Ms. Pooja Gambhir & Ors. vs Mr. Parveen Jain & Ors.
2009 Latest Caselaw 2134 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                    Date of Reserve: May 06, 2009
                                                       Date of Order: May 19, 2009

+ OMP 74/2009
%                                                              19.05.2009
    Ms. Pooja Gambhir & Ors.                            ...Petitioners
    Through : Mr. Harish Malhotra, Sr. Adv. with Mr. Vipul Gupta, Advocate

      Versus

      Mr. Parveen Jain & Ors.                                   ...Respondents
      Through: Mr. Rajesh Rattan, Advocate


      JUSTICE SHIV NARAYAN DHINGRA

1.    Whether reporters of local papers may be allowed to see the judgment?

2.    To be referred to the reporter or not?

3.    Whether judgment should be reported in Digest?


      JUDGMENT

1. By this application/petition under Section 9 of the Arbitration &

Conciliation Act, 1996 (for short, "the Act") the petitioner has made a prayer

that the Court should restrain the respondents or their representatives from

disposing of the properties bearing No.B-317, Saraswati Vihar, Pitam Pura,

Delhi, D-8 & Swarn Park, Mundka, each measuring 1,000 sq. yds and

respondents be also restrained from selling movable or immovable assets of

the Company T.I. Steels Pvt. Ltd.

2. The contention of the petitioners is that the petitioners incorporated a

company under the name of T.I. Steel Pvt. Ltd. This company was running an

industrial unit at Panta Sahib and certain term loan and working capital were

borrowed by the petitioner from Vijaya Bank, Barakhamba Road by creating

equitable mortgage of their properties. An MoU was entered into between the

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 1 Of 7 petitioner and respondent whereby the respondent agreed to carry on the

business of the company M/s T.I. Steel Pvt. Ltd. and the petitioners were to

remain sleeping partners and parties were to fulfill certain terms and

conditions in accordance with MoU dated 6th September 2008 executed

between the parties.

3. As per the terms and conditions, the petitioners were not to be entitled

to profit or loss of the company with effect from 1st April 2007 and all

liabilities and profits after 1st April 2007 were to be that of the respondents.

The existing bank loan taken by the company was also to be the

responsibility of the respondent. The respondent was to make arrangement to

get the properties of the petitioner lying as security released from the bank

and to give fresh security of their own to the bank. However, the petitioners

were to be responsible for all kinds of liabilities of the company up to 31 st

March 2007 including excise, income tax, custom, VAT, service tax, electricity

and water charges, labour creditors and other liabilities relating to

government or non governmental entities. All these liabilities were mentioned

in the balance sheet. It was also agreed that even if some liabilities were not

mentioned in the balance sheet and which may arise in future for the period

up to 31st March 2007, except loan of Vijaya Bank to the tune of Rs.22.5

crore, the same shall be the liability of the petitioner. The petitioner was also

to get credit of the payments for the period prior to 31st March 2007. Thus in

nutshell, the respondents were to adjust the amount received from the

debtors of the period up to 31st March 2007 and pay to the creditors out of

this amount and shortfall if any was payable by the petitioners. Apart from

that, the respondents had also agreed for payment of monthly compensation

to the petitioners in following terms:

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 2 Of 7 "i) A sum of Rs.12 lakhs each in the month of August, 2008

and September, 2008;

              ii)     A sum of Rs.17 lakhs in the month of October, 2008;

              iii)    A sum of Rs.22 lakhs in the month of November, 2008 and

thereafter on monthly basis till the concast process of

manufacturing is commenced;

iv) The amount of Rs.22 lac p.m. as stated in para 7(iii) above

will be enhanced to Rs.30 lakhs per month immediately

following the month in which the concast process is

commenced."

4. It is submitted by counsel for the petitioners under MoU that the

respondents were to buy all shares of M/s T.I. Steel not exceeding 65 lac

equity shares belonging to the petitioners at a pre-determined rate of Rs.15

per share. Any excess shareholding over and above 65 lac was to be

purchased by the respondents after settlement of amount between both the

parties. It was also agreed that shares mortgaged by the respondents to the

petitioners shall be returned by the petitioners to the respondents as soon as

the accounts were settled. The petitioners namely Ms. Pooja Gambhir, Ms.

Stuti Gambhir, Mr. Naresh Gambir all were to resign from the directorship of

the company immediately on release of the properties by the bank and after

receiving payment of shares and withdrawal of the personal guarantee.

However, during interregnum the respondents were to enjoy the control over

the management of the company and the petitioners were to cooperate with

the respondents. It was also agreed that the respondents shall not incur

further loan from the bank on the guarantees furnished by the petitioners.

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 3 Of 7

5. It is brought on record by the petitioners that the respondents asked

the bank for enhancement of loan limits without substitution of collateral

securities and the petitioners learnt about this when the petitioners received

letter from the bank about seeking enhancement of credit facilities from

Rs.22.5 crore to Rs.26.9 crore. The petitioners then wrote to the bank that the

loan limit cannot be enhanced in terms of the MoU between the parties so

long as fresh securities were not furnished by the respondents. The

petitioners also alleged that the respondent had failed to fulfill their

obligations under the MoU and had not paid periodical amounts as agreed

between the parties. In order to secure the payments of the petitioners,

petitioners wanted an injunction to be issued against the respondents'

properties.

6. The respondents in their reply stated that the arbitration agreement

between the parties provided that all the disputes between the parties were

to be decided by the named arbitrator. The petitioners could not have raised

the dispute before the Court and the disputes between the parties be referred

to the named arbitrator. However, allegation of the petitioners that the

respondent had not fulfilled its obligations under the MoU were denied rather

counter allegations were made that the petitioners had not disclosed true

facts to the respondents at the time of entering into MoU and many liabilities

of the company for the period prior to 31st March 2007 were not disclosed and

the same were much more than the recoveries to be made by the company.

The balance sheet and profit and loss account of the company did not reflect

true picture and many facts were concealed. The respondents started

receiving claims against the company in bulk. The respondents placed on

record a letter written by HP State Electricity Board (HSEB) asking for deposit

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 4 Of 7 of Rs.212.75 lac in view of the earlier letter of HP State Electricity dated 25th

April 2006. He referred to another letter of HP State Electricity Board

enhancing its liability to Rs.436.08 lac. He also stated that the company had

received a notice from the creditors for payment. One notice was on behalf of

Jolly Industries whereby a payment of Rs.3,37,633/- was demanded. Another

notice was on behalf of Skipper Electricals for payment of Rs.13, 31,327/-,

because of dishonor of the two cheques dated 1st December 2006 and 4th

January 2007. The third letter was from Hotel Grand raising a demand of

Rs.24,873/- and one letter was from M/s Aggarwal Traders asking for

Rs.2,51,204/-, another was from Jaipur Transport Company asking for balance

payment of Rs.40,860/- and another from Rajasthan Road Pvt. Ltd. asking for

payment of Rs.2,05,000/-. These demands which started flowing to the

company were much in excess of the debts as reflected in the balance sheet,

with the result that the company could not pay the agreed amount to the

petitioners since the amount as agreed in MoU was on the understanding that

the balance sheet filed by the petitioners with the Registrar of Companies

reflected true picture.

7. The counsel for the petitioners argued that the documents and letters

received by the respondents were only in respect of those creditors who

figure in the balance sheet of company. Even if all these creditors are taken

into account, the amount received by the respondents from the debtors was

in excess of the credits and, therefore, no amount was payable by petitioners.

Regarding HSEB demand, it is submitted that vide letter dated 6th April 2009,

HSEB has withdrawn the demand raised and, therefore, no such demand was

there from HSEB. The copy of letter dated 6th April 2009 has been placed on

record.

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 5 Of 7

8. I have perused the letter of HSEB dated 6th April 2009. This letter shows

that HSEB has not given up the earlier demands but has only postponed the

demand. The letter clearly states that fresh demand was under preparation

and shall be intimated to the respondent company.

9. The MoU in this case was entered into in September 2008. The

respondent thereafter had started running the company and the petitioners

and respondents are at the initial stage of the MoU. Irrespective of letters of

demand received, it is not difficult to assess as to what amount was due and

payable by respondents to the petitioners after taking into account the

demands raised upon the company. The properties of the petitioners are

mortgaged with the bank for granting loan to the company and the

respondents are running and managing this company, I consider that the

respondents should have got the security of the petitioners substituted by

providing security from their own resources with the bank, in view of their

taking over the loan liability and giving an assurance in MoU that they shall

substitute the security. Petitioners have a prima facie case and balance of

convenience is also lying in their favour.

10. So long as the respondents do not substitute the security furnished by

the petitioners to Vijaya Bank and settle the accounts of petitioners,

respondents are restrained from selling or disposing of their properties

bearing No.B-317, Saraswati Vihar, Pitam Pura, Delhi and immovable

properties situated at D-8 & Swarn Park, Mundka, each measuring 1,000 sq.

yds. Respondents are also restrained from selling machinery, equipments,

plant and immovable assets of the Company T.I. Steels Pvt. Ltd.

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 6 Of 7

11. In my view, it would be appropriate that the parties approach the

named arbitrator immediately to get their disputes resolved. Although this

petition was made by the petitioners in February 2009 but no steps seems to

be taken by the petitioners of invoking arbitration clause. The petitioners are

directed to invoke the arbitration clause and refer the matter to the Arbitrator

within 15 days from today. In case the arbitration clause is not invoked within

15 days from today, this injunction granted against the respondents shall

come to an end.

12. In above terms, the petition stands disposed of.

May 19, 2009                                          SHIV NARAYAN DHINGRA J.
rd

OMP-74/2009 Pooja Gambhir & Ors. v. Mr. Praveen Jain & Ors. Page 7 Of 7