Delhi High Court - Orders
Ht Media Limited vs Brightstar Restaurants Private ... on 3 June, 2021
Author: Sanjeev Narula
Bench: Sanjeev Narula
$~12
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 177/2021
HT MEDIA LIMITED ..... Petitioner
Through: Mr. Anil Kher, Senior Advocate with
Mr. Abhimanyu Walia, Advocate.
versus
BRIGHTSTAR RESTAURANTS PRIVATE LIMITED & ORS.
..... Respondents
Through: Mr. Samrat Nigam, Advocate for
Respondent No. 1.
Mr. Kapil Sankhla and Ms. Meghna
Sankhla, Advocates for Respondent
Nos. 2 and 3.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
ORDER
% 03.06.2021 [VIA VIDEO CONFERENCING]
1. At the outset, counsel for the parties have been informed that the undersigned had been the counsel for Respondent Nos. 2 and 3 and enquired if they have any objection to this Court hearing the matter. Both the counsel stated that they have no-objection and accordingly the Court proceeded to hear the matter.
I.A. No. 7259/2021 (application for exemption)
2. Allowed, subject to all just exceptions.
O.M.P.(I) (COMM.) 177/2021 Page 1 of 113. The application stands disposed of.
I.A. No. 7260/2021 (for seeking liberty for filing of relevant Court fee)
4. The present application under Section 151 of the Code of Civil Procedure, 1908 ('CPC') on behalf of the Petitioner seeks liberty to file requisite court fee at a later stage.
5. The Petitioner submits that due to the current COVID-19 pandemic and resultant restrictions, they are unable to procure the necessary court fee stamps. Due to the urgency of matter, Petitioner has filed the present petition without the court fee.
6. The application is allowed, subject to the Petitioner filing the requisite court fee within two weeks from the day the lockdown restrictions imposed by the Government of NCT of Delhi are lifted and the facility for issuance of court fee stamps is resumed.
7. The application stands disposed of.
O.M.P.(I) (COMM.) 177/2021
8. The present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (in short 'the Act'), seeks urgent interim reliefs on account of disputes arising between the parties in respect of an Investment Agreement dated 23rd December, 2015. Under the Investment Agreement, the Petitioner agreed to subscribe for, and Respondent No. l agreed to issue and allot debentures to the Petitioner for an aggregate amount of Rs. 7,50,00,000/- (Rupees Seven Crores and Fifty Lacs Only) as on the closing date, subject to O.M.P.(I) (COMM.) 177/2021 Page 2 of 11 fulfilment and compliance of conditions by the Respondents, including but not limited to executing a Deed of Personal Guarantee (in short 'DPG') to the satisfaction of the Petitioner. In accordance with the terms of the agreement, the debentures were to carry a coupon rate of 8% per annum, compounded annually, on the face value of the debenture which has to be paid by Respondent No. 1 on a cumulative basis, upon redemption of debentures.
9. Under Clause 6.4 of the Investment Agreement, the parties have agreed that in the event Respondent No. 1 fails to pay the amount due to the Petitioner pursuant to the Investment Agreement (including redemption of any debenture or payment of any accrued and accumulated coupon thereon), Respondent Nos. 2 and 3 along with Respondent No. 1 shall also be liable to pay such amount to the Petitioner. Respondent No. 2 has also executed an irrevocable and unconditional DPG dated 23rd December, 2015 undertaking to make prompt payments to the Petitioner in case Respondent No. 1 fails to make the payments as stipulated in the Investment Agreement.
10. Petitioner contends that it had the option to exit the Investment Agreement and redeem its investment on the occurrence of the following events: (i) expiry of 10 years from closing date; (ii) any proposed restructuring of the company; (iii) proposed transfer or assignment of IPR rights; and (iv) any proposed amendment to the AOA or MOA adversely affecting investors rights.
11. In addition to the above, the Petitioner also had an option to redeem its O.M.P.(I) (COMM.) 177/2021 Page 3 of 11 investment under Clause V (2) of Schedule 3 of the Investment Agreement which stipulates as under:
"V. Conversion and Redemption
1. .................................
2. Notwithstanding anything contained to the contrary in Clause V(I) above:
c) the Investor shall have the right to convert any or all of the Investor Debentures, together with the accumulated and accrued coupon on such Investor Debentures at any time prior to the Maturity Date into Equity Shares at the Conversion Price, and
d) the Investor shall have the right to redeem the Investor Debentures, together with the accumulated coupon thereon prior to the Maturity Date upon the occurrence of any of the following events:
(v). a Liquidation Event;
(vi ).a change of Control of the Company:
(vii). any breach by the Company of the terms and conditions of Master Franchise Agreement dated August 8, 2014 between the Company and Carl's Jr. Restaurants LLC; and
(viii) any default by the Company of the terms of any debt obtained by the Company including under any financing documents, including the Cybiz Call Debt, save and except for defaults in relation to any trade or supplier credit offered to the company in the ordinary course of Business.
[emphasis added]"
12. The Petitioner has also disclosed that the Respondents were desirous of conducting an extensive advertisement campaign with the Petitioner and in this regard, parties executed an Advertising Agreement dated 23rd December, 2015. Pursuant to the said Agreement, the Petitioner published advertisements in its newspaper to the satisfaction of Respondents and there O.M.P.(I) (COMM.) 177/2021 Page 4 of 11 has never been any issue or objection in this regard. In respect of the advertisements/publications, Petitioner has been issuing invoices from time to time. Respondents have failed to comply with their obligations and are liable for the services rendered under the Advertising Agreement and an amount of Rs. 9,34,152/-, as principal, is due and payable.
13. Mr. Anil Kher, learned Senior Counsel for the Petitioner argues that when the Petitioner issued the legal notice dated 19th January, 2021, in response thereto, Respondent No. 2, vide email dated 9th February, 2021, informed that he had already resigned from the directorship of Respondent No. 1, vide resignation letter dated 5th November, 2020. The aforesaid constitutes a 'change of control' of Respondent No. 1. Accordingly the Petitioner invoked the Redemption Clause V(2) of Schedule 3 of the Investment Agreement and called upon the Respondents to redeem the debentures amounting to Rs. 7.5 crores together with the cumulative coupon thereof @ 8% per annum compounded annually on the face value of debentures.
14. Respondents have failed to comply and accordingly in these circumstances, the Petitioner has approached this Court for interim reliefs to secure the amount in dispute, relying inter alia upon the DPG dated 23rd December, 2015 executed by Respondent No. 2.
15. The Petitioner has also invoked Clause 21 of the Investment Agreement which provides the alternate dispute resolution mechanism inserted in the event disputes arise between them under the said Agreement and is extracted O.M.P.(I) (COMM.) 177/2021 Page 5 of 11 hereinbelow:
"21.2 The Parties agree that any dispute or difference, controversy or claim of whatever nature howsoever arising out of or in connection with this Agreement, including, without limitation, any question regarding its existence, validity or termination (each, a "Dispute"), shall be referred to and finally resolved by arbitration in accordance with the Arbitration and Conciliation, 1996, as amended. The venue and seat of arbitration shall be New Delhi. The number of arbitrators shall be 1 (one) appointed in accordance with the Arbitration and Conciliation Act, 1996, as amended."
16. Mr. Samrat Nigam, learned counsel for Respondent No. 1 appearing on advance notice refutes the contention of the Petitioner and submits that the Petitioner has not made true and correct disclosures. He submits that simultaneously with the execution of the Investment Agreement, the parties had also entered into an Advertising Agreement and the amount received from the Petitioner under the Investment Agreement was given back. Therefore, he submits, both the Agreements have to be read together. Since the amount in dispute has already been paid, there is no default on the part of Respondent No. 1. Mr. Kapil Sankhla, learned counsel for Respondent Nos. 2 and 3 supports the contentions made by Respondent No.1.
17. The investment made by the Petitioner was redeemable in accordance with the terms of the Investment Agreement which stipulates that the Petitioner shall have the right to redeem the debentures, together with the accumulated coupon thereon prior to the maturity date, upon the occurrence of events specified which include the change of control of the company. Respondent No. 2 is also a party to the Investment Agreement and is described as one of the promoters of Respondent No. 1. He also issued his personal guarantee in favour of the Petitioner. Thus, prima facie, resignation O.M.P.(I) (COMM.) 177/2021 Page 6 of 11 of Respondent No. 2 as the Director of Respondent No. 1 is a 'change of control' circumstance of the management of Respondent No. 1, which entitled the Petitioner to invoke the redemption clause provided in the Investment Agreement. When the Petitioner invoked the redemption clause, Respondent No. 1 gave a vague response, admitted the execution of the Investment Agreement, but denied the liability inter alia in the following words:
"3. That your client, HT Media and Mr. Samir Chopra and Mrs. Saloni Chopra executed Investment Agreement and Deed of Personal Guarantee Agreement both dated 23.12.2015. That my client was not in any knowledge of the Investment Agreement dated 23.12.2015 executed amongst HT Media, Mr. Samir Chopra and Mrs. Saloni Chopra up until very recently.
xxxxxx xxxxxx
6. That another agreement, Deed of Personal Guarantee Agreement was executed between HT Media and Mr. Samir Chopra on the same date as the Investment - Agreement i.e. 23.12.2015. That Mr. Samir Chopra unconditionally and irrevocably executed the Deed of Personal Guarantee Agreement as per clause 2.1.2 of the said Agreement.
7. That your client's call demanding to make payment of INR 7,50,00,000/- with 8% per annum compounded annually is disputed by my client and my client are not liable to make any payments to your client, HT Media."
18. In reply to the invocation of the DPG, Respondent No. 2 inter alia stated that he is no longer in control of the management of Respondent No. 1, having resigned from the post of Director. Besides, it was also contended that the transaction of Rs. 7,50,00,000/- is nothing but reversal of book entries, as the amount received as investment was transferred back in terms of the Advertising Agreement.
O.M.P.(I) (COMM.) 177/2021 Page 7 of 1119. Prima facie the defence raised in the correspondence after six years of receipt of investment in an attempt to show that there is no liability, is without any basis. There is no document on record to demonstrate that the investment in the form of debentures stands paid off. Respondents do not dispute the Petitioner's entitlement to redemption before the maturity date, but instead argue that there is no liability as they made payment under a separate agreement.
20. The Petitioner has submitted that the financial condition of Respondent No. l is also precarious and has heavy liabilities and is in the process of winding up its business operations in India. Furthermore, Respondent Nos. 2 and 3 are relocating to the United States of America and are disposing of their personal assets. In view of the above, the Petitioner has established a prima facie case in its favour. The balance of convenience also lies in favour of the Petitioner and therefore if an injunction is not granted, the Petitioner is likely to suffer an irreparable loss. Accordingly, the Respondents are directed to file an affidavit and disclose their list of assets, both movable as well as immovable in terms of the decision of this Court in Bhandari Engineers & Builders Pvt. Ltd. v. Maharia Raj Joint Ventures & Ors. 1, within a period of three weeks from today. Further, Respondent Nos. 1 & 2 are restrained from creating, alienating, encumbering, disposing of in any manner, either directly or indirectly, any of their immoveable assets, without the leave of the Court or the Arbitral Tribunal as the case may be.
21. Mr. Kher submits that in response to the legal notice issued by the O.M.P.(I) (COMM.) 177/2021 Page 8 of 11 Petitioner, Respondent No. 1 had agreed to arbitration and had suggested the name of Hon'ble Mr. Justice (Retd.) Kailash Gambhir, former Judge of the Delhi High Court as the Sole Arbitrator. He submits that the Petitioner is agreeable to the suggestion. At the same time, Mr. Nigam submits that admittedly there is another agreement executed between the parties being the Advertising Agreement dated 23rd December, 2015. Now that disputes have arisen in relation to the said agreement as well, the Court may also consider appointing a common Arbitrator to adjudicate the disputes between the parties in respect of both the agreements. Mr. Kher submits that he has no objection to the request made, however he states that there should be two separate arbitration proceedings, particularly because Respondent Nos. 2 and 3 are not parties to the Advertising Agreement. Respondent Nos. 2 and 3, without prejudice to their rights and contentions, are agreeable to go for arbitration and the name proposed is acceptable to them. They submit that they shall raise all their objections, including but not limited to the existence of the arbitration agreement, before the learned Arbitrator under Section 16 of the Act.
22. In view of the above, since there is a consensus between the parties on the existence of the arbitration agreement and that disputes have arisen, which have to be referred to arbitration, the Court has no hesitation in allowing the request. Accordingly, Hon'ble Mr. Justice (Retd.) Kailash Gambhir, former Judge of the Delhi High Court (Contact No. 9871300033), is appointed as the common Sole Arbitrator to adjudicate upon the disputes arising out of:
1MANU/DE/1497/2020 O.M.P.(I) (COMM.) 177/2021 Page 9 of 11
(i) Investment Agreement dated 23rd December, 2015 between the Petitioner and Respondent Nos. 1,2 and 3;
(ii) Advertising Agreement dated 23rd December, 2015 between the Petitioner and Respondent No. 1.
23. It is clarified that although a common Arbitrator has been appointed, the arbitration proceedings in respect of the afore-said agreements shall be separate and independent.
24. Since the Arbitrator has now been appointed, it would be appropriate for the parties to approach the learned Arbitrator for any interim measures under Section 17 of the Act. Accordingly, it is directed that the present petition shall be treated as one under Section 17 of the Act and considered and decided by the learned Arbitrator. Till such time, the order passed today, shall continue to operate.
25. It is further clarified that the observations made by this Court, hereinabove, are only a prima facie expression of the views of the Court for the purpose of deciding the present petition. The learned Arbitrator shall adjudicate the disputes between the parties and the application under Section 17 of the Act, uninfluenced by any of the observations made hereinabove.
26. Both the parties shall be free to file their claims/counter-claims before the learned Arbitrator which shall be decided in accordance with law. All the rights and contentions of the parties are left open.
O.M.P.(I) (COMM.) 177/2021 Page 10 of 1127. The parties are directed to appear before the learned Arbitrator as and when notified. This is subject to the learned Arbitrator making the necessary disclosure under Section 12(1) of the Act and not being ineligible under Section 12(5) of the Act.
28. The learned Arbitrator will be paid his fee in terms of the provisions of the Fourth Schedule appended to the Act.
29. The present petition is disposed of in the above terms.
SANJEEV NARULA, J JUNE 3, 2021 v O.M.P.(I) (COMM.) 177/2021 Page 11 of 11