Delhi High Court - Orders
Rishima Investments Sa Llc vs Shristi Infrastructure Development ... on 18 November, 2021
Author: C.Hari Shankar
Bench: C.Hari Shankar
$~18 and 19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(EFA)(COMM.) 6/2021 & EX.APPL.(OS) 1079/2021
RISHIMA INVESTMENTS SA LLC ..... Decree Holder
Through Mr. Raj Shekhar Rao, Sr. Adv,
Mr. Manu Rajvanshi, Ms. Mansi Sood,
Advs.
Versus
SHRISTI INFRASTRUCTURE
DEVELOPMENT CORPORATION
LIMITED ..... Judgement Debtor
Through Mr. Manoj Singh, Adv.
+ O.M.P.(EFA)(COMM.) 5/2019 & EX.APPL.(OS) 1077/2021
RISHIMA SA INVESTMENTS
LLC (MAURITIUS) ..... Decree Holder
Through Mr. Raj Shekhar Rao, Sr. Adv,
Mr. Manu Rajvanshi, Ms. Mansi Sood,
Advs.
Versus
SHRISTI INFRASTRUCTURE DEVELOPMENT
CORPORATION LIMITED & ANR...... Judgement Debtors
Through Mr. Manoj Singh, Adv.
CORAM:
HON'BLE MR. JUSTICE C.HARI SHANKAR
ORDER
% 18.11.2021 (Video conferencing) EX.APPL.(OS) 1079/2021 in O.M.P.(EFA)(COMM.) 6/2021 EX.APPL.(OS) 1077/2021 in O.M.P.(EFA)(COMM.) 5/2019
1. These are applications at the instance of the petitioner/award Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 1 of 11 Signing Date:24.11.2021 18:11:16 holder, seeking a direction to the respondents/award debtors to deposit, before this Court, the entire amounts awarded against the respondents in favour of the petitioner by the arbitral award dated 30th April, 2019.
2. Mr. Rajshekhar Rao, learned Senior Counsel for the petitioner, submits that though, initially, security had been provided vide order dated 30th May, 2019, by a restraint against the respondents from creating any third party interest, or parting with the possession of Westin Hotel, Rajarhat, Kolkata, the value of the said hotel has, since, fallen. He submits that hotel is worth, at best, somewhere in the region of ₹ 450 crores (as per his instructions), whereas the amount awarded to the award holder, against the respondents, is ₹ 761 crores. Para 684 of the award, of which enforcement is being sought, reads thus:
684. Accordingly, the Tribunal makes the following award:
(1) Shristi Infrastructure Development Corporation Limited is ordered, by way of specific performance, to pay to Rishima SA Investments LLC within 28 days of this Award, The sum of INR 761 pursuant to clause 17.2 of the share Subscription and Shareholders Agreement, as at March 31, 2019.
(2) The Tribunal orders, by way of specific performance, Shristi Infrastructure Development Corporation Limited to pay to Rishima SA Investment LLC within 28 days of this Award a further sum pursuant to clause 17.2 of the Share Subscription and Shareholders Agreement, being 25% IRR to the date of this Award in an amount to be agreed between the parties, or, failing agreement, to be determined by the Tribunal.
(3) Upon payment of the sums in (1) and (2) above, Rishima SA Investments LLC shall deliver to Shristi Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 2 of 11 Signing Date:24.11.2021 18:11:16 Infrastructure Development Corporation Limited executed transfers and any other title documents relating to its shares in Shristi Hotel Private Limited.
(4) If for any reason the awards in (1) and/or (2) above are declared unenforceable in whole or in part by any court or tribunal, Shristi Infrastructure Development Corporation Limited shall pay to Rishima SA Investments LLC the sum of INR 160.2 crores pursuant to clause 14.2 of Share Subscription and Shareholders Agreement (or such lesser sum as shall be sufficient to satisfy the awards in (1) and (2) above, after taking account of any amounts paid by Shristi Infrastructure Development Corporation Limited pursuant thereto) upon delivery by Rishima SA Investments LLC to Shristi Infrastructure Development Corporation Limited of executed transfers and any other title documents relating to its share in Shristi Hotel Private Limited.
(5) Rishima SA Investments LLC's claim for currency losses is reserved to a future award.
(6) Interest on the sums awarded is reserved to a future award.
(7) Shristi Infrastructure Development Corporation Limited and Shristi Hotel Private Limited are ordered, for so long as Rishima SA Investments LLC holds its shareholding in Shristi Hotel Private Limited, not to hold any Board Meetings or meetings of Shristi Hotel Private Limited, or passing any resolutions thereat, otherwise than in compliance with clauses 6, 7 and 8 of the Share Subscription and Shareholders Agreement.
(8) Rishima SA Investments LLC's claims for breach of the arbitration agreement in relation to the actions of Shristi Infrastructure Development Corporation Limited and Shristi Hotel Private Limited in the National Company Law Tribunal of India and served to a future award.
(9) Costs are reserved to a future award."
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 3 of 11 Signing Date:24.11.2021 18:11:163. On this aspect, Mr. Manoj Singh, learned Counsel for the respondents, submitted that the award was against Respondents 1 and 2 jointly and severally, against the petitioner, and the amount enforceable was only ₹ 160.2 crores (for which purpose he relies on para 684(4) of the award).
4. Prima facie, I am not inclined to agree with the submissions of Mr. Manoj Singh. Para 684(1) of the award makes it clear that Respondent 1 is required to pay, to the petitioner, ₹ 761 crores. Insofar as in para 684(4) is concerned, that is only in the nature of a residuary dispensation, in the event of the directions in para 684(1) or (2) being declared unenforceable in whole or in part by any Court or Tribunal. No such declaration has taken place and it is not the contention of Mr. Manoj Singh, either, that there is any such declaration. Para 684(4), therefore, does not apply at all. Clearly, as per the award, therefore, Respondent 1 is required to pay, to the petitioner, ₹ 761 crores.
5. Mr. Rajshekhar Rao drew my attention to the affidavit of assets filed by Respondent 1, consequent to the directions issued by this Court, specifically paras 4 and 6 thereof, which read thus:
"4. The present annual income of the Judgement Debtor as per the audited financial statements for the year ending 31 March 2021, after paying income-tax, is as follows:-
a. From business carried on by the Judgement Debtor Rs. - 1,444.19 Lakhs (Loss before Exceptional Item, Income Tax Earlier years, Deferred Tax and Other Comprehensive Income) b. From other sources Rs. NIL Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 4 of 11 Signing Date:24.11.2021 18:11:16 *****
6. The Judgment Debtor possess the following Assets as on Financial Year ending 31.03.2021:
(a) Banking accounts.
Particulars Value in INR (Crores) In Current Account (including Liquid 1.30 Fund) In unpaid Dividend Account/Special 0.06 Deposit Account In Fixed Deposit (Pledged with Bank) 2.45 Total (A) 3.81
(b) Stocks and shares:
Name of the No. of Face Value of Current Remarks Company Shares Value Investment Status Sarga Hotel 6,00,00,000 10 128.87 Pledged Written Private for down Limited SHPL due to (SHPL) erosion of Net worth Shrishti 29,99,960 10 3.00 Free Urban Infrstructure Development Limited Sarga 19,50,000 10 1.95 Free Udaipur Hotels & Resorts Private limited Border 3,54,500 10 2.88 Free Written Transport down Infrastructure due to Development erosion Limited of Net worth East Kolkata 1,00,000 10 0.10 Pledged Infrastructure Development Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 5 of 11 Signing Date:24.11.2021 18:11:16 Private Limited Vipani 4,96,000 10 0.28 Pledged Written Hotels & down Resorts due to Private erosion Limited of Net worth Finetune 20,00,000 10 1.04 Free Written Engineering down Services due to Private erosion Limited of Net worth Vindhayachal 89,311 10 0.09 Pledged Attivo Food Private Limited Haldia Water 51,000 10 0.05 Pledged Services for Private HWSPL Limited (HWSPL) Bengal 9,89,800 10 123.13 Free Shristi Infrastructure Development Limited Asian Health 1,05,00,000 10 10.50 Free Care Services Limited Shristi Sam 3.76 Free Lain Yogi (Investment in Partnership Firm) Shrishti Sam 0.36 Free Lain (Investment in Partnership Firm) Shristi SPML 0.21 Free (Investment in Partnership Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 6 of 11 Signing Date:24.11.2021 18:11:16 Firm) Total (B) 276.22
(c) Life and endowment policies : NIL
(d) House Property : NIL
(e) Other Property:
Property Area Book Remarks
Value in
INR
(Crores)
Land at 8 acres
Premises
AA
II/CBE/2
(Erstwhile
Plot No.
CBD 2 in
Action
Area II at
Jatragachi,
New Town,
PS,
Rajarhat
Divided into:
i) Housing 1.18 Acre 0.00 Charge of Home buyers
for units allotted and
mortgage of land held by
lenders. The amount of
17.87 Cr is part of
inventory/work-in-
progress.
ii) Long-term Charge held on lease
lease to Sarga 3.50 Acre 53.01 rights by Yes Bank for
Hotel Pvt. Ltd. facilities to SHPL.
iii) Land for Development Right of
development of 3.32 Acre 50.28 Citimall Plaza and
Retails mall & mortgage of land to
Commercial Financial Institution.
Land at 329321 sq. 0 The amount is included in
Krishnanaga ft. (FSI to the value of
r, Dist. -· be inventory/work-in
Nadia, West developed) progress. The Market
Signature Not Verified
Digitally Signed
By:SUNIL SINGH NEGI
O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 7 of 11
Signing Date:24.11.2021
18:11:16
Bengal value of the project to be
developed as per PSI Rs
Rs.65.86 Cr. Charge of
home buyers for units
allotted and mortgage
held by lenders.
TOTAL (C) 103.29
(f) Other securities;
Property Cost in INR Remarks
(Crores)
Inventory of Work in 422.01 The Company has not
Progress & Raw Materials recognized revenue
- Housing & Other Projects received from
customers due to
IndAS-115 and
subject to charge of
homebuyers. The
Bank/Financial
Institution have first
charge on the Cash
Flows.
Advance to Vendors & 23.99 Subject to charge of
Others Housing & Other the Working Capital
Projects lenders
Loans & Advances to 29.92
Subsidiaries & Other
Companies
Advance against Revenue 39.13 Subject to Charge of
Share to Land Owners Lenders
(Pending adjustment)
* Secured by way of
1st charge over 28.31
acres of Shristinagar
Guwahati Phase 1
project land and all
movable and
immovable fixed
assets both present
and future
Other Fixed Assets 0.49 Includes Motor Car
subject to
hypothecation to
lenders
Sundry Debtors 5.48 Subject to charge of
Working Capital
Signature Not Verified
Digitally Signed
By:SUNIL SINGH NEGI
O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 8 of 11
Signing Date:24.11.2021
18:11:16
lenders
TDS/GST Receivable 9.54 Subject to charge of
Working Capital
lenders
Deferred Tax Assets 14.20
Total (D) 544.76
GRAND TOTAL 928.08
(A+B+C+F)
6. A conjoint reading of paras 4 and 6 (supra) does not disclose the existence of unencumbered assets, which could secure the awarded amount of ₹ 761 crores. He submits that, therefore, in order to ensure that the arbitral award is not frustrated, the respondents ought to be directed to deposit the aforesaid amount in Court.
7. Mr. Manoj Singh, learned Counsel appearing for Respondent 1, submits, firstly, that the application has been preferred under a wrong provision of law, inasmuch as it cites Section 151 of the Code Civil Procedure, 1908 (CPC), which is not applicable in such a circumstance. This, in my view, is a technical objection, against which there is wealth of judicial authority to the effect that mere citing of a wrong provision in an application does not imperil the application fatally, provided it is otherwise maintainable.
8. Some amount of discussion took place, at the bar, with respect to Section 48(3) of the Arbitration and Conciliation Act, 1996 (" the 1996 Act"), which reads thus:
"(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 9 of 11 Signing Date:24.11.2021 18:11:16 decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security."
9. Mr. Singh submits that, though the direction for securing the Westin Hotel, against the awarded amount, might have been sustainable under Section 48(3), that provision is no longer applicable to the award holder, as at that stage, the challenge, by the respondents against the award was pending before the High Court of Singapore. According to Mr. Manoj Singh, Section 48(3) applies only during the pendency of a challenge against the award and not after the challenge is decided, one way or the other. Even though the challenge has failed, he submits that once the decision of the High Court of Singapore has been passed, Section 48(3) exhausts itself.
10. Prima facie, I am not inclined to agree with this submission either. In my, prima facie view, an award debtor, who is pursuing a challenge against the award before a competent forum, cannot be placed in a worse position than an award debtor who fails in the said challenge. If the challenge launched by the award debtor against the award fails, in my view, Section 48(3) would continue to apply. It is interesting to note that Section 48(3) does not use the words "during the pendency of the challenge against the award", or "awaiting the outcome of the challenge to the award" or any other words to like effect. All it states is that if an application for setting aside has been made to a competent authority, the Court could, if it considers it proper to do so, adjourn the decision on the enforcement of award and could direct the other party to give suitable security. Such security has Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 10 of 11 Signing Date:24.11.2021 18:11:16 been directed during the pendency of the challenge. If the security has now become insufficient, I see no reason why in exercise of the power of the Court under Section 48(3), further security cannot be directed.
11. Mr. Manoj Singh further contends that he has moved a separate application under Section 48(1) of the 1996 Act, disputing the enforceability of the award. He submits that, till this application is decided, no direction for securing the amount in the award can be passed by the Court. He was citing, in this contest, the judgment of the Supreme Court in Government of India v. Vedanta Ltd 1, when the clock struck 5:30 pm and the Court decided to call it a day.
12. Accordingly, renotify as part heard on 24th November, 2021 for continuation of submissions of Mr. Singh.
C.HARI SHANKAR, J NOVEMBER 18, 2021 r.bararia 1 Signature Not Verified 2020 (10) SCC 1 Digitally Signed By:SUNIL SINGH NEGI O.M.P.(EFA)(COMM.) 6/2021 & contd. matter Page 11 of 11 Signing Date:24.11.2021 18:11:16