Gtl Limited & Others vs Ifci Limited & Anr
2011 Latest Caselaw 4516 Del

*           THE HIGH COURT OF DELHI AT NEW DELHI
%                                  Judgment decided on: 15.09.2011

                         CS(OS) No.2278/2011

GTL LIMITED & OTHERS                                    ..... Plaintiffs
                Through           Mr. Vikas Singh, Sr. Adv. with
                                  Mr. Farid Karachiwala, Ms. Fariyal
                                  Tahseen, Mr. Nikhil Rohatgi &
                                  Mr. Akshay Ringe, Advs.

                                  versus


IFCI LIMITED & ANR                                      ..... Defendants
                 Through          Mr. Maninder Singh, Sr. Adv. with
                                  Mr. Pawanjit S. Bindra & Mr. Vishrov
                                  Mukherjee, Advs. for defendant No.1.

CORAM:-
HON'BLE MR JUSTICE MANMOHAN SINGH

1.

Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in Digest?

MANMOHAN SINGH, J (Oral)

CS(OS) No.2278/2011, I.A. Nos.14802/2011 (u/o XXXIX, R.1&2 CPC), 14803/2011 (u/o II, R.2 CPC), 14804/2011 (exemption) & 14805/2011 (exemption) and Caveat No.846/2011

1. Urgent matter is received at 4.00 p.m.

2. The three plaintiffs, namely, GTL Limited, Chennai Network Infrastructure Limited and GTL Infrastructure Limited, have filed the present suit for declaration and permanent injunction against the defendants, namely, IFCI Limited and IFCI Financial Services Limited,

seeking the following prayers:-

"a) This Hon'ble Court be pleased to declare that the said Notice dated 8th September, 2011 sent by defendant No.1 to plaintiff No.1 and 2 being contrary to and in violation of the provisions specified in Annex 4 of the CDR Master Circulate dated 1st July, 2011 issued by the Reserve Bank of India, Inter-Creditor Agreement, the Debtor Creditor Agreement and the same be declared as illegal, null and void;

b) This Hon'ble Court be pleased to pass a decree for permanent injunction against defendant No.1 restraining it from and selling the Pledged Shares during the operation of standstill as per the provisions of the CDR Master Circular dated 1st July, 2011 read with the Inter-Creditor Agreement and the Debtor Creditor Agreement;

c) The suit be decreed with exemplary costs; and

d) such further and other relief as the circumstances of the case may require as this Hon'ble Court may deem fit and proper."

3. Along with the suit, the plaintiffs have also filed the interim application under Order XXXIX, Rules 1 & 2 read with Section 151 CPC being I.A. No.14802/2011, seeking immediate interim order to stay the implementation, operation and effect of notice dated 08.09.2011 and also from selling, transferring, alienating, parting with any of the shares pledged with them by the plaintiff No.1's company.

4. It is pertinent to mention here that prior to the above- mentioned suit, plaintiff No.1 filed the suit for declaration and permanent injunction being CS(OS) No.1771/2011 against defendants No.1 & 2 herein as well as plaintiffs No.2 & 3 impleaded here who were made parties as defendants No.3 & 4 in that suit as proforma defendants. In the said suit, in one of the prayers, the said plaintiff No.1 sought the relief

(h) that "pending the final decision of the Empowerment Group in relation to the proposed Corporate Debt Restructuring Scheme, the defendants be restrained by an order and injunction of this Hon'ble Court from, in any manner, directly or indirectly, dealing with, disposing of, selling, offering for sale, appropriating or causing to be appropriated, causing to be offered for sale, creating or causing to be created any third party rights of whatsoever nature in the suit shares and/or the balance pledged shares or any part thereof." In the earlier suit, the prayer was also sought against defendants No.1 & 2, their agents, servants or any other person claiming through or under them to restrain perpetually by an order and injunction, in any manner, directly or indirectly, from dealing with, disposing of, selling, offering for sale, causing to be offered for sale of the suit shares.

5. One of the arguments in the earlier suit was that the present plaintiffs were in advance stage of referring the matter for Corporate Debt Restructuring with the ultimate objective of securing the interests of their shareholders and lenders, including defendant No.1 and there was a meeting of the Board of Directors on 21.07.2011 for referring the matter to the CDR Cell. The Empowered Group of CDR was likely to hear the matter and give its approval for admission to CDR before the end of that month. It was argued that once the CDR process is commenced, as per the Regulation of Reserve Bank of India and the Debtor Creditor Agreement, there would be a standstill period of 90 days during which time the present plaintiffs and the lending banks are barred from taking/continuing any legal action. It was alleged that defendant No.1 was aware that the said Scheme is at an advance stage to refer the matter to the CDR.

6. As defendants No.1 & 2 got the confidential information, they have proceeded to sell/appropriate the suit shares despite of the fact that

there was no breach and in fact, in breach of Section 176 of the Indian Contract Act, 1872. The comprehensive detail of the said Scheme was mentioned in the earlier suit in para No.2(n) of the plaint which reads as under:-

"2(n) Given the adverse impact that the sudden drop in share price of plaintiff No.1 and defendant Nos.3 and 4, and the various factors (like the 2G scam, high rate of interest, high rate of fuel, slow rollout of new licenses and delay in 3G/BWA rollouts rate) affecting the telecom industry, the financial position of the plaintiff No.1 and defendant Nos.3 and 4 were severely affected. The plaintiff No.1 and defendant Nos.3 and 4 are now considering restructuring its debts. The plaintiff No.1 and defendant Nos.3 and 4 are in the advance stage of referring the matter for Corporate Debt Restructuring with the ultimate objective of securing the interests of its shareholders and its lenders, including defendant No.1. The defendant No.4 has convened a meeting of the board of directors on July 21, 2011 for referring the matter to the CDR Cell. The Empowered Group of CDR is likely to hear the matter and give its approval for admission to CDR before the end of this month. Once the CDR process is commenced, as per the Regulation of Reserve Bank of India and the Debtor Creditor Agreement, there would be a standstill period of 90 days during which time both the plaintiff No.1 and defendant Nos.3 and 4 and the lending banks are barred from taking/continuing any legal action. On account of this defendant No.1, knowing that defendant No.4 is at the advance stage of referring to CDR, the defendants No.1 and 2 have utilised this confidential information to further their own oblique motives and have proceeded to sell/appropriate the suit shares despite the fact that there was no breach and in fact, in breach of Section 176 of the Contract Act. No flow of consideration has even been disclosed. The entire transaction is dhrouded in mystery and in fact is clandestine. It amounts to conversion. In fact, a copy of the restructuring proposal was forwarded by defendant No.4 to defendant No.1 under the cover of its letter dated 16.07.2011. As such, the defendants No.1 and 2 were made aware of the restructuring exercise proposed to be undertaken by

defendants No.3 and 4 for protecting the interest of the shareholders and the lenders, including defendant No.1. The plaintiff No.1 and defendant Nos.3 and 4 crave leave to refer to and reply upon the said letter when produced. The plaintiff craves leave to file an appropriate complaint before the appropriate forum for rigging the share prices."

7. After having heard all the parties on the interim application in suit, this Court while passing the order dated 29.08.2011 has come to the conclusion that the present plaintiff No.1, namely, GTL Limited was unable to prove any prima facie case in its favour, as defendant No.1 is a valid pledgee of more than 27 crores shares which are still open to redeem in view of the order passed. In para-80 (i) of the said order, it was observed by this Court that in case defendant No.1 exercises the right to sale, it shall do so as per the law and to the extent of the debt secured and the amount due. While disposing of the injunction application filed by the plaintiff in the earlier suit, the Court in sub-para

(b) of para-82 passed the following orders:-

"b) However, the defendant No.1, now being the pledgee, is therefore, entitled to sell and dispose of the same after issuance of valid notice required under Section 176 of the Act and the plaintiff or the defendant No.3 would be entitled to redeem the same. In case they fail to redeem the same within the time granted by the defendant No.1, it would be entitled to sell/transfer or assign the same in the manner provided in two agreements and after adjustment of its debt, the remaining amount shall be returned to the co- owners."

8. In fact, the plaintiffs during the course of the arguments comprehensively argued the point of CDR Scheme when the interim application was heard. In view of the order passed on 29.08.2011 in I.A. No.11586/2011 in the earlier suit bearing CS(OS) No.1771/2011, defendant No.1 herein in terms thereof issued a notice dated 08.09.2011

showing its intention to sell the invoked shares after giving the reasonable time under the compliance of Section 176 of the Indian Contract Act, 1872. It appears that the plaintiffs have not redeemed the said shares under Sections 176 & 177 of the Indian Contract Act, 1872 after the receipt of notice, rather they have filed the fresh suit seeking the stay of implementation, operation and effect of notice dated 08.09.2011.

9. Mr. Vikas Singh, learned Senior counsel appearing on behalf of the plaintiffs, has argued that defendant No.1 has executed an Inter Creditor Agreement with the CDR cell and currently defendant No.1 is named as participating financial institution and bank in schedule I to the Inter Creditor Agreement that is executed by the participating banks and financial institutions, including defendant No.1

10. The Reserve Bank of India Circular dated 03.06.2009 provides that the objective of the CDR Framework is to ensure timely and transparent mechanism for the restricting of the corporate debts of viable entities facing problems, outside the purview of the BIFR, DRT and other legal proceedings, for the benefit of all concerned. The framework will at preserving viable corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and co-ordinates programme.

11. He has referred to 5.3.1 to 5.3.3 as well as the Section 8 (Standstill Provision) of the said Scheme which clearly indicate that defendant No.1, who is also a lender, cannot take any proceeding against the eligible borrower, or against individual extending personal guarantee in respect of the financial assistance provided by the lenders to the eligible borrower and it also includes enforcement of securities created in favour of any lender by the eligible borrower.

12. He submits that from the above, it is evident that the

Corporate Debt Restructuring Scheme is a voluntary mechanism by which once the banks and financial execute an Inter Creditor Agreement agree to be bound by the terms of the same and be bound by the relevant RBI Circulars and Guidelines.

His contention is that in view thereof, the plaintiffs are entitled to ex parte ad-interim order.

13. Mr. Maninder Singh, learned Senior counsel appearing on behalf of the defendants has argued that the filing of present suit is an abuse of process of law. His submission is that the suit is not maintainable, as all the issues raised by the plaintiffs in the present suit were already raised in the earlier suit and were also considered by the Court and after considering the same, no interim order was issued. He argues that the present suit is barred under the principle of Section 11 as well as barred under the provisions of Order II, Rule 2 CPC and even otherwise on merit, the plaintiffs are not entitled for any relief claimed in the interim application.

14. In support of his submission, the learned Senior counsel has also referred Explanation-IV of Section 11 CPC which reads as under:-

"Explanation IV. - Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit."

15. As far as the application of the said provision is concerned, the learned Senior counsel for defendant No.1 has referred the decision of the Supreme Court in the case of Satyadhyan Ghosal and others vs. Smt. Deorajin Debi and another, reported in AIR 1960 Supreme Court 941. The relevant paras-7 & 8 of the said judgment reads as under:-

"(7) The principle of res judicata is based on the need of giving a finality to judicial decisions. What it says is that once a res is judicata, it shall not be adjudged again. Primarily it applies as between past litigation and future litigation. When a matter - whether on a question of fact or on a question of law - has been decided between two parties in one suit or proceeding and the decision is final, either because no appeal was taken to a higher court or because the appeal was dismissed, or no appeal lies, neither party will be allowed in a future suit or proceeding between the same parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in s. 11 of the Code of Civil Procedure; but even where s. 11 does not apply, the principle of res judicata has been applied by courts for the purpose of achieving finality in litigation. The result of this is that the original court as well as any higher court must in any future litigation proceed on the basis that the previous decision was correct.

(8) The principle of res judicata applies also as between two stages in the same litigation to this extent that a court, whether the trial court or a higher court having at an earlier stage decided a matter in one way will not allow the parties to re-agitate the matter again at a subsequent stage of the same proceedings. Does this however mean that because at an earlier stage of the litigation a court has decided an interlocutory matter in one way and no appeal has been taken therefrom or no appeal did lie, a higher court cannot at a later stage of the same litigation consider the matter again?"

16. Mr. Maninder Singh also made his submission that the suit is also barred under Order II, Rule 2 CPC. His submission is that even any liberty is granted by the Court to file the fresh suit under the said circumstances and in case the suit is barred by the principles of res judicata, no relief could be issued in favour of the party where the issue in question was already, directly or substantially, decided by the Court. He refers the judgment of the Supreme Court in the case of Dadu Dayalu Mahasabha, Jaipur (Trust) vs. Mahant Ram Niwas and another,

reported in (2008) 11 Supreme Court Cases 753.

17. He submits that the parties had executed two agreements in question after the said Scheme. He has also referred Clause 13.1 (o) of the Facility Agreement dated 12.07.2010 arrived between the parties which is subsequent to the said Scheme. The said clause reads as under:-

"13.1(o) The Borrower and/or the Company commences or takes steps to initiate a voluntary winding up or restructuring process under any applicable bankruptcy, insolvency, winding up or other similar law nor or hereafter in effect, or consents to the entry of an order for relief in an involuntary proceeding under any such law, or consents to the appointment or taking possession by a receiver, liquidator, assignee (or similar official) for any part of its property."

18. He submits that at the time of execution of two agreements, it was clear understanding between the parties that despite of said Scheme in case of any default, the entire amount of loan was to be paid/adjusted by various means without any further notice. Therefore, clause (o) was embodied in the agreement with the consent of the parties, otherwise the defendant No.1 was ready to give the loan to plaintiff No.2 without the said clause.

19. On enquiry, the learned Senior counsel states that his clients are not prepared to protect the amount by way of Bank Security or to deposit the same in Court which is due and they are also not ready to redeem the shares.

20. After having considered the rival submissions of the learned counsels for the parties for some time, prima facie, I feel that it is doubtful as to whether the present suit is maintainable. I am also not satisfied on merit to pass any ex-parte interim orders as prayed by the plaintiffs. In fact, no case is made out for the same. Thus, the ad-interim injunction is, therefore, declined. The maintainability of the suit would

be considered as soon as the defendants would file the written statement.

21. Let the written statement be filed within three weeks. Reply, if any, to the interim application be also filed within the same period.

22. List the matter on 10.10.2011.

23. Dasti, under the signatures of the Court Master.

MANMOHAN SINGH, J SEPTEMBER 15, 2011 ka