Bombay High Court
Rameshchandra Mansukhani And 5 Ors vs Jagdishchandra Mansukhani And 6 Ors on 12 February, 2020
Author: G. S. Patel
Bench: G.S. Patel
901-CARBP31-20.DOC
Ashwini
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION PETITION NO. 31 OF 2020
Rameshchandra Mansukhani & Ors ...Petitioners
Versus
Jagdishchandra Mansukhani & Ors ...Respondents
Mr Chetan Kapadia, with Gauraj Shah & Saloni Shah, i/b DSK
legal, for the Petitioners.
Mr Y Sharma, with Atul Singh, H Kumar Vaidyanathan & Purnata
Raiyani, i/b H Kumar Vaidyanathan, for Respondents Nos. 1 to
4.
CORAM: G.S. PATEL, J.
DATED: 12th February 2020 PC:-
1. There is still insufcient and incomplete compliance with previous orders. The Court Receiver reports that the total amount inward transfers of shares of Man Industries (India) Limited ('MIIL'), the 6th Respondent, as of today is only 5,30,772 fully paid up equity shares. Previous orders required the JCM Group led by the 1st Respondent to transfer to the Court Receiver an aggregate of 9,96,000 equity shares of MIIL. This was in three lots. One lot was 34,000 shares which were to be re-acquired since the JCM Group had allowed shares of roughly this amount to be transferred away Page 1 of 7 12th February 2020 ::: Uploaded on - 13/02/2020 ::: Downloaded on - 09/06/2020 00:35:04 ::: 901-CARBP31-20.DOC allegedly in redemption of some pledges. Their counsel had made a statement that the amount will be brought back. In parallel, the JCM Group permitted the transfer by redemption of pledges of a further amount of about 95,000 shares, which Mr Vaidyanathan later in fairness corrected to mean 1,12,000 shares. The third lot was roughly 8.5 lakh shares held by the JCM Group in MIIL. The total of all of these is 9,96,000. What is transferred so far is only 5,30,772. There is shortfall of about 4,65,228 shares.
2. Mr Sharma on behalf of the 1st Respondent candidly states that the JCM group does not have the fnancial means to acquire the defcit. He explains that all the bank accounts are under some sort of freeze or block including orders of this Court but also including bank actions against the JCM Group. In addition, there are liens and claims on the JCM Group's holding in MIIL, as for instance by orders of SEBI (under challenge) and directives issued by one or more banks (also said to be under challenge). None of this is my concern, especially in a Section 9 Petition seeking relief after an Award has been passed.
3. The order itself tells us why this conduct of the JCM Group is unacceptable. There was a Deed of Family Settlement ('DFS') that related inter alia to this transfer of shareholding in MIIL from the JCM Group, presently the Respondents, to the RCM Group, the Petitioners. It was the JCM Group that in arbitration sought specifc performance of this DFS. The RCM Group submitted to a decree. Thus both sides desired implementation of the DFS.
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4. The fact that both sides have challenged the arbitral award is for the present purposes immaterial. That challenge will be heard but the concern is the way the JCM Group has conducted itself in regard to the orders of this Court and the statements made to this Court. For instance, apart from the 9th January 2020 order where the JCM Group instructed counsel then appearing to make a statement in regard to shares, on the next date, 23rd January 2020, when I took up the matter again in the afternoon, the 1st Respondent, Mr Jagdishchandra Mansukhani was personally present in Court. He made a statement and gave an undertaking. Paragraphs 11 and 12 of the second order of 23rd January 2020 read thus:
"11. As I noted this morning, some 95,761 shares of MIIL were apparently transferred out ostensibly in invocation of a pledge. Mr Mansukhani agrees and undertakes to bring back 95,671 shares of MIIL or their rupee equivalent at today's market rates. I am informed that the trading rates of MIIL are relatively stable and there is unlikely to be a signifcant price diferential.
12. Mr Mansukhani states that he is not in a position to comply with this overnight or even in the next few days. He states that he will need two weeks to meet this target. I will give him three. I will give him additional indulgence not from any sense of sympathy, all of which would be entirely misplaced, but to give him no room to complain that he was nor aforded an adequate opportunity. Mr Chagla's submission that no additional indulgence ought to be shown to the Mansukhanis is entirely valid. But I would rather risk a little time in the interest of a complete compliance. The Mansukhanis will understand that there is now no scope whatsoever for any non-compliance or even Page 3 of 7 12th February 2020 ::: Uploaded on - 13/02/2020 ::: Downloaded on - 09/06/2020 00:35:04 ::: 901-CARBP31-20.DOC delayed compliance. The statement made by Mr Mansukhani is accepted as an undertaking to the Court and I have explained to him the consequences of breaching this undertaking. To make that abundantly clear, there is already a contempt notice issued to him. It is not being discharged. A second breach of the undertaking will constitute aggravated contempt. He would be well advised to seek suitable legal advise on the exact implications of that."
(Emphasis added)
5. It is in this context, I do not see how I can possibly grant the request made by Mr Sharma to allow more time for compliance. If the JCM Group fnds itself in this position it has only itself to blame. The JCM Group cannot take courts for a ride. It cannot continually breach undertakings and disobey orders and fout directions. This is now a matter of implementation of the order of the Court and undertaking given to the Court. There is an absolutely zero- tolerance policy in this Court for such violations. Expressions of helplessness are utterly useless in a situation like this and I am putting this bluntly and clearly as possible. When a party conducts itself in this manner, it can only expect one thing: that the Court will act swiftly and will act without mercy.
6. There is another problem. Even the disclosures made are inadequate though my previous orders were abundantly clear. Details of the pledges created by the JCM Group are not disclosed. Full fnancial statements are not disclosed. Mr Sharma has instructions to state that there is some problem of reconciliation. That is incomprehensible. Accounts must be made up annually and Page 4 of 7 12th February 2020 ::: Uploaded on - 13/02/2020 ::: Downloaded on - 09/06/2020 00:35:04 ::: 901-CARBP31-20.DOC returns must have been actually fled. There is no question of telling a Court in February 2020 that for the last Financial Year there is a reconciliation problem.
7. I will grant no further indulgence beyond Monday 17th February 2020 for a full compliance. By this I mean that the entire defcit of shares must be brought in to the Receiver's demat account by that date. Second, there must be a complete disclosure. All items that are missing from the extant disclosures must be supplied in an Afdavit to the Advocate for the Petitioners by 12.00 noon on Saturday, 15th February 2020.
8. I am taking the liberty of now setting out so that there is no misunderstanding what the consequences of a default are going to be. First, there will be no further extension of time, so the JCM Group might as well not trouble to apply. Second, this will then be a clear case of aggravated contempt and I will proceed on that basis, so the JCM Group should prepare itself and instruct its Advocate accordingly. Third, I will direct the Court Receiver, already appointed, to now move against every single asset of the JCM Group and its individual members, including all personal assets both movable and immovable.
9. I trust the Advocates for the JCM Group will be able to explain to their clients what exactly this means and what is involved. To make sure that there is no ambiguity, I am including in this all residential properties, motor cars, individual items, furnishing, artefacts, artworks, jewellery, carpets, furniture -- in short, every Page 5 of 7 12th February 2020 ::: Uploaded on - 13/02/2020 ::: Downloaded on - 09/06/2020 00:35:04 ::: 901-CARBP31-20.DOC single thing to the JCM Group's individual member's names. Fourth, I will also immediately direct the Court Receiver to forthwith transfer the entire holding that is in the Court Receiver's Demat Account nominated by the Petitioners. This transfer will be with prejudice. There will be no question of the JCM Group thereafter being entitled to question this transfer irrespective of what grounds they have taken in their Section 9 Petition. Fifth, I will summarily dismiss the JCM Group's Section 34 Petition.
10. Mr Kapadia for the Petitioners states that at page 992 there is a list of seven diferent entities, all depository participants in which Respondent No. 1, Jagdischandra Mansukhani seems to have Demat Accounts. I notice that at page 995 there is an eighth entity, one Mangal Keshav Financial Services LLP. The DPID and the client ID for each Demat Account are noted (except perhaps for Mangal Keshav Financial Services LLP). The DPID and client ID for Jagdishchandra Mansukhani with Mangal Keshav Financial Services LLP will be provided by Advocates for JCM Group to the Advocates for Petitioners by 5.00 pm today. They will not wait for a copy of this order to be uploaded to comply with this direction.
11. Each of the seven entities listed below (and the listing includes the relevant DP ID and Client ID) will, by Monday 24th February 2020 return a statement to this Court (and which need not necessarily be on Afdavit) of the holdings of Jagdishchandra J Mansukhani in MIIL from 11th September 2013 till date. I will require an exact transactional statement showing all acquisitions and disinvestment of the shares. In addition, these depository participants will also submit a statement of all recording of pledges Page 6 of 7 12th February 2020 ::: Uploaded on - 13/02/2020 ::: Downloaded on - 09/06/2020 00:35:04 ::: 901-CARBP31-20.DOC with all details and whether these pledges are continuing and how many pledges have in fact been redeemed till date.
12. List the matter high on board on Monday, 17th February 2020.
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