Bombay High Court
Evonik India Pvt. Ltd vs Reliable Spaces Pvt. Ltd on 19 October, 2020
Author: G.S. Patel
Bench: G.S.Patel
Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd
IA IN CARBP370-2020.DOCX
Shephali
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION NO. ____ OF 2020
IN
COMM ARBITRATION PETITION NO. 370 OF 2020
Reliable Spaces Pvt Ltd.
Reliable House, Hanuman Silk Mill
Compound, Opp. Huma Mall, Kanjurmarg
(West), Mumbai 400 078 ... Applicant
IN THE MATTER BETWEEN--
Evonik India Pvt Ltd
Krislon House
Saki Vihar Road, Saki Naka
Andheri (East)
Mumbai 400 072 ... Petitioner
~ versus ~
Reliable Spaces Pvt Ltd
Reliable House
Hanuman Silk Mill Compound
Opp Huma Mall
Shephali
Mormare
Kanjurmarg (West)
Digitally signed
Mumbai 400 078 ... Respondent
by Shephali
Mormare
Date: 2020.10.20
10:59:15 +0530
Page 1 of 14
19th October 2020
Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd
IA IN CARBP370-2020.DOCX
ALONG WITH
COMM ARBITRATION PETITION NO. 370 OF 2020
Evonik India Pvt Ltd
Krislon House
Saki Vihar Road, Saki Naka
Andheri (East)
Mumbai 400 072 ... Petitioner
~ versus ~
Reliable Spaces Pvt Ltd
Reliable House
Hanuman Silk Mill Compound
Opp Huma Mall
Kanjurmarg (West)
Mumbai 400 078 ... Respondent
A PPEARANCES
FOR THE PETITIONER IN Mr Shyam Kapadia,
THE ARBITRATION with Mr Gaurav Shah & Ms
PETITION & THE Jigisha Vodadaria i/b Negandhi,
RESPONDENT IN THE Shah & Himayatullah
INTERIM APPLICATION:
"EVONIK"
FOR THE APPLICANT IN Ms Gulnar Mistry,
THE INTERIM with Mr Dhirendra Sinha, Mr
APPLICATION AND THE Subit Chakrabarty, Mr Vishal
RESPONDENT IN THE Dushing & Abhishek Salien, i/b
ARBITRATION PETITION: Vidhi Partners
"RELIABLE"
Page 2 of 14
19th October 2020
Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd
IA IN CARBP370-2020.DOCX
CORAM : G.S.Patel, J.
JUDGMENT RESERVED ON : 14th October 2020
JUDGMENT PRONOUNCED ON : 19th October 2020
JUDGMENT:
1. The Petition is a post-Award Section 9 Petition. The Petitioner ("Evonik") was the successful claimant in arbitration. It obtained an award dated 8th May 2019 against the Respondent ("Reliable") in the amount of Rs 3,10,56,333. This was a principal amount of Rs 1,92,01,100/- (a refundable security deposit under a Lease Agreement dated 28th August 2014) and interest from the date of termination at 18% per annum until 15th July 2018. The learned Sole Arbitrator also awarded further interest from 16th July 2018 at 18% per annum until the date of the Award, and interest from the date of the Award until payment or realisation at 11% per annum.
2. Reliable challenged the Award under Section 34 in Commercial Arbitration Petition No 1019 of 2019. I have by a separate judgment today dismissed that Petition with costs.
3. Evonik's Section 9 petition seeks an order of disclosure, a restraint against Reliable from creating any third party rights or alienating its assets, and security in the amount of Rs 3,55,89,707 (the Award with interest computed until 9th May 2019).
4. The Section 9 petition was before me on 12th February 2020. At that time, Ms Mistry for the Reliable pointed out that Reliable's Page 3 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX Section 34 petition was pending. I passed an order indicating I would hear both together, but of course the Section 34 Petition first; for, if that succeeded, the Section 9 Petition was bound to fail.
5. Ms Mistry made a statement in regard to the leased premises at Liberty Tower in Airoli. These were Units Nos 801 and 802 on the eighth floor and Unit 702 on the seventh floor of Liberty Tower, which Reliable owns, and which stands on a plot it has on lease from MIDC at the Kalwa Industrial Estate. These units were the subject matter of the lease between Reliable and Evonik, taken to arbitration. Ms Mistry said that Units Nos 801 and 802 were leased to one Aptus Health Care Pvt Ltd and Unit No 702 to one Atos Pvt Ltd. Both were to run until October 2020. Ms Mistry said on instructions that until the Section 34 Petition was disposed of, and for which I fixed a schedule, Reliable would not create any further interest in these units, and that included renewing the leases to Aptus or Atos or giving them on any fresh lease or leave and license. I proposed to take both matters on 13th March 2020.
6. The roster changed, as rosters are wont to do, and the Section 9 matter came up before GS Kulkarni J at Reliable's instance in March 2020 but was adjourned, with the previous order being continued.
7. Then came the coronavirus, the pandemic and the lockdown. All schedules went awry.
8. On 29th May 2020, Reliable moved court again. It had now filed an Interim Application. It sought a modification of my order of Page 4 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX 12th February 2020 to permit the three units to be let out without fetter or restriction, and for permission to enter into a leave and license agreement with one Azelis (India) Pvt Ltd for Unit No 702. It seems that the Atos lease for Unit No 702 had already ended in April 2020 (and was not operative until October 2020 as I had been told in February 2020). Evonik objected, but on the basis that the income the new agreement would generate would be to the benefit of whichever party succeeded, the Court allowed the application on some terms. Ms Mistry agreed that the license fees would be deposited in court until the Section 34 Petition was heard. The Court allowed the modification and gave permission for the Azelis leave and license. A copy of this agreement was to be put on record. The monthly license fee was to be deposited.
9. It seems Reliable did execute this leave and license with Azelis on 5th August 2020. But it did not include the stipulation for depositing the monthly license fee in Court as agreed and as ordered. Now Reliable feared that a post-facto inclusion of this provisions would 'adversely affect' the transaction between Reliable and Azelis. It therefore filed a precipe on 6th August 2020 to be relieved of the obligation to incorporate the information about these disputes in the Azelis leave and license agreement.
10. The prayer in the present Interim Application by Reliable is to permit Reliable to give out Units Nos 801-A and 802 (about 25,712 sq ft in Liberty Tower) to one Physicians Interactive India Pvt Ltd, said to be a group company of Aptus Healthcare, for five years, without fetters or restrictions. Alternatively, Reliable seeks a modification of the Page 5 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX 12th February 2020 and 9th March 2020 orders to permit this fresh leave and license with Physicians Interactive for five years.
11. I can think of nothing I am less inclined to do. This Application is as astonishing in its effrontery as its mendacity. How, I wonder, could Reliable have 'forgotten' about Kulkarni J's order of 29th May 2020? How could it have 'forgotten' about its own counsel's statement on instructions to the Court? The application careers along in merry insouciance, but is dangerously close to being a cause to issue a suo motu contempt notice.
12. Mr Kapadia, barely able to contain his ire, for Evonik took me through the Affidavit in Reply. He points out that Reliable made no effort between February and May 2020 to correct its statement that the Aptus license was to run until October 2020. It is admitted that Kulkarni J orally directed Reliable to insert a clause into the Azelis document that the license fees were to be deposited here. Then comes Reliable's rather too convenient moment of amnesia. Indeed, as Mr Kapadia points out, Reliable had four obligations after the 29th May 2020 order. It had to place the Azelis leave and license agreement on the record of this court. Reliable did not do this. A copy had to be given to the Petitioner. Again, not done. Reliable had to ensure that the license fees would be brought into court -- not done. The leave and license agreement had to have a term that the license fees would be deposited in court -- not done, failing memory claimed. Mr Kapadia says that the only thing that is now certain about Reliable is that it is thoroughly unreliable. That may well be true.
Page 6 of 1419th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX
13. Reliable has deposited nothing with this Court. Kulkarni J's order was of 29th May 2020. The Azelis leave and license agreement
-- conveniently still undisclosed -- is said to be 5th August 2020. We are nearing the end of October 2020. And now Reliable wants an unfettered right to transact for two other premises; but says nothing at all about what it proposes to do to comply with Kulkarni J's order and the Azelis transaction.
14. An application of this kind and in this background dismisses itself.
15. But I must have regard to Evonik's interests too. It has not yet moved in execution and perhaps rightly so, for the Section 34 petition was pending. True, there was no formal stay, and Evonik might well have pressed forward in execution. Its self-imposed forbearance is to be lauded. Especially in contrast to Reliable's brazen approach.
16. Reliable owes Evonik Rs 3,44,89,707/- calculated until 9th May 2019. More than a year has passed since it made that application. In addition, I have just dismissed Reliable's Section 34 petition, with costs of Rs. 7,35,500/-. The additional amount now due from Reliable to Evonik under the Award itself from 9th May 2019 would, on my rough calculation, be just over Rs 30 lakhs. That would take the total to about Rs. 3.75 crores. In addition, there are the costs I awarded, which brings the total to Rs. 3.80 crores.
17. On reflection, I see no reason why Evonik's claim should be limited to the original security deposit, one placed six years ago in Page 7 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX 2014, of Rs 1,90,01,100/-. Money has a carrying cost. Money has a price. And there comes a time when, surely, one must say enough is enough.
18. Nothing in Reliable's conduct in this Interim Application inspires the slightest confidence. And yet Evonik must be secured while it files its execution application under Order XXI of the CPC.
19. Ms Mistry is instructed to submit that in a Section 9 Petition, the principles of Order XXXVIII Rule 5 regarding attachment before judgment will apply. They may; but Section 9 is not constrained by those principles. The Section 9 petition -- to which there is even now no reply -- points out with documentary material that Reliable is in a financial crisis. Its financial records for the year ended 31st March 2019 show huge losses. Its immovable properties, including Liberty Tower, are collateralized to financial institutions for over Rs 162 crores. So is its furniture. Its only income is from rentals. There is also, as Mr Kapadia points out, enough authority to say that an award holder must not be denied the fruits of the Award that he has laboured so long and so hard to obtain. See: Dirk India Pvt Ltd v Maharashtra State Electricity Generation Company Ltd;1 explicitly approved by the Supreme Court in Hindustan Construction Co Ltd & Anr v Union of India & Ors.2 Certainly the Order 38 Rule 5 principles must be borne in mind and should guide, but they cannot be used to defeat the sanctity of the arbitral process: Nimbus Communications Ltd v BCCI -
1 (2013) 7 Bom CR 493 : 2013 SCC OnLine Bom 481; paragraph 13. 2 2019 SCC OnLine SC 1520.
Page 8 of 1419th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX I;3 Nimbus Communications Ltd v BCCI - II;4 Deccan Chronicle Holdings Ltd v L&T Finance Ltd;5 and Tata Capital Financial Services Ltd v Unity Infra Projects Ltd & Ors.6
20. The other argument that now that the Section 34 petition is dismissed, Evonik can only move in execution, is based on a total misreading of Centrinet Pharmaceuticals India Pvt Ltd v Hindustan Antibiotics Ltd.7 A single point of distinction will suffice. In Centrinet, the Section 9 petitioner had already filed execution proceedings under Order XXI and yet attempted to move in parallel in Section 9. That is not the case here. Evonik is yet to file its execution application. It must be protected until then. I am not making an order of payment, but only one of security pending execution. That is certainly within the remit of a post-Award Section 9, for that section now permits precisely such an application 'until the Award is enforced' (i.e., not only until it becomes enforceable, a very different thing).
21. In other words, Reliable cannot get what it wants in its Interim Application unless it secures Evonik in the manner it deserves in its Section 9 Petition.
3 2012 (5) Bom CR 114; discussing the law enunciated by the Supreme Court in Adhunik Steels Ltd Orissa Manganese & Minerals Pvt Ltd, AIR 2007 SC 2563.
4 2016 SCC OnLine Bom 6781.
5 2013 SCC OnLine Bom 1005.
6 2015 SCC OnLine Bom 3597. A Section 9 Court has the power to mould relief in each case to secure the ends of justice and preserve the sanctity of the arbitral process.
7 2019 SCC OnLine Bom 1614.
Page 9 of 1419th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX
22. After I informed both parties of the frame of the following order, Ms Mistry on telephonic instructions stated that Reliable would make the deposit ordered below by 22nd October 2020. That statement is accepted as an undertaking to the Court -- with everything that this implies.
23. I am also making it clear that any relief to Reliable in terms of being relieved of its undertakings or of vacating of previous orders will not operate on an uploading of this order but only on compliance in the terms set out below. I should add that though there is no specific prayer by Reliable in its Interim Application in regard to the Azelis transaction, which it seems to have left hanging on a praecipe, almost as if to suggest that this is now a fait accompli and it can get away with it, I have made provision below for that transaction too.
24. The rival rights will, I believe, be served by the following common order on both the Interim Application and the Section 9 Petition:
(a) By 22nd October 2020, Reliable will deposit in this Court an amount of Rs 3.8 crores as agreed before me today. On that deposit being made, the Prothonotary & Senior Master will invest the amount in accordance with the usual practices of his office initially for one year and will thereafter renew this deposit periodically until further orders of the Court;
(b) It will be open to Reliable to furnish, to the satisfaction of the Prothonotary & Senior Master, an unconditional bank guarantee of a nationalized bank (and no other Page 10 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX bank) in this amount and to specifically cover further interest, in lieu of a cash deposit;
(c) If the cash deposit is made, on the application of the Section 9 Petitioner, Evonik, to the Prothonotary & Senior Master, the deposit will be transferred to the credit of any execution application that Evonik files.
(d) Evonik shall also be entitled to apply to the executing court to withdraw the whole or part of any such cash deposit on such terms as that court may think fit; all contentions on both sides are kept open.
(e) Upon Reliable complying with all these requirements from (a) to (e) above and not otherwise, Reliable will be relieved of its statements to Court on 12th February 2020 and 29th May 2020; and then, and only in that event, but not otherwise, there will be an order in terms of prayer (a) of the Interim Application, with a further order removing all fetters and restrictions in regard to the Azelis leave and license agreement for Unit No 702.
This relief to Reliable is expressly conditional on compliance with paragraphs (a) to (d), which are a condition precedent.
(f) In default of compliance with paragraphs (a) to (d) above--
(i) Reliable will make a disclosure of all its movable and immovable assets, including all bank accounts and investments, on affidavit by 2nd November 2020. Evonik may use this Page 11 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX affidavit and its disclosures in any execution proceedings. The disclosures will include bank statements for the last one year, financial returns complete in all aspects and including all schedules to the returns for the last three years, details of all encumbrances including the nature of the security, the identity of the secured creditor, the amount of debt and the details of the security documents. The disclosures will specifically identify the bank account into which the Azelis license fees from August 2020 have been deposited, and will include a disclosure of the leave and license agreements with Azelis and Physicians Interactive or any other entity in respect of these three premises.
(ii) There will be an injunction in terms of prayer clause (b) of the Section 9 Petition.
(iii) the Interim Application will stand dismissed without further reference to the Court;
(iv) Reliable will deposit in court by 3rd November 2020 the entire Azelis License Fee from 5th August 2020 until date or to be received (as Ms Mistry says there was some fit-out free period) and then deposit the license fee monthly until further orders. These deposits will be invested by the Prothonotary & Senior Master and renewed periodically; and Page 12 of 14 19th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX
(v) In default of (g)(iii) above, (A) the Court Receiver will--
(I) Stand appointed of Unit No 702 in Liberty Tower and will take symbolic possession of it and make Azelis an agent of the Receiver until the end of the leave and license period;
(II) Call on the licensee Azelis to deposit all future monthly license fees with the Court Receiver;
(III) Attach the bank account into which the Azelis license fees have been deposited;
(IV) Take symbolic possession of Units Nos. 801/801-A and 802 in Liberty Tower and will make a report to the executing Court; and
25. All orders of deposit and, if operative, injunction and Court Receiver will continue until further orders of the executing court in any execution application that Evonik files.
26. The Interim Application and the Section 9 Petition are disposed of in these terms. They will, however, be placed on 26th October 2020 for compliance.
Page 13 of 1419th October 2020 Evonik India Pvt Ltd v Reliable Spaces Pvt Ltd IA IN CARBP370-2020.DOCX
27. I am making it clear that, in addition to the foregoing, should I see non-compliance on that day, I will initiate suo motu contempt proceedings against Reliable and its directors for non-compliance with Kulkarni J's order of 29th May 2020. I expect Reliable's Chairman and Managing Director to attend the online hearing on 26th October 2020.
(G.S. PATEL, J.) Page 14 of 14 19th October 2020