Bombay High Court
Ratnam Sudesh Iyer vs Mr. Jackie K. Shroff on 25 April, 2013
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
1 arbpl.527-2013
acd
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION LODG.NO. 527 OF 2013
Ratnam Sudesh Iyer ]
an individual, Singaporean citizen ]
and resident, residing at 16A, ]
Dalvey Estate, Singapore 259557. ] ...Petitioner.
Vs.
Mr. Jackie K. Shroff, ig ]
an individual, Indian citizen and ]
resident, residing at Vastu, 14th ]
floor, Band Stand, Bandra (W) ]
Mumbai- 400 050. ] ...Respondent.
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Mr. D.D. Madan,Sr. Advocate a/w Mr.Vishal Gandhi with Ms. Koma Thaker,
i/b M/s Gandhi & Associates, for Petitioner.
Mr. F. D'vetre St. Advocate a/w Mr.S.V. Doijode i/b M/s Doijode Associates,
for Respondent.
------
CORAM : R.D. DHANUKA, J.
RESERVED ON: 22nd April, 2013.
PRONOUNCED ON: 25th April, 2013.
JUDGMENT:
1 By this arbitration petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, the petitioner seeks an order and direction against the respondent to deposit the sum of Rs.8.49 crores with this court or with 1 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 2 arbpl.527-2013 arbitral Tribunal or with an escrow agent and for an unconditional and irrevocable bank guarantee in favour of the petitioner to secure the said sum and for an injunction restraining the respondent from utilizing/spending or creating any third party right over the said sum from the proceeds of approximately Rs.54 crores the respondent has to receive from the sale of his shares in Multi Screen Media Pvt. Ltd.
2 By consent of both parties, matter was heard finally and is being disposed of by this order. Some of the facts for the purposes of deciding this petition are as under:
(a) The petitioner as well as the respondent are the shareholders of Atlas Equifin Pvt. Ltd. which is an investment holding company and owns assets including shares of Multi Screen Media Pvt.Ltd. (for short 'MSM Ltd'), earlier known as Sony Entertainment Television Pvt.Ltd.
(b) M/s Atlas Equifin Pvt. Ltd. held 1106829 equity shares in the said MSM Ltd. The respondent had held 1,40,000 equity shares of Rs.10/- each in the said Atlas Equifin Pvt. Ltd. M/s Grandway Global Holdings is also shareholder of the said MSM Ltd. and held 18353531 equity shares of Rs.10/- each. The shareholders of the said Grandway Global Holdings and Atlas Equifin Pvt. Ltd.
wanted to exit from the said MSM Ltd.
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(c) It is the case of the petitioner that the placement instructions dated 15.11.2005 was signed by the petitioner and the respondent and other parties by which the Standard Chartered Bank was authorized as their escrow agent to identify a purchaser to purchase the shares held by each of them in the MSM Ltd.
(d) On 19.4.2010, the respondent lodged a complaint with the Economic Offences Wing, Mumbai Police against the petitioner, the bank and others and disputed his signature on the placement instructions dated 15.11.2005 by which the petitioner, the respondent and other parties authorized the Standard Chartered Bank as their agent to identify a purchaser to purchase the shares of the said company.
(e) There was discussion between the petitioner and the respondent regarding such complaint made by the respondent and thereafter both the parties entered into a deed of settlement dated 3.1.2011. Under the said deed of settlement, the respondent agreed that in future the respondent shall not write any letter or communication or complaint to any police authority and/or judicial, quasi judicial authority or statutory authority or any person or entity complaining about the subject matter of the said settlement deed.
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(f) The petitioner agreed to pay to the respondent a sum of US$ 1,500,000 (One Million Five Hundred Thousand) vide banker's cheque. The said banker's cheque was handed over to D.M. Harish & Co., Advocates of the respondent to keep in escrow who was directed to hand over the same to the respondent on receipt of confirmation from Economic Offences Wing that the complaint of the respondent vide letter dated 19.4.2010 was closed and there would be no investigations of any nature whatsoever in respect of the said complaint. It was agreed that immediately upon receipt of letter of confirmation of withdrawal or order of quashing the complaint, the banker's cheque of US$ 1,500,000 (One Million Five Hundred Thousand) shall be handed over by M/s D.M. Harish & Co to the respondent unless the said cheque had already been handed over. It was also agreed that the petitioner would pay further sum of US$ 2 Million only within 7 days of the receipt of the sale proceeds by Grandway Global Holdings and/or Atlas Equifin Pvt. Ltd. from the sale of the shares of Grandway Global Holdings and/or Atlas Equifin Pvt. Ltd. It was agreed that an undated cheque of USD 2 Million as and by way of security be kept in escrow with Mr. Anil Harish of M/s D.M. Harish & Co., Advocates of the respondent. It was agreed that only in the event of sale of shares of the said MSM Ltd taking place, it shall be the duty of the petitioner to immediately inform the respondent and Mr. Anil Harish of such sale of shares of MSM Ltd so that the cheque of USD 2 Million kept in escrow may be handed over to the respondent. It was 4 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 5 arbpl.527-2013 agreed that in the event that the petitioner does not inform the respondent and if the respondent comes to know of the sale of the shares of MSM Ltd., the respondent by providing supporting documents about the sale may call upon Mr. Anil Harish and his Advocate to hand over the cheque and Mr. Anil Harish shall upon satisfying himself call upon the petitioner to confirm in writing within a period of 7 working days, failing which he shall be entitled to hand over the said cheque to the respondent. It was agreed that the entire arrangement for payment of USD 3.5 Million to the respondent was in consideration of the settlement arrived at as recorded therein in addition to what the respondent was entitled in his capacity as shareholder of the said Atlas Equifin Pvt. Ltd.
(g) It was agreed that if the respondent commits breach of any of the terms and conditions of their obligation under the deed of settlement or if any of the representations/assurances of the respondent under the said deed turn out to be false or incorrect, the said deed of settlement shall stand terminated and the respondent shall forthwith return amount of US$ 1,500,000 (One Million Five Hundred Thousand) to the petitioner. The said deed of settlement recorded arbitration agreement in clause 9 thereof. The petitioner accordingly deposited the cheque of US$ 1,500,000 (One Million Five Hundred Thousand) and also the second cheque with the said escrow agent.
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(h) The respondent accordingly addressed a letter on 10.1.2011 to the Economic Offences Wing about the settlement arrived at between the parties and agreed to withdraw the said complaint filed by him and ratified placement mandate given to the Standard Chartered Bank on 15.11.2005 and requested to permit him to unconditionally withdraw the said complaint or to treat the said complaint as a closed chapter. By a letter dated 13.1.2011, the Economic Offences Wing confirmed that the enquiry was closed. The first cheque of US$ 1,500,000 (One Million Five Hundred Thousand) was then released by the escrow agent in favour of the respondent which cheque was encashed by the respondent.
(i) By letter sent by email by the wife of the respondent to the petitioner and copy marked to various shareholders of the said Atlas Equifin Pvt.
Ltd., wife of the respondent informed the petitioner that she had been informed that the deal term sheet has been singed by the providence and Standard Chartered Bank. She expressed her surprise that the petitioner did not mention about the said deal to her as well as to the respondent. She alleged that once again the petitioner was not being straight with them and she was concerned about that. She requested the petitioner to update to her and the respondent. After receipt of the said email sent by wife of the respondent to the petitioner, the petitioner replied on the same day stating that the petitioner had already told her 6 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 7 arbpl.527-2013 that the term sheet has been already with providence. It was stated that the petitioner was not aware of the term sheet signed with providence and Standard Chartered Bank. The petitioner stated that he would not bother about any update nor should she bother about the same. As and when the deal would happen, she might take the money and run for which she was waiting. In response to the said email sent by the petitioner, wife of the respondent sent another email to the petitioner, copy thereof was forwarded to shareholders of the company. It is stated in the said email as under:
"As it is everyone else Mr. Iyer. I have no wish to continue to fraternize with a forger. And you may kindly refer to the settlement document between us where it is clearly mentioned you are bound to give us updates. For the record, you never mentioned a term sheet had been signed. Its only now when I brought it up, did you talk about it."
(j) On 30.6.2011, the respondent through his Advocate addressed to the petitioner alleged that since January 2011 the Advocate had not received any updates from the petitioner regarding sale of shares as mentioned in clause 4.2 of the settlement agreement. It was contended that being power of attorney holder of the respondent and in the light of the terms of the settlement agreement, the petitioner was under an obligation to inform the respondent about the status of the sale of the shares held by the respondent. The petitioner was called upon to inform about all steps about any action taken by the petitioner in that regard. On 7th July, 2011, the petitioner sent a letter to M/s D.M. Harish & Co., contending 7 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 8 arbpl.527-2013 that there was no obligation upon him under the settlement agreement to inform about the updates and that he was under obligation only in the event of sale of shares of the said MSM Ltd taking place and not otherwise. By the said letter, the petitioner alleged that in complete breach of solemn assurance given by the petitioner, from 15th June, 2011, the respondent addressed email to Mr. Raman Maroo, Mr. Jayesh Parekh and others making false and defamatory allegations against the petitioner which amounted to breach of the terms and conditions, obligations and representations and/or assurance on the part of the respondent. In the said letter the petitioner informed that his obligation under the settlement agreement was to pay USD 2 Million upon receipt of sale proceeds by Grandway Global Holdings and/or Atlas Equifin Pvt. Ltd. from sale of his shares held by Grandway Global Holdings and/or Atlas Equifin Pvt. Ltd. in the said MSM Ltd.
(k) In the month of May 2012, the share purchase agreement was signed admittedly between some of the shareholders of the said company and the purchaser as proposed. The shareholders including the petitioner have received part consideration under the said sale purchase agreement.
(l) In the month of August, 2012, the petitioner filed petition under Section 9 of the Arbitration and Conciliation Act, 1996 against the respondents for seeking interim measures. By an order dated 6.8.2012 passed by S.J. Kathawalla, J., the wife of the respondent who was impleaded as respondent to 8 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 9 arbpl.527-2013 the said petition was dropped in view of her statement that she was neither a party to the settlement agreement nor arbitration agreement. The escrow agent made a statement that he shall hand over cheque held by him in escrow only after receiving direction from the learned Arbitrator and/or from this court. This court accepted the said statement. By consent of the parties, the dispute between the petitioner and the respondent is referred to the sole Arbitrator Mr. Justice S.N. Variava, the former Judge of the Supreme Court. Both parties were granted liberty to move the learned Arbitrator for seeking ad-interim reliefs under Section 17 of the Arbitration and Conciliation Act, 1996, keeping all rights and contentions of the parties open.
(m) The petitioner thereafter filed application under Section 17 of the Arbitration and Conciliation Act, 1996 before the learned Arbitrator seeking interim measures. The petitioner also filed statement of claim, inter alia, praying for a declaration that the respondent had committed breach of the deed of settlement dated 3.1.2011 which has caused damage to the petitioner and has prayed for compensation. The petitioner has also prayed for refund of US$ 1,500,000 (One Million Five Hundred Thousand) with interest @ 18% per annum and prayed for an injunction against the respondent from seeking relief and enacashing the second cheque handed over to the escrow agent.
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(n) In the said proceedings, the respondent herein filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 raising an issue of jurisdiction in respect of the claim for damages made by the petitioner contending that same was beyond the scope of reference. By an order dated 17.1.2013, the learned Arbitrator held that at that stage he was unable to accept the statement of the respondent that the claim for damages has no connection with the deed of settlement.
(o) By an order dated 8.4.2013 passed by the learned Arbitrator in application filed under Section 17 of the Arbitration and Conciliation Act, 1996, it is held that the reliefs prayed by the petitioner were by way of attachment before judgment which were beyond the powers of the arbitral tribunal under Section 17 of the said Act and could only be granted by a court of law under Section 9 of the Arbitration and Conciliation Act, 1996. By the said order, the learned Arbitrator granted liberty to the petitioner to again move this court under Section 9 of the Arbitration and Conciliation Act, 1996 for the same reliefs and dispose of the said application filed under Section 17. The petitioner accordingly filed this petition under Section 9 for interim reliefs.
3 Mr. Madan, the learned Senior Counsel appearing on behalf of the petitioner submits that though the respondent had agreed not to make any complaint under clause 3 of the deed of settlement, wife of the respondent has 10 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 11 arbpl.527-2013 described the petitioner as forger in her email which was sent to several persons.
It submitted that by the said email, the respondent had made a complaint to various parties about the subject matter of the present deed. The learned Senior Counsel submits that under the deed of settlement, the respondent in clause (J) of the recital admitted that the placement dated 15.11.2005 contained the signature of the respondent in his capacity as a shareholder of the Atlas Equifin Pvt. Ltd.
along with signatures of other shareholders of Atlas Equifin Pvt. Ltd., Grandway Global Holdings and Waygrand Holdings Limited, which the respondent had claimed to be not his signature. The learned Senior Counsel submits that by addressing such email the respondent had committed gross violation of the said obligation recorded in clause-3 read with recital (J) thereof and as a result thereof, the petitioner is not only entitled to recover the amount of US$ 1,500,000 (One Million Five Hundred Thousand) paid to the respondent but is also entitled to injunction in respect of the balance consideration of USD 2 Million. The petitioner is also entitled to claim damages against the respondent for such breach. It is submitted that this court in application filed under Section 9 of the Act by the petitioner was pleased to grant interim relief insofar as cheque held by the escrow agent is concerned.
4 Mr. Madan invited my attention to the averments made in the application filed under Section 17 stating that the respondent was not in stable financial condition and has been financially unsound over the past few years and 11 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 12 arbpl.527-2013 has not been able to honour his cheques and that criminal cases have been filed against him. The learned Senior Counsel submits that even income tax department has filed a case against the respondent as is apparent from the order of the Income Tax Appellate Tribunal passed on 29.8.2012. It is submitted that on the perusal of the said order, it can been seen that the respondent has been borrowing moneys to maintain his lifestyle and does not even earn adequate amount to sustain his lifestyle. It is submitted that even the fees of the children of the respondent were being paid by mother-in-law of the respondent. The learned Senior Counsel invited my attention to the para 19 of the order passed by the Income Tax Appellate Tribunal on 29.4.2012 in support of his plea that the respondent is heavily indebted to various banks and was not able to discharge his personal liability. The learned Senior Counsel also pointed out the observations made by the assessing officer that the respondent had given a loan of Rs.9.97 crores to various parties from whom no interest was offered as income. The learned Senior Counsel submits that in view of such financial condition of the respondent and in view of ex-facie breach of terms and conditions of deed of settlement committed by the respondent, the petitioner has good chances of succeeding in arbitration and petitioner would not be able to recover any such amounts from the respondent if the interim measures as prayed by the petitioner are not granted by this court and the appropriate security is ordered against the respondent and in favour of the petitioner.
12 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::13 arbpl.527-2013 5 The learned Senior Counsel Mr. D'vetre appearing on behalf of the respondent on the other hand submits that the petitioner had 12% shareholding in the said Atlas Equifin Pvt. Ltd. whereas the respondent had 10% shareholding.
M/s Grandway Global Holdings had 90% shareholding in the MSM Ltd. The said Grandway Global Holdings had taken a loan of about Rs.93 Million from the Standard Chartered Bank which had insisted for pledge of shares by Grandway Global Holdings.
6The respondent was not direct shareholder of the said Grandway Global Holdings. It is case of the respondent that the said Standard Chartered Bank had also insisted that Atlas Equifin Pvt. Ltd. should also pledge its 13% shares and the individual shareholders of the said company shall also give consent in that regard. The said Standard Chartered Bank relied upon the placement instructions which was alleged to have been signed by the respondent according to the petitioner.
7 The learned Senior Counsel submits that in view of the execution of the deed of settlement between the parties, the respondent admittedly withdrew the complaint filed with the Economic Offences Wing. On such withdrawal of the complaint, US$ 1,500,000 (One Million Five Hundred Thousand) has been already released in favour of the respondent. It is submitted that insofar as the balance consideration under the said deed of settlement is 13 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 14 arbpl.527-2013 concerned, the petitioner had not deposited any amount with the escrow agent but has only handed over an undated cheque with the escrow agent which amount would become due and payable in favour of the respondent on completion of sale of shares of MSM Ltd. It is submitted that the respondent had complied with all his part of his obligation under the said deed of settlement. The learned Senior Counsel submits that it is an admitted position that the deal in respect of the transfer of shares is already signed between the shareholders of the said company and the purchaser and the part consideration is already received by the transferors of the shares including the petitioner.
8 The learned Senior Counsel submits that it is thus clear that there is no impact of the said email addressed by the wife of the respondent to the petitioner and other shareholders. It is submitted that there was no complaint made by the said email to any authorities as alleged by the petitioner. The learned Senior Counsel submits that by the email dated 9 th June, 2011 sent at 3.05 pm by the wife of the respondent to the petitioner, the respondent had only made a grievance about the details of the term-sheet signed between the providence and the Standard Chartered not furnished by the petitioner to the respondent. The petitioner in his reply took a stand that he was not under any obligation to give such updates before the said deal was complete. In that context, the wife of the respondent in her email sent on 15.6.2011 at 11.59 pm used the words "forger". It is submitted that the same was not by way of any 14 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 15 arbpl.527-2013 complaint to any authority. It is submitted that the said email was sent in view of the provocative email sent by the petitioner at 15.47 pm to the wife of the respondent.
9 The learned Senior Counsel submits that the petitioner knowing well that the said deal having been finalized between the transferors and the purchaser, the petitioner would have to release the balance consideration of USD 2 Million in favour of the respondent and thus this false plea is raised by the petitioner to avoid his obligation to pay the said amount to the respondent after more than 15 months of the said email sent by wife of the respondent.
10 Insofar as the financial condition of the respondent is concerned, the learned Senior Counsel submits that the reliance placed by the petitioner on the order passed by the Income Tax Appellate Tribunal is totally misplaced. Even if the financial condition of the respondent once upon a time as alleged in the said order was not good, the said order does not indicate the financial condition of the respondent as of today. The learned Senior Counsel submits that no reliance can be placed by the petitioner on the press report. The learned Senior Counsel submits that the loan referred in the said order passed by the Income Tax Appellate Tribunal was of year 2002.
15 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::16 arbpl.527-2013 11 The learned Senior Counsel submits that the reliefs sought by the petitioner is in the nature of attachment before judgment and the principles of Order 38 Rule 5 of the Code of Civil Procedure, 1908 are applicable to the proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. The petitioner has to satisfy this court that the petitioner has made out a case for grant of interim measures as prayed by the petitioner in this petition. The learned Senior Counsel submits that the parties to whom the said email was forwarded along with petitioner are the directors and/or shareholders who were also issued notices by the Economic Offences Wing. It is submitted that there was no defamation of the petitioner by sending such email. The learned Senior Counsel submits that in any event the petitioner himself has pleaded in his statement of claim as well as petition under Section 9 of the Arbitration and Conciliation Act, 1996 that the said deed of settlement was signed under duress by the petitioner and thus in view of such statement made by the petitioner himself, no reliance on clause 3 can be made by the petitioner against the respondent. The learned Senior Counsel submits that the respondent had taken all steps to see that the transfer of the shares is done in favour of the purchaser. The learned Senior Counsel submits that though the petitioner has placed reliance upon the paper report and has made other allegations about alleged financial condition of the respondent, no such averments are made in this petition filed under Section 9 of the Arbitration and Conciliation Act, 1996.
16 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::17 arbpl.527-2013 12 The learned Senior Counsel placed reliance upon the judgment of the Supreme Court in the case of Raman Tech & Process Engg. Co. & Anr.
Versus Solanki Traders [(2008) 2 SCC 302], and in particular paragraphs 4 to 6 thereof in support of his plea that for grant of reliefs by way of attachment before judgment, principles laid down by the Supreme Court in the said judgment have to be satisfied. Paragraphs 4,5 and 6 of the said judgment read thus:
"4. The object of supplemental proceedings (application for arrest or attachment before judgment, grant of temporary injunction and appointment of receivers) is to prevent the ends of justice being defeated. The object of Order 38 Rule 5 CPC in particular, is to prevent any defendant from defeating the realization of the decree that may ultimately be passed in favour of the plaintiff, either by attempting to dispose of, or remove from the jurisdiction of the court, his movables. The scheme of Order 38 and the use of the words "to obstruct or delay the execution of any decree that may be passed against him" in Rule 5 make it clear that before exercising the power under the said Rule, the court should be satisfied that there is a reasonable chance of a decree being passed in the suit against the defendant. This would mean that the court should be satisfied that the plaintiff has a prima facie case. If the averments in the plaint and the documents produced in support of it, do not satisfy the court about the existence of a prima facie case, the court will not go to the next stage of examining whether the interest of the plaintiff should be protected by exercising power under Order 38 Rule 5 CPC. It is well settled that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an order of attachment before judgment, unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. Equally well settled is the position that even where the defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.17 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::
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5. The power under Order 38 Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 is a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realized by unscrupulous plaintiffs by obtaining orders of attachment before judgment and forcing the defendants for out-of-court settlements under threat of attachment.
6. A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgment. A plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 CPC. Court should also keep in view the principles relating to grant of attachment before judgment. (see Premraj Mundra V. Md. Manech Gazi for a clear summary of the principles)"
13 In rejoinder, Mr. Madan submits that the respondent has accepted in recital 'J' of the deed of settlement that he had signed on the agreement of 2005 and has agreed not to make any such complaint in future. The learned Senior Counsel submits that though it is stated in the statement of claim as well as in the application under Section 17 by the petitioner that the said deed of settlement was signed under duress, he has set out the circumstances in which such statement of duress came to be made. It is submitted that the entire petition should be read in toto and not the said allegations in isolation. The learned 18 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 19 arbpl.527-2013 Senior Counsel submits that the respondent has not placed any documents on record showing that his financial condition is improved since year 2002. It is submitted that the respondent himself was party to the said consent by which the escrow agent was allowed to keep the cheque of USD 2 Million under escrow.
14 Mr. D'vetre submits that when the said order was passed by this Court (Coram:S.J. Kathawalla, J.), consideration of the said amount of USD 2 Million was not due to the respondent at that stage as the deal for transfer of shares was not finalised.
15 The question that arise for consideration of this court in this proceedings is whether respondent has prima facie committed any breach of the deed of settlement by sending the letter by email on 15 th June, 2011 at 11.59 p.m. to the petitioner and copy whereof was forwarded to some of the shareholders/directors of the company alleging that the respondent did not have wish to continue to fraternize with a forger. A question that also arises for consideration of this court is as to whether the petitioner has made out a case for attachment before judgment while praying for an order against the respondent to deposit sum of Rs.8.49 Crores or seeking an injunction against the respondent from creating third party rights in respect of the said sum from the proceeds of about 54 Crores which he has to receive from the sale of his shares in Multi Screen Media Pvt. Ltd.
19 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::20 arbpl.527-2013 16 On perusal of the deed of settlement and the records it is clear that pursuant to the execution of the said deed of settlement, the respondent has already withdrawn his complaint made to the Economic Offence Wing against the petitioner and the said complaint is closed by the said Economic Offence Wing. It is also not in dispute that pursuant to the said withdrawal of the complaint, petitioner has already released part of consideration in favour of the respondent i.e. sum of US$1,500,000 only vide bankers cheque. Under the terms of the said deed of settlement, the balance consideration became payable to the respondent within seven days of the receipt of the sale proceeds by M/s.
Grandway Global Holdings Limited or Atlas Equifin Private Limited from the sale of the shares held by Grandway and/or Atlas in Multi Screen Media Pvt Ltd.
It is not in dispute that the share purchase agreement has already been signed between the transferor of shares and the purchaser in respect of the said shares and part of consideration has been already received by the transferor including the petitioner. It is not in dispute that the said deal between the transferor of the said shares including the petitioner and the purchasers of the said shares is in existence and is not terminated on the ground of any such email addressed by the wife of the respondent to the petitioner and other shareholders of the said company.
20 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::21 arbpl.527-2013 17 On perusal of the email sent by the wife of the respondent on 9 th June, 2011 to the petitioner, it is clear that the wife of the petitioner wanted to place on record that she or respondent was not given information about the term sheet signed by the providence and Standard Chartered Bank. In response to the said email, the petitioner's stand was that he was not aware of the term sheet signed between the providence and Stanchart. Petitioner clarified that he was not bothered about any updates nor the wife of the respondent should bother.
The stand of the petitioner was that as and when the deal happens, she may take the money and run. In response to this email sent by the petitioner with such stand, the wife of the respondent in her email sent on 15 th June, 2011 at 11.59 p.m. stated that she had no wish to continue to fraternize with a forger.
Respondent invited attention of the petitioner to the deed of settlement and contended that the petitioner was bound to give respondent updates. In my view the contents of the three emails exchanged between the parties have to be read together and has to be interpreted harmoniously and not by reading the last email sent on 15th June, 2011 by the wife of the respondent in isolation. It is not the case of the petitioner that in view of the said email sent by the wife of the respondent, the deal between the transferors of the shares and purchaser was not materialized and/or cancelled. Mr. Madan, the learned senior counsel on instructions fairly admits that the deal for transfer of shares is subsisting and part payment under the said deal has also been received by the petitioner.
21 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::22 arbpl.527-2013 18 On perusal of the deed of settlement, it is clear that the balance consideration of USD 2 million is payable by the petitioner to the respondent within seven days of the receipt of the sale proceeds by Grandway Global Holding and/or Atlas Equifin from the sale of shares held by Grandway Global Holding and/or Atlas Equifin in the said Multi Screen Media Pvt. Ltd. and for the purpose thereof an undated cheque for United States Dollars 2,000,000 has been kept in the escrow with Mr. Anil Harish of D.M. Harish and Co.
Advocates for the respondent. Clause 4.2 also provides that only in the event of the sale of the shares of MSM taking place, it shall be the duty of the petitioner to immediately inform the respondent and his Advocates of such sale of the shares of MSM so that the cheque in the said sum which is kept in escrow may be handed over to respondent. The said clause further provides that in the event that the petitioner does not inform the respondent and if the respondent comes to know of the sale of the shares of MSM, the respondent by providing supporting documents about the sale may call upon the escrow agent to hand over the cheque and the escrow agent shall there upon after satisfying himself about the same call upon the petitioner to confirm in writing within the period of 7 business working days failing which he shall be entitled to hand over the cheque to respondent. It is not in dispute that when such email dated 9 th June, 2011 was sent by the wife of the respondent to the petitioner asking for updates, share purchase agreement was already signed between the transferor of the shares and the purchaser. When the petitioner had applied for ad interim reliefs 22 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 23 arbpl.527-2013 on 15th April, 2013, when this court had granted limited ad interim relief for the period of one week, there was no affidavit in reply filed by the respondent nor any submission on merits were made by the respondent. However, after considering the pleadings and documents and after hearing the learned counsel at length, I am of the prima facie view that no breach of clause 3 has been committed by the respondent of the deed of settlement entered into between the parties on 3rd January, 2011.
19In my view, Mr. D'vetre the learned senior counsel appearing on behalf of the respondent is right in his submission that in three letters sent by email have to be interpreted harmoniously and the context in which two letters sent by email by the wife of the respondent has to be seen. In view of the fact that the deal between the transferor of shares and the purchaser was already signed prior to the said email sent by the wife of the respondent and in view of the fact that even after expiry of 15 months thereafter no steps are taken by the petitioner against the respondent nor the said deal has been cancelled by the parties thereto, in my view there as no impact of the said email sent by wife of the respondent on 15th June, 2011 at 11.59 a.m. on the said deal. The Petitioner has already received part payment under the said deal. In my prima facie view, thus no case is made out by the petitioner that the respondent has committed breach of the deed of settlement or that the petitioner has good chance of succeeding in arbitration based on the email dated 15 th June, 2011 sent by 23 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 24 arbpl.527-2013 wife of the respondent to the petitioner and other shareholders and/or directors.
20 In so far as allegation of the petitioner that the financial condition of the respondent is bad and if the petitioner succeeds in the ongoing arbitration proceedings, the petitioner would not be able to recover part of the consideration already paid by the petitioner to the respondent under the said deed of settlement or compensation arising out of the alleged breach committed by the respondent and thus appropriate order of deposit of Rs.8.49 Crores shall be ordered is concerned, in my view the reliance placed by the petitioner on the news item is misplaced. In my view even if the school fees of the children of the respondent is paid by the mother-in-law of the respondent in 2004-05, it would not indicate that the financial condition of the respondent is bad in 2013. Insofar as order passed by the Income Tax Appellate Tribunal relied upon by the petitioner is concerned, on perusal of the said order, it indicates that the respondent has not only borrowed money but has also lent money to various parties. In any event said transaction appears to be of 2002 thus the order of the Income Tax Appellate Tribunal relied upon by the petitioner is of no assistance to the petitioner.
21 The Supreme Court in the case of Ram Tech. And Process Engg.
Co. and anr. (supra) has dealt with the object of order 38 rule 5 of the Code of Civil Procedure, 1938 which principles are applicable to the application filed 24 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 25 arbpl.527-2013 under section 9 of the Arbitration & Conciliation Act, 1996. The Supreme Court has held that before exercising such power under Order 38 rule 5 the court should be satisfied that there is a reasonable chance of a decree being passed in the suit against the defendant and the court should be satisfied that the plaintiff has a prima facie case. It is held that if the court is not satisfied about the existence of the prima facie case, the court will not go to the next stage of examining whether the interest of the plaintiff should be protected by exercising power under Order 38 Rule 5 CPC. It is held that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an an oder of attachment before judgment unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. The Supreme Court held that the powers under the said provision is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rules. It is held that the purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt and can not be used as a leverage for coercing the defendant to settle the suit claim.
22 In my view, the petitioner has not made out prima facie case that the petitioner has good case of succeeding in the ongoing arbitration proceedings against the respondent. In my view, the petitioner has also not made out a case for attachment before judgment against the respondent. Petitioner has 25 / 26 ::: Downloaded on - 09/06/2013 19:51:39 ::: 26 arbpl.527-2013 not demonstrated that the respondent is trying to move or dispose of his assets with intension to defeat the decree that may be passed.
23 I, therefore, pass the following order :
Arbitration Petition is dismissed. Ad-interim order passed by this Court on 15th April, 2013 is vacated. There shall be no order as to costs.
24 At this stage, Mr. Madan, the learned Senior Counsel appearing for the petitioner applies for continuation of the ad-interim order passed by this Court on 15th April, 2013, which is opposed by Mr. D'vetre, the learned Senior Counsel appearing for the respondents. Application for continuation of ad-
interim order is rejected.
(R.D. DHANUKA,J.) 26 / 26 ::: Downloaded on - 09/06/2013 19:51:39 :::