Meja Urja Nigam Pvt Ltd vs Ratna Infrastructure Projects ...
2018 Latest Caselaw 4328 Del

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*    IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                       Reserved on: 24th JULY, 2018
                                     Pronounced on: 27th JULY, 2018
+    ARB. A. (COMM.) 5/2018, CCP(O) 35/2018

     MEJA URJA NIGAM PVT LTD
                                                         ..... Petitioner
                           Through    Mr.Jayant   Mehta,       Mr.Aman
                                      Varma,    Ms.Anshula       Grover,
                                      Mr.Parth            S.Chaudhari,
                                      Mr.Shukhankar and Ms.Suveni
                                      Bhagat, Advocates.

                           versus

     RATNA INFRASTRUCTURE PROJECTS PVT LTD.
                                              ..... Respondent
                  Through  Ms.Kiran Suri, Sr. Advocate with
                           Mr.Purvesh Buttan, Mr.Abhay
                           N.Das, Mr.Fahad Imtiaz and
                           Ms.Aishwarya Kumar, Advocates.
     CORAM:
     HON'BLE MR. JUSTICE YOGESH KHANNA

     YOGESH KHANNA, J.

1. The contract was awarded to the respondent on 18.05.2010. The period of contract was 36 months from the date of LOA and the value of the contract was `137,21,75,327/-. Since the respondent could complete only 63% of the work within the time period i.e. of the value of `85,17,29,655/- so on payment of `85.00 crores to the respondent, still the value of the work to the extent of `52,04,45,672/- was not complete and the work was to be awarded

to M/s. GDCL (LOA dated 04.03.2014) for completion of balance work for an amount of `107,93,23,478/-. Hence the petitioner claims the risk along with the damages in the claim petition to the extent of `224,66,16,460/-. The petitioner sought for a security for this amount but it was declined by the learned arbitrator vide the impugned orders and even a cost was imposed upon the appellant. It is the case of the petitioner the arbitral tribunal passed the order against the terms of the contract. The order passed on 10.11.2017 is as follows:

"12. It is true that the respondent has not filed the audited balance sheets and financial statements for four consecutive years and the averments contained in paragraphs 17 to 19 of the reply shows that the respondent has not complied With the relevant provisions of the Companies Act 2013 till date and this fact coupled with the statement of profit and loss (Annexure-A) filed by the applicant prima facie indicated that financial health of the respondent is not good, but that by itself cannot justify grant of an order under section 17(1) (ii) of the Act. That apart, the claimant-applicant has failed to show as to how irreparable injury will be caused to it and how the balance of convenience is in its favour. Section 164 of the Companies Act specifies disqualifications for appointment of Director and Section 167 speaks of vacation of office of Director. These consequences may follow where the relevant provisions relating to filing of the financial statement and audited balance sheets have been violated, but that violation cannot entitle the claimant to seek a direction against the claimant for deposit of huge amount of more than Rs.227.00 crore or clothe this tribunal with the power to direct the respondent to furnish the bank guarantee of that amount."

xxxxx "16. No doubt the record of the case prima facie show failure of the respondent to comply with the statutory requirements under the Companies Act 2013 and that may visit Its officers with some penalty, but that cannot ipso facto lead to an inference that the respondent's financial condition is precarious. In any case the poor financial health of the respondent cannot be a ground for issuing the direction for deposit of Rs.227,25,08,172j- or to direct it to furnish a bank guarantee for equivalent amount and that too without taking note of the fact that in the related matter, which was filed prior to the claim of the claimant-applicant, the respondent has prayed for a ward for a sum of Rs.118 crores and odd with interest. Until and unless this tribunal finally determines

the legality of the action taken by the c1aiman -. applicant to terminate the contract and entitlement of either party to receive the particular amount, no order for interim protection can be granted.

17. Before parting with the case, I would like to observe that during the course of arguments, the arbitral tribunal had directed the respondent to furnish a list of its moveable and immoveable assets. In compliance of that direction, the respondent sent a list of moveable and immoveable assets along with mail dated 10.11.2017 sent by its authorized signatory Shri T. Ravikrishna, who is also General Power of Attorney holder."

2. The respondent filed a list of 35 properties, both moveable and immoveable, belonging to the respondent in compliance of the orders. In fact the arbitral tribunal in para 18 and 19 held as under:

"18. A reading of the list of assets shows that the respondent has sufficient property which can be treated as security for payment of the amount, if any, awarded in favour of the claimant at the conclusion of the arbitral proceedings.

19. In the result the application is dismissed. However, it is made clear that if the claimant - applicant finds that the respondent is disposing of its assets without any tangible reason then it may file appropriate application before this tribunal."

3. Thereafter the petitioner moved an application on 01.12.2017 requesting the learned arbitrator to direct the respondent to comply with the orders dated 29.11.2017 and dated 10.11.2017 and to give further details of its assets. However the learned arbitral tribunal held the application is, primarily, of review and rejected it. Few paragraphs of the order dated 22.12.2017 are as under:

"6, In my view the ratio of the above noted two judgments is extremely helpful in deciding the present application. As held in Gangotri Enterprises Ltd. vs. Union of India & Ors., the sum claimed by the claimant-applicant Rs.227,25,08,172/- in lieu of the loss and damages suffered by it, which has been disputed by the respondent is yet to be determined. In other words the Arbitral Tribunal is yet to decide Whether or not the claimant is entitled to the sum claimed by it and till that determination is done, the amount claimed in the statement of claim cannot he treated as sum due from the respondent

Therefore it must be held that the claimant-applicant has failed to make out a strong prima fade case, which constitutes condition precedent for exercise of power under section 17(1)(ii)(c) of the Act.

10. I have considered the respective arguments. In the present application, it has neither been alleged nor it has been suggested that the respondent is disposing of or in any manner alienating moveable or immovable assets without any tangible reason. The claimant-applicant has not placed on record tangible or intangible evidence to show that the respondent is trying to fritter away its assets with a view to frustrate the award which may be passed by the tribunal In Arbitration Case No.1 of 2014. In the absence of any evidence about proposed alienation of assets by the respondent, the tribunal cannot pass an omnibus order of restraint against utilization of its assets by the respondent for the purpose of its business by assuming that the alienation of assets will necessarily with an oblique motive to defeat the rights of the claimant herein. The basic elements like prima-facie case, balance of convenience and irreparable injury are clearly against the grant of any injunction to impede the right of the respondent herein to deal with its property, moveable as well as immovable according to its choice and free will. If a restraint order like the one prayed for by the claimant-applicant is passed and final adjudication of the arbitration is against the claimant/applicant then it will almost be Impossible to compensate the respondent for the loss, if any, which it may suffer by operation of the injunction I restraint order. On the other hand, the tribunal can, if it feels convinced with the tenability of the applicant's claim, pass appropriate order I direction, which can be executed by taking recourse to available legal mechanism.

11. I am in agreement with Mrs. Kiran Suri that this tribunal does not have the power to review an order made under Section 17 of the Act and if either party feels that the order made under Section 17 (1) has not been complied with then it can take recourse to the options available under Section 17 (2). Clause (e) of Section 17 (1) on which reliance has been placed by Shri Jayant Mehta is not available for direct or indirect reconsideration of an order made under Section 17 (1) of the Act."

`1.00Lac cost was also imposed upon the respondent.

4. The learned counsel for the appellant submitted the orders dated 10.11.2017 and dated 22.12.2017 be set aside and the respondent be directed to deposit the claim amount of Rs.224 crores approx. and/or furnish the bank guarantee for the equivalent

amount. The amount so claimed, per-se is not admitted by the respondent, hence direction qua deposit of such amount or bank guarantee thereof was rightly declined. However on list of the assets to be filed by the respondent, this Court passed the following orders :

"Order dated 12.03.2018: The learned counsel for the respondent submits that he has oral instructions to say that the respondent company shall file the affidavit of its immovable and movable assets along with encumbrances, if any, in respect of the assets of the respondent company; but they are waiting for written instructions.

Order dated 20.03.2018: The affidavit as was contemplated in the order dated 12.03.2018 has not been filed by the respondent. Be filed within two weeks from today with an advance copy thereof to the learned counsel for the petitioner. Order dated 22.05.2018: This is an appeal under Section 37 of the Arbitration and Conciliation Act against orders dated 10.11.2017 and 22.12.2017 passed by the sole arbitrator. During the course of hearing learned counsel for the petitioner says he shall be satisfied if the details of the assets of both moveable and immoveable properties belonging to the respondent be filed in the form of an affidavit by the respondent. It is submitted the learned arbitrator though in its award dated 10.11.2017 in para 17 has noted a list of moveable and immoveable assets, signed by the authorised signatory of the respondent giving details of 35 assets along with its values but details of such assets were not mentioned and it was for this reason the petitioner moved yet another application on which an order dated 22.12.2017 was passed by the learned arbitrator saying he has no power to review its order dated 10.11.2017. The learned counsel for the petitioner argued what he desired was only details of such assets, a list of which was already on record. At this stage, learned counsel for the respondent says the respondent shall file an affidavit giving complete details of assets along with encumbrances, if any. In the circumstances, the respondent shall file an affidavit in terms of above within a week from today with an advance copy to the learned counsel for the petitioner. The filing of the affidavit shall satisfy, at this stage, the appeal filed by the petitioner."

5. Admittedly the respondent has filed an affidavit dated 13.07.2018 with list of properties. The word "encumbered" is written against each asset in the said list but the respondent has not disclosed either the details of moveable assets as also the extent of

charge created on such assets. Similarly discrepancy exists qua immoveable properties. A bare perusal of the Company Master Data of respondent taken from the website of Ministry of Corporate Affairs, Govt. of India viz. Annexure R1 to the reply to petition reveals all the moveable assets are charged to the extent of sums shown against each of such assets. Though the value of charge shown against each assets totals to be Rs.567 crores but in the affidavit dated 13.07.2018 of the respondent the value of moveable assets is shown to be only Rs.448 crores approximately. Similarly the affidavit though says the immovable assets are worth Rs.347 crores but all are shown charged without noting the extent of charge. This assume important in the context of financial statements and audited balance sheets being not filed before the Registrar of Companies by the respondent for the last many years and hence if the respondent has agreed to file an affidavit to put quietus to the litigation then it should not be a mere formality. Rather it must contain full details of the moveable assets viz. registration numbers of vehicles etc; its present value(s), its location and the extent of charges created on it with details of such charges. Similarly the affidavit should also disclose the extent of charge upon each of the immoveable properties so stated in the affidavit dated 13.07.2018.

6. Thus the applicant's appeal is disposed of with a direction to the respondent to file the list with details as stated above within two weeks before the learned arbitrator. The appeal stands

disposed of in terms of above while waiving/setting aside the order of cost of Rs.1 Lac imposed upon the petitioner. CCP(O) 35/2018 is also disposed of.

7. No order as to further costs.

YOGESH KHANNA, J JULY 27, 2018 DU