Welspun One Logistics Parks Fund I vs Mr Mohit Verma And Ors on 1 August, 2022

[Cites 9, Cited by 0]

Delhi High Court

Welspun One Logistics Parks Fund I vs Mr Mohit Verma And Ors on 1 August, 2022

By way of the present petition being O.M.P.(I)(COMM.) No.157/2022 filed under section 9 of the Arbitration & Conciliation Act 1996 („A&C Act‟ for short), the petitioner Welspun One Logistics Parks Fund I, has sought urgent interim measures of protection inter-alia by way of a direction to stay the operation and effect of termination letter Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 1 of 16 14:40:13 dated 14.04.2022 issued by the respondent terminating Non-Binding Term Sheet dated 26.11.2021 („Term Sheet‟) signed between the parties alongwith other ancillary and consequential reliefs.

2. By way of another petition, bearing Arb. P. No. 792/2022, filed under section 11(6) of the A&C Act, the same petitioner has prayed for appointment of a sole arbitrator to adjudicate upon the disputes that are stated to have arisen with the respondent, in terms of clause 12 of the Term Sheet.

3. Briefly stated, the transaction between the parties as contained in the Term Sheet comprised the intended sale of certain parcels of land for a certain consideration; and upon the terms and conditions as contained in the Term Sheet by 11 parties, who are respondents herein - comprising individuals, LLPs, a private limited company and a limited company - to the petitioner.

4. The details of the transaction are not relevant for purposes of the present decision, since what is being decided hereby is only a preliminary objection raised by the respondents, namely that the petitioner is not a „legal entity‟ and is therefore not competent to file or maintain the present petition at all.

5. It may be noted that the Term Sheet contained clause 12, relating to governing law and jurisdiction, which stipulates that the transaction contemplated in it shall be governed by Indian law; and further, that all disputes arising from and/or due to the Term Sheet shall be resolved by arbitration in accordance with the A&C Act by a sole arbitrator with the „seat‟ and „venue‟ of arbitration being at Delhi.

Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 2 of 16 14:40:13

6. Notice on the petition was issued on 25.05.2022; whereupon the respondents filed their reply dated 22.06.2022. Rejoinder to the reply was filed on 01.07.2022.

7. Based on a preliminary objection taken in the reply, Mr. Neeraj Malhotra, learned senior counsel appearing for one of the respondents has submitted that „Welspun One Logistics Parks Fund I‟ is not a „legal entity‟ but is merely a nomenclature given to a „scheme‟ floated by a „fund‟; and cannot therefore maintain any legal proceedings.

8. Pursuant to such objection, the petitioner was directed to place on record documents to evidence the petitioner‟s legal status; whereupon the petitioner has placed on record an Indenture of Trust dated 14.09.2020 („Trust Deed‟ for short) relating to an entity called „Welspun One Warehousing Opportunities Fund‟; a Certificate of Registration dated 17.11.2020 relating to „Welspun One Warehousing Opportunities Fund‟; alongwith an Investment Management Agreement dated 27.11.2020 („Investment Management Agreement‟ for short) between one Catalyst Trusteeship Limited (described in the Trust Deed as „Trustee‟)and Welspun One Logistics Parks Private Limited (described in the Trust Deed and the Investment Management Agreement as „Settlor‟ and „Investment Manager‟ respectively). The Trust Deed creates a registered trust in connection with the affairs of Welspun One Warehousing Opportunities Fund.

9. As recorded in order dated 04.07.2022, to maintain confidentiality of financial and other commercial details, which according to the Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 3 of 16 14:40:13 petitioner, are not material for the present matter, the petitioner was permitted to file redacted versions of aforesaid documents.

10. To answer the preliminary objection as regards maintainability of the petition at the instance of the petitioner, Mr. Jayant Mehta, learned senior counsel for the petitioner has submitted as under:

(i) By way of the Trust Deed, Welspun One Logistics Parks Private Limited acting as a „Settlor‟ of the Trust and Catalyst Trusteeship Limited acting as „Trustee‟, set-up an irrevocable, determinate, contributory investment trust under the Indian Trust Act, 1882 („Indian Trust Act‟ for short) to be called Welspun One Warehousing Opportunities Fund.

The Trust Deed was duly registered with the Joint Sub- Registrar, Andheri, Mumbai Suburban District (Bandra) under the (Indian) Registration Act 1908, primarily with the objective of launching „schemes‟ to seek monies from prospective unit-holders, to invest the same in accordance with the objective of achieving profits;

(ii) One of the covenants in the Trust Deed was that Welspun One Warehousing Opportunities Fund would seek registration as an Alternative Investment Fund („AIF‟ for short) under the Security and Exchange Board of India (Alternative Investment Funds) Regulations 2012 („AIF Regulations‟ for short);

(iii) The Trust Deed appointed Catalyst Trusteeship Limited as the Trustee of the Welspun One Warehousing Opportunities Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 4 of 16 14:40:13 Fund and for the schemes launched under that fund, in accordance with the terms of the Trust Deed;

(iv) Furthermore, under the Investment Management Agreement, Welspun One Logistics Parks Private Limited was appointed as the Investment Manager for the Welspun One Warehousing Opportunities Fund and for its schemes. Welspun One Warehousing Opportunities Fund was to launch different schemes from time-to-time by the Trustee, on the recommendations of the Investment Manager, with the stipulation that each such scheme would be organized, administered and managed by the Trustee acting through the Investment Manager;

(v) The present petition has been actually filed by Welspun One Logistics Parks Private Limited, which is a legally recognized incorporated entity, as the Investment Manager for one of the schemes namely Welspun One Logistics Parks Fund I, which (latter) is one of the schemes being run under the registered trust called the Welspun One Warehousing Opportunities Fund. Since the petitions have been filed by an incorporated entity, which is the investment manager of the fund, the present petition is maintainable.

11. Arguing against the maintainability of the petitions at the instance of the petitioner as described, Mr. Neeraj Malhotra, learned senior counsel appearing for the respondents has submitted as follows:

(i) An earlier Non-Binding Term Sheet dated 01.09.2020 was executed between Welspun One Logistics Parks Private Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 5 of 16 14:40:13 Limited with the respondents, which term sheet lapsed by efflux of time;

(ii) However the subsequent Non-Binding Term Sheet dated 26.11.2021, that is the Term Sheet under consideration now, was not executed with the said private limited company but with a „scheme‟, calling itself a „fund‟; and describing itself in the (second) Term Sheet as a private trust registered with the Securities and Exchange Board of India („SEBI‟ for short) as an AIF. No entity, as may be recognised in law, was party to the Term Sheet, since Welspun One Logistics Parks Fund I is merely a scheme launched by the Trust called Welspun One Warehousing Opportunities Fund; and the former has no legal standing to maintain this petition.

Welspun One Logistics Parks Fund I is neither a legal person nor an artificial person;

(iii) Regulation 2(b) of the AIF Regulations provides that an AIF, as understood in that provision, is a „fund‟ established or incorporated either as a trust; or as a company; or as a limited liability partnership; or as a body corporate; which entity may then perform or engage in activities permitted under the AIF Regulations;

(iv) Welspun One Logistics Parks Fund I is neither a trust, nor a company, nor a limited liability partnership, nor a body corporate; nor even a sole proprietorship concern or a partnership firm or an HUF. Therefore the petitioner is not Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 6 of 16 14:40:13 an entity recognized in law; and can therefore neither sue nor be sued;

(v) The petitioner‟s case that it was Mr. Anshul Singhal, who has signed the Term Sheet as authorized signatory appointed vidé resolution dated 21.07.2020 on behalf of Welspun One Logistics Parks Fund I, is also untenable since Welspun One Logistics Parks Fund I could not have passed any such resolution, since it is not a legal entity; apart from the fact that the said alleged resolution dated 21.07.2020 has not been placed on the record. In any case, no such resolution could have been passed by Welspun One Logistics Parks Fund I, since the latter is a non-person, non-entity with no existence in the eyes of law;

vi) Furthermore, board resolution dated 04.05.2022 purportedly passed by Welspun One Logistics Parks Pvt. Limited, in favour of one Mr. Amresh Passi, who has signed and filed the affidavit in support of the present petition, is irrelevant since Welspun One Logistics Parks Pvt. Limited is not a signatory to the Term Sheet which is subject matter of the present petition. Mr. Amresh Passi could, in any case have been authorized only to act for Welspun One Logistics Parks Pvt. Limited and not for Welspun One Logistics Parks Fund I.

12. The respondents have also sought to highlight, what they consider to be shifting stands taken by the petitioner, allegedly for the Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 7 of 16 14:40:13 purpose of guising itself as a legal entity, which the respondents say, the petitioner is not.

13. In support of its objection, the respondents have inter-alia placed reliance upon the following judgments :

i) State of West Bengal & Ors. vs. Swapan Kumar Guha & Ors., 1 on the point that a „scheme‟ has to be understood generally according to the dictionary meaning of that word, that it is inter-alia "a carefully arranged and systematic program of action", a "systematic plan for attaining some object", "a project", "a system of correlated things"". This judgment, though rendered in the context of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, has been relied-upon to suggest that a „scheme‟ is not a legal entity but can at best be a mere arm of an entity;

ii) Svapn Constructions vs. IDPL Employees Co-Operative Group Housing Society Ltd. & Ors., 2 on the point that a non-entity or non-person, having no existence in the eyes of law, is not capable of suing or being sued in a court of law;

iii) Vidya Drolia & Ors. vs. Durga Trading Corporation,3, to submit that as part of determining the prima-facie existence of an arbitration agreement on the touchstone of whether it contains the core contractual ingredients, one of the 1 (1982) 1 SCC 561, at para 8 2 2005 SCC Online Del 1392 at paras 15, 17 3 (2021) 2 SCC 1 at para146 Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 8 of 16 14:40:13 ingredients to be considered is whether the parties to the contract are competent to enter into a contract under the Indian Contract Act 1872.

14. While the matters addressed by the precedents cited by the respondents are well-settled, in the opinion of this court it is not necessary to delve into such matters since, at this stage, this court is only concerned with the following short question, viz. : whether the petitioner, as named in the petition, is an entity recognised in law, that can maintain the present petition founded upon Non- Binding Term Sheet dated 26.11.2021 that is subject matter of the present proceedings ?

15. Now, from the averments contained in the petition and the documents filed on record, it is noticed that Welspun One Warehousing Opportunities Fund is an AIF duly registered with the SEBI under the AIF Regulations, as evidenced by Certificate of Registration dated 17.11.2020 showing registration of Welspun One Warehousing Opportunities Fund as such, filed on record by the petitioner.

16. The signatory to the Term Sheet is one Mr. Anshul Singhal, who has signed the Term Sheet as „authorized signatory‟ on behalf of Welspun One Logistics Parks Fund I. Although the text of the Term Sheet does refer to Welspun One Logistics Parks Fund I as a „private registered trust‟, clearly that is not the case. But what is to be considered, at this stage, is the effect of such misdescription on the maintainability of the present petition, without delving any further into the merits of it.

Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 9 of 16 14:40:13

17. What is notable is that the memorandum of parties/cause-title of the present petition reads:

"Welspun One Logistics Parks Fund I Through its Investment Manager Welspun One Logistics Parks Pvt. Limited Having office at:

*****"

Whereby, it is seen that Welspun One Logistics Parks Private Limited, acting as the Investment Manager of Welspun One Logistics Park Fund I is named as the petitioner, even though the reference to the Welspun One Logistics Parks Fund I appears earlier in the description. Just because the name of the scheme, i.e. Welspun One Logistics Park Fund I comes earlier in the memo of parties/cause title, it cannot be said that Welspun One Logistics Parks Private Limited, which is the Investment Manager of the Welspun One Logistics Parks Fund I, is not the entity that has filed the present petition.

18. While assessing the position of the private limited company named in the Memo of Parties, one of the critical provisions contained in the Trust Deed, i.e. clause 10.1.26; and Recital „G‟ and clauses 2.3, 4.2.22 and 4.2.24 of the Investment Management Agreement, which define the powers of the Trustee and the Investment Manager, must be noticed :

Clause 10.1.26 of Trust Deed "10.1.26.Other powers: Without prejudice to any other provisions this indenture and subject to the AIF Regulations, the Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 10 of 16 14:40:13 Trustee shall also have the following powers and authorities exercisable on the recommendation of the Investment Manager:

(a) to institute, conduct, compromise, compound, or abandon any legal proceedings for or on behalf of or in the name of the Fund, Schemes or the Trustee, and to defend, compound or otherwise deal with any such proceedings against the Fund, Scheme or Trustee or its officers or concerning the affairs of the Fund or Scheme and also to compound and allow time for payment or satisfaction of any equity due and of any claims or demands by or against the Fund or Scheme and to refer any differences to arbitration and observe and perform any awards thereof:

(b) *****

(c) to enter into all such negotiations and contracts, and execute and do all such acts, deeds and things for on or behalf of or in the name of the Fund and the Schemes as the Trustee may consider expedient for or in relation to any of the matters or otherwise for the purpose of the Fund and the Schemes;

(d) *****

(e) to sign, seal, execute, deliver and register according to law all deeds, documents and assurances in respect of the Fund and its Schemes;

*****"

(emphasis supplied) Recital'G' of Investment Management Agreement G. The Investment Manager agrees to its appointment as the investment manager of the Fund and the Scheme(s) on the terms and conditions contemplated in this Agreement.

(emphasis supplied) Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 11 of 16 14:40:13 Clause 2.3 of Investment Management Agreement "2.3 The Investment Manager hereby accepts the appointment as an investment manager to the Fund and each Scheme and agrees to render investment management, administrative and other related services to the Fund and each Scheme, from the Effective Date in accordance with Applicable Law, the respective Investment Objective, the provisions of this Agreement and the other Scheme Documents."

                                   Clause 4.2.22             of    Investment        Management
                                   Agreement

"4.2.2. Power to manage and administer the Fund and each Scheme: The Investment Manager, shall have the power to take all decisions of the Fund and each of its Schemes including decisions in relation to their management and administration, strictly in accordance with the relevant Scheme Documents."

(emphasis supplied) Clause 4.2.24 of Investment Management Agreement "4.2.24 Other Powers: Without prejudice to any other provisions of the Scheme Documents and subject to the AIF Regulations, the Investment Manager shall also have the following powers and authorities exercisable without any further act or approval or vote of the Beneficiaries (unless otherwise specified in the Scheme Documents) but under the supervision of the Trustee:

(a) to institute, conduct, compromise, compound, or abandon any legal proceedings for or on behalf of or in the name of the Fund, Schemes or the Trustee, and to defend, compound or otherwise deal with any such proceedings against the Fund, Scheme or Trustee or its officers or concerning the affairs of the Fund or Scheme and also to compound and allow time for payment or satisfaction of any equity due and of any claims or Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 12 of 16 14:40:13 demands by or against the Fund or Scheme and to refer any differences to arbitration and observe and perform any awards thereof.

(b) to make and give receipts, releases and other discharges for moneys payable to the Fund and the Schemes and for the claims and demands of the Fund and the Schemes;

*****"

(Emphasis Supplied)

19. In the opinion of this court, limited to the aspect of maintainability of the present petition at the instance of the petitioner, as described in the memo of parties, the answer to the question posed is embedded in Recital „G‟ read with clauses 2.3, 4.2.22 and 4.2.24 of the Investment Management Agreement.

20. To clear the confusion as to the connection between Welspun One Logistics Parks Pvt. Limited with the Term Sheet, it is observed that though there is clearly some ambiguity in the description of the contracting entity on the first page of the Term Sheet, the term "Buyer" has been defined more clearly in clause 2 of the Term Sheet in the following words :

"Welspun One Logistics Parks Fund I ("Fund") is the first scheme of Welspun One Warehousing Opportunities Fund, which is a category II alternate investment fund registered with SEBI under the provisions of SEBI (Alternate Investment Funds) Regulations 2012. The Buyer herein is the investment manager of the Fund and is accordingly and duly authorised to enter into this Term Sheet on behalf of the Fund."

(emphasis supplied) Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 13 of 16 14:40:13

21. When read objectively and meaningfully, it is seen that the reference to Mr. Anshul Singhal appointed vidé resolution dated 21.07.2022, in the context of the „Buyer‟ as defined in clause 2 above, is to appoint him as the authorized signatory of the Investment Manager of the Buyer. Clearly therefore, the signatory to the Term Sheet is the authorized signatory of the Welspun One Warehousing Opportunities Fund, acting through its Investment Manager.

22. On a combined reading of the foregoing provisions of the Trust Deed and the Investment Management Agreement, and the description of the petitioner in the Memo of Parties, the following inferences arise:

i) The petitioner before this court is Welspun One Logistics Parks Private Limited, which is the Investment Manager of the Welspun One Warehousing Opportunities Fund, of which Welspun One Logistics Parks Fund I is one of the „schemes‟. The petitioner Welspun One Logistics Parks Pvt.

Limited is acting through its authorised representative Mr Amresh Passi;

ii) Clause 4.2.24 of the Investment Management Agreement authorizes Welspun One Logistics Parks Private Limited, as Investment Manager of Welspun One Warehousing Opportunities Fund and of any schemes floated by the fund, to institute and conduct legal proceedings for or on behalf of, or in the name of, the fund, and its schemes; and to perform Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 14 of 16 14:40:13 other consequential and ancillary acts such as compromising, compounding or abandoning such proceedings; and

iii) The Term Sheet has been signed by an authorised signatory of the Investment Manager of Welspun One Warehousing Opportunities Fund, which is the fund set-up by the Trust and recognised under the AIF Regulations.

23. What strikes this court as peculiar, is that the respondents - all 11 of them - have taken the stand that they have signed the Term Sheet containing covenants with financial implications and obligations running into several crores, with „a non-entity‟ or a „phantom entity‟, which the respondents neither acknowledge nor recognize today. In doing so, the respondents completely ignore the Investment Management Agreement and the Investment Manager, which (latter) is the entity that the respondents have dealt-with.

24. While there is no qualm that there is some element of misdescription of parties to an extent, but in law, it cannot be said that the respondents did not undertake any transaction at all with the petitioner. To hold that the petitioner is a „non-entity‟ would imply that the signatory to Term Sheet dated 26.11.2021would have no recourse to any legal remedy whatsoever. This court is not willing to countenance such position.

25. In the above view of the matter, it is not necessary, at least at this stage, to decide whether a scheme is a „legal entity‟ or not.

Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 15 of 16 14:40:13

26. As a sequitur to the above discussion, the answer to the preliminary objection as to whether the petitioner in the present petition is an „entity‟ that can maintain the present proceedings, is in the affirmative.

27. The present petition is accordingly held maintainable at the instance of the petitioner.

ANUP JAIRAM BHAMBHANI, J AUGUST 01, 2022 Ne/ds Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:01.08.2022 OMP(I)(COMM) 157/2022 Page 16 of 16 14:40:13

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