Mercator Ltd vs Dredging Corporation Of India Ltd on 17 November, 2022

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Delhi High Court - Orders

Mercator Ltd vs Dredging Corporation Of India Ltd on 17 November, 2022

1. These enforcement proceedings arise out of three awards dated Signature Not Verified Digitally Signed By:SHITU NAGPAL O.M.P.(EFA)(COMM.) 2/2019 & connected matters. Page 1 of 6 Signing Date:18.11.2022 18:36:33 15.03.2018 passed in favour of Mercator Ltd. ["Mercator"] against Dredging Corporation of India Ltd. ["DCIL"] in a London seated arbitration. The awards have been upheld by the seat court.

2. Mr. Amitava Majumder, learned counsel for the Mercator, states that the sum awarded amounts to ₹14,18,94,834/- in OMP(EFA)(COMM) 2/2019, ₹15,22,23,208/- in OMP(EFA)(COMM) 3/2019, and ₹16,29,35,547/- in OMP(EFA)(COMM) 4/2019, inclusive of pre- reference and pendente lite interest. Further interest @9% per annum from the date of the award until payment, and costs, amounting in sum of ₹2,21,00,000/- were also awarded.

3. By an order dated 31.10.2019, DCIL was directed to deposit the entire awarded amount, alongwith up-to-date interest, with the learned Registrar General of this Court within six weeks. By a further order dated 23.01.2020, the submission of DCIL that it does not have sufficient funds to satisfy the awarded amount was noted. All assets of DCIL, including the bank accounts, were attached to the tune of the awarded amount, but the order was kept in abeyance for 15 days to enable DCIL to place on record particulars of their bank accounts, alongwith the balance as on 23.01.2020, and the schedule/proposal for deposit of the awarded amount. This order was reiterated on 10.02.2020 and DCIL was also directed to place on record a valuation of its assets, both encumbered and unencumbered, alongwith an estimate of its weekly/monthly expenses which are required to discharge its statutory liabilities and the wages of the employees. Vide order dated 24.02.2020, the order dated 23.01.2020 was kept in abeyance until the next date of hearing, in view of DCIL's affidavit that it owns unencumbered immovable property to the tune of Signature Not Verified Digitally Signed By:SHITU NAGPAL O.M.P.(EFA)(COMM.) 2/2019 & connected matters. Page 2 of 6 Signing Date:18.11.2022 18:36:33 ₹29.07 crores and also unencumbered dredgers valued at more than ₹300 crores. As a Resolution Professional ["RP"] has been appointed with regard to Mercator, adjournments were thereafter granted to enable learned counsel to take instructions from the RP. By the order dated 25.05.2022, further time was granted to DCIL to place the schedule/process for deposit of the awarded amount within four weeks.

4. On the last date of hearing i.e. 06.09.2022, a submission on behalf of DCIL was recorded that it had approached Mercator for a settlement of the decretal dues. Although the statement was disputed by Mr. Majumdar, time was granted to enable earnest efforts to be made in this regard. It was, however, made clear that if the settlement did not fructify, DCIL was to file the schedule/proposal for deposit of the awarded amount within six weeks from the said date.

5. Unfortunately, none of these orders have been complied with. Although there was apparently some discussion between the parties towards the possibility of a settlement, an affidavit dated 16.11.2022 is handed over in Court on behalf of DCIL which reads as follows:

"7. With reference to the Order of the Hon'ble Delhi High Court dated

06.09.2022 in O.M.P.(EFA)(COMM.) 2/2019 ,3/2019 and 4/2019, with a view to mutually settle the issue, a Committee was constituted by the Award Debtor to discuss and negotiate with the Decree Holder and first virtual meeting was held between the Committee with the Resolution Professional of the Decree Holder along with its counsel Shri Amitava Majumdar on 20.10.2022 wherein it was agreed between the parties that the proposal for settlement of the pending dispute relating to the present Arbitral Awards would be provided to the Resolution Professional and its Counsel at the earliest for enabling them to take a balanced decision to settle the disputes once and for all.

8. Immediately after the meeting, internal discussions had taken place with respect to submission of the proposal to the decree holder and further examination of the matter was done by the Committee. The principal amount awarded under three arbitral awards is Rs.

Signature Not Verified Digitally Signed By:SHITU NAGPAL O.M.P.(EFA)(COMM.) 2/2019 & connected matters. Page 3 of 6 Signing Date:18.11.2022 18:36:33

32,94,72,475/- (Rupees Thirty Two Crores Ninety Four Lakhs Seventy Two Thousand Four Hundred and Seventy Five only) (Claims+Damages+Demob+Legal Costs). Due to delay on account of administrative reasons the Award Debtor could not give the proposal to the Decree Holder so far. As not much time has been left the Award Debtor is therefore filing the Affidavit in Court.

9. The Award Debtor proposes to pay the Decree Holder the principal amount of Rs. 32,94,72,475/- (Rupees Thirty Two Crores Ninety Four Lakhs Seventy Two Thousand Four Hundred and Seventy Five only) (Claims+Damages+Demob+Legal Costs) in twelve equal monthly instalments starting from January,2023 towards full satisfaction of the decretal amount under the Execution Petitions pending before the Hon'ble Delhi High Court. It is humbly submitted that the Award Debtor due to financial crunch would not be in a position to service any interest on the amount awarded in the three Arbitral Awards. The above proposal to pay the principal amount is being made subject to the Decree Holder giving an undertaking that it will not claim any interest on the above principal amount or any other further amount in future in connection with the three Arbitral Awards.

10. Keeping in view the financial position of the Award Debtor and also in view of the facts and circumstances of the case the Award Debtor prays this Hon'ble Court to accept the above proposal proposed by the Award Debtor towards the satisfaction of the Arbitral Award."

6. It is clear therefrom that despite the passage of more than two months since the last order was passed, no concrete proposal was made by DCIL to Mercator in the interregnum. The proposal contained in this affidavit is for payment of the principal amounts awarded under the three awards (after deducting pre-reference and pendente lite interest), that too in 12 monthly instalments commencing in January, 2023. Mr. Majumdar has taken instructions and states that this proposal is not acceptable to Mercator.

7. In the event that a settlement had not fructified within six weeks from the order dated 06.09.2022, it was also incumbent upon DCIL to place before the Court a schedule/proposal for deposit of the awarded Signature Not Verified Digitally Signed By:SHITU NAGPAL O.M.P.(EFA)(COMM.) 2/2019 & connected matters. Page 4 of 6 Signing Date:18.11.2022 18:36:33 amount. This direction was first issued almost three years ago, on 23.01.2020, and reiterated several times since. The affidavit handed over in Court does not demonstrate compliance with the aforesaid directions. Indeed, Mr. K.M. Nataraj, learned Additional Solicitor General of India, is unable to suggest to the contrary. The situation is undoubtedly one of concern, as a public sector undertaking of the Government of India is in repeated violation of the directions to place a proposal for deposit of the amount awarded into Court.

8. The affidavit handed over today reveals that the financial position of DCIL is also a cause for concern. Although an affidavit of February, 2020 suggested that DCIL has unencumbered assets of approximately ₹329 crores, today's affidavit states as follows: -

"4. It is submitted that due to COVID-19 the business of the Award Debtor also got affected and could not realize the anticipated revenue that the Award Debtor was expecting to realize. The income generated by the Award Debtor between 01.04.2020 to 31.03.2021 is Rs.767 Crore as against expenses incurred during the said period which is more than Rs.939 Crores. The total loss incurred by the Award Debtor during the said period is around Rs.180 Crores. For the financial year 01.04.2021 to 31.03.2022 the income generated by the Award Debtor is Rs.819 Crore as against expenses incurred during the said period which is Rs.815 Cores.

5. The monthly expenditure of the Award Debtor is more than its income and therefore, the Award Debtor has drawn an overdraft to the tune of Rs.100 Crores from the banks as on 31.08.2022 to meet the deficit. Further, the Award Debtor has loan liability for procurement of three dredgers which will be cleared by January, 2024, The Award Debtor has also taken term loan to the tune of Rs. 20 Crore for which the Award Debtor has to service interest. Apart from the above the Award Debtor has outstanding liability of Rs.146.47 Crores towards dry dock repairs to different shipyards. The Award Debtor also has outstanding vendor payment of Rs.184.61 Crores."

9. On 25.05.2022, the Court had also recorded the statement of DCIL Signature Not Verified Digitally Signed By:SHITU NAGPAL O.M.P.(EFA)(COMM.) 2/2019 & connected matters. Page 5 of 6 Signing Date:18.11.2022 18:36:33 that it will not deal with or dispose of any of its assets, except in the ordinary course of business, including towards payment of dues to its employees, statutory dues, and other operational expenses. That order will continue until the next date of hearing. DCIL is directed to file an affidavit as to its current assets, including the details of whether these assets are encumbered and unencumbered, current valuation, copies of the latest audited balance sheets and profit and loss accounts, within two weeks from today.

10. I note that DCIL has itself contemplated payment of the amount of ₹32,94,72,475/- in 12 monthly instalments, starting from January, 2023. While this offer is not acceptable to Mercator, to show its bona fides, DCIL is directed to deposit a sum of ₹5 crores with the Registry of the Court by 31.01.2023. The amount deposited will be kept in an interest bearing fixed deposit.

11. In the event the aforesaid amount is not deposited and the affidavits as directed herein are not filed within the time granted by this order, the Managing Director of the DCIL will remain personally present in Court on the next date of hearing. This order will not come in the way of DCIL making a better proposal to Mercator, which Mercator may consider.

12. List on 15.02.2023.

PRATEEK JALAN, J NOVEMBER 17, 2022 'Bhupi'/ Signature Not Verified Digitally Signed By:SHITU NAGPAL O.M.P.(EFA)(COMM.) 2/2019 & connected matters. Page 6 of 6 Signing Date:18.11.2022 18:36:33

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Delhi High Court - Orders