Delhi High Court
Hindustan Engineering And ... vs Spicejet Limited & Ors. on 29 March, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: March 15, 2022
Pronounced on: March 29, 2022
+ CO.APP. 2/2018
HINDUSTAN ENGINEERING AND INDUSTRIES LIMITED
(PRIOR TO MERGER KNOWN AS MALANPUR STEEL
LIMITED) ...... Appellant
Through: Mr. Jayant Mehta, Senior Advocate
with Mr. Shantanu Ghosh &
Mr. Raghuvender Ghose, Advocates
Versus
SPICEJET LIMITED & ORS. ..... Respondents
Through: Mr. Atul Sharma, Mr. Abhinav
Sharma & Mr. Ashutosh Ranjan,
Advocates for respondent No.1
Mr. Arvind Nigam, Senior Advocate
with Ms. Manmeet Arora, Mr. Tarang
Gupta, Mr. Keshav Sehgal & Ms.S.
Kalra, Advocates for respondents
No.2 to 4
CORAM:
HON'BLE MR. JUSTICE SURESH KUMAR KAIT
HON'BLE MR. JUSTICE SUDHIR KUMAR JAIN
ORDER
CM APPLN. 5824/2022 (Under Rule 9 of Companies (Court) Rules,
1959)
1. By this application, applicant/respondent No. 2 to 4 are seeking
permission to sell 12,45,300 shares of respondent No.1 at the prevailing
market rate, which are in the custody of respondent No. 2 in dematerialized
form.
2. Learned senior counsel for applicants/ respondents No.2 to 4
submitted that vide order dated 05.03.2018, this Court had permitted sale of
52,92,500 shares, inclusive of 12,45,300 shares, at the rate of Rs.118.25 per
share and to deposit the sale proceeds in the "no lien account", which was to
be further converted into Fixed Deposit receipts and deposited with the
Registrar General of this Court. However, since 12,45,300 shares were
dematerialized by respondent No.1 belatedly only on 24.01.2020 and
thereafter, in the light of Covid-19 pandemic, the share price of respondent
No.1 drastically fell, so the sale of these shares in terms of undertaking
furnished before the Court on 05.03.2018 at the reduced price is onerous,
and, therefore, sale could not be affected.
3. It was further submitted by learned senior counsel for the applicants
that respondent No.1-company is under liquidation and appeal preferred by
respondent No.1 is pending adjudication before the Hon'ble Supreme Court.
Learned senior counsel strenuously submitted that the share price of
respondent No.1 is volatile and is expected to fell even more drastically and
if winding up of respondent No.1 is permitted by the Hon'ble Supreme
Court, the asset value of the shares would be negligible. Thus, permission of
the Court is sought to sell 12,45,300 shares at the prevailing market value;
sale proceeds thereof shall be deposited in a "no lien account" and converted
into an FDR and deposited with the Court. Lastly, it was submitted that if
the applicants are not permitted to sell these shares at the prevailing market
rate, then respondent No.2 shall suffer a huge loss.
4. On the other hand, learned senior counsel appearing on behalf of
appellant submitted that by virtue of this application, applicants/ respondents
No.2 to 4 are seeking review of order dated 05.03.2018, because an appeal
against thereof is highly barred by time. It was submitted that this Court
after detailed hearing and consideration of submissions advanced by both
the sides, had passed the order dated 05.03.2018 while keeping in view the
volatility aspect of share pricing and directed sale of 62,92,500 shares,
inclusive of 12,45,300 shares and to deposit the sale proceeds with the
Registrar General of this Court in the form of FDR.
5. Learned senior counsel for appellant drew attention of this Court to
the fact that before passing of order dated 05.03.2018 by this Court,
respondents No.2 to 4 under three separate Share Purchase agreements dated
20.01.2018 had sold 52,93,500 shares @ Rs.118.25 per share for a total sale
consideration of Rs.52,59,56,375/-, which fact has also been noted in Para-2
of the order dated 05.03.2018. Next submitted that vide order dated
05.03.2018, respondent No.1 was directed de-materialize 40,48,200 and
12,45,300 shares, subject to the respondent Nos.2 to 4 furnishing an
indemnity bond indemnifying respondent No.1 against any claim, damage or
loss on account of dematerialization and furnishing an undertaking by
respondents No.2 to 4 that the entire sale proceeds under the agreement
dated 20.01.2018 would be deposited in a "no lien account", which shall be
converted into fixed deposit receipts in the name of respondents No.2 to 4
and deposited with the Registrar General of this Court. Learned senior
counsel next submitted that towards sale proceeds of 40,48,200 shares @
Rs. 118.25 each share, on or about 16-05-2018 respondents No.2 to 4
deposited amount of Rs. 47,86,99,650/- in the form of fixed deposit receipts
with the Registrar General of this Court but did not deposit the total sale
proceed of Rs.62,59,56,375/- towards sale of 52,93,500 shares and thereby,
there is shortfall of Rs.14,72,56,725 towards the sale consideration of
12,45,300 shares.
6. Learned senior counsel for appellant submitted that under the share
purchase agreement the sale proceeds have already been received by the
respondents No. 2 to 4 on 28.01.2018, which fact was suppressed by
respondents No.2 to 4 when order dated 05.03.2018 was passed by this
Court. It was further submitted that these respondents have deliberately
delayed dematerialization of the said shares in terms of order dated
05.03.2018 and did not complete the process even despite extension of time
vide order dated 09.12.2019. It was asserted by learned senior counsel that
applicants/ respondents No. 2 to 4 cannot be permitted to sell the 12,45,300
shares at the prevailing market rate and instead, they be directed to deposit
the sale proceeds of the said shares @118.25 as directed by this Court vide
order dated 05.03.2018.
7. In rebuttal, learned senior counsel for applicants/ respondents No.2 to
4 submitted that sale proceeds of 12,45,300 shares @ Rs.118.25 has not
been received and encashed by these applicants and since respondent
No.1/company is under liquidation and its share price has drastically fallen,
these shares be permitted to be sold at the current market value. In addition,
it was submitted appellant be directed to furnish security to restitute
respondent No. 2 at the prevailing share price of Rs. 61.40/- and compensate
it for the loss that would be caused on account of reduction of the share price
of respondent No. 1.
8. Upon hearing learned senior counsel representing both the sides and
perusal of material on record, this Court finds that when the order dated
05.03.2018 was passed, respondents No.2 to 4 had brought it to the notice of
this Court that a share purchase agreement dated 20.01.2018 for sale of
52,92,500 shares @ Rs.118.25 was entered with Motto Investment Private
Limited, though price of the share on the said date was 121.75. It was also
submitted by applicants/ respondents No.2 to 4 that they were willing and
ready to deposit the entire sale proceeds into a "no lien account". Thereafter,
an affidavit dated 13.03.2018 was filed by the Working Director of
respondents No. 2 to 4 to this effect and in pursuance thereto, amount of
Rs.47,86,99,650/- in the form of fixed deposit receipts was deposited with
this Court. Meaning thereby, out of total 52,92,500 shares, 40,48,200 shares
were sold @ 118.25 each and the sale proceeds were deposited with the
Court. Needless to say that the said deposit is subject to outcome of the
present appeal. The controversy raised in the present application pertains to
remaining 12,45,300 shares.
9. According to applicants/ respondents No.2 to 4, the remaining
12,45,300 shares could not be sold pursuant to order dated 05.03.2018, as
these were belatedly dematerialized only on 24.01.2020. It is not disputed
that share price of respondent No.1 has since passing of order dated
05.03.2018 fallen and has gone as below as Rs.61.40/- per share on
31.01.2022 i.e. the date of making this application. There is no doubt, in
such circumstances, applicants would not be able to sell remaining
12,45,300 shares @ 118.25 in terms of order dated 05.03.2018. It is also not
disputed by both the sides that respondent No.1 is under liquidation and
there is likelihood of further falling of its shares price. In these facts, it is
impractical to direct respondents No.2 to 4 to sell 12,45,300 shares
@118.25.
10. In view of above, the present application is allowed and applicant/
respondents No.2 is permitted to sell 12,45,300 shares of respondent No.1 at
the current market rate. Respondent No. 2 shall deposit the sale proceeds
realized from the sale of the said 12,45,300 shares in a "no lien account" and
convert the same into FDR and deposit with the Registrar General of this
Court.
11. The application is accordingly disposed of.
(SURESH KUMAR KAIT)
JUDGE
(SUDHIR KUMAR JAIN)
JUDGE
MARCH 29, 2022/r
