Delhi High Court
Citicorp International Ltd vs Shiv-Vani Oil & Gas Exploration on 8 July, 2016
Author: V.Kameswar Rao
Bench: V.Kameswar Rao
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on May 19, 2016
Judgment delivered on July 08, 2016
+ EX.P. 251/2014, CCP(O) 94/2015, EA(OS) Nos. 518-
519/2014 and 810/2014
CITICORP INTERNATIONAL LTD ..... Decree Holder
Through: Mr. Rajeeve Mehra,
Sr. Adv. and Mr. Rajiv
Nayar, Sr. Adv. with Mr.
Arun Kathpalia,
Mr. Sandeep Mahapatra, Mr.
Ashish Mukhi & Mr. Dhruv
Malik, Advs.
versus
SHIV-VANI OIL & GAS
EXPLORATION ..... Judgement Debtor
Through: Mr. Pawan Sharma,
Adv. with Mr. Anuj Shah,
Adv.
Mr. P. Chidambaram, Sr.
Adv. & Mr.Sandeep Sethi,
Sr. Advs. with Ms.Rukhmini
Bobde & Ms.Aakansha
Nehra, Advs. for ICICI Bank
Ltd. & ICICI Bank UK PLC
in EA (OS) No. 526/2015.
Mr. Punit Bhalla, Adv. for
ILF&S in EA (OS) Nos.
142/2016, 195/2016 and
250/2016
Mr. Sanjeev Puri, Sr. Adv.
with Mr. Sidharth Sethi &
Mr.Kunal Mimani, Advs. for
Standard Chartered Bank in
EA (OS) No.864/2015.
Ex.P 251/2014 Page 1 of 32
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.
EA(OS) Nos. 700/2014, 526/2015, 864/2015, 195/2016, 142/2016 & 250/2016
1. By this order, I shall decide EA (OS) Nos.700/2014, 526/2015, 864/2015, 195/2016, 142/2016 and 250/2016.
2. EA (OS) 700/2014 is filed by the judgment debtor namely Shiv- Vani Oil and Gas Exploration Services Ltd.; EA (OS) 526/2015 is filed by the ICICI Bank U.K. PLC; EA(OS) 864/2015 is filed by the Standard Chartered Bank acting in its capacity as a security trustee for and on behalf of 8 banks / financial institutions and EA(OS) Nos. 195/2016, 142/2016 and 250/2016 are filed by IL&FS Trust Company Ltd., the receiver.
EA(OS) 700/2014
3. This is an application filed by the judgment debtor for modification of order dated 28th July, 2014 to the extent of excluding the rigs owned by subsidiaries. It is averred in the application and contended by Mr. Pawan Sharma, learned counsel appearing on behalf of the judgment debtor that the order dated 28 th July, 2014 inter alia restraining the judgment debtor from selling the rigs owned by the Ex.P 251/2014 Page 2 of 32 subsidiaries of the judgment debtor could not have been passed in these execution proceedings against the judgment debtor.
4. He states that the subsidiary companies are separate legal entities, different from the judgment debtor/applicant and the decree holder cannot in any manner seek restraint order against selling of the assets of the subsidiary companies as the alleged claim of decree holder is against the judgment debtor and not against its subsidiaries and the order dated 28th July, 2014 is causing hardship to the subsidiary companies which are not privy to the Execution Petition against the judgment debtor. He states, the decree holder has mislead this Court for obtaining the said order by giving false impression to this Court in Para 11 of the EA(OS) No.519/2014 that the rigs mentioned in Annexure E are the rigs owned by the judgment debtor, where as in Annexure E, the decree holder has included rigs owned by the subsidiaries also, which is untenable. EA(OS) 526/2015
5. This is an application under Order XXXIX Rule 4 read with Section 151 of Code of Civil Procedure, 1908 filed by ICICI Bank U.K. PLC, which is a Company registered in accordance with the laws of England and Wales. It is the contention of Mr. P.Chidambaram and Ex.P 251/2014 Page 3 of 32 Mr. Sandeep Sethi, learned Sr. Counsels appearing for the applicant that the applicant Company entered into a facility agreement dated 12th July, 2010 with the Shiv-Vani Oil and Gas Company LLC (SVOGCL), a limited liability Company incorporated under the laws of Sultanate of Oman and a subsidiary of the judgment debtor for providing credit facilities to the tune of USD 45,000,000. On entering the facility agreement, the applicant first disbursed on 13th July, 2010 an amount of USD 9,000,000 and later USD 31,000,000 on 23rd August, 2010. The applicant entered into a commercial mortgage with SVOGCL on 21st September, 2011 whereby SVOGCL mortgaged the following assets by way of first and exclusive charge in favour of the applicant to secure the repayment of the aforesaid loans. Three (3) units of ZJ 30 Truck mounted 900 HP land rigs each with a telescope mast of 1700 KN maximum hook load capacity owned and operated by the mortgagor as described further below:-
Name Hoist 20 Hoist 21 Hoist 35 Registration 7113 RK 7248 RK 7098 RK Number Model Number SJX5700TZJ30 SJX5700TZJ30 SJX5700TZJ30 Serial Number 031235 031234 040444 VIN LA9E5VCH13SJZ035 LA9E5VCHX30SJZ034 LA9E5VCH040SJZ044 Year of Build 2004 2004 2004
6. According to them, the SVOGCL thereafter had committed Ex.P 251/2014 Page 4 of 32 default in making the payments to the applicant herein for the credit facilities availed by it. Applicant served default notices on SVOGCL on 19th July, 2013, 17th January, 2014, 16th April, 2014, 9th January, 2015 and 17th April, 2015. However, despite notices, SVOGCL failed to make the payments to the applicant for the credit facilities and thereafter on 21st April, 2015 the applicant issued notice calling upon SVOGCL to make immediate payment of all outstanding advances accrued interest and all other amounts accrued or outstanding amounting to USD 41,545,481.29 within 7 days. According to them as the 7 days period elapsed and the SVOGCL having failed in its obligation to repay the amount to the applicant, the applicant is entitled to exercise the rights available to it as a secured creditor in relation to the mortgaged assets as mentioned in the agreement dated 21st September, 2011. However in view of the order dated 28th July, 2014, whereby this Court restrained the judgment debtor namely Shiv-Vani Oil and Gas Exploration Services Limited from selling all their onshore rigs as per statement inserted by the decree holder by way of Annexure at pages 95 and 96 of the execution petition, the applicant is unable to exercise the said rights.
7. In other words, it is the submission of Mr. P.Chidambaram, that the decree holder while detailing the rigs owned by judgment debtor at Ex.P 251/2014 Page 5 of 32 pages 95 and 96 has inserted the details of the rigs owned by the subsidiaries of the judgment debtor thereby creating an impression as if such rigs were that of the judgment debtor. The said rigs at serial nos. 39, 40 and 41 at page 96 are not the assets of the judgment debtor for them to be attached. He states that in fact at page 8 of the petition under the heading Schedule, the decree holder had rightly not reflected the rigs at serial no. 39, 40 and 41, but while reflecting the rigs at pages 95 and 96, the rigs at serial no. 39, 40 and 41 belonging to the SVOGCL and under the charge of the applicant have been included. He also draws my attention to the facility agreement at Annexure A-1 to the application (Page 41), wherein Schedule - II reflects the mortgaged assets of three (3) rigs being units of ZJ30 Truck Mounted 900 HP land rigs each with a telescope mast of 1700 KN maximum hook load capacity, the names being Hoist 20, Hoist 21, Hoist 35. He states that there is no averment nor any document has been filed in the main Petition to show that the rigs belong to the judgment debtor. He refers to clause 3.1, under clause 3 at page 24 of the documents to the application to show that the applicant has first priority mortgage over the mortgaged assets. He states that the applicant is a secured creditor. According to him, there is no representation by the decree holder that apart from the 27 rigs, other rigs have been leased out to the judgment debtor. There is no averment Ex.P 251/2014 Page 6 of 32 in the petition that the rigs are in the possession of the judgment debtor. He also states, the decree holder could not have approached this Court with respect to the rigs which are outside the jurisdiction of this court and in that regard, he relied upon the Judgment of this Court reported in 2009 3 Arb. Law Report 524 Daelim Industrial Co. Ltd. vs. Numaligarh Refinery Ltd. On a plea taken by the decree holder in its reply about the competency of Mr. Sudhir Balram Dole to file this application, Mr. Chidambaram relied upon Order XXIX Rule 1 of the Code of Civil Procedure, 1908 to say that Mr. Dole being a Managing Director is competent to sign the application and in that regard he relied on the judgment of the Supreme Court in 1996 (6) SCC 660 United Bank of India vs. Naresh Kumar and ors. He also states that the plea of the decree holder that this Court is required to lift the corporate veil to see that the judgment debtor and its subsidiaries are in fact common economic entity and as such the rigs of subsidiaries of the judgment debtor can be attached is untenable, as the SVOGCL is a separate legal entity and the rigs are in the name of the SVOGCL which are under the exclusive charge of the applicant herein. According to him, looking from any perspective, the applicant being a secured creditor, it is the applicant, who has right on the rigs and not the decree holder. He would rely on the judgment of the Supreme Court in the case reported as Ex.P 251/2014 Page 7 of 32 2015(3) SCC 363 Infrastructure Healing and Financial Services Ltd vs. BPL Ltd in that regard. With regard to lifting of corporate veil, it is his submission, it is not a case of lifting of corporate veil as, the entity, SVOGCL, is a separate legal entity; no case of fraud pleaded; the applicant has the exclusive charge on the three rigs. He would rely on the judgment of the Madras High Court AIR 1969 Madras 359 M/s Spencer and Co. Ltd. Madras vs. The Commissioner of Wealth Tax Madras in support of his contention. He seeks the modification of order dated July 28, 2014 so as to exclude the rigs owned by SVOGCL described at serial no. 39, 40 and 41 (page 96) of the petition. EA (OS) 864/2015
8. As stated above, this is an application filed by the Standard Chartered Bank acting as a Security Trustee on behalf of 8 other banks / financial institutions. This application is of a similar nature. It is averred in the application and also contended by Mr. Sanjeev Puri, learned Sr. Counsel, that this application has been necessitated as vide order dated July 28, 2014, the judgment debtor has been restrained from selling the rigs, which includes 3 rigs at serial nos. 33, 34 and 35 (with rigs no. 27, 28 and 29) at pages 95-96 of the petition, of which a charge was created in favour of the applicant by Oriental Oil and Gas Services Ltd. formerly Ex.P 251/2014 Page 8 of 32 known as M/s. SV Oil and Natural Gas Company Limited, a direct Mauritian incorporated subsidiary of the judgment debtor to secure a term loan facility of USD 51,000,000 availed by it from the applicant (acting as the arranger, agent, security trustee and account bank) and the lenders under a facility agreement dated 3rd September, 2009. The above fact was known to the decree holder since May, 2014, yet it appears that the same was not brought to the notice of this Court before order dated 28th July, 2014 was passed. The Oriental Oil and Gas Services Ltd. availed the above term loan facility for the purpose of inter alia refinancing the amounts outstanding from it under an earlier facility agreement dated 12th May, 2008 between, amongst others, Oriental and the applicant. The loan availed by the Oriental Oil and Gas Services Ltd. under the earlier facility agreement was for the acquisition of 3 oil drilling rigs mentioned below:-
Rig Description ZJ 70 D bearing No. 27 2000 HP ZJ 70 D bearing No. 28 2000 HP ZJ 70 D bearing No. 29 2000 HP
According to Mr. Puri, pursuant to the terms of facility agreement, Oriental also entered into a deed of hypothecation dated 4 th September, 2009 with applicant. In accordance with the deed of hypothecation, Ex.P 251/2014 Page 9 of 32 Oriental created first and exclusive charge by way of hypothecation over all of oriental's movable assets, both present and future including on the charged rigs. Thereafter, vide deed of fixed and floating charge dated 9th September, 2009 between oriental and the applicant herein, Oriental also created a first fixed and floating charge over its assets, including over the charged rigs in favour of the applicant. The fixed charge over the charged rigs created pursuant to the deed of fixed and floating charge was also registered and inscribed at Mauritius before the conservator of mortgages on October 13, 2009. Vide a lease agreement dated 4th September, 2009 between Oriental and Judgment Debtor, oriental leased the charged rigs to the judgment debtor. At the same time vide deed of assignment and charge dated 4th September, 2009 between the Oriental and the applicant, Oriental assigned to the applicant all its present, future right, title and interest in the said lease agreement. He would also draw my attention to pages 133, 141, 158 and 167 of the application. According to him, the Oriental has failed to comply in full with its payment and other obligations under the facility agreement and that monies due and payable under the facility agreement have not been paid since first demanded in September, 2012. This amounts to an event of default under the facility agreement and entitles the applicant to enforce security created under the deed of hypothecation and the deed of fixed Ex.P 251/2014 Page 10 of 32 and floating charge by, amongst others, exercising the power of sale in respect of Oriental assets including the charged rigs. He states that in exercise of the rights under the deed for fixed and floating charge, the applicant in May, 2014 has already appointed receivers in respect of Oriental assets in India and they are authorized to exercise inter alia power of sale in respect of oriental assets including the charged rigs. He would state that the applicant vide its letter dated 16 th May, 2014 had already notified the Citicorp that in terms of the facility agreement and certain other related agreements, Oriental had created first and exclusive charge on all its assets including on the charged rigs in favour of the applicant. It, however, appears this fact was not brought to the notice of this court resulting in order dated 28th July, 2014. Had the decree holder apprised this fact to this Court, this Court would not have passed the order dated 28th July, 2014 so as to include the said rigs within the ambit of its order. He states, the location of the rigs keeps on changing. According to him, the rigs at serial Nos. 1 and 2 of page 158 are covered by the interim order. He seeks, the modification/vacation of order dated July 28, 2014, insofar as it extends to the charged rigs appearing at Serial Nos. 33, 34 and 35 of the list of rigs (with rig nos. 27, 28 and 29) provided at pages 95 and 96 of the execution petition. Ex.P 251/2014 Page 11 of 32
9. I note, the decree holder has filed a consolidated reply to EA(OS) nos. 526/2015 and 648/2014, but in view of the fact that the learned counsel for the applicant has withdrawn IA 648/2014, the reply is construed as a reply to EA(OS) No. 526/2015 only and thus the petition with regard to the maintainability of EA (OS) 648/2015 on the ground of unstamped power of attorney does not survive.
10. In so far as EA (OS) Nos. 700/2014, 526/2015 and 864/2015 are concerned, to which replies have been filed, it is the submission of Mr. Rajeeve Mehra, learned Sr. Counsel appearing on behalf of the decree holder / non-applicant that the application EA(OS) No. 526/2015 is not maintainable as there is no resolution of the applicant / company in favour of Mr. Sudhir Balram Dole to enable him to sign, verify and institute the application. That apart it is his submission that the plea of the applicants in these applications that the decree holder has mislead the Court which resulted in passing the order dated 28 th July, 2014 is incorrect. He states that at Page 8 of the petition against column "in what manner the court assistance is required", the decree holder did mention about attaching immoveable, moveable and current assets, which, and / or in the possession of the judgment debtor including but not limited to the assets named as per the schedule given in that petition. Ex.P 251/2014 Page 12 of 32 In other words, he state that it is not the case of the decree holder that attachment of the assets of judgment debtor was only sought, but also of those which are in its possession. That apart he states that there is no misrepresentation by the decree holder at Pages 95-96. According to him, at Page 95 the table illustrates the break-up of ownership and deployment of the rigs owned by the Shiv-Vani Group, which includes the subsidiaries of the judgment debtor Company. That apart, it is his submission that this Court on being satisfied that a case exist to restrain the judgment debtor from alienating its assets and also the assets belonging to its subsidiaries, passed the restraint order. In fact according to him, in its application seeking restraint order over the rigs, being Execution Application 519/2014, the decree holder had submitted that the judgment debtor operates majorly through its subsidiaries and had supported this argument with reference to the contents of the Annual Reports of the judgment debtor for the years 2012-13, 2013-14, which contains the consolidated financial details of the judgment debtor. He also refers to the reports to state that a 100% subsidiary of the judgment debtor is executing a contract in Egypt. It is further his submission that the description of the rigs purportedly belonging to the subsidiary and over which a charge has been created in favour of the applicant as provided in the Application do not conform to the description of the rigs Ex.P 251/2014 Page 13 of 32 mentioned at Serial no. 39, 40 and 41 on page 96 of the documents filed with the Execution Petition. He states that the case of the applicant in EA (OS) 526/2014 is that these rigs are the same as those over which charge has been created in favour of the applicant, however, no effort has been made by the applicant to explain as to how it has arrived at a conclusion that these rigs are covered by the restraint order. He lay stress on the Annual reports to contend that the assets for the use of judgment debtor have been purchased with the funds of the judgment debtor but in the subsidiaries name, while the judgment debtor paid large sums of money purportedly towards the lease rentals to those very subsidiaries. By this method, Crores of Rupees would have flown out of the account of the judgment debtor towards its subsidiaries. He further states that perusal of the Annual Reports also bring out that the judgment debtor has provided interest free loans, without any repayment schedule to its subsidiaries which are located in various offshore locations. According to him, these subsidiaries with these loans provided by the judgment debtor had purchased rigs and have leased back these very rigs to the judgment debtor. The operations of the judgment debtor have been conducted in this manner over a period of time and monies from the judgment debtor company are systematically being put in the subsidiaries and have been used to finance the purchase / acquiring Ex.P 251/2014 Page 14 of 32 assets in the name of the subsidiaries to the detriment of the decree holder. According to him, the decree holder has further been instructed by the bondholders to submit that it is evident that the subsidiaries of the judgment debtor have purchased the rigs out of funds belonging to the judgment debtor and as such have been acquired through related party transactions, such acquisitions ought not to be construed in a technical sense, rather the facade should be removed and the transactions be seen in a clearer light and the true movement of funds be identified, which would reveal that the true ownership of rigs owned by the subsidiaries are in fact belonging to the judgment debtor. In other words, the management of these subsidiary companies is being effectively held by the judgment debtor and the assets of these subsidiaries have been purchased out of the funds of the judgment debtor for its own use. Similar corporate structures are in place of all other subsidiaries located in offshore locations of the judgment debtor.
11. According to him, it is well settled principle of law that the courts in such scenario where separate companies have been incorporated by the same group, may see whether they exist as autonomous units or as organs of each other. The Courts, in cases where the situation demands, for example in cases where the ownership is a mere sham, may lift the Ex.P 251/2014 Page 15 of 32 corporate veil and use its discretion to do complete justice upon equitable consideration, i.e., not just to look at the juristic person alone but its directors, officers, nominees and even employees. He states that continuance of interim order dated 28th July, 2014 is necessary for safeguarding the interest of the decree holder.
12. Similar are his contentions with regard to EA (OS) 864/2015 and EA (OS) 700/2014 filed by the Standard Chartered Bank and by the judgment debtor, inasmuch as, the judgment debtor operates through its subsidiaries; the rigs purportedly over which a charge has been created in favour of the applicant EA (OS) 864/2015 as provided in the application do not conform to the description of the rigs mentioned at serial nos. 33, 34 and 35 on page 96 of the petition. No effort has been made by the applicant to explain as to how it has arrived at the conclusion that these rigs are covered by the restraint order, and the applicant has failed; to make out a case in the application; even otherwise, he relied upon the annual reports of the judgment debtor company to submit, what has already been stated by me above. He would rely upon the following judgments in support of his contentions.
(i) Pankaj Aluminium Industries Pvt Ltd vs. Bharat Aluminium Company Ltd. Company Petition 13/2008 decided on 23rd March, Ex.P 251/2014 Page 16 of 32 2011;
(ii) 2011 (14) SCC 66 SMS Tea Estates Pvt. Ltd vs. Chandmari Tea Company Pvt. Ltd;
(iii) Deepak Khosla vs. Union of India and ors W.P.(C) 7651/2009 decided on 8th October, 2009;
(iv) Gatx India Pvt. Ltd. vs. Arshiya Rail Infrastructure Ltd. and Anr. OMP 1132/2013 decided on August 20, 2014.
EA(OS) 142/2016
13. Insofar as EA(OS) 142/2016 is concerned, as stated above, this is an application filed by IL&FS Co. Ltd, the receiver appointed by this Court, on November 18, 2015 in EA(OS) 1001/2015 for auctioning the following oil rigs:-
(i) Two 600 horsepower deep drilling rigs,
(ii) One 1400 horsepower deep drilling rig,
(iii) One 2000 horsepower deep drilling rig and
(iv) One set of directional drilling.
14. The prayers made in the application are as under:-
a) Allow the application and extend the time as detailed under :
(i)minimum period of 24 weeks are required for completion of the auction process of the Rigs located in India;
(ii) a minimum period of 32 weeks for completion of the auction process the rig which is located in Iraq in Ex.P 251/2014 Page 17 of 32 compliance of the order dated 18.11.2015; and
b) pass such order/further order(s) as this Hon'ble Court may graciously be pleased to pass in the interest of justice."
15. It is the submission of Mr. Punit Bhalla that the Court vide its order dated November 18, 2015 had fixed the period for completing the auction proceedings by end of January, 2016. He states that the certified copy of the order dated November 18, 2015 was received by the applicant company on January 6, 2016 and the following action has been taken by the applicant:-
Date Action taken by ITCL as the Court Receiver
11.12.2015 Obtained quotation from the Advertisement
Publishing
Agencies
15.12.2015 Obtained quotation fi-om E auction agencies
22.12.2015 Obtained quotation fi-om Legal Expert
4.1.2016 Obtained quotation from Technical Expert
6.1.2016 Received the certified copy of Court Order
through
post
12.1.2016 Appointment of MadhavLabhe (Technical
Expert) and
PunitBhalla (Legal Expert)
14.1.2016 Letter to Shiv Vani for assisting in the process
of
inspection with specific timeline of 18-01-
2016
14.1.2016 Commencement of Inspection of Rigs through
Kick off
Meeting
2nd to 3rd week of February, 2016 Scheduled Completion of valuation and
Inspection
16. He states, that in the event of all auction process going online and auction being successful at the first attempt, minimum of 24 weeks are required for completion of the auction process of the rigs located in India Ex.P 251/2014 Page 18 of 32 and minimum 32 weeks for the rigs which are located in Iraq. He states, keeping in view the aforesaid period, the relief, as noted above has been prayed for. Reply has been filed by the ICICI Bank to this application. Meaningfully read, it is their case that smaller extension may be granted on the condition that the sale must be concluded within the said period. EA(OS) 195/2016
17. Insofar as EA(OS) 195/2016 is concerned, the same has been filed by IL&FS Trust Co. Ltd seeking clarification with regard to the sale of the assets as directed in the order dated November 18, 2015. The prayers in the application are as under:-
"a) Allow the application and Clarify to the extend that who will bear the Expenses for the sale of the rigs and the fee of the receiver may also be clarified in the same; and
b) pass such order/further order( s) as this Hon 'ble Court may graciously be pleased to pass in the interest of justice."
18. Reply has been filed by the ICICI Bank, wherein in para 5, following is the stand of the ICICI Bank Ltd.
"5. It is at the outset clarified that the Secured Assets have been exclusively charged in favour of ICICI and accordingly, an application was filed before the Ld. Ex.P 251/2014 Page 19 of 32 Debt Recovery Tribunal (namely O.A. No. 170 of 2015). Further, ICICI had submitted that there was a willing buyer for the Secured Assets. Ld. DRT had also permitted the sale of the Secured Assets, subject to the final outcome of the proceedings in O.A. No. 170 of 2015. However, the Decree Holder had objected to the said sale and in light of the same it was agreed that the Secured Assets be sold through this Hon'ble Court. In light of the same it is submitted that all parties involved ought to bear the cost of the sale of the Secured Assets."
19. In para 7, it is also stated as under:-
"7. In light of the aforementioned it is submitted that IL&FS is already in default of the Order dated 18.11.2015 passed by this Hon'ble Court. That without prejudice to the submissions in relation to Ex. Appl. (OS) No. 142 of 2016, it is submitted that the fees of IL&FS and corresponding expenses in conducting the sale (upon providing proof of payment), may be borne from the receipt of the monies from the sale of the Secured Assets. Further, if there is a failure to sell the Secured Assets, then, in the humble submission of the Answering Respondent, the Judgment Debtor shall bear the aforementioned costs."
20. The judgment debtor has also filed its reply to this application. In para 2, 3 and 4, following is the stand of the judgment debtor:-
"2. The answering Respondent states that the assets that Ex.P 251/2014 Page 20 of 32 have been ordered to be sold vide order dated 18.11.2016 of this Hon'ble Court, are exclusively charged with ICICI Bank Ltd. ("ICICI Bank"). Further, the aforesaid order was passed in E.A. No. 1001 of 2015, an application filed by ICICI Bank seeking the sale of the assets of the Respondent.
3. That vide order dated 18.11.2016, this Hon'ble Court directed that the proceeds from the sale of the aforesaid assets are to be deposited with the Registrar General of this Hon'ble Court in an interest bearing FDR and would subsequently be appropriated as may be determined by this Hon'ble Court.
4. That by means of the Application under reply, the Applicant sought a clarification with regard to its fee and costs that it may incur in disposing off the aforesaid assets, in this regard it is submitted that, the fee of the Applicant and any costs that it may incur in disposing of the assets may be deducted from the sale proceeds received from sale of the assets."
21. The learned counsel for the decree holder would submit that the charges must be borne by ICICI Bank Ltd, whereas the learned counsel for the ICICI Bank would contend the opposite. In fact, during the course of submissions, it was put to the learned counsel for the judgment debtor, the expenses be borne by the judgment debtor as situation has arisen because of the omission and commission on the part of the Ex.P 251/2014 Page 21 of 32 judgment debtor. It was represented, that the account of the judgment debtor, do not have any money to meet the expenses of the auction to be carried out by IL&FS Trust.
EA(OS) 250/2016
22. Insofar as EA(OS) 250/2016 is concerned, the same has been filed by IL&FS Trust seeking police assistance in taking possession of the equipments.
Conclusion in EA(OS) Nos. 700/2014, 526/2015, 864/2015
23. Having heard the learned counsel for the parties and considered the replies filed to these applications, insofar as the submission of Mr. Rajeeve Mehra on the competence of Mr. Sudhir Balram Dole, in the absence of any authorisation to file the application is concerned, the same is liable to be rejected for the simple reason, it is noted that Mr. Dole is the Managing Director and CEO of the ICICI Bank UK PLC. Order XXIX Rule 1 of the Civil Procedure Code, stipulates suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation, by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case. In the present case, from the affidavit filed by Mr. Dole, it is seen that he is the M.D and CEO of the applicant organisation. Being the M.D and Ex.P 251/2014 Page 22 of 32 CEO, he being the Principal Officer of the corporation, is competent to sign and verify on behalf of the applicant, the application. The Supreme Court in United Bank of India (supra), has held that by virtue of office the person holds, can sign and verify the pleadings on behalf of the corporation. In that view of the matter, the submission in that regard need to be rejected. It is not disputed by the decree holder that the rigs in question, insofar as EA(OS) 526/2015 are concerned, are outside the jurisdiction of this Court. If that be so, this Court would have no jurisdiction to execute a decree qua the rigs, which are outside this Court's jurisdiction, keeping in view the principles underlying sub- section 4 of Section 39 of the Code of Civil Procedure. It may be clarified, that the rigs at serial nos. 39, 40 and 41 charged to the applicant in EA(OS) 526/2015, are situated at Oman, as per the decree holder. Similarly, the rigs at serial nos. 33, 34 and 35 (charged to the applicant in EA(OS) 864/2015) are not within the jurisdiction of this Court. The very purpose of execution is realisation of money from the person or the property of the judgment debtor. When an Award made is executable as a decree and the execution sought is against property, the execution shall lie at a place where the property is situated. As noted above, the rigs being outside the jurisdiction of this Court, the execution petition per-se with regard to the rigs of the applicants at serial Nos. 39, 40 and 41 and Ex.P 251/2014 Page 23 of 32 33, 34 and 35 would not be maintainable and the decree holder could not have sought a direction in the manner the decree holder did vide EA(OS) No. 519/2014. The reliance placed by Mr. Chidambaram in the case of Daelim Industrial Co. Ltd. (supra) and Citi Bank (supra) was primarily in the context of Section 39 of the CPC, whereas, this petition has been filed under Section 44A of the CPC. It has been held by the Division Bench of this Court in Goyal Gases (supra), that Section 44A is endowed with an in built scheme of execution which is all together distinct and not comparable with the scheme envisaged under Section 39(3). Be that as it may, the issue of seeking execution, with regard to a property which is outside the jurisdiction of this Court is well settled and the Supreme Court, in the case of M.V. Al Quamar vs. Tsavliris Salvage (International) Ltd. & Ors. 2000 (8) SCC 278 did held in that case that if the ship in question, which is arrested at Visakhapatnam had sailed out of the territorial waters of Andhra Pradesh then the Andhra Pradesh High Court would have lost its jurisdiction to entertain such a suit or the execution proceedings for executing the decree of foreign Court. It also held, but once it was within its territorial waters, the ship could have been validly subjected to such a suit not only against itself but against its owner. In other words, it is the view of the Supreme Court, for a Court to have jurisdiction to entertain a suit or execution proceedings for Ex.P 251/2014 Page 24 of 32 executing the decree of foreign Court, the subject-matter of the suit/execution proceedings need to be within the Court's jurisdiction and hence, in the facts of this case also and to that extent, the execution of decree over the rigs situated outside the jurisdiction of this Court, the petition would not be maintainable and the interim order need to be vacated on that ground.
24. In so far as the submission on behalf of the decree holder that the applicants be put to strict proof that the rigs mentioned at serial nos. 33, 34, 35, 39, 40 and 41 belong to the subsidiaries as the description of the said rigs contained in the documents filed by the applicants do not match those in the list provided by the decree holder, suffice to state that the counsel who appeared in the post-lunch session on 19th May, 2016 was put a specific query, whether, he states the rigs on which interim order was granted are not the same which are subject matter of the charge in favour of the applicants, he refused to say so.
25. What is important is, the plea, raised by the applicants that the rigs do not belong to the judgment debtor. The decree holder do not dispute this particular fact. In fact, the averments made in the reply to the application and the submissions so advanced by Mr. Rajeeve Mehra, it is clear that the decree holder is resisting the applications, primarily on the Ex.P 251/2014 Page 25 of 32 ground that the judgment debtor being in possession of the rigs, the decree holder was within its competence to seek a direction against the rigs, even though owned by the subsidiary companies. I am unable to accept such a plea of Mr. Mehra for the simple reason that a subsidiary company, even though a 100% subsidiary of the judgment debtor, still it is a separate entity in the eye of law. The plea of lifting of corporate veil is not sustainable in this case. It has been rightly held by the Madras High Court, that merely because a company purchases almost entirety of the shares in another company, it will not serve as a means of putting an end to the corporate character of the other company or the controlling company acquiring the ownership of the controlled company so as to treat them as one entity for purposes of rights and liabilities. That apart, I agree with the submission made by Mr. Chidambaram that the applicant, having the charge over the rigs, it is the applicant, which can invoke the charge against the subsidiary company of the judgment debtor and the decree holder in the present case having no charge on the rigs, cannot thereby seek an execution of the decree through the rigs belonging to the subsidiary company of the judgment debtor. The reliance placed by Mr. Chidambaram on the judgment of the Supreme Court in the case of Infrastructure Leasing & Financial Services Limited (supra), is justified wherein the Supreme Court quoting the Ex.P 251/2014 Page 26 of 32 Halsbury's laws, has in Para 32 held as under:-
"32. The purpose of the classification of creditors has its significance. It is with this object that when a class has to be restricted, the principle has to be founded on homogeneity and commonality of interest. It is to be seen that dissimilar classes with conflicting interest are not put in one compartment to avoid any kind of injustice. For example, an unsecured creditor who has filed a suit and obtained a decree would not become a secured creditor. He has to be put in the same class as other unsecured Creditors."
26. Insofar as the judgments relied upon by Mr. Rajeeve Mehra are concerned, the judgment of the Supreme Court in SMS Tea Estates Pvt. Ltd. (supra), which was primarily relied upon by Mr. Rajeeve Mehra to contend on the effect of an instrument not appropriately stamped by relying upon section 35 of the Stamp Act, 1899. Since the said application being EA(OS) 648/2015 does not survive for consideration, as the same has been withdrawn by the applicant, the reliance placed on this judgment is inconsequential.
27. Insofar as the judgment in the case of Deepak Khosla and Anr. (supra), is concerned, suffice to state that in view of my aforesaid conclusion, relying upon Order XXIX CPC, the judgment relied upon by Ex.P 251/2014 Page 27 of 32 Mr. Mehra has no application to the facts of this case. That apart, insofar reliance placed by Mr. Mehra on Para 26 of Pankaj Aluminium (supra) is concerned, suffice to state that the said judgment is not applicable in the facts of this case in view of the fact that in the said case, this Court, in Para 21 has concluded that the Court need not lift the corporate veil as the petitioner and its group companies has throughout been representing themselves to be a single economic entity. In fact, the memorandums of understanding clearly show that they were executed between the respondent on the one hand as well as the petitioner and other group companies on the other. It was in that context, this Court had referred to the doctrine of Single Economic Entity and made a reference to the judgment in the case of DHN Food Distributors Ltd and ors vs. London Borough of Tower Hamlets [1976] 3 ALL ER 462 at page 467. Suffice to state, it is not the case of even the decree holder that the loan facilities taken by the subsidiaries of the judgment debtor were along with the judgment debtor as one economic entity. In other words, the loan facilities were taken independently/individually by the subsidiaries of the judgment debtor company and in terms of the Loan Facility Agreements / other agreements, the charge on the assets were of the applicants herein in E.A(OS) 526/2015 and EA (OS) 864/2015. The said judgment has no applicability in the facts of this case.
Ex.P 251/2014 Page 28 of 32
28. Insofar as the judgment in the case of Gatx India Pvt. Ltd (supra), wherein Mr. Rajeeve Mehra has placed reliance on Para 55 of the judgment, suffice to state that the said judgment was in the context of section 9 application under the Arbitration & Conciliation Act and I do not see any relevancy of the said judgment in the facts of this case.
29. The application being EA(OS) 526/2015 filed by the applicant needs to be allowed. It is clarified that the order dated July 28, 2014 of this Court shall not be applicable to the rigs at serial Nos.39, 40 and 41 at pages 95-96.
30. Similarly, insofar as EA (OS) 864/2015 is concerned, similar is the position. As contended by Mr. Sanjeev Puri, it is the applicant in EA(OS) 864/2015, which has the charge on the rigs at serial Nos.33, 34 and 35 as noted from the documents, deed of hypothecation dated September 4, 2009 and deed of fixed and floating charge dated September 9, 2009. The decree holder do not dispute the position of the subsidiary company of the judgment debtor having taken the facility from the applicant and had mortgaged the three rigs in favour of the applicant, which has the first charge over those three rigs. It is not the case of the decree holder that it is also a secured creditor. In the absence of such a stand, this application also needs to be allowed. It is clarified Ex.P 251/2014 Page 29 of 32 that the order dated July 28, 2014 of this Court shall not be applicable to the rigs at serial Nos.33, 34 and 35 at page 96 of the petition.
31. In view of my conclusion, the EA (OS) 700/2014 filed by the judgment debtor also needs to be allowed to the extent held in EA (OS) 526/2015 and EA (OS) 864/2015. Applications EA (OS) 700/2014, EA (OS) 526/2015 and EA (OS) 864/2015 are disposed of.
32. Insofar as EA(OS) 142/2016 is concerned, the ICICI Bank does not object to the extension of time, except that a smaller extension be given. Noting the stand taken by IL&FS Trust, this Court is of the view that the time period for auctioning the property as directed by this Court vide order dated November 18, 2015, need to be extended for a period of 20 weeks from today. The application is disposed of.
33. Insofar as EA(OS) 195/2016 is concerned, noting the facts of this case, wherein while ordering auction of the four rigs, vide its order dated November 18, 2015, has, noted the submissions made by the counsel for the parties in the following matter, appointed the receiver and passed the order for disposing of the assets. I reproduce the relevant part of the order as under:-
"He further submits that the Court may permit the assets to be sold-off and the sale consideration be deposited in Ex.P 251/2014 Page 30 of 32 the Court for appropriation as per the rights of the parties. Mr. Rajive Mehra, the learned Senior Advocate for the non-applicant states that the issue whether the applicant has exclusive charge on the aforesaid assets which are sought to be sold-off is still pending adjudication before the DRT.
Mr. Rajiv Nayar, the learned Senior Advocate for the non- applicant would, without prejudice to rights and contentions of the parties, submit upon instructions, that the aforesaid assets be sold-off through the Court Receiver and all the monies so realized be deposited in the Court, which would subsequently be appropriated as may be determined by the Court.
In view of the above, M/s. IL&FS Trust Company Ltd. is appointed as the Receiver to dispose off the aforesaid assets by the end of January, 2016. The sale proceeds shall be deposited with the Registrar General of this Court in an interest bearing FDR.
The learned counsel for the parties would submit that they would have no objection if the proceedings before the DRT in OA No. 170/2015 proceed in accordance with law. In the circumstances, the proceedings before the DRT shall continue in the light of the order passed today."
If that be so, this Court is of the view that the expenses for the auction process shall be borne equally by the decree holder and the ICICI Bank Limited. The same shall be subject to further orders to be Ex.P 251/2014 Page 31 of 32 passed by this Court. Application disposed of.
34. Insofar as EA(OS) 250/2016 is concerned, this Court is of the view that the same needs to be allowed. The concerned In-charge of the police station, where the rigs are situated shall provide appropriate security to the receiver for executing the order dated November 18, 2015. Application is disposed of.
35. List the Execution Petition and pending applications on 5th December, 2016.
(V.KAMESWAR RAO) JUDGE JULY 08, 2016 Jg/ak Ex.P 251/2014 Page 32 of 32