Delhi High Court - Orders
Simplot India Llc & Anr vs Himalaya Food International Limited on 7 July, 2020
Author: Jayant Nath
Bench: C. Hari Shankar, Jayant Nath
$-5 (original)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (I) (COMM.) 166/2020, I.A. 5197/2020 & I.A.
5198/2020
SIMPLOT INDIA LLC & ANR. ..... Petitioners
Through: Mr. Krishnendu Datta, Ms.
Madhu Sweta, Mr. Sumit Gupta
and Ms. Mehak Khurana, Advs.
versus
HIMALAYA FOOD
INTERNATIONAL LIMITED ... Respondent
Through: None
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
ORDER
% 07.07.2020
(video-conferencing)
I.A. 5197/2020 (exemption)
Allowed, subject to all just exceptions. The application is disposed of.
I.A. 5198/2020 (exemption from filing attested affidavit and court fee)
1. This application, by the petitioners, seeks exemption from filing attested affidavit and paying court fee.
2. In view the restrictions imposed consequent on the Covid-2019 O.M.P. (I.) (COMM.) 166/2020 Page 1 of 17 pandemic, and the administrative order dated 4th April, 2020, passed by this Court, on the administrative side, this application is allowed, subject to the petitioners filing attested affidavit and depositing court fee within 72 hours of resumption of normal Court work.
3. The application is disposed of.
O.M.P. (I) (COMM.) 166/2020
1. This is a petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "1996 Act"). The prayer clause, in this petition, reads thus:
"In view of the above facts and circumstances stated hereinabove, it is most respectfully prayed that this Hon‟ble Court may be please to:
a) Pass an order restraining the Respondent from selling, alienating, encumbering, disposing of or transferring or creating any third party interest over the movable or immovable properties of the Respondent Company; and/or
b) Pass an order restraining the Respondent's proposal of transferring its leasehold rights on the spare land in Industrial Area Paonta Sahib; and/or
c) Pass an order restraining the Respondent from disposing of its assets comprised of 34 Acres of Agricultural land at NH-8 near Delhi); and/or
d) Pass an order directing the Respondent to furnish a Bank Guarantee for securing the amount awarded by the Arbitral Tribunal at SIAC in its Final Award on March 23, 2020; and/or
e) Pass an order attaching all the bank accounts maintained by the Respondent Company in various Banks and O.M.P. (I.) (COMM.) 166/2020 Page 2 of 17 its movable assets at its registered office and all other properties; and/or
f) Pass ex-parte ad-interim order in terms of Prayer (a) to
(e); and/or
g) Alternatively, pass an order entitling Petitioners to have a receiver take interim custody of the Respondent's assets until the satisfaction of the Final Award; and/or
h) Pass such other and further orders as this Hon'ble Court may deem just and convenient in the facts and circumstances of the present case."
2. Petitioner No.1 is a company registered in the State of Idaho, USA and holds 99.99% shares in Petitioner No. 2, Simplot India Foods Pvt. Ltd. .
3. According to the recital of facts, in the petition, the justification for invoking Section 9 of the 1996 Act, as set out therein, may be presented thus:
(i) In 2011, the respondent company, Himalaya Food International Ltd., formerly Himalaya International Ltd., approached an affiliate company of Petitioner No. 1 to set up a joint venture to manufacture and market frozen foods in India.
This translated into a Shareholders‟ Agreement (hereinafter referred to as "SHA"), dated 7th October, 2011, between the Petitioner No. 1 and the respondent, whereby a joint venture company, namely, Himalaya Simplot Pvt. Ltd. (hereinafter referred to as "HSPL") was incorporated in the month of October, 2011. 50% shares, in the said company, were held by O.M.P. (I.) (COMM.) 166/2020 Page 3 of 17 the Petitioner No. 1 and the respondent, each.
(ii) On 24th August, 2012, a Master Agreement was entered into, between Petitioner Nos. 1 and 2, the respondent and HSPL. According to the said Master Agreement, an amount of USD 12.75 Million was to be paid by the Petitioner No. 2 to the respondent, in return whereof the respondent had agreed to sell its Potato Processing Equipment (hereinafter referred to as "PPE"), to Petitioner No. 2. Petitioner No. 2 was also required to take a portion of the manufacturing facilities of the Respondent at Vadnagar, Gujarat, on long term lease. There were various breaches, of the aforesaid Master Agreement, by the respondent, as a result of which the business of HSPL is stated to have come to a halt.
(iii) The petitioners, in the circumstances, invoked arbitration, as provided in Section 10.09 of the Master Agreement and Clause 12.3(c) of the SHA. Notice of arbitration was preferred, by the petitioners, before the Singapore International Arbitration Centre (hereinafter referred to as "SIAC"), in accordance with the aforesaid arbitration clauses, on 24 th May, 2013, which was registered as ARB 108/2013.
(iv) At this juncture, the respondent filed CS(OS) 1231/2013, against the petitioners, for restraining them from proceedings with the aforesaid arbitration before the SIAC. The said suit was dismissed, by this Court, vide judgment dated 17th January, O.M.P. (I.) (COMM.) 166/2020 Page 4 of 17 2014.
(v) The respondent, thereupon, took up the matter with SIAC, where it did not succeed. However, the respondent appealed to the High Court of Singapore, which, vide order dated 5th July, 2016, terminated the aforesaid arbitration on the ground that there was no strict compliance with pre-arbitral steps, required to be taken, before the arbitration commenced.
(vi) The petitioners, thereafter, remedied the above lacuna, by taking pre-arbitral steps, qua the aforesaid claims. The arbitration clauses in the Master Agreement and the SHA, were, once again, invoked by the petitioners, vide notice of arbitration dated 13th February, 2017, filed with the SIAC. The claim of the petitioners against the respondent, translated into Indian rupees, amounted, approximately, to ₹ 99 crores. The case was registered, by the SIAC, as SIAC Arbitration No.ARB047/17/KRW of 2017.
(vii) During the pendency of the aforesaid arbitration, the respondent filed Company Application A-11/PB/2017, before the National Company Law Tribunal, New Delhi ("NCLT"), under Sections 230 to 234 of the Companies Act, 2013, proposing a scheme for demerger of the respondent company. The petitioners allege that this was done with the aim of hiving the assets of the respondent, so that it could renege on its contractual obligations qua the petitioners. Under the aforesaid O.M.P. (I.) (COMM.) 166/2020 Page 5 of 17 scheme, the respondent proposed to demerge its business interests in production and of export of potato products, with the business of Appetizers Snacks Food Ltd. (ASFL), after the approval of the demerger. The scheme further proposed that the respondent would retain only the business of production and domestic sale of mushroom and domestic and export sale of packaged sweets, Indian snacks and milk products, from its Paonta Sahib plant. The Vadnagar plant of the respondent, which, it is alleged, constituted its principal business, was to be hived off to ASFL. The scheme further proposed that the business interest of the respondent in 13.44 hectares land, located in Rajasthan was proposed to be demerged with the business of Himalaya Greens Apartment Ltd. (HGAL).
(viii) It appears that, consequent to filing of the aforesaid proceedings, by the respondent, the NCLT passed various orders directing holding of meetings of secured and unsecured creditors, shareholders, etc. Consequent thereupon, in a meeting of the equity shareholders of the respondent conducted on 28 th April, 2017, the proposed resolution, for demerging the interest of the respondent, was passed with the requisite majority. Thereafter, a consolidated report was filed by the scrutinizer, before the NCLT on 7th May, 2017.
(ix) Concerned with the above developments, the petitioners moved this Court by way of O.M.P. (I) (COMM.) 229/2017 under Section 9 of the 1996 Act, seeking a restraint, against the O.M.P. (I.) (COMM.) 166/2020 Page 6 of 17 respondent, from demerging its assets and vesting the assets in its subsidiaries. It was also pointed out, in the said petition, that the respondent had concealed, from the NCLT, the fact of the arbitration, pending before the SIAC at the instance of the petitioners.
(x) Notice was issued on the aforesaid O.M.P. (I) (COMM.) 229/2017, by this Court, on 31st May, 2017, on which date the statement of the respondent was also recorded, to the effect that there was no likelihood of the immovable properties of the respondent being alienated, for the time being. The order, passed by this Court on the said date, deserves reproduction :
"
* IN THE HIGH COURT OF DELHI AT NEW DELHI O.M.P.(I) (COMM.) 229/2017 SIMPLOT INDIA FOODS PVT.LTD. ....Petitioner Through: Mr.Chetan Sharma, Sr.Adv. with Ms.Madhu Shweta, Mr.Sumit Gupta and Mr.Amit Gupta, Advs.
Versus
HIMALYA INTERNATIONAL
LIMITED....Respondent
Through: Mr.V.Shankara,
Adv.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
O.M.P. (I.) (COMM.) 166/2020 Page 7 of 17
ORDER
31.05.2017
IA No.7060/2017
Exemption allowed, subject to all just
exceptions.
O.M.P.(I) (COMM.) 229/2017
Issue notice. Learned counsel for the respondent accepts notice. Reply be filed within six weeks. Learned counsel for respondent submits that for the time being there is no likelihood of the respondent's selling, disposing off or transferring the immovable properties of the respondent company. The above statement is taken on record.
List on 8.9.2017.
A copy of the order be given dasti under signatures of the Court Master.
JAYANT NATH, J.
MAY 31, 2017"
(xi) This order was continued on 16th November, 2017.
(xii) Despite the above undertaking, tendered by it in Court, the respondent, on 28th October, 2017, held a Board Meeting, in which it was decided to sell its 34 acres of agricultural land located at NH-8 near Delhi, and a selling agent was appointed for the said purpose. It is pointed out that this land constituted one of the assets, transfer of which, to the subsidiary of the petitioners, was proposed before the NCLT. The petitioners‟ claim that they learnt of the aforesaid proposed sale from a letter, dated 28th October, 2017, from the respondent to the O.M.P. (I.) (COMM.) 166/2020 Page 8 of 17 Bombay Stock Exchange (BSE), which was displayed on the website of the BSE. This act prompted the petitioners to move CCP(O) 42/2017, before this Court, for initiation of contempt proceedings, against the respondent, for having violated the undertaking given to this this Court on 31st May, 2017.
(xiii) While, O.M.P. (I) (COMM.) 229/2017 and CCP(O) 42/2017 were pending, the petitioners moved an application under Section 17 of the 1996 Act, before the SIAC, for a restraint against the respondent, from disposing of the fixed assets, owned by it, to a value of USD 13,057,123, approximating ₹ 99 crores constituting the claim of the petitioners against the respondent.
(xiv) On the aforesaid application, preferred by the petitioner under Section 17 of the 1996 Act, the SIAC passed an order, dated 9th October, 2018, in the following terms :
"2. The Respondent hereby makes the following commitment to the Claimants and to the Tribunal on the basis set out below:
(a) In the period leading up to the issuance of a final award by the Tribunal on the merits of the Claimants' claim in this Arbitration, the Respondent will notes the Claimants and the Tribunal in writing of the sale, transfer or disposal of any of the Respondent's immovable properties and fixtures (or part thereof), including but not limited to the Agricultural Land and the French Fry Equipment (as defined in the Application) (collectively the "Respondent's Fixed Assets ").O.M.P. (I.) (COMM.) 166/2020 Page 9 of 17
(b) Such notice will be given within 2 working days of the conclusion of any agreement to transfer, dispose of or sell the Respondent's Fixed Assets, and in any event at least 2 weeks before any transfer of the Respondent's Fixed Assets is made.
(c) The notice will also mention the purpose of the sale and what the proceeds of the sale will be used for, and will include a copy of the relevant agreement to transfer, dispose of or sell the Respondent's Fixed Assets (redacted so as to only disclose the date of the agreement, the details of the asset being sold, the sale price, the completion details e.g. date of completion and manner in which payment is to be made, and the purpose of the sale) as well as any document, if any, evidencing the purpose of the sale, and what the proceeds are to be used for. The Claimants undertake to keep the information provided confidential. Further to the above, within 2 working days of the completion of any transfer, disposal or sale, the Respondent shall provide evidence that the proceeds of sale were in fact used for the stated purpose.
(d) The above information are given in SIAC Arbitration No. 47 of 2017 and are without prejudice to the parties respective positions in the Delhi High Court proceedings.
(e) The Claimants are to withdraw the Application with no order as to costs
(f) There be liberty to apply. "
(xv) In view of the aforesaid undertaking, tendered by the respondent before the SIAC, this Court, vide order, dated 6th December, 2018, disposed of O.M.P. (I) (COMM.) 229/2017 and CCP(O) 42/2017, in the following terms:
"O.M.P. (I.) (COMM.) 166/2020 Page 10 of 17
* IN THE HIGH COURT OF DELHI AT NEW DELHI + O.M.P.(I) (COMM.) 229/2017 SIMPLOT INDIA FOODS PVT.LTD. ....Petitioner Through: Ms. Madhu Swati, Adv.
Versus HIMALYA INTERNATIONAL LIMITED...
Respondent Through Mr. Puneet Tyagi and Mr. Aviral Dhirendra, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER ORDER 06.12.2018 I.A. No.16679/2018
1. Issue notice. Ms. Madhu Swati accepts notice on behalf of the non-applicant/petitioner. Learned counsel says that she does not wish to file a reply in view of what is to be noted hereafter:
2 Learned counsel for the applicant/respondent says that the Section 9 Petition filed under the Arbitration and Conciliation Act, 1996, by the non-
applicant/petitioner has been rendered infructuous for two reasons: (i) firstly, on account of order dated 09.10.2018, passed by the Singapore International Arbitration Centre (in short `SIAC') and (ii) secondly, on account of the applicant/respondent giving up on abandoning/withdrawing the Scheme of Arrangement, which was preferred before the NCLT, Delhi Bench.
3 Ms. Madhu Swati, who, appears on advance notice on behalf of the non-applicant/petitioner, O.M.P. (I.) (COMM.) 166/2020 Page 11 of 17 affirms the fact that SIAC has passed the forementioned order. Learned counsel says that she has no objection to the prayer being allowed. It is ordered accordingly.
4 The application is disposed of in the aforesaid terms.
O.M.P.(I) (COMM.) 229/2017, I.A. Nos. 2824/2018, 5970/2018, 7306/2018 & 7979/2018 & CCP (O) 42/2017 5 In view of the order passed in I.A. No.16679/2018, nothing survives in the Section 9 petition and the same is, accordingly, disposed of.
6 Consequently, all pending applications as also the Contempt Petition shall stand closed.
RAJIV SHAKDHER, J DECEMBER 06, 2018"
(xvi) On 14th March, 2019, award was reserved, by the SIAC, on the aforesaid dispute.
(xvii) Despite the order, dated 6th December, 2018, passed by this Court, which, in turn, was based on the undertaking tendered by the respondent before the SIAC on 9th October, 2018, it is averred that, on 25th March, 2019, the Board of Directors (BOD) of the respondent approved the proposal for sale of the aforesaid agricultural land, located at NH-8. This, it is stated, was reflected in a letter, dated 25th March, 2019, from the respondent to the BSE.
(xviii) On 6th December, 2019, the respondent published an O.M.P. (I.) (COMM.) 166/2020 Page 12 of 17 update on the website of the BSE, intimating that the consortium of banks, in its meeting, decided to issue NOC for sale of non-core assets of the respondent, which included the aforesaid agricultural land located at NH-8. The sale proceeds, according to the said update, were to be used for paying off the dues of the respondent, to the bank.
(xix) In these circumstances, the petitioners addressed two e-
mails to the respondent on 20th December, 2019 and 17th January, 2020, alleging that the respondent had disobeyed the order, dated 6th December, 2018, of this Court as well as the undertaking, dated 9th October, 2018, tendered by it before the SIAC. These e-mails, it is averred, elicited no response from the respondent.
(xx) On 6th January, 2017, the respondent is stated to have written to the BSE, intimating that a Memorandum of Understanding (MOU) had been signed by the respondent for transfer of its leasehold rights of spare land located in Industrial Area, Paonta Sahib, for ₹ 4 Crores.
(xxi) On 23rd March, 2020, SIAC delivered its final award, awarding, to the petitioners, a total amount of ₹ 30,28,68,544/-. This award was, subsequently, corrected on 8th May, 2020 only to the extent that the interest was made payable on „per annum‟, instead of „per day‟ basis.
O.M.P. (I.) (COMM.) 166/2020 Page 13 of 17(xxii) It is asserted that the respondent has not challenged the aforesaid award, which remains, consequently, undisturbed till date.
4. It is in these circumstances that the respondent has moved this Court, invoking its jurisdiction under Section 9 of the 1996 Act. The petitioners allege that the manner, in which the respondent has acted, throughout, is clearly indicative of the fact that the respondent intends, in every which way, to frustrate the arbitral proceedings before the SIAC and would, naturally, seek to render the arbitral award, dated 23rd March, 2020, of the SIAC, inoperable, by alienating all its assets. Reliance has been placed, in this regard, on the balance-sheet of the respondent for the financial years 2018-19, which reflects that, on 31st March, 2018, the reserves, available with the respondent, were ₹ 61.35 crores, whereas on 31st March, 2019, the balance-sheet reflects the reserves of the respondent as (-) ₹ 8.20 crores. This, it is pointed out, indicates that the respondent over the financial years 2018-2019, depleted all its reserves, obviously with a view to frustrate the arbitral award passed by the SIAC.
5. In these circumstances, ad interim relief, in accordance with the prayer clauses afore-extracted in para 1 (supra) has been prayed on the following grounds:
(i) Despite the order, dated 9th October, 2018, passed by the learned Arbitral Tribunal by consent of the parties, the respondent acted in violation thereof.O.M.P. (I.) (COMM.) 166/2020 Page 14 of 17
(ii) The respondent had violated the said undertaking by approving the proposal for sale of agricultural land, located at NH-8, near Delhi, without intimating either SIAC or the petitioners.
(iii) The respondent had also failed to respond to the emails dated 20th December, 2019 and 17th January, 2020, addressed by the petitioners to the respondent, pointing out this fact.
(iv) The aforesaid agricultural land at NH-8 was, inter alia, subject matter of the demerger scheme, filed before the NCLT, and later withdrawn by the respondent, as well as in O.M.P. (I)(COMM.) 229/2017, earlier filed by the petitioners before this Court.
6. Mr. Datta submits that advance notice of the present petition was served on the respondent. However, there is no appearance on behalf of the respondent, despite the matter having been called out twice. This Court, therefore, necessarily has to proceed on demurrer for the present.
7. The facts disclosed hereinabove indicate, prima facie, that the respondent is seeking to evade its liability, towards the petitioners and render the arbitral proceedings, before the SIAC, a futility, one way or the other. Attempts have been made, repeatedly, to alienate its assets, and the undertaking and assurances, given, both before the SIAC as O.M.P. (I.) (COMM.) 166/2020 Page 15 of 17 well as before this Court, appear, prima facie, to have been violated. The petitioners have placed on record, material including, inter alia, the approval of the BOD of the respondent dated 25 th March, 2019, for sale of the agricultural land, located near NH-8, as obtained from the website of the BSE dated 6th December, 2019, the signing of the MOU by the respondent for transfer of its leasehold rights in respect of the land, located in Industrial Area Paonta Sahib, as well as the position of the reserves of the respondent dated 31st March, 2019, vis-à-vis the position as it existed on 31st March, 2018, as reflected in the balance- sheet of the respondent for the financial years 2018-2019, which indicate, prima facie, that, were this Court not to grant ad interim relief, there is every likelihood of the respondent alienating its assets and rendering the final award, dated 23rd March, 2020, by the SIAC, a futility.
8. In the circumstances, refusal to grant ad interim relief, for the present, is bound to result in irreparable prejudice to the petitioners. The balance of convenience would also be in favour of grant of such relief, as, were the petitioners to fail, and were the respondent to succeed, the injuncted action could always be taken even at that stage.
9. In view thereof, issue notice to the respondent. Notice be served on the respondent by the Registry as well as by the learned counsel for the petitioners by way of e-mail at the e-mail ID of the respondent within a period of five days. Response to this petition may be filed by the respondent, if any, within a period of four weeks, with advance O.M.P. (I.) (COMM.) 166/2020 Page 16 of 17 copy to the petitioners, who may file rejoinder thereto, if any, within a period of two weeks thereof.
10. Renotify on 8th September, 2020.
11. Till the next date of hearing, the respondent is restrained from selling, alienating, encumbering, disposing, transferring or creating any third party interest over its movable or immovable properties, without leave of this Court.
C. HARI SHANKAR, J JULY 07, 2020 r.bararia O.M.P. (I.) (COMM.) 166/2020 Page 17 of 17