are partners in a Joint Venture being - Siddharth - Mahavir - SPML Joint Venture
Kanchan P Dhuri 3 / 42 IAL-24923-2021.odt
("the Joint Venture"). The shareholding of the parties in the Joint Venture was -
Applicant- 53%, Respondent No. 3-37% and SPML-10%.
4. Respondent No.1 is the bank where the Joint Venture has accounts. Two
of these are an Escrow Account and a Current Account. Respondent No.2 is the
Managing Director and Chief Executive Officer of Respondent No.1. Incidentally,
Respondent No.3 also has a Cash Credit Account in Respondent No.1 (Bank).
CIRCUMSTANCES LEADING TO FILING OF THE PRESENT INTERIM
APPLICATION :
5. The parties (and one entity who sought to intervene) have filed elaborate
written arguments, raising a large number of issues, many of them not required to be
fully gone into, for reasons indicated below. However, to put things in context, it will
be useful to set out a brief background of the circumstances leading to filing of the
present Interim Application.
6. In 2016, the Appellant filed the Company Petition against the Applicant.
By an Order dated 18th September 2018, the said Company Petition was admitted. By a
subsequent Order dated 7th August 2019 the Company Petition was allowed and the
Applicant was directed to be wound up. Were the winding up Order to subsist and/or
while it was still subsisting, it would relate back.
7. The Applicant appealed against the aforesaid Order dated 7 th August,
Kanchan P Dhuri 4 / 42 IAL-24923-2021.odt
2019. On 7th May, 2021, by consent, the following Order came to be passed in the
appeal filed by the Applicant:
"The above Appeal was heard from time to time. In the
meantime, many undesirable events have taken place in the matter.
However, since the parties have agreed to a workable order as
suggested by this Court being passed, we are not setting out the said
events, but are disposing of the Appeal without going into the
merits, by the following order which is passed by consent :
i. Mr. Sunil Kotecha, Ex-Director of the Respondent No.1
Company, who is present in Court, undertakes to deposit with the
Prothonotary and Senior Master a demand draft drawn in favour of
the Prothonotary and Senior Master for a sum of Rs.2,50,00,000/-
on or before 13th May, 2021. He further undertakes not to seek any
extension beyond 13th May, 2021 to deposit the said amount. The
undertakings are accepted.
ii. Upon the amount of Rs.2,50,00,000/- being deposited by
Shri Kotecha, the impugned order dated 7th August, 2019, shall
stand set aside and in the event of default, the order of winding up
dated 7th August, 2019 shall without reference to this Court, stand
revived and the Official Liquidator shall stand appointed for the
Respondent No.1 Company, who will forthwith take possession of
the assets as well as statutory records of the Company.
iii. Company Petition No.708 of 2016 shall appear before the
Learned Single Judge on 7th June, 2021, FOB for final hearing.
On that day or on the day when the Company Petition is called
out, the Petitioner will be at liberty to interalia move an
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Application seeking appointment of a Provisional Liquidator of
the Respondent No.1 Company.
iv. The said Company Petition as well as the Interim
Applications moved therein by either of the parties, shall be decided
strictly on merits.
v. The Company / its Directors shall not sell, alienate,
encumber, part with possession or create third party rights in
respect of any of the immovable / fixed assets of the Company upto
7th June, 2021 or until the matter is called out before the learned
Single Judge, whichever is later.
vi. If any amounts are received / recovered by Respondent
No.1 Company or its directors pursuant to its ongoing /
completed project/s, the same shall be deposited by the
directors in a separate account specially opened for this purpose
and the amounts deposited therein shall not be used upto 7 th
June, 2021 or until the matter is called out before the learned
Single Judge, whichever is later."
(Emphasis supplied)
8. After seeking extensions on account of delay, the Applicant deposited
the amount of Rs. 2.5 crores and the winding up Order came to be set aside. There
is therefore, today, no Order of winding up.
9. The Company Petition was thereupon listed before the Learned
Single Judge. At this stage, the Applicant contended that the Company Petition
was liable to be transferred to the National Company Law Tribunal ("NCLT").
Kanchan P Dhuri 6 / 42 IAL-24923-2021.odt
Reliance was placed on the judgments of the Apex Court in Action Ispat and Power
Pvt Ltd v/s Shyam Metalics and Energy Ltd. 1 and A. Navinchandra Steels Pvt Ltd
v/s SREI Equipment Finance Ltd and others2.
10. By an Order dated 10th August, 2021 the Learned Single Judge
accepted the Applicant's contention and ordered the Company Petition to be
transferred to the NCLT. All pending applications filed thereunder were disposed
of. The relevant part of the Order is quoted below:
"30. I must mention that the Division Bench of this Court,
whilst remanding the above Company Petition to the learned
single Judge for hearing and final disposal (by its order dated 7 th
May, 2021), had passed certain protective directions. In my
opinion, those will have to be continued. It is accordingly directed
that subject to any order passed by the NCLT, Mumbai:-
(i) The Applicant - Company / its Directors shall not\ sell,
alienate, encumber, part with possession or create any third party
rights and/or interests in respect of any of the immovable / fixed
assets of the said Company;
(ii) If any amounts are received / recovered by the Applicant -
Company or its directors pursuant to its ongoing / completed
project/s, the same shall be deposited by the directors in a separate
account specially opened for this purpose and the amounts
deposited therein shall not be used without the permission of the
NCLT.
1 (2021) 2 SCC 641
2 (2021) 4 SCC 435
Kanchan P Dhuri 7 / 42 IAL-24923-2021.odt
(iii) A statement of the amounts recovered/received by the
Applicant - Company / its directors and deposited in the said
separate bank account shall be placed before the NCLT on the date
when the matter is called out before the NCLT. A copy of the same
shall be provided to the Advocate for the Petitioner.
31. It is clarified that the NCLT will be at liberty to vacate
and/or modify the above protective directions after hearing the
parties concerned. Interim Application Lodg No.13530 of 2021 is
accordingly disposed of. However, in the facts and circumstances of
the case, there shall be no order as to costs.
32. In view of the fact that the above Company Petition is
now ordered to be transferred to the NCLT, nothing survives in
the other Applications listed above and the same are disposed of
accordingly."
(Emphasis supplied)
11. The Appellant has challenged this Order dated 10 th August 2021 by filing
the present Appeal. Before us, the Appellant contended that the Single Judge was in
error transferring the matter to the NCLT. The Appeal was briefly heard by us and by
an Order dated 26th October 2021 the Order dated 10th August 2021 was stayed to the
extent of the transfer of the Company Petition to the NCLT.
12. During the pendency of the present Appeal, the Applicant has taken out
the present Interim Application. Before we set out and deal with the case in the
Interim Application (and the objections thereto) we may only note a few more Orders
Kanchan P Dhuri 8 / 42 IAL-24923-2021.odt
passed thereon.
13. The Applicant moved the present Interim Application on 3 rd November,
2021 when the following Order was passed:
"1. Despite notice issued to the Respondent No.3 by the
Advocate for the Applicant, none appear for the Respondent No.3.
Stand over to 18th November, 2021.
2. In the meantime, the Respondent No.3 shall not withdraw
any further amount from the bank account maintained by the
Respondent No.1."
14. By subsequent Orders dated 18th November 2021 and 17th January 2022
in the present Interim Application parties were directed to file their respective Written
Submissions. These have been filed. We have also heard the parties at length. One Mr.
Chandrakant Sonawane, has sought to intervene. Although no formal application has
been filed by him, he has also filed his Written Submissions.
APPLICANT'S CASE
15. The Applicant's case before us is:
(a) In 2016, the Company Petition was filed against the Applicant which
came to be admitted on 18th September 2018. On 7th August 2018 an Order
directing winding up of the Applicant and appointing a liquidator was passed.
(b) The Applicant, Respondent No.3 and SPML are partners in the
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"Joint Venture". The "Joint Venture" has inter alia, a Bank account with
Respondent No.1 (Bank) called "Escrow Account". Respondent No.3 (whose
director is a cousin of the Applicant's director) is claiming an entitlement to the
amounts deposited in the Joint Venture's Escrow Account. Respondent No.3 is, in
this behalf, relying upon certain supplemental agreements executed inter-alia
between the Applicant and Respondent No.3. These are (i) Supplementary Joint
Venture Deed; (ii) Irrevocable Power of Attorney (iii) Sub-contract Agreement and
(iv) Escrow Agreement. These were executed on or around April 2019. These have
been referred to as "the 2019 Agreements". Simply put, what the 2019 Agreements
did was to transfer work (and benefits arising therefrom) from the Applicant to
Respondent No.3. This is wrongful and should be restrained.
(c) On 19th February 2019 (after the Company Petition had been
admitted) the Applicant transferred 50% out of its 53% share in the Joint Venture to
one Mr. Chandrakant Sonawane.
(d) The Official Liquidator filed OLR No. 90 of 2020 seeking a
declaration that: (i) the April 2019 Agreements between the Applicant and
Respondent No.3 and (ii) the February 2019 transaction between the Applicant and
Mr. Chandrakant Sonawane were fraudulent and void in terms of Section 536 of
the Companies Act, 1956 as they were executed after liquidation had commenced.
Kanchan P Dhuri 10 / 42 IAL-24923-2021.odt
(e) Respondent No.3, on the other hand, has, filed Interim Application
No.5444 of 2020 seeking validation of the 2019 Agreements and Interim
Application No.3392 of 2020 to declare consumer proceedings which prevented
Respondent No.3 from withdrawing amounts from the Joint Venture account as
null and void. The dispute between the parties pertained to who was entitled to
amounts from the Escrow Account and whether Respondent No.3 should get the
entire amount or only 37%. On 21 st September 2020 an Order was passed in Interim
Application No.3392 of 2020 preventing any withdrawal from the Joint Venture
account without leave of the Court.
(f ) On 26th April, 2021 this Court in Interim Application No.5444 of
2020 passed an Order permitting the Applicant to withdraw 37% and SPML to
withdraw 10% of the amounts deposited in the Escrow Account. The Order did not
permit the withdrawal of 53% share from Joint Venture's account.
(g) In this backdrop and to safeguard the interests of the Applicant, the
Orders dated 7th May, 2021 and 28th May, 2021 were passed providing that if any
amounts were received in ongoing/completed projects by the Applicant this should
be deposited in a separate account.
(h) Respondent No.3 has been siphoning money over and above its share
of 37% in the Joint Venture. Respondent No.3 ought to be directed to refrain from
Kanchan P Dhuri 11 / 42 IAL-24923-2021.odt
withdrawing any amount from the Escrow Account of the Joint Venture and the
Applicant's interest and share ought to be protected.
16. The Applicant orally and through its Written Submissions further
submitted as follows:
(a) The Irrigation Department of the Government of Maharashtra has
on several occasions vide letters, disapproved the 2019 Agreements whereby work
under the government contract awarded to the Joint Venture was sub-let in entirety
to Respondent No.3.
(b) The Board Resolution dated 5th April 2019 passed by the Applicant
approving entering into the 2019 Agreements was passed subject to the approval of
the concerned Government Department.
(c) On 11th August 2021 Respondent No.1 (Bank) had issued a letter to
the Jalgaon police station accepting that 53% of the Joint Venture belongs to the
Applicant and no disbursement of any money would be allowed without NOC of all
Joint Venture partners. Respondent No.1 (Bank) has suppressed this letter and
disbursed sums to Respondent No.3 from the Applicant's share in the Joint
Venture without the knowledge or obtaining a NOC from the Applicant.
(d) When the 2019 Agreements were entered into by the Applicant there
was no restraint on the Applicant entering into these transactions and the
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Applicant believed, Company Petition No.708 of 2016 would be dismissed and
even otherwise it did not have any fraudulent intent.
(e) The case canvassed by Respondent No.3 that it is innocent and it is
only the Applicant who has attempted to circumvent the winding up proceedings is
not believable as representatives of the Applicant and Respondent No.3 are first
cousins and have been carrying on business in partnership since 2009. Hence, any
motive attributable to the Applicant is also attributable to Respondent No. 3.
(f ) The 2019 Agreements are void and unenforceable in view of Section
536(2) of the Companies Act, 1956.
(g) On 28th May 2021 the Applicant came out of liquidation and is now
trying to safeguard its 53% share in the Joint Venture.
(h) The amount in the Joint Venture's Escrow Account needs to be
protected. If the Order dated 10th August, 2021 Ordering the transfer of the
Company Petition is set aside, it is possible that the Applicant may again go into
liquidation. If this were to happen the Interim Applications and Orders passed
therein including the Order directing that no amounts should be withdrawn from
the Escrow Account may stand revived.
(i) As on date, the Order passed by the Learned Single Judge
transferring the captioned Company Petition to the NCLT is stayed. Hence,
Kanchan P Dhuri 13 / 42 IAL-24923-2021.odt
presently, the Orders of the Learned Single Judge restraining transfer from the
Escrow Account are not set aside.
(j) The Applicant was notified regarding the captioned Interim
Applicant in a timely manner and service of the Application was received on 2 nd
November, 2021 through registered post.
CASE OF MR. SONAWANE
17. One Mr. Chandrakant Sonawane, without filing an application for
impleadment and/or seeking leave of this Court has filed his Affidavit in Reply and
Written Submission in the matter. While, Mr. Sonawane is not impleaded in the
present proceedings, briefly, Mr. Sonawane's case as set out in his Written
Submissions is as follows:
(a) On 19th February, 2019 the Applicant transferred 50% out of its 53% share in
the Joint Venture to Mr. Sonawane. Therefore, the Applicant only has a 3%
share in the Joint Venture. Mr. Sonawane holds 50%. Any Orders permitting
withdrawal of any money would affect his rights.
(b) As on the date of entering into the 2019 Agreements, the Applicant did not
have 53% share in the Joint Venture and hence the 2019 Agreements are
illegal, void and not binding on Mr. Sonawane. The 2019 Agreements are
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also void in terms of Section 536 of the Companies Act, 1956.
(c) Vide Order dated 26th April, 2021 this Court permitted Respondent No.3 to
withdraw their share only to the tune of 37%. This, according to Mr.
Sonawane, is both a recognition and a protection of his 50% share.
(d) Vide Order dated 7th May 2021 this Court directed that if any amounts are
received/recovered by the Applicant or its directors pursuant to
ongoing/completed projects, the same shall be deposited by the directors in
a separate account specially opened for this purpose. Hence, the entire
amount of 53% is to be transferred into a separate account of the Applicant.
RESPONDENT NO.3'S CASE
18. Respondent No.3 has broken down its Written Submissions into the
following topics (i) Suppression of material facts and background of the 2019
Agreements; (ii) Background of the Orders passed and withdrawal of amounts
from the Escrow Account; (iii) Circumstances under which the 3 rd November 2021
Order was sought and obtained; (iv) Why free operation of the Escrow Account
and other accounts is urgent and crucial and (v) Why there is no case for
continuing any restraint in operating the Escrow Account. These submissions seek
to controvert the case of the Applicant. They also, in the process deal with Mr.
Sonawane. They are set out below.
Kanchan P Dhuri 15 / 42 IAL-24923-2021.odt
I. Suppression of material facts and background of 2019
Agreements :
19. The Applicant has suppressed material facts from this Court and the
present Interim Application is liable to be dismissed on this ground alone. The
Applicant has unfairly obtained the Order dated 3 rd November 2021. Had the facts
which are before the Court been disclosed and had Respondent No.3 been present,
the Order would have never been passed. It ought to be recalled immediately.
20. The first thing that this Court should note is that while the Applicant
is questioning the 2019 Agreements, it has deliberately withheld, in entirety, the
backdrop in which this was done. The background is critical and is as under:
(i) On 24th July 2009, the Government of Maharashtra awarded a contract to the
"Joint Venture" for supplying power to 12 lift irrigation schemes having a
tender value of approximately Rs. 147.8 crores.
(ii) On 5th August 2009 and 12th August 2009, the Joint Venture executed sub-
contracts in favour of its constituents Respondent No.3 and the Applicant
respectively sub-contracting 50% of the value of work to each party.
(iii) From 2016 onwards, the Applicant began experiencing financial difficulty and
was unable to execute its share of work. On 7 th September 2016, the Company
Petition was filed against the Applicant seeking winding up of the Applicant.
Kanchan P Dhuri 16 / 42 IAL-24923-2021.odt
Vide Order dated 18th September 2018, the Petition was admitted. This was not
disclosed to Respondent No.3.
(iv) The financial condition of the Applicant continued to deteriorate further and
the Applicant continued to be unable to carry out its part of the project work.
(v) The Applicant's defaults affected the performance, by the Joint Venture, of its
obligations under the contract awarded to it.
(vi) To ensure that there was no default by the "Joint Venture" qua the
performance of its obligations to the State of Maharashtra, the sub-contract
given in favour of the Applicant was terminated by the Joint Venture and the
Joint Venture gave the sub-contract (for the work, which the Applicant was
unable to execute), to Respondent No.3. In other words, Respondent No.3
stepped into the Applicant's shoes.
(vii) To reflect this understanding and/or arrangement in April 2019 various
documents/Agreements were executed. These documents were as under:
(a) 5th April 2019 - Board resolution passed by the Applicant acknowledging
its paucity of funds and recording that the Applicant was in the process
of entering into a Supplementary Joint Venture Deed and Subcontract
Agreement to assign the balance work under the contract to Respondent
No.3.
(b) 8th April 2019 - Letter addressed by Applicant to the Joint Venture
Kanchan P Dhuri 17 / 42 IAL-24923-2021.odt
expressing its inability to continue the work and cancelling its earlier
sub-contract dated 12th August 2009.
(c) 8th April 2019- Supplementary Joint Venture Deed executed between the
parties to the Joint Venture.
(d) 8th April 2019- Irrevocable Power of Attorney executed by parties to the
Joint Venture in favour of a director of R3. [We may mention here that
the Applicant has asserted that subsequently on 20 th March 2020 it
revoked this Irrevocable Power of Attorney. Respondent No.3 has joined
issue with this and submitted that the Irrevocable Power of Attorney
created an interest in favour of Respondent No.3 and could not be
unilaterally revoked.]
(e) 8th April, 2019- Sub-Contract Agreement executed between the Joint
Venture and its partners. Vide this agreement balance work remaining
for the project after completion of work under the 13 th RA Bill was sub-
contracted in its entirety to Respondent No.3. It was agreed that
payments due for the sub-contracted work were to be made to
Respondent No.3. The Joint Venture was entitled to retain only a margin
of 0.50% on the gross bill and the entire balance payment i.e 99.5% was to
be made to Respondent No.3. Payments in respect of the work sub-
contracted were to be deposited in the Escrow Account to be opened
Kanchan P Dhuri 18 / 42 IAL-24923-2021.odt
with Respondent No.1 (Bank).
(f ) 10th April, 2019- Escrow Agreement executed between Respondent No.3,
the Joint Venture and Respondent No.1 (Bank). Pursuant to this Account
No.00101119000740 (the Escrow Account) was opened. The Escrow
Agreement specified that all the amounts received in the Escrow
Account shall directly be transferred to Respondent No.3's cash credit
account (00154700000119) with Respondent No.1 (Bank).
(viii) Respondent No.3 was kept in the dark about the Company Petition filed against
the Applicant and the Orders passed therein. The Applicant has miserably
failed to place on record any document establishing that Respondent No.3 was
informed of the Order of admission of the Company Petition at the time of
entering into the aforementioned agreements. Except for a bold statement about
the Directors being cousins, there is nothing.
(ix) Consequently, the actions of Respondent No.3 were bonafide and in ignorance
of the Orders passed. It acted, as it did, and executed work and incurred
expenses, in these circumstances.
(x) The Applicant in previous proceedings between the parties and also in the
present proceedings has unequivocally admitted and acknowledged that it
executed the 2019 documents/Agreements with full knowledge of the Orders,
which is gross.
Kanchan P Dhuri 19 / 42 IAL-24923-2021.odt
(xi) The Applicant having taken the benefit of these documents cannot dispute or
disclaim the same. Respondent No.3 not only took over the work but also
liabilities of approximately Rs.14.31 crores of the Applicant on taking over the
project work. What is particularly relevant is that the Applicant has at
paragraph 13(c)(iv) of its Written Submissions, stated thus:-
"It is submitted that when the transactions above were entered
into there was no restraint on entering into the same. The
Applicant believed the Petition would be dismissed and even
otherwise did not have any fraudulent intention."
[Emphasis supplied]
(xii) Admittedly, from April 2019 i.e from date of commencement of work under the
14th R.A. bill onwards, it is Respondent No.3 who has been carrying out all work
in totality for the project utilizing its own investment, resources and effort.
Neither the Applicant nor Mr. Sonawane had any role to play. Respondent No.3
was carrying out the work and therefore rightfully receiving payments.
(xiii) The 2019 Agreements were executed by Respondent No.3 as a bonafide act and
this benefited the Applicant and also protected the Joint Venture.
(xiv) It is singularly unfortunate that after Respondent No.3 has carried out work
worth approximately Rs.51.67 crores utitlizing its own investment, resources
and effort with zero contribution or assistance from the Applicant (or Mr.
Sonawane), the Applicant has belatedly contended that the 2019 Agreements
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are void in terms of Section 536(2) of the Companies Act, 1956.
(xv) Fortunately for Respondent No.3, the Order dated 7th August 2019 directing
winding up of the Applicant has been set aside and the Applicant is not in
liquidation. As such, there is no question of any applicability of Section 536 of
the Companies Act, 1956.
(xvi) It is unfortunate that the Applicant who (a) did not inform Respondent No.3 of
the Order of admission at the time of entering into the 2019 Agreement; (b)
sub-contracted its entire share of work to Respondent No.3; (c) did not raise
any objection against Respondent No.3 solely carrying out the entire works
utilizing its own investment and resources; (d) asserted on oath that when the
2019 Agreements were entered into there was no restraint and/or fraudulent
intent; is now shamelessly claiming the 2019 Agreements are void and
demanding its alleged share in payment for works which were never carried out
by it.
II. Background of Orders passed and withdrawal of amounts from the
escrow account :
21. The Applicant has also sought to mislead this Court, by not providing
any context or the complete picture in relation to the Orders passed by this Court. The
correct and proper picture is that the proceedings before the Company Court were as
under:
Kanchan P Dhuri 21 / 42 IAL-24923-2021.odt
i During the pendency of the project work, and much after the April 2019
Agreements, vide Order dated 7th August 2019, this Court Ordered the
liquidation of the Applicant.
ii The Director of the Applicant (which was then in liquidation) was unable to
digest the fact that Respondent No.3 was successfully carrying out the
necessary work and receiving payments.
iii On 23rd March, 2020, the director of the Applicant, (purporting to act on
behalf of the Applicant, when the Applicant was in liquidation) filed Consumer
Application No.137 of 2020 before the District Consumer Forum at Jalgaon
alleging deficiency in services rendered by Respondent No.1 (Bank) and inter
alia seeking a stay on withdrawal of sums from the Escrow Account. He had no
locus to do so. The case filed was dishonest and this was an abuse of process.
iv It is, in these circumstances, apprehending that the Applicant (i.e its Directors)
might obtain Orders of access to the funds on 17th September, 2020,
Respondent No.3 filed Interim Application No.3392 of 2020 in Company
Petition No.708 of 2016 inter alia seeking a declartion that the Consumer
Complaint is illegal and ineffective. On 21 st September, 2020 this Court, on an
application made by Respondent No.3, which sought to ensure that the
Applicant's directors refrain from malafidely withdrawing any sums from the
Escrow Account, passed an Order directing that no amounts can be withdrawn
Kanchan P Dhuri 22 / 42 IAL-24923-2021.odt
from the Escrow Account of the Joint Venture without the leave of this Court.
This Order was passed to protect the rights and interest of Respondent No. 3
over the amounts deposited in the Escrow Account.
v On 1st November, 2020 Respondent No.3 to show its bonafide intent and out of
abundant caution filed Interim Application No.5444 of 2020 in Company
Petition No.708 of 2016 under Section 536(2) of Companies Act, 1956 inter alia
seeking a declaration that the 2019 Agreements entered into were legal and
valid. Although, these agreements were executed before the winding up Order,
Respondent No.3 was legally advised to do so, since the winding up Order
could be said to relate back.
vi Respondent No.3 is in urgent and immediate need of funds to carry out the
balance project work. This is because while it has been actually doing the work,
the money is being paid by the State to the Joint Venture. It was therefore
spending and not getting paid. This could not go on. It was running out of
funds and work was suffering. The State government had on several occasions
advised that no further extensions of time would be granted. On 26 th April
2021, therefore Respondent No.3 first sought defreezing of the Escrow
Account atleast to the extent to which there was no contest. This Application
was moved when this Court was taking up only urgent matters via video
conferencing. Therefore, this Court only considered this limited request and
Kanchan P Dhuri 23 / 42 IAL-24923-2021.odt
did not go into the disputed amounts and by an Order of that date, this Court
defreezed the Escrow Account to the extent of Respondent No.3's undisputed
claim. This was an immediate pro tem Order and there was therefore no
adjudication on the merits of the rival cases.
vii Vide an Order dated 10th August, 2021, a Single Judge of this Court Ordered
the transfer of the said Company Petition to the NCLT and consequently noted
that all Interim Applications filed in the Company Petition were disposed of.
Accordingly, even Interim Application No.3392 of 2020 and Interim
Application No. 5444 of 20202 filed by Respondent No. 3 were disposed of and
all Orders passed therein came to an end. Therefore any reliance on the Order
dated 26th April 2021 or a suggestion that there is a subsisting embargo on the
operation of the Escrow Account is misplaced.
22. Admittedly, Respondent No.3 has solely been executing the project work
using its own investment and resources. Owing to the malafide acts of the Applicant,
Respondent No.3 was unable to gain access to monies in the Escrow Account. To
ensure that work was not impacted, Respondent No.3 borrowed money and drew
down its maximum Cash Credit Facility from Respondent No.1 (Bank) upto Rs.12.90
cores and also borrowed Rs.1.78 crores out of a limit Rs.2 crores from ICICI Bank.
Respondent No.3 utilized these fund inter alia for payment of labour, procurment,
transportation of materials, installation and commissioning of the Jigaon Project.
Kanchan P Dhuri 24 / 42 IAL-24923-2021.odt
23. Respondent No.3 was in dire need of funds to carry out the remaining
project work. As such, on 27 th September, 2021 Respondent No.3 issued a letter to
Respondent No.1 (Bank) forwarding the 10 th August Order and requested Respondent
No.1 (Bank) to transfer Rs.14,39,28,819 to the Cash Credit Account of Respondent
No. 3 as per the Escrow Agreement. This would ensure that the borrowings from
Respondent No.1 (Bank) would be partly repaid and fresh funding begin.
24. Respondent No.1(Bank) sought for a legal opinion of an Advocate who
opined that in view of the Order dated 10th August 2021, whereby the Interim
Applications were disposed of, the stay on the Escrow Account was no longer in
operation and therefore, Respondent No.1 (Bank) could process the request of
Respondent No.3. In the ordinary course of its business, on 8 th October, 2021
Respondent No.1 (Bank) therefore transferred Rs.14,39,28,819 to the Cash Credit
Account of Respondent No.3 maintained with Respondent No.1 (Bank). This is
nothing but a part discharge/repayment of the loan/credit facility given by
Respondent No.1(Bank).
25. Therefore there is no illegality and/or embargo on the aforementioned
transfer.
III. Circumstances under which the 3rd November, 2021 Order was
sought and obtained :
Kanchan P Dhuri 25 / 42 IAL-24923-2021.odt
26. The Applicant filed the present Interim Application and it was moved on
3rd November, 2021. The Order dated 3rd November, 2021 came to be passed in the
absence of Respondent No.3 and was obtained through suppression of material facts.
Notice of listing was given to Respondent No.3 one day prior to the hearing. There
was no earth shaking urgency which warranted such short notice, that too during the
Diwali holidays. Owing to the Diwali vacation and 3 rd November, 2021 being "Choti"
Diwali, there was a lack of communication between Respondent No.3 and its
Advocates, and unfortunately none remained present on the next day, for the hearing.
Taking advantage of the absence of Respondent No.3 none of the relevant facts (now
as set out in the Affidavit in Reply filed by Respondent No.3) were brought to the
notice of this Court and it is in these circumstances the Order dated 3 rd November,
came to be passed. Vide the Order dated 3 rd November 2021 the Escrow Account had
been frozen. In fact, Respondent No.1 (Bank), without due cause, (and on account of
an incorrect reading of the said Order dated 3 rd November, 2021) also froze the Cash
Credit Account (bearing no.00154700000119) of Respondent No.3 and the Current
Account (bearing no.00101119000739) of the Joint Venture with Respondent No.1
(Bank). Now that the full picture is before this Court, the Order should be recalled
immediately.
IV. Why free operation of the Escrow Account and other accounts is
Kanchan P Dhuri 26 / 42 IAL-24923-2021.odt
urgent and critical :
27. There is extreme urgency of requirement of funds in Order to carry out
the project work and for discontinuation of the Order dated 3 rd November 2021.
Owing to repeated efforts by Respondent No.3 the Government of Maharashtra by its
letter dated 12th October 2021 has granted a 5th and final extension till 30th June 2022
for completing the contract work.
28. In Order to complete the Jigaon Project work within the stipulated
period, Respondent No.3 is in need of approximately Rs.9,00,00,000 (Rupees Nine
Crores) per month till 30th June, 2022 inter alia for:
(i) payment of wages to skilled and unskilled workers, labourers;
(ii) payments to be made to suppliers/vendors;
(iii) procurement of equipment for electrical sub stations;
(iv) funds for installation of transmission lines;
(v) day to day expenses for staff etc.
29. The project contemplates lift irrigation schemes to be used to provide
water to farmers for agricultural purposes in drought prone areas in the Buldhana dist.
If funds are not obtained, the entire irrigation scheme would be stalled. This will not
only cause immense loss to the government treasury but also immeasurable hardship
and crop damage to farmers owing to lack of irrigation and also expose the Joint
Venture to serious consequences.
Kanchan P Dhuri 27 / 42 IAL-24923-2021.odt
30. On 24th November 2021, a payment of Rs.5,71,20,411/- crores (Five
Crores Seventy-One Lakhs Twenty Thousand Four Hundred and Eleven Only)
towards works completed by Respondent No.3, (against the 21 st R.A. bill) was
deposited by the Government Department into the Escrow Account. On account of
the Order dated 3rd November 2021, Respondent No.3 is unable to withdraw this sum
from the Escrow Account.
V. Why there is no case for continuing any restraint in operating the
Escrow Account :
31. The entire argument of the Applicant in so far as it relates to the reliance
upon the Order dated 7th May, 2021 is completely misconceived in law. This Order
was passed in an Appeal filed by the Applicant against an Order of this Court directing
the Applicant's liquidation. Respondent No.3 is not a party to the said Company
Petition. The said Order was not directed against Respondent No.3 but was intended
to protect the Appellant from the Applicant as amounts were due and payable by the
Applicant to the Appellant. This Court passed the 7 th May Order in Order to safeguard
the interest of the Appellant and its creditors and to ensure that the Applicant does
not dispose of any amounts, it receives/recovers pursuant to its ongoing projects. This
Order pertained to amounts, which the Applicant and/or its directors were entitled to
receive/recover and did not pertain to amounts over which the Applicant and/or its
Kanchan P Dhuri 28 / 42 IAL-24923-2021.odt
directors had no entitlement. In light of the 2019 Agreements, the Applicant and/or its
directors were not entitled to receive and/or recover amounts deposited in the Escrow
Account.
32. Further, the Applicant in its oral and written submissions before this
Court has contended that this Court has stayed the Order dated 10 th August, 2021 as a
whole as such the Order passed in the Interim Applications filed in the said Company
Petition are not disposed of. This is also an incorrect reading of the said Order. This
Court vide its Order dated 26th October, 2021 has only stayed the aforesaid Order to
the extent of transferring the Company Petition to the NCLT. The Interim
Applications filed therein stand disposed of and cannot stand automatically revived
without a specific Order in this regard. The arguments that the Applicant may, once
again, be wound up, is to be stated to be rejected. There is no question of second-
guessing what may or may not happen to the said Company Petition. It is clear that on
the facts as placed, the Applicant is certainly not entitled to the relief as sought.
33. The falsity of the Applicant's case is also clear from the contradictory
and shifting stand taken by it in these proceedings itself. The Applicant in its Affidavit
in Reply to Respondent No.3's Interim Application No.5444 of 2020 in the said
Company Petition has asserted that on 19th February 2019 it had allegedly sold 50% of
its stake in the Joint Venture to one Mr. Sonawane and now the Applicant was only left
with 3% share in the Joint Venture. This claim is also made by the Applicant in its
Kanchan P Dhuri 29 / 42 IAL-24923-2021.odt
letter dated 3rd June 2021 addressed to Respondent Nos.1 and 2 requesting for
withdrawal of its so called 3% share and not 53% share from the Escrow Account and
that it be permitted to deposit this 3% into a separate account. This claim of the
Applicant is contrary to its stand now adopted in the captioned Interim Application to
deposit Rs.13,80,73,861/- into a separate account. After this false and contrary stand
was pointed out by Respondent No.3 in its Affidavit in Reply, the Applicant in its
Rejoinder has belatedly claimed that it has transferred 50% of its stake to one Mr.
Sonawane. The transaction, if any, is between the Applicant and Mr. Sonawane and
has no bearing whatsoever on the entitlement to money deposited in the Bank
Accounts. Under the 2019 Agreements, 99.5% of the income of the Joint Venture is to
come to Respondent No.3. The two claims are in different spheres. One is an intra-
Joint Venture partner dispute. The other is an entitlement between Joint Venture and
Respondent No.3. On this ground alone, the present Interim Application deserves to
be rejected with costs.
34. Mr. Chandrakant Baliram Sonawane claiming to have been allotted 50%
out of the Applicant's 53% in the Joint Venture attempted to intervene in the present
Interim Application without filing any formal application for him to be impleaded as
party in the present proceeding. Mr. Sonawane has not been impleaded in the present
matter and despite this filed an Affidavit in Reply as also written submissions in the
present proceeding. In his pleadings and written submissions as during oral
Kanchan P Dhuri 30 / 42 IAL-24923-2021.odt
submissions before this Court Mr. Sonawane has sought to misinterpret the Order
dated 26th April, 2021 passed in Interim Application No.5444 of 2020 in the said
Company Petition. Vide the aforementioned Order this Court defreezed the Escrow
Account to the extent of Respondent No.3's undisputed claim. Thereafter, the counsel
for Mr. Sonawane sought a stay for four weeks on execution of this Order, which was
rejected by this Court. This Court refused this request and noted in its Order that Mr.
Sonawane's rights over a sum of Rs.10,27,70,343 forming part of the 53% amount
against which Mr. Sonawane may have a claim is still in the Escrow Account as such
there was no occasion for a stay being granted. The Court did not adjudicate upon the
merits of the dispute in any manner whatsoever and has made no observations qua Mr.
Sonawane's so called share. Respondent No. 3 submitted that Mr. Sonawane is now
seeking to misinterpret this observation and malafidely claim rights over this amount
of Rs.10,27,70,343.
35. The Applicant's reliance on correspondence with Government
Departments is of very little consequence. The Government Department does not
have any authority or locus to disapprove the 2019 Agreements which are internal
arrangements entered into by the Joint Venture with its constituents. Further, vide its
letter dated 26th May 2020 the Government Department has in fact taken on record
the 2019 Agreements and also acted in accordance with the same.
36. The Applicant has sought to mislead this Court by placing on record
Kanchan P Dhuri 31 / 42 IAL-24923-2021.odt
forged Board Minutes at Serial No.13 of its Compilation of Documents seeking to
allege that the Board Resolution passed by the Applicant authorizing the 2019
Agreements was subject to government approval. These minutes are at variance
with the original board minutes annexed at Ex.F of Respondent No.3's Reply
wherein no such condition has been imposed. The Applicant has forged these
board minutes as an afterthought and in a desperate attempt to support its plea that
the 2019 Agreements are void.
37. Respondent No.3 in its Written submissions, therefore summarized
its case as under:
"35. Therefore, it is clear from the aforementioned facts and
submissions that :
I. Respondent No.3 was not a party to the said Company
Petition. The Application as filed and reliefs as sought are not
maintainable in the said Petition.
II. In any event, the directions passed by this Court in its order
dated 7th May, 2021 do not apply to Respondent No.3 in view of
what emerges from the factual scenario set out above, and from a
reading of the said order itself.
III. The record indicates, prima facie if not ex facie, that the
transactions of sub-contracting the balance work to Respondent
No.3 were genuine bonafide transactions done for the overall benefit
of the Joint Venture and the Applicant to ensure that the contract
work is completed and further fines and other consequences
Kanchan P Dhuri 32 / 42 IAL-24923-2021.odt
including black-listing are not imposed on the Joint Venture.
IV. In any event, without prejudice to the aforesaid and in the
alternative, Respondent No.3 having admittedly executed, acted
upon and benefitted from the Supplementary Joint Venture Deed,
Irrevocable Power of Attorney, Sub-Contract Agreement and
Escrow Agreement is estopped from contending that these
agreements are void and not in force. In any event, till date there is
no substantive proceeding filed by the Applicant assailing any of
these transactions. In fact, even in written submissions filed before
this Court in this very proceeding, the Application in paragraph
13(c)(iv) of its Written Submissions states as follows:
"It is submitted that when the transactions above
were entered into there was no restraint on entering
into the same. The Applicant believed the Petition
would be dismissed and even otherwise did not have
any fraudulent intention." [Emphasis supplied]
Therefore, it does not lie in the mouth of the Applicant to now
contest the said agreements as sought to be done in this proceeding.
V. Admittedly, solely Respondent No.3 carried out work from
April 2019 i.e the 14th R.A. bill onwards.
VI. The order dated 7th August 2019 directing winding up of the
Applicant has been set aside and the Applicant is not in liquidation.
Section 536 of the Companies Act, 1956 is not applicable. This
Court vide order dated 10th August 2021 has ordered the transfer of
the said Company and has disposed of all pending Interim
Applications. This part of the order disposing of the said
Applications is in fact not even under challenge. Therefore, there is
no question of any interlocutory orders operating at this stage.
VII. It is neither permissible nor desirable to speculate upon any
Kanchan P Dhuri 33 / 42 IAL-24923-2021.odt
hypothetical situation let alone pass orders affecting vested rights of
third parties on such basis, as the Applicant wants this Court to do.
If the Applicant is once again wound up, that will not automatically
revive all Interim Applications that have been specifically disposed
of or orders that have been passed therein. In fact, it is the
Applicant's case that it ought not to be wound up and the said
Company Petition should be transferred to the NCLT. In the event
the Applicant succeeding in its own contention, Section 536 of the
Companies Act, 1956 will not come into play. What is therefore
required to be tested is whether given the circumstances, the
Applicant has made out a case for the reliefs sought by it in the
interregnum. The answer to that question is clearly in the negative.
The Applicant cannot be allowed to play fast and loose with this
Court.
VIII. Even otherwise, public interest is at stake, and militates
against passing of any orders in this Application. The record clearly
shows that the project has been substantially delayed and a 5 th and
final extension upto 30th June 2022 has been granted for completion
of work. Respondent No.3 requires funds of approximately Rs. 9
crores per month to carry out the work. Respondent No.3's access
to funds has been time and again restricted as a result of which all
work has stopped. The State of Maharashtra has noted this in its
letter dated 12th January, 2022 by which imposition of penalty has
been threatened.
IX. The order dated 26th April 2021 passed by this Court does
not adjudicate upon the entitlement of the Applicant and the
Intervener to seek claim over 53% of the amounts deposited in the
Escrow Account. This is a complete misreading of the said Order. In
any event there is no order since all Interim Applications taken out
Kanchan P Dhuri 34 / 42 IAL-24923-2021.odt
in the said Company Petition are disposed of. Also, the Intervener is
not a party to any proceedings and has not filled any substantive
proceedings in the matter. Neither the Intervenor nor the Applicant
are doing any work for the project. Without doing any work, they
cannot be allowed to retain monies, which are generated out of and
used for completing the project work."
APPLICANT'S ADDITIONAL SUBMISSIONS
38. On 2nd February 2022, the Applicant filed additional Written
Submissions asserting it was necessary for the Applicant to deal with certain
submissions made by Respondent No.3 vide its Written Submissions. In its additional
Written Submissions, the Applicant stated as follows:
a Respondent No.3 has incorrectly projected that the Applicant for the first
time during oral submissions, claimed the 2019 Agreements are void in
terms of Section 536 of the Companies Act, 1956. This submission is
contained in the Applicant's reply to Interim Application No.5444 of 2020
which is part and parcel of its present pleadings.
b Respondent No.3 has not been able to provide any satisfactory response to
the fact that Respondent No.3's director is the first cousin of the
Applicant's director and having such close relations was aware of the fact
of the winding up petition. There is no denial of this fact.
c Respondent No.3 has failed to address that the Applicant's transaction
Kanchan P Dhuri 35 / 42 IAL-24923-2021.odt
with Mr. Chandrakant Sonawane and the 2019 Agreements were disputed
and challenged by the official liquidator vide OLR No.90 of 2020.
Moreover, Respondent No.3's application seeking validation of these
transactions was never decided.
d The Applicant's Board minutes book was in possession of the liquidator
and could not be forged as alleged by Respondent No.3.
e Respondent No.3 has incorrectly asserted that there was no adjudication
on merits vide Order dated 26th April, 2021.
f Respondent No.3 has incorrectly asserted that the Order dated 21 st
September 2020 whereby no amounts were allowed to be withdrawn from
the escrow account was passed to protect Respondent No.3. This is
incorrect and not borne out from the Order.
g Respondent No.3 has not dealt with the submission that the matter was
heard for substantial time on 18th November 2021 wherein this Court
continued the injunction operating against withdrawals from the escrow
account. The captioned interim application was served on 28 th October
2021.
h The Applicant has not taken contradictory stands and the Applicant's
conduct is bonafide.
Kanchan P Dhuri 36 / 42 IAL-24923-2021.odt
i Respondent Nos.1 and 2 have till date failed to file their written
submissions and Respondent No.1 (Bank) has incorrectly transferred sums
to Respondent No.3.
j The Order dated 17th January, 2022 is contrary to the interim protection
granted to the Applicant vide earlier Orders. The Applicant has
withdrawn amounts way beyond its share of 37% from the escrow account.
The Applicant's share ought to be safeguarded.
FINDINGS AND ANALYSIS
39. We have given our anxious consideration to the aforesaid
submissions. While we have extensively adverted to the submissions of all parties,
for completeness, several of the elaborate contentions made before us may not be
relevant. The Applicant is today, not in winding up. Hence, we are at this stage,
not required to examine the question of effect of the winding up Order on the 2019
Agreements. We are therefore not called upon to decide the arguments on the
invalidity of the April 2019 Agreements based on Section 536 of the Companies
Act, 1956. We are not required to examine the Applicant's contention that the
Applicant may, in the future, go into liquidation. Therefore, a large part of the
arguments made before us is purely academic and can be ignored.
Kanchan P Dhuri 37 / 42 IAL-24923-2021.odt
40. We now turn to the immediate and urgent question, which requires
our attention, namely should there be any embargo or restraint against Respondent
No.3 from operating the Bank Accounts referred to above, namely the Escrow
Account and the Cash Credit Account. The record before us clearly indicates the
following :-
a the Joint Venture was awarded the Lift Irrigation Project by the State of
Maharashtra;
b the original shareholding in the Joint Venture was 53% (Applicant); 37%
(Respondent No.3) and 10% (SPML);
c the original arrangement was that the Joint Venture had split the work
awarded to it, 50:50 between the Applicant and Respondent No.3;
d due to inability of the Applicant to perform its 50%, the parties executed the
2019 Agreements, in April 2019, whereunder Respondent No.3 took over
the responsibility of the 50% part which the Applicant was to complete;
e the factum of execution of the 2019 Agreements is not disputed, under the
2019 Agreements, the only entitlement of the Joint Venture is to 0.50% of
the gross bill. The Applicant has no direct entitlement anymore. It
effectively, in a manner of speaking walked away;
f since April 2019, it is Respondent No.3 which is executing the work on its
Kanchan P Dhuri 38 / 42 IAL-24923-2021.odt
own. It is spending its own money, including by borrowing and it is being
paid out of the amounts, which the State Government is releasing. This is,
in terms of the 2019 Agreements;
g the Joint Venture is already behind schedule in executing the work awarded
to it (being executed by Respondent No.3, in fact) and has been given a last
extension by the State Government till 30th June 2022;
h any continued restraint on the operation of either the Escrow Account
and/or the Cash Credit Account, will seriously prejudice the completion of
the Lift Irrigation Project and will be against public interest. It will also be
extremely inequitable to entertain the request of the Applicant (or Mr.
Sonawane) who sat by, while Respondent No.3 did all the work, to now seek
payment not be made to Respondent No.3. Any interference against the
Bank Account operation will cause serious prejudice;
i We are considering an Appeal against an order transferring the Company
Petition to the NCLT. The scope of this Appeal is limited. It cannot extend
to deciding inter party civil disputes on matters of contract. These are to be
decided by the appropriate forum. Had the full facts, now before us, been
brought to our notice, we would in the first instance, not passed the Order
dated 3rd November 2021.
Kanchan P Dhuri 39 / 42 IAL-24923-2021.odt
41. Prima facie if not ex facie the transactions of sub-contracting the
balance work do appear for overall benefit of Joint Venture and the Applicant. The
contention regarding the Applicant and Respondent No.3's directors being cousins
does not by itself establish malafides on the part of Respondent No.3 warranting
grant of reliefs sought.
42. Admittedly and as is borne out from the Applicant's pleadings and
Written Submissions, the Applicant has executed and benefited from the 2019
Agreements. No substantive proceedings challenging the 2019 Agreements, are
preferred and these agreements remain in force and applicable.
43. The argument of the Applicant under Section 536 of the Companies
Act is not tenable, since as on date, the Order dated 7 th August, 2019 directing
winding up of the Applicant is set aside and the Applicant is not in liquidation. We
cannot adjudicate upon a hypothetical situation of the Order dated 7 th August 2019
being reinstated and pass Orders affecting third parties on the basis of a situation,
which may or may not occur.
44. In so far as the Orders dated 21 st September 2020 and 26th April 2021
are concerned it is apparent from perusal thereof that the same were not passed on
merits. In any event as on date all Interim Applications in the Company Petition
stand disposed of, and therefore the said Orders do not survive.
Kanchan P Dhuri 40 / 42 IAL-24923-2021.odt
45. A reading of the Order dated 7th May 2021, makes it clear that the
directions contained in the aforesaid Order could not bind Respondent No.3.
46. What is extremely material is that Respondent No.3 has carried out
all work from the 14th R.A. bill onwards. This is an undisputed fact. The Applicant
and Mr. Sonawane cannot retain monies, generated out of executing the project
when they have admittedly not performed any work. In other words, it cannot be
that Respondent No.3 must continue to execute the work on its own and not be
entitled to retain monies generated therefrom.
47. We further note that Mr. Sonawane has merely placed on record a
Board Resolution dated 19th February 2019 to claim that 50% out of the Applicant's
53% share in the Joint Venture has been transferred to him. In our view, this itself,
will not entitle him to any relief qua the operation of Bank Accounts. Perusal of this
Board Resolution reveals it merely authorized the transfer and further authorized
entering into necessary papers/documents for finalizing the proposed deal. No
such agreements/papers/documents finalizing such transfer have been placed on
record. It is not even Mr. Sonawane's case that such documents were entered into.
In the absence thereof Mr. Sonawane's entitlement is not proved. We cannot also
shut our eyes to the fact that Mr. Sonawane who claims to have acquired a 50%
share in the Joint Venture in February 2019 did precious little since then. This
conduct casts serious doubts about his entitlement and bonafides both.
Kanchan P Dhuri 41 / 42 IAL-24923-2021.odt
48. The facts set out by Respondent No.3 leave no matter of doubt that
the Applicant has acted in an entirely dishonest and reprehensible manner
throughout various proceedings before this Court. The project is one of public
importance and has already been substantially delayed. Therefore public interest is
at stake. A 5th and final extension upto 30th June 2022 has been granted to complete
the project work. Respondent No.3 requires funds amounting to Rs. 9 crores per
month to carry out the project on an urgent and immediate basis. We therefore do
not see any merit in continuing the Order dated 3rd November 2021 and subsequent
Orders continuing the same. The Applicant has not been able to make out a case
for grant of reliefs as sought.
49. We make it clear that our observations and findings are for the
purposes of and/or in the context of, deciding whether any restraint against the
operation of Bank Accounts should be imposed. We are not required to adjudicate
and nor finally adjudicating the contractual disputes between the parties, in these
proceedings.
50. Accordingly, we pass the following Order:
i The Order dated 3rd November 2021 as continued vide subsequent Orders
stands vacated.
ii There is no embargo against Respondent No.3 operating, dealing with and
Kanchan P Dhuri 42 / 42 IAL-24923-2021.odt
making withdrawals from account no.00101119000740 (the Escrow
Account) in accordance with the Supplementary Joint Venture Deed, the
Irrevocable Power of Attorney and the Sub-contract Agreement all dated
8th April 2019 and the Escrow Agreement dated 10th April, 2019.
iii There is no embargo against Respondent No.3's operating, dealing with
and making withdrawals from its Cash Credit Account (00154700000119)
and the Current Account with Respondent No.1 (Bank).
iv The Interim Application is dismissed.
v No Order as to costs.
( MILIND N. JADHAV, J. ) ( S.J. KATHAWALLA, J. )
51. The Advocate for the Applicant has made a request that this Order be
stayed. Learned Advocate appearing for Respondent No.3 has objected to the same.
However, this Order shall not be implemented for a period of two weeks from the date
of uploading of this Order.
( MILIND N. JADHAV, J. ) ( S.J. KATHAWALLA, J. )
