Bombay High Court
Future Corporate Resources Pvt.Ltd vs Edelweiss Special Opportunities Fund ... on 13 October, 2022
Author: Gs Patel
Bench: G.S.Patel, Gauri Godse
Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund
905-906-COMAPL-31223-2022+.doc
Shephali
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL APPELLATE DIVISION
COMMERCIAL APPEAL (L) NO. 31212 OF 2022
IN
INTERIM APPLICATION (L) NO. 18775 OF 2022
IN
COMMERCIAL SUIT NO. 164 OF 2022
WITH
INTERIM APPLICATION (L) NO. 31218 OF 2022
Future Corporate Resources
Pvt Ltd,
A company incorporated under the
Companies Act 1956, and having its
registered office at Knowledge House,
SHEPHALI
SANJAY
MORMARE
Shyam Nagar, Jogeshwari Link Road,
Digitally signed by
SHEPHALI
Jogeshwari (East), Mumbai - 60 ...Appellant
SANJAY
MORMARE
Date: 2022.10.17
10:11:09 +0530
~ versus ~
1. Edelweiss Special
Opportunities Fund,
A category II Alternate Investment
Fund, registered with SEBI and acting
through its investment manager/trustee
having its office at Edelweiss House, off
CST Road, Kalina, Mumbai 400 098.
Page 1 of 44
13th October 2022
Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund
905-906-COMAPL-31223-2022+.doc
2. Edel Land Ltd. (formerly
known as ECAP),
A company incorporated under the
Companies Act, 1956 and having its
registered office at Tower-3, Wing B,
Kohinoor city Mall, Kohinoor City,
Kirol Road, Kurla West,
Mumbai 400 070 and a corporate office
at Edelweiss House, Off CST Road,
Kalina, Mumbai 400 098. ...Respondents
A PPEARANCES
for the appellant Mr Navroz Seervai, Senior
Advocate, with Gaurav
Joshi, Senior Advocate, with
Nirman Sharma, Ansh
Karnawat, Petrushka Dasgupta,
Mridul Yadav & Dhruti
Chheda, i/b ALMT Legal.
for respondents Mr Viraag Tulzapurkar, Senior
Advocate, with Dr Birendra
Saraf, Senior Advocate, with
Ranjeev Carvalho, Dhruva
Gandhi, Sachin Chandarana &
Akshay Dhayalkar, i/b Manilal
Kher Ambalal & Co.
Present in Court Mr SK Dhekale, Court Receiver,
with Ajay Malvankar, Section
Officer.
WITH
COMMERCIAL APPEAL (L) NO. 31221 OF 2022
IN
Page 2 of 44
13th October 2022
Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund
905-906-COMAPL-31223-2022+.doc
INTERIM APPLICATION (L) NO. 18696 OF 2022
IN
COMMERCIAL SUIT NO. 207 OF 2022
WITH
INTERIM APPLICATION (L) NO. 31223 OF 2022
Ojas Tradelease And Mall
Management Pvt Ltd,
A company incorporated under the
Companies Act 1956 and having its
registered office at Knowledge House,
Shyam Nagar, Jogeshwari Vikhroli Link
Road, Jogeshwari (East), Mumbai - 80 ...Appellant
~ versus ~
1. IDBI Trusteeship Services
Ltd,
A company incorporated under the
Companies Act 1956 and having its
registered office at Asian Building,
Ground Floor, 17 R. Kamani Marg,
Ballard Estate, Mumbai 400 001
2. Central Bank of India,
A banking company incorporated under
the Banking Regulation Act 1949,
having its registered office at
Chandramukhi, Nariman Point,
Mumbai 400 021 and Corporate Office
branch at 1st Floor, MMO Building,
Fort, Mumbai 400 023. ...Respondents
Page 3 of 44
13th October 2022
Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund
905-906-COMAPL-31223-2022+.doc
A PPEARANCES
for the appellant Mr Ashish Kamat, with Nirman
Sharma, Ansh Karnawat,
Petrushka Dasgupta, Mridul
Yadav & Dhruti Chheda, i/b
ALMT Legal.
for respondents Dr Birendra Saraf, Senior
Advocate, with Jehaan Mehta,
Suniil Tilokchandani, Nipa
Ghosh, i/b Manilal Kher
Ambalal & Co.
Present in Court Mr SK Dhekale, Court Receiver,
with Ajay Malvankar, Section
Officer.
CORAM : G.S.Patel &
Gauri Godse JJ
DATED : 13th October 2022
ORAL JUDGMENT (Per GS Patel J):-
1. On 12th September 2022, a learned Single Judge of this Court passed an ad-interim order on two Interim Applications in two separate but interconnected Commercial Suits. The order is undoubtedly an ad-interim one. It says so explicitly and directs the Interim Applications to be placed for final disposal as per their turn. The Defendants in the Suit are in appeal against that ad-interim order.
Page 4 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
2. Commercial Suit No. 164 of 2022 is filed by Edelweiss Special Opportunities Fund ("Edelweiss") and by one Edel Land Limited, previously known as Ecap Equities Limited ("Ecap") against Future Corporate Resources Private Limited ("FCRPL"). These two Plaintiffs filed Interim Application (L) No. 18775 of 2022. This is the Edelweiss Suit and the Edelweiss Interim Application. Commercial Suit No. 207 of 2022 is filed by IDBI Trusteeship Services Limited ("IDBI") against Ojas Tradelease & Mall Management Private Limited ("Ojas"). The 2nd Defendant is the Central Bank of India, with which we are not concerned. In this, IDBI filed Interim Application (L) No. 18696 of 2022. This is the IDBI Suit and the IDBI Interim Application.
3. The combined order has two sections, with a separate discussion and operative order in each Interim Application. In the IDBI Interim Application, the operative ad-interim order is to be found in paragraph 13 at pages 28 to 31 in the Appeal paper-book:
"13. Considering the aforesaid discussion, the following order is passed in Interim Application (L) No. 18696 of 2022 in Commercial Suit No. 207 of 2022:-
(i) Pending the hearing and final disposal of Interim Application (L) No. 18696 of 2022, the Court Receiver, High Court, Bombay is appointed as the Receiver of the mortgaged property more particularly described in Schedule-I to the Indenture of Mortgage dated 7th May 2020 (Exhibit-F-1 to the Plaint). Considering that the mortgaged property is a Mall at Ahmedabad, the Court Receiver shall take possession thereof but not dispossess any party who is found in occupation of any shops/tenements therein by virtue of any license agreement and/or a lease executed in their favour. Any such occupants Page 5 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc of the shops/tenements in Mall, shall, from the period October 2022 onwards, pay their respective license fees / rent / compensation directly to the Court Receiver. These occupants shall also furnish their respective Leave and License Agreements / Leases to the Court Receiver, when called upon to do so. If any of the occupants want to surrender their respective shop/tenement, they shall do so only to the Court Receiver. If any shops/tenements are found vacant or closed, the Court Receiver shall take physical possession of the same and put his seal thereon.
For this purpose, the Court Receiver is entitled to break open any locks to ensure that physical possession of the said vacant / closed shop/s or tenement/s is with the Court Receiver. It is made clear that pending the hearing and final disposal of the Interim Application, the Court Receiver shall not sell the mortgaged property except with the consent of IDBI Trustee, OJAS and Central Bank of India.
(ii) In addition to the appointment of the Court Receiver, pending the hearing and final disposal of Interim Application (L) No. 18696 of 2022, there shall also be an order and injunction restraining Defendant No. 1 (OJAS), its servants, agents, officers, assignees and/or any person/s claiming through and/or under them, from directly or indirectly selling, transferring, alienating, encumbering, giving on leave and license, partying with possession, and/or creating any third-party rights, title and/or interest in the mortgaged property, or any part thereof, more particularly described in Schedule-I to the Indenture of Mortgage dated 7th May 2020 (Exhibit-F-1 to the Plaint)."
4. The operative ad-interim order on the Edelweiss Interim Application is in paragraphs 18 to 20 at pages 34 and 35. Those paragraphs read thus:
Page 6 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc "18. In these circumstances, there shall be ad-interim relief against FCRPL in terms of prayer clause (b) which reads thus:
"b. Pending the hearing and final disposal of the Suit, order and direct the Defendant to disclose on oath all the assets and/or properties acquired by it, till date, together with complete particulars, including the location, valuation of each and every asset and/or property, whether movable or not (including shareholding in any company in which it is a shareholder or any beneficial interest in any manner whatsoever), as also the details of all such assets, monies, bank deposits, investments and accounts held by the Defendant singly or jointly (with any other person or entity), the details of all transactions entered into by this Defendant, including assets and cash transfers in the last three years and amounts received by the Defendant pursuant to the Exit Demand Notice dated 8th September, 2020 and to produce bank statements for all of their bank accounts and income tax returns for the last three years;"
19. The disclosures as contemplated above shall be made by FCRPL within a period of four weeks from today.
20. In addition to this, as and by way of ad-interim relief, FCRPL is restrained by order and injunction, whether by itself or acting through its servants, agents, representatives and/or any other person acting for and/or on its behalf, from creating any third party rights and/or interests whatsoever, whether by way of sale, lease, license, mortgage or any other encumbrance, over and/or in respect of any of its assets and effects, whether movable or immovable, except in the ordinary course of business."
Page 7 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
5. FCRPL, the Defendant in the Edelweiss Suit, and Ojas, the 1st Defendant in the IDBI Suit, have come up in appeal. Mr Seervai appears for FCRPL, while Mr Kamat represents for Ojas. Mr Tulzapurkar appears for Edelweiss, and Dr Saraf for IDBI. We have heard them all.
6. We will need to briefly trace the transactional history in the matter. The transactions in the Edelweiss case are the genesis; IDBI and Ojas were later entrants. On 26th November 2018, there was a Shareholders' Agreement ("SHA") between Edelweiss and Ecap on the one hand and Kishor Biyani ("Biyani") and a company then known as Suhani Trading and Investment Consultants Private Limited, later FCRPL, on the other. The arrangement between Edelweiss and Ecap on the one hand and Biyani and Suhani/FCRPL, was that the two Edelweiss companies would acquire a substantial amount of equity shares of Future Retail Limited ("FRETAIL") in the open market, i.e., from the stock exchanges. FRETAIL's stock is quoted and traded. From any perspective, this was clearly an investment arrangement: the two Edelweiss companies were not lenders to Biyani or FCRPL. We have been taken through some portions of the SHA. We do not propose to examine to quote these at length but will summarise our understanding of the salient provisions. That the Edelweiss companies purchased FRETAIL shares from the open market is undisputed. The SHA has a defined timeline. Since Edelweiss and Ecap were investors, two things were contemplated. One was the preservation within a defined margin of the value of the investment. The second was an exit from equity ownership for Edelweiss after a specified period. To explain: Edelweiss and Ecap bought FRETAIL Page 8 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc shares at a known price from the Stock Market. The investment was substantial. The SHA contemplated that the share price of FRETAIL would not drop -- or would not be allowed to drop -- by more than 40%. If the stock exchange trading/quoted price of FRETAIL shares fell below 40%, then there occurred what was called a Trigger Event. This had defined consequences. An important definition in the SHA is the concept of a Shortfall Amount. But this itself has components. One component is the Exit Amount, also separately defined. There is a complicated formula (pages 105 to 106), but essentially the Exit Amount provides for what is roughly a 15.75% IRR or Internal Rate of Return. The Shortfall Amount is the difference between the Exit Amount and the amount realised by Edelweiss and Ecap by the sale of what were called Investor Securities, separately defined as the FRETAIL shares that Edelweiss and Ecap purchased on the closing date. Clause 5.1 contemplates a sale by Edelweiss and Ecap. A Trigger Event was defined to have the meaning attributed to it in Clause 11 of the SHA. Clause 4 of the SHA contained a specific covenant to pay. Clause 4.1 said that Biyani and FCRPL, jointly, severally, irrevocably and unconditionally, as separate and independent obligations agreed to pay to the investors the Exit Demand as specified in that clause. Clause 3 had a put option, which was to operate on or after the specified put option date or at any time after a Trigger Event occurred. There was a corresponding call option in Clause 2. Clause 4.1 is central to one of the arguments that Mr Seervai makes. We will return to this later.
7. The closing date was 29th November 2018. The buy-in amount by Edelweiss and Ecap was Rs.299,93,42,306/- at Rs.526.79 Page 9 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc per share. Edelweiss acquired 40,43,272 FRETAIL equity shares, and Ecap took 16,50,350 FRETAIL equity shares, thus making a total of 56,93,587 FRETAIL shares between the two.
8. This was the situation in November 2018. On 28th February 2020, a little over a year later, FRETAIL's trading price dropped to Rs.303.55 per share. This was, or is said to have been, 40.3% lower then the price at which Edelweiss and Ecap bought the shares, i.e., Rs.526.79 per share. According to Edelweiss and Ecap, this automatically resulted in an occurrence of the Trigger Event in terms of Clause 11.7.9 of the SHA. On 2nd March 2020, FRETAIL's stock price changed to Rs.305.80, a marginal rise, but this was still said to be greater than 40% margin contemplated by the SHA and was therefore said also to be the occurrence of a Trigger Event. On 3rd March 2020 Edelweiss and Ecap wrote to Biyani and FCRPL that a Trigger Event had occurred and that the rights arose in their favour. A copy of this communication is at page 163. In this, Edelweiss and Ecap said that they now had the right to exercise the put option as also the right to sell the securities to any person on the exchange.
9. On 7th May 2020, an unconditional Deed of Guarantee came to be executed by Ojas, one of the sister concerns or part of the Biyani/Future group to secure FCRPL's obligations under the SHA, including the obligation to pay the shortfall amount. This guarantee was periodically upgraded from its original Rs.162 crores to Rs.240 crores and finally to Rs.350 crores. No part of the claim in either Suit is founded on this guarantee.
Page 10 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
10. In addition to this guarantee, Ojas executed an Indenture of Mortgage with IDBI creating a first ranking pari passu charge over a property admeasuring 1,33,500 sq ft on the ground, first and second floors of Wing C of a commercial shopping mall called 'Acropolis' in Ahmedabad. The mortgage document is undisputed. The amount said to be secured by the mortgage is Rs.300 crores.
11. On 8th September 2020, Edelweiss and Ecap separately wrote to FCRPL and to Biyani mentioning the Trigger Event, the previous letter of 3rd March 2020 and said that they had sold certain shares of the Investor Securities and made some recoveries. Edelweiss said it had sold 40,34,177 FRETAIL shares and realised Rs.42,25,46,978/-. Ecap said it had sold 15,21,874 FRETAIL shares realising Rs.16,58,58,076/-. Both said that the realizations were lower than the Exit Demand and there was, therefore, now a Shortfall Amount due under the SHA.
12. This is the basis on which Edelweiss demanded from FCRPL and Biyani immediate payment of an amount Rs.191,34,73,934/- by 10th September 2020. For its part, Ecap demanded payment of Rs.70,87,83,529/- by the same date.
13. One day later, on 9th September 2020 both Edelweiss and Ecap 'amended' their Exit Demands for the Shortfall Amount. Edelweiss now said that the amount due was Rs.233,60,20,912/-. Ecap's demand was now Rs.87,46,41,605/-. While Edelweiss and Ecap say that there was no reply, we find there that there is actually no clear explanation why or how this change was computed and why Page 11 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc there was an error in the first place. The amendment letter does not explain. It only provides reworked figures.
14. But this was not the only sale. On 15th October 2018, i.e., before the date of the SHA, FCRPL had executed a Pledge Agreement of FRETAIL shares in favour of Edelweiss and Ecap. This was later amended on 22nd November 2018. The initial pledge of FRETAIL's shares was in favour of Edelweiss and Ecap. The amendment created the pledge in favour of the security trustee, IDBI, which came to be appointed as security trustee under a separate Security Trustee Agreement also of 15th October 2018. This too was amended on 22nd November 2018 and there was a Deed of Accession on 29th November 2018.
15. This is relevant because on 8th September 2020, on instructions from Edelweiss and Ecap, IDBI issued a notice under Section 176 of the Indian Contract Act calling upon FCRPL and Biyani to pay an aggregate amount of Rs.262,22,57,463/-. This is the aggregate of the so-called uncorrected amounts first demanded by Edelweiss and Ecap. Predictably, on 9th September 2020, there was a 'corrigendum notice' by which the Shortfall Amount was now raised to Rs.321,06,62,517/- (adopting the revised or amended demand from Edelweiss and Ecap).
16. On 15th September 2020, the Deed of Guarantee received its first amendment.
Page 12 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
17. On 25th January 2021, IDBI issued another notice under Section 176 demanding payment of the Shortfall Amount and saying that in default IDBI would proceed to sell the pledged FRETAIL shares.
18. According to all the Plaintiffs, there was then some composite scheme of arrangement proposed before the NCLT for a merger and transfer of the businesses of some 20 companies in the Future Group -- including Ojas -- to some entities in the Reliance group.
19. By June 2021, the stock market price of FRETAIL shares was still falling.
20. On 2nd June 2021, Ojas's guarantee was amended as second time, now to Rs.350 crores.
21. On 4th June 2021, IDBI on behalf of Edelweiss and Ecap issued a demand certificate under the Deed of Guarantee calling on Ojas to pay Rs.350 crores within three days.
22. In the meantime, that is through the rest of 2021 and for about the first quarter of 2022, and for a month beyond, nothing happened. Nobody brought suit. The scheme for compromise was before the NCLT. That scheme finally failed on 25th April 2022. It was only two or three months later, in June 2022, that these Suits were filed. There were the usual preliminary skirmishes with the Plaintiff seeking urgent ad-interim reliefs. There was one order of 10th August 2022 framed as an injunction restraining the disposal of Page 13 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc asserts except in the ordinary and usual course of business without prior leave of the court.
23. These Interim Applications were then heard at some length and resulted in the impugned ad-interim order of 12th September 2022.
24. Mr Seervai, launching a blistering attack on the impugned order, makes four points in the FCRPL appeal. The first is that entire Edelweiss/Ecap Suit is either a claim on an indemnity or one for liquidated damages under, respectively, Clauses 4.1 and 4.2 of the SHA. No such injunction or order of disclosure is possible in the pursuit of such a claim. The second submission is that the impugned order incorrectly bypasses the mandatory provisions of Section 12A of the Commercial Courts Act. The third argument is that the Edelweiss Interim Application proceeds on the basis of an entitlement to an attachment before judgment. None of the well- settled parameters justifying an attachment before judgment are to be found in either the Plaint or the Interim Application. As a fallback position, there are submissions and prayers framed ostensibly under Order 39 of Code of Civil Procedure 1908 ("CPC") but without acknowledging that Order 39 Rule 1(b) of the CPC is nothing but the other face of Order 38 Rule 5 of the CPC. The same considerations must apply to both. He submits that if no case is made out for the grant of an order of attachment before judgment, then it is never possible to grant an injunction under Order 39 Rule 1(b) of CPC. It is no answer to the failure of an attachment of judgment application to say that all that is being granted is an Page 14 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc injunction. The fourth point he makes is that in fashioning the interim order, the learned Single Judge appears to have said that even under the Commercial Courts Act, a chartered High Court has a wider and more plenary jurisdiction beyond the provisions of the CPC; and, specifically, beyond the provisions of Order 38, Order 39, Order 40 XL even Section 151 of the CPC.
25. As to the first point, the argument proceeds on the footing that the claim is not for an ascertained amount. It is not, Mr Seervai says, a debt. Emphasis is laid on the wording of Clauses 4.1 and 4.2 of the SHA. We find these at pages 118 and 119 and they read thus:
"4. COVENANT TO PAY 4.1 The Promoters, jointly and severally, irrevocably and unconditionally, and as a separate and independent obligation and without prejudice to the other provisions contained herein, hereby agree to pay to the Investors on a full indemnity basis, forthwith upon demand by the Investors ("Exit Demand"):
(i) in case of occurrence of a Trigger Event or upon the whole or any part of Clause 2 (Call Option) and Clause 3 (Put Option) (including the right to exercise the Put Option or Call Option or any actions or obligations consequent thereto) being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, an amount equivalent to the Exit Amount; and
(ii) an amount equivalent to the Shortfall Amount in case of a Shortfall Event, irrespective of whether any of the Trigger Event or Shortfall Event as aforesaid or any related fact or circumstance thereto was known or ought to have been known to the Investors or any of their officers, employees, Page 15 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc agents or advisors. For the avoidance of doubt, in the event there is a shortfall Event, it is clarified that if the Promoters pay an amount equivalent to the Shortfall Amount, they will not be required to pay any further amounts under this Clause 4.1 (Covenant to Pay) to the Investors.
4.2 The Promoters agree that the amounts payable to the Investors pursuant to this Clause 4 (Covenant to Pay), shall be payable without any demur or delay and in the event that any payment required to be made under this Clause is adjudged or classified as 'liquidated damages', the Promoters agree that such amounts payable hereunder are reasonable and shall be deemed to be a crystallized amount and are a genuine pre-estimate of damages that would be caused to the Investors in case of occurrence of an event specified in this Clause 4 (Covenant to Pay), and the same is not penal in nature."
(Emphasis added)
26. Mr Seervai's submissions on this point do not commend themselves; certainly not at the ad-interim stage. Clause 4.1 does not create convert to damages a contractual obligation to pay a debt, one that can be exactly ascertained by applying the various formulae we find in the SHA, merely because it uses the words 'on a full indemnity basis'. This is not an indemnity clause at all; it only means that the full amount is to be paid and cannot be questioned. There is a separate indemnity Clause 12 that we find at page 134, which reads thus:
"12. INDEMNITY 12.1 The Promoters shall jointly and severally at all times indemnify the Investors and its officers, directors, and employees against any and all liabilities and expenses Page 16 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc incurred by them in the execution of the powers under this Agreement from and against any and all direct losses, whether suffered or incurred by any of them which arise out of, or result from, or are connected with any breach by any of the Promoters of their representations, covenants, agreements or obligations contained in this Agreement or any violation of Applicable Law or terms of any authorization unless such losses result from the Investors' fraud, misconduct, willful default or gross negligence. 12.2 The indemnification rights granted to the Investors under this Clause 12 (Indemnity) are independent of, and in addition to, such other rights and remedies that the Investors may have at law or in equity or otherwise, including the right to recover, the right to seek specific performance, rescission, restitution, a restraining order or injunctive relief."
27. No claim is made in either Suit for an indemnity under Clause
12. Prima facie -- and that is all we will do at this stage -- the expression 'on a full indemnity basis' does not mean do more than clarify that the entirety of the claim is covered by the covenant to pay. There is no other way to read this because otherwise there would be a conflict between Clause 4.1 and Clause 12; or Clause 12 would be rendered entirely otiose.
28. The submission that the claim is in the nature of liquidated damages is equally ill-founded. Clause 4.2 extracted above is like a safety valve. It protects against a possible defence, precisely of the kind that Mr Seervai makes, that this is a claim in liquidated damages. Clause 4.2 says the demand is in fact nothing of the kind and even if it is claimed to be, it will satisfy the necessary tests;
Page 17 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc under no circumstances will it be a penalty. Clause 4.2 therefore anticipates a possible objection. That is all there is to it.
29. Commercial contracts must be read in a way that makes commercial common sense; as any reasonable and prudent commercial party would. Mr Seervai's argument is contrary to this long-settled principle. In effect, his submission amounts to saying this: "Biyani and FCRPL agreed that Edelweiss and Ecap would make an investment in FRETAIL. We agreed on a SHA that has a put option, a call option and a provision by which, and within a defined time, Edelweiss and Ecap could recoup their investment with an agreed return. We also agreed on the conditions that would cause a Trigger Event and the consequences of the Trigger Event. We anticipated that there may be a Shortfall, a difference between the Exit Demand and the sale price of the Investor Securities plus the Pledged Securities. We gave a guarantee and mortgage to cover the possible debt. But when that claim for the Shortfall is made, we now say there is no debt, that the claim sounds in damages or liquidated damages or both, and that Edelweiss, Ecap and IDBI must now wait decades to recover the debt we covenanted to pay." That formulation cannot possibly succeed; and most emphatically not at the ad-interim stage. If accepted, it would utterly demolish the covenant to pay, and do considerable violence to the plain meaning and unambiguous intent of the contract, i.e., the SHA.
30. We do not think there is much substance to Mr Seervai's suggestion that Edelweiss, Ecap and IDBI purposely sold the shares at a depressed valuation. That would make no commercial sense Page 18 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc whatsoever because it would mean Edelweiss, Ecap and IDBI preferred instead to bank on the inherent unpredictability of a litigation in the Commercial Division. It seems to us appropriate to proceed on the basis that all three sold the shares at the best possible price they could after their entitlement to that sale under the SHA had accrued.
31. On the submission about the similarity between the conditions of Order 38 Rule 5 and Order 39 Rule 1(b) of the CPC, Mr Seervai wants an authoritative pronouncement. At this ad- interim stage, we decline to take up the gauntlet or to give Mr Seervai the satisfaction he demands. We only note the argument and leave the rest for another day. He juxtaposes the requirements of Order 38 Rule 5 -- "the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him, is about to dispose of the whole or any part of his property, or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court" -- with one of the considerations under Order 39 Rule 1(b): "that the defendant threatens, or intends, to remove or dispose of his property with a view to defrauding his creditors." Both, he says, conceive of an identical situation. Therefore, if you cannot grant one, you cannot grant the other.
32. Mr Seervai takes us to portions of the Plaint. There is, he submits, not a single material particular in the Edelweiss Suit to show that FCRPL or Biyani are about to dispose of the whole or any part of the property or to remove it from the jurisdiction of this Court with intent to obstruct or delay the execution of any decree, Page 19 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc an eventuality that is quite some distance away in any case, or that Mr Seervai's clients 'threatened or intend to remove or dispose of' property with the view to defrauding their creditors. The fact that there are arrangements with other creditors or there was a scheme of arrangement before the NCLT is not in itself sufficient reason. The falling share market price of FRETAIL shares may have consequences under the SHA but that, Mr Seervai submits, is a far cry from providing good and sound justification for the kind of sweeping order that has been made. He points out that while prayer
(e) for an attachment before judgment is not granted, prayer (g) in the Plaint, which is the other side of the coin, has in fact been granted. Mr Seervai's submission is that the effect of this injunction is, first, to elevate Edelweiss and Ecap from their position as unsecured creditors to secured creditors and, second, to prevent FCRPL and Biyani from settling or compromising with other secured creditors. It is settled law, he submits, that an unsecured creditor can never obtain such an injunction.
33. Mr Seervai relies on the decision of a Division Bench of the Calcutta High Court in Sunil Kakrania & Ors v Saltee Infrastructure Ltd & Anr.1 The reliance here is on the findings of the Supreme Court in Raman Tech & Process Engineering Co & Anr v Solanki Traders2 to the effect that Order 38 Rule 5 of CPC is indeed a drastic and extraordinary power. It is no answer, Mr Seervai says, to say that because there is an inherent power under Section 151 of CPC, therefore the considerations of Order 38 Rule 5 and Order 39 Rule 1(b) of CPC have no application. The words of those provisions are 1 2009 SCC OnLine Cal 1638 : AIR 2009 Calcutta 260. 2 (2008) 2 SCC 302.
Page 20 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc clear. If no case is made out for the grant of such relief, then absent a specific finding justifying the relief, such an injunction cannot be granted under Section 151of CPC. The Sunil Kakrania case referenced, necessarily, the Supreme Court decisions in Manohar Lal Chopra v Rai Bahabdur Rao Raja Seth Hiralal 3 and the reference in that in turn on Padam Sen v State of Uttar Pradesh.4
34. Sunil Kakrania was a money suit, and immovable property was claimed to be 'the property in dispute in the suit' because the amount claimed was supposedly payable for construction -- very much like a contractor saying that because he had put up some construction, he had an estate in the construction itself as security for his unpaid bill. What the Division Bench held was that there was no case for an injunction under clauses (a), (b) or (c) of Order 39, Rule 1, or even Order 39, Rule 2. Yet, if he could make out a sufficient case and meet the necessary conditions, the plaintiff contractor could apply under Order 38, Rule 5 -- and even those conditions were not actually met in the case before the Division Bench. A mere vague allegation that the defendant was impecunious or that a decree would be ineffective was insufficient. The Division Bench seems to have held that a court cannot invoke Section 151 of the CPC to restrain a defendant from transferring or alienating his own property (a reference to Padam Sen), over which the plaintiff has no rights, nor can a plaintiff claim pre-decretal attachment of this property. It is clear why Mr Seervai emphasizes this decision. He places the present case on precisely the same footing as the case of the plaintiff in Sunil Kakrania.
3 1962 Supp (1) SCR 450 : AIR 1962 SC 527.
4 (1961) 1 SCR 884 : AIR 1961 SC 218.
Page 21 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
35. When this was presented to the learned Single Judge, the finding returned in the impugned order was that a chartered High Court has, in its Letters Patent, a wider remit. In paragraph 16 of the impugned order, reliance came to be placed on the Division Bench judgment of this Court in La-Fin Financial Services Pvt Ltd v IL&FS Financial Services Ltd.5 That decision was in an appeal against the grant of an injunction on a Notice of Motion. A similar argument regarding attachment before judgment was noted as having been canvassed in paragraph 19 of La-Fin. It was also captured again in paragraphs 38 and 39, where again the injunction was sought to be equated to an order of attachment before judgment. The argument was rejected in paragraph 40 inter alia relying on Manohar Lal Chopra. The relevant portions were quoted. Then there was a reference to a decision of this Court in Triangle Drilling Limited v Jagson International Limited & Anr.6 The decision of the Division Bench in Triangle Drilling was that it was well settled that chartered High Courts had powers to grant an injunction and that these are not confined by statutory provisions. We quote paragraph 43 of La- Fin, with its internal quotation:
43. We must mention here that the decision of the Supreme Court in Manohar Lal Chopra's case, has been relied upon by another Division Bench of this Court in the case of Triangle Drilling Ltd v Jagson International Ltd. In the facts of this case (Triangle Drilling), a suit was filed by the Appellants against the 1st Respondent for recovery of hire charges in respect of two jack-up rigs. A Notice of Motion was filed seeking interim relief inter alia restraining 5 2015 SCC OnLine Bom 4794.
6 Appeal No. 704 of 1992 in Notice of Motion 2042 of 1992 in Suit No. 2678 of 1992, decided on 15th October 1992.Page 22 of 44
13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc Respondent No. 1 from receiving payment under a contract with Respondent No. 2 until the amount in the suit was paid to the Appellants and/or deposited in the Court and/or secured by a bank guarantee. This Notice of Motion was substantially decided on the ground that the power of the Court was circumscribed by the provisions of Order 38 Rule 5 and Order 39 of CPC and that on the facts and circumstances of the case, reliefs asked for were not capable of being granted. It was in these circumstances that the Appeal was filed before the Division Bench. The short question therefore before the Division Bench was whether the prohibitory reliefs sought by the Appellants were not covered by the relevant provisions of the CPC, 1908 and therefore incapable of being granted, even if there was no merit in the defence. In that context, the Division Bench held that it is well settled that at least with respect to Chartered High Courts, the High Court's power to grant a temporary injunction was not confined to the statutory provisions alone. Relying upon the Supreme Court decision in Manohar Lal Chopra's case, the Division Bench took the view that the learned single Judge had erred in law that he had no power or jurisdiction to grant the prohibitory reliefs claimed, even assuming that there was no substance in the defence raised by Respondent No. 1. The relevant portion of this judgment is reproduced hereunder:-
"The short question, therefore, is whether the main basis of the order of the learned Single Judge, namely, that the prohibitory reliefs sought by the Appellants are not covered by the relevant provisions of the Code of Civil Procedure and that, therefore, they were not capable of being granted, even if there was no merit in the plea in defence, is well founded in law. We may assume, without granting, that the prohibitory reliefs are not Page 23 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc covered by the relevant provisions of the Code. However, the well settled legal position with respect to Chartered High Courts is that the powers of those High Courts to grant an injunction are not confined to the statutory provisions alone. The Calcutta High Court has held that the powers of that High Court to grant a temporary injunction were not confined to the terms of Order XXXIX Rules 1 and 2 of the Code and that the Chartered High Courts have inherent power under the general equity jurisdiction to grant an injunction independently of the provisions of the code and also that such power can be exercised by a Single Judge sitting on the Original Side of the High Court (See Nakasioara Jute Mills v. Nirmal Kumar (1941) 1 Calcutta 373). Our Court has also taken the same view. (See Muchand v. Gill and Co. (1920) (44 Bombay 283).
In Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962 SC 527, the question which fell for consideration was whether having regard to the language of clause (c) of section 94 of the Civil Procedure Code, interim injunction can be issued only if a provision for their issue is made in order XXXIX Rules 1 and 2. The submission on behalf of the appellant in that case was that clause (c) of section 94 provides that the Court may, if it is so prescribed, grant a temporary injunction in order to prevent the ends of justice from being defeated and that the word 'prescribed', according to section 2 Page 24 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc of the Code means 'prescribed by Rules' and that Rules 1 and 2 of Order XXXIX lay down precisely the circumstances in which a temporary injunction may be issued. The majority decision rejected this submission and held that Courts have inherent jurisdiction to issue temporary injunction in circumstances which are not covered by the provisions of Order XXXIX of the Code. The reasons set out in support of this view are as follows:
"It is well settled that the provisions of the Code are not exhaustive, for the simple reason that the Legislature is incapable of contemplating all the possible circumstances which may arise I future litigation and consequently for providing the procedure for them. The effect of the expression 'if it is so prescribed' is only this that when the rules prescribed the circumstances in which the temporary injunction can be issued, ordinarily the Court is not to use its inherent powers to make the necessary order in the interests of justice, but is merely to see whether the circumstances of the case bring it within the prescribed rule. If the provisions of section 94 were not there in the Code, the Court could still issue Page 25 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc temporary injunctions, but it could do that in the exercise of its inherent jurisdiction. No party has a right to insist on the Court's exercising the jurisdiction and the Court exercises its inherent jurisdiction only when it considers absolutely necessary for the ends of justice to do so. It is in the incidence of the exercise of the power of the Court to issue temporary injunction that the provisions of section 94 of the Code have their effect and not in taking away the right of the Court to exercise its inherent power.
There is nothing in Order XXXIX rules 1 and 2, which provides specifically that a temporary injunction is not to be issued in cases which are not mentioned in those rules. The rules only provide that in circumstances mentioned in them the Court may grant a temporary injunction."
Referring to section 151 of the Code, it was observed:
"The section itself says that nothing in the Code shall be deemed to limit or otherwise affect the inherent power of the Page 26 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc Court to make orders necessary for the ends of justice. In the face of a clear statement, it is not possible to hold that the provisions of the Code control the inherent power by limiting it or otherwise affecting it.
The inherent power has not been conferred upon the Court, it is a power inherent in the Court by virtue of its duty to do justice between the parties before it.
Further, when the Code itself recognizes the existence of the inherent power of the Court, there is no question of implying any powers outside the limits of the code."
In the minority judgment of Shah J., the power of Chartered High Courts exercising ordinary original jurisdiction to exercise inherent jurisdiction to issue an injunction was expressly recognised. His Lordship observed:
"Power to issue an injunction is restricted by Section 94 and O. 39 and it is not open to the Civil Court which is not a Chartered High Court to exercise that power ignoring the restrictions imposed thereby in purported exercise of its inherent jurisdiction"Page 27 of 44
13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc (Underlining supplied).
For the foregoing reasons, in our opinion the learned Single Judge, with respect, erred in law in taking the view that he had no power or jurisdiction to taking the view that he had no power or jurisdiction to grant the prohibitory reliefs claimed, even assuming that there was no substance in the defence raised by the First Respondent. (emphasis supplied) (Emphasis added, follows the original)
36. La-Fin and the Triangle Drilling are both decisions of benches of coordinate strength. Each of them separately and both together bind us. It is not shown to us that these decisions were rendered per incuriam or are no longer good law. We are simply asked to prefer the view of the Calcutta High Court Division Bench in Sunil Kakrania. We cannot. No principle of binding precedent permits this.
37. While on the subject, we may only note Section 94 of the CPC.
"94. Supplemental proceedings.--In order to prevent the ends of justice from being defeated the Court may, if it is so prescribed,--
(a) issue a warrant to arrest the defendant and bring him before the Court to show cause why he should not give security for his appearance, and if he fails to comply with any order for security commit him to the civil prison;
(b) direct the defendant to furnish security to produce any property belonging to him and to place the same at the disposal of the Court or order the attachment of any Page 28 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc property;
(c) grant a temporary injunction and in case of disobedience commit the person guilty thereof to the civil prison and order that his property be attached and sold;
(d) appoint a receiver of any property and enforce the performance of his duties by attaching and selling his property;
(e) make such other interlocutory orders as may appear to the Court to be just and convenient."
38. An order under Order 38 Rule 5 is always a greater relief -- and therefore to be exercised with even more circumspection -- than the lesser relief of an injunction under Order 39. We are not shown any authority from 1908 that exactly equates Order 38 Rule 5 and Order 39 Rule 1(b). The fact that these are separately and distinctly positioned in the CPC may itself provide a clue. We leave it at that.
39. Then Mr Seervai submits that the learned single Judge wrongly invoked the 'wider powers' of a chartered High Court, a distinction that, he submits, is obliterated by the Commercial Courts Act, 2015 ("CCA"). It cannot be, he submits, that a chartered High Court has wider powers under the CCA than one that is not. There is no substance to this argument either. The CCA specifically acknowledges the existence and special provisions of the Letters Patent for some High Courts. True, Section 16 of the CCA gives primacy to the CPC. But what the argument misses is that even the CPC recognizes the existence of chartered High Courts and makes significant exceptions for them -- including, importantly, Page 29 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc in matters of jurisdiction. The CPC has always yielded to the Letters Patent, and except where it says so specifically (for example, in Section 13), the CCA does not eradicate the Letters Patent.
40. For these reasons, we do not think there is sufficient substance to Mr Seervai's submissions on the powers -- inherent or otherwise -- of the court, at least at this ad-interim stage.
41. We take up next Mr Seervai's argument regarding Section 12A of the CCA. Mr Seervai's submission is that Section 12A is mandatory. It was introduced by amendment. It reads thus:
"12A. Pre-Institution Mediation and Settlement--
(1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-
institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.
(2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for the purposes of pre-institution mediation.
(3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987 (39 of 1987), the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from the date of application made by the plaintiff under sub-section (1):
Provided that the period of mediation may be extended for a further period of two months with the consent of the parties:Page 30 of 44
13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963 (36 of 1963).
(4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator. (5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996)."
(Emphasis added)
42. No plaintiff, he submits, can merely by filing an Interim Application for interim relief get out of the mandatory requirement of Section 12A. We do not think Mr Seervai's submission on this is well taken. The CCA was meant to expedite the disposal of commercial disputes. Section 12A was meant to accelerate that disposal by providing a disposal mechanism that did not involve Courts. Section 12A does not permit a plaintiff to bypass its provisions by merely filing an interim application. The words "which does not contemplate" does not mean "in the opinion of the plaintiff". A plaintiff may in a commercial cause may contemplate very many things and may want even more. That is immaterial. In a given Commercial Suit if there is no application for interim relief, or there can be none, then undoubtedly Section 12A must apply. But can Section 12A be bypassed by a plaintiff simply by filing an application for interim relief? The answer is clearly no. Equally, Section 12A is not meant to be weaponised by a defendant to Page 31 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc prevent a Court from passing an order where the Court believes an order is justified and necessary. Accepting Mr Seervai's argument might, we believe, lead us to down this perilous path. If a Court believes that on a plaintiff's Interim Application there is a justification for an interim order, then Section 12A cannot be used to say that the Court is powerless to make that interim order. That would in fact be even in the teeth of Section 16 of the CCA and the emphasis on the operation of the provisions of the CPC. It would amount to ousting the court's discretionary and equitable jurisdiction at an interlocutory stage. Nothing in Section 12A remotely tends to this interpretation.
43. We must pause to consider the situation as it stood in April 2022 when the scheme of compromise had failed before the NCLT. Edelweiss and Ecap had sold in open market all (or some) of the equity shares that they purchased at the beginning of the transaction. At their instance, IDBI had also sold pledged securities. These open market stock exchange sales are not denied. As far as Edelweiss and Ecap were concerned, the pledged security had been realised and they had exited the SHA (wholly or in part) by exercising their exit option of 'sale by investors' under the SHA. The Edelweiss Suit is for the remainder. But for the Ojas mortgage, Edelweiss and Ecap would have been unsecured creditors.
44. That mortgage is a crucial circumstance for our purposes. It means that, apart from the stock market realisations that Edelweiss, Ecap and IDBI made, there was security for the balance -- a valid and subsisting mortgage of parts of the Acropolis Mall. The security cover Page 32 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc was Rs.300 crores. It is in this context that we must access what is it that the Plaint say in support of the claim for interim injunctions.
45. We have been taken through various paragraphs of the Plaint. We see no purpose in reproducing these at lengths since we are dealing with an ad-interim order, and it is not our intention to prejudice the final hearing of these Interim Applications. But other than saying that the Future group is in financial trouble, that share prices are falling, and that there is indebtedness, there is nothing at all before the Court to warrant an extreme or wide-ranging injunction in favour of Edelweiss or Ecap. Matters might have stood differently if the sales proposed by Edelweiss, Ecap or IDBI (as pledgee) had been thwarted or attempted to be stopped. Nobody has obstructed those sales. In fact, there have been realisations.
46. What these Appeals turn on is not so much these nice questions of law but whether on the facts of the case and on the material before the Court such a wide ad-interim order could have been made in the Edelweiss Interim Application. This is to our minds the only determinative aspect. and that is the question of delay on the part of the Plaintiffs, combined with an extremely disturbing inaccuracy or incompleteness in making the claim.
47. To put it in perspective: the Plaintiffs claim there is a debt, and that it is unpaid. They also claim that there is a mortgage or security covering that unpaid debt. We would have expected that, between the two plaints, we would have a clear picture of what portion of the debt is left uncovered by the security (the mortgage).
Page 33 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc Had this been shown, then perhaps even the mere fact of the Defendants being in financial doldrums might have been enough to warrant wider or deeper orders of injunction or disclosure. But if this differentiation -- between the unpaid debt and the security cover -- is not demonstrated, then at least at the ad-interim prima facie stage it is difficult to see how there can be said to be a case made out for a wide or more stringent order.
48. When a Plaintiff comes to Court with a case such as this, the one thing that every Court not only expects -- is entitled to insist on
-- is absolute certainty as to the amount claimed. This does not mean that we accept Mr Seervai's argument that the debt is in the nature of liquidated damages or an indemnity. The Plaintiffs in both Suits claim that there is an amount of Rs.401 crores that is due. Particulars of claim in the Edelweiss Suit are at Exhibit "S" at page
261. We reproduce that table (overleaf ).
Page 34 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc "EXHIBIT - S PARTICULARS OF CLAIM ESOF Ecap Total Total Investor 40,43,272 16,50,315 56,93,587 Securities Total Investment 2,13,00,29,325 86,93,12,981 2,99,93,42,306 Amount Investor Securities 40,34,177 16,46,602 56,80,779 sold (Sep-20) Investment 2,12,52,38,003 86,73,57,137 2,99,25,95,140 Amount of Investor Securities sold Realization from 68,90,03,708 27,56,06,623 96,46,10,331 sale of Investor Securities and Pledged Securities Realization from 42,25,46,978 16,68,59,626 58,94,06,604 Investor Securities sold Realization from 26,64,56,729 10,87,46,998 37,52,03,727 collateral shares (Apr-Jun-20) Shortfall Amount 2,76,90,62,196 1,13,75,63,796 3,90,66,25,991 on the sold Investor Securities accrued at 15.75% IRR as on 10th June 2022 Charges as per 8,17,60,732 3,06,12,456 11,23,73,188 Delayed Payment Rate on the Shortfall amount as per Exit Demand Notice Total Dues 2,85,08,22,927 1,16,81,76,252 4,01,89,99,179 Page 35 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
49. We do not understand this. Unsurprisingly, nor do the Defendants. Why is there a mismatch between 'Total Investment Amount' and 'Investment Amount of Investor Securities sold'? This can only mean that Edelweiss and Ecap still have some unsold FRETAIL shares. This is clear from the difference between 'Total Investor Securities' and 'Investor Securities sold (Sep-20)'. What is the explanation for this? What is the value of these unsold FRETAIL shares? Is that value accounted anywhere? Why should it not be? It would stand to reason, given the SHA, that the value of these unsold shares should be credited somewhere -- but where and at what per-share price would be the question, especially if, as the Plaintiffs all say, FRETAIL share prices have been in free fall since 2020. Should that credit be of the date of the suit, the date of the demand, the date of the sale of the other shares, or the highest value after the date of occurrence of the Trigger Event? For Edelweiss, 'Realization from sale of Investor Securities and Pledged Securities' should be the exact total of 'Realization from Investor Securities sold' and 'Realization from collateral shares (Apr-Jun-20)'. Plainly, it is not.
50. In the course of arguments, we were told that this table of particulars of claim contains errors and needs explanation, at least in the first column of the descriptors. There are items in these columns that are impossible to reconcile. More importantly, it is impossible here to reconcile the figures from the correspondence of 8th/9th September 2020 and the documents annexed to that correspondence. No such tracing is done in the plaint. More interestingly, though both plaints claim the same amount, the Page 36 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc tabulation in the IDBI Suit at Exhibit "J" at page 36 is entirely different.
51. There is one other element in the particulars of claim that is completely unexplained. The sale of shares is supposed to have happened somewhere between June and September 2020. But these particulars of claim in the Edelweiss Suit include charges for 'delayed payment' from September 2020 all the way to today. It is impossible to expect that a Plaintiff can legitimately delay coming to Court and then claim interest for the period of its own delay. Even the shortfall amount is computed as of June 2022, not September 2020. This means that the IRR -- like the delayed payment charges
-- has been computed for another two years from the time the debt was due. Notably, in their demand letters, Edelweiss and Ecap demanded immediate payment.
52. None of this seems to have been brought to the attention of the learned Single Judge. We have little doubt that had this been pointed out with accuracy, the learned Single Judge would have taken a different view. We say this because in at least two places, the impugned order proceeds on the footing that the claim for Rs. 401.89 crores is virtually an undisputed debt. At this stage, we cannot say this for certain today. If we remove the delayed payment amount, the claim falls. If we deduct the IRR claim for two years, and have it computed as of September 2020, it falls further. There was already a corrigendum to the first demand. A reconciliation between the first demand, the corrigendum and the particulars of claim was undoubtedly necessary. It is missing.
Page 37 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc
53. This takes us to very old principle well known to common law jurisdiction: delay defeats equity. There may be a class of cases where delay may be excused or overlooked or even treated as acquiescence, and, in a given case, mere delay will not prevent a court from passing an order if the circumstances are sufficiently strong to so demand. But in a case such as this, we see no explanation at all anywhere in the Plaint for the delay between September 2020 until June 2022. That is a period of nearly two years. We are only told that in this time, the Plaintiffs were securing ever increasing guarantees (although there is no claim on guarantees) and that they had also obtained thereafter a mortgage of the Acropolis Mall. But that is surely a factor that must taken into account against the Plaintiffs. As we noted, if, after the sale, there is security then the claim presented to a Court for an injunction must be restricted to that portion that is left unsecured or is beyond the provided security. Nobody today knows what that amount is. It is surely for the Plaintiffs to tell us what amount is left unsecured, and which is likely threatened by some form of dissipation or loss. Of this, we have nothing.
54. The delay between September 2020 (and September 2020 is perhaps generous to the Plaintiffs) and the date of the Suit is one thing, but there is also a preceding delay that in unexplained entirely. That is the delay between end-February/early-March 2020 and September 2020. According to the Plaintiffs, the Trigger Event occurred on 28th February 2020 and then again on 2nd March 2020. That would have entitled Edelweiss and Ecap to immediate action under the SHA. The pledge was already in existence. Perhaps the pledgee may have had to delay slightly on account of having to Page 38 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc give a notice under Section 176 of the Contract Act, but there is a deafening silence between early March 2020 and September 2020. This cannot simply be papered over by saying that the Plaintiffs were hopeful of a resolution or that they were trying to get themselves included in the proposed CIRP process or that they were taking guarantees or obtaining a mortgage or were in negotiations. This law is well settled, that Courts will not indulge or benefit parties who have slept over their rights.
55. There is clearly an attempt to separate the two Suits for the purposes of relief. In the Edelweiss Suit and Interim Application, wide injunctions are sought along with disclosure, but there is no attempt to explain how much of the Edelweiss claim lies outside the security created by the mortgage. The two are not distinct transactions. They are joined at the hip. For the mortgage is meant to cover nothing but the Edelweiss/Ecap debt. There must, therefore, be an accurate delineation, with utmost precision, discernible at once, of the exact debt payable under the SHA to Edelweiss and Ecap, and then a demonstration of how it is not adequately protected by the mortgage in the IDBI Suit. The attempt to segregate the two is not a reasonably possible approach. Both had to be seen as running together, and the claim in the IDBI Suit had to be seen only as covering the debt in the Edelweiss Suit. There is no separate debt due to IDBI from Ojas, which is the mortgagor but not the entity that incurred the debt.
56. Our Division Bench often stands accused of being of more than somewhat tiresome in our almost slavish adherence -- we say Page 39 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc 'steadfast fidelity' -- to the Wander Ltd & Anr v Antox India P Ltd 7 principle: that the appeals court should not readily interfere with an interlocutory order unless it is shown to be perverse, arbitrary, capricious, contrary to law or not a reasonably possible view. We have applied it repeatedly, as indeed we believe we must, because that is settled law of 32 years. But we have always been careful to say that where we find that order that is challenged in appeal before us is not a reasonably possible view, then intervention is called for. We hesitate to use phrases such as 'arbitrary', 'capricious' or 'perverse'
-- the Supreme Court itself has repeatedly cautioned against using such strong language. We do not use those in relation to this order either. But we do believe that, had the two factors of delay and imprecision in computing the claim been brought to the notice of the learned Single Judge, there would have been two consequences. First, in the Edelweiss Interim Application, there could have been no question of an order of disclosure because such an order of disclosure can only be a step in aid of some other relief that is properly granted. Second, there could not also have been an injunction of the kind set out in paragraph 20. That injunction is so wide that it would have the effect of completely halting all business by FCRPL. This could only be done after, as we have noted, there was a precise assessment of what portion of the claim was left uncovered by the mortgage. If the mortgage is sufficient to cover the 7 1990 (Supp) SCC 727. In past orders, we have also referenced Mohd Mehtab Khan v Khushnuma Ibrahim Khan, (2013) 9 SCC 221; Monsanto Technology LLC v Nuziveedu Seeds Ltd, (2019) 3 SCC 381; and Shyam Sel & Power Ltd & Anr v Shyam Steel Industries Ltd, 2022 SCC OnLine SC 313. We applied the principle inter alia in World Crest Advisors LLP v Catalyst Trusteeship Ltd & Ors, 2022 SCC OnLine Bom 1409; Pradip R Kamdar & Anr v Rajiv Sanghvi & Ors, 2022 SCC OnLine Bom 3147 and in Dipesh Mehta & Ors v Gerard Shirley & Ors, 2022 SCC OnLine Bom 3453.
Page 40 of 4413th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc remaining debt, as properly computed or justifiably explained, and had this been pointed out to the learned single Judge, then we have no doubt that he would have not made such an order in the Edelweiss Interim Application -- at least not without a much stronger additional prima facie case of asset dissipation by Biyani and FCRPL. Therefore, Edelweiss would have had to demonstrate all three factors: a good explanation for the delay, that a sizeable portion of the debt was left unsecured, and cogent material to show dissipation of assets. This is not a question of whether the impugned order is possible or not possible. Our approach is that the learned single Judge was regrettably not shown the countervailing material to fashion an appropriately proportionate order at the ad-interim stage.
57. To put it differently, we intervene, and we believe justifiably, because in our view, the operative portion of the impugned order is disproportionate to the cause made out. It was much wider than could reasonably have been granted on the facts and circumstances of the case. As we noted earlier, had Edelweiss, Ecap and IDBI been stymied from making any realisations at all, then a full spectrum order may certainly have been called for. That not being the case, there being this unsatisfactorily explained or even unexplained delay on the part of the Plaintiffs, and there being too a crucial discord and imprecision in quantifying the debt left unsecured, we believe that the interim order ought to have been more narrowly tailored than it was. The differential between the mortgage security cover and the claimed debt is both crucial and determinative at this ad-interim stage.
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58. For these reasons, we vacate the ad-interim order in the Edelweiss Interim Application.
59. The mortgage is of part of the premises in the Acropolis Mall (the ground, first and second floors of C-Wing). We are told by Mr Tulzapurkar and Dr Saraf that portions are occupied by associated entities of the Future group. But what of it? There is no law that says that the owner of a mall must necessarily truck only with third parties and outsiders. In a regular mortgage action for foreclosure, the appointment of a Receiver may be viewed as a matter of course, and there may be an associated injunction. but the wording of that order of Receivership and injunction must be carefully calibrated and attenuated so that it does not exceed more than what is legitimately permissible in law. The Receiver stands appointed and has taken symbolic possession of the mortgaged property, that is ground, first and second floors of the Acropolis Mall. But we see no reason for the Receiver to take physical possession of any part of the shops nor to do anything other than stand symbolically appointed. The entirety of the ground, first and second floors of the Mall will continue to be in custodia legis.
60. As to the injunction, as currently phrased, it stops without the permission of the Receiver or this Court, any and every business in the Mall. Correctly viewed, all income would flow only to the Court Receiver. Even routine expenses would have to be separately detailed and provisioned, which they are not. This form of a wide injunction was also, in our view, excessive in the narrow facts of this case. An injunction restraining Ojas from disposing of, parting with Page 42 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc possession, alienating or further encumbering the mortgaged property is more than sufficient. None can have an objection to this. We do not see how the purpose of the Plaintiff is achieved by bringing the entire operation of the Mall to a halt and by choking all revenue streams.
61. Consequently, it is this limited order that will continue to operate until final disposal of both Motions. The impugned order is modified in terms above.
62. The Appeals are disposed in these terms.
63. We now have a request from Edelweiss and Ecap to continue the interim order of 12th September 2022 for such time as this Court thinks fit. There is not a single apprehension expressed in the Edelweiss Suit that either Biyani or FCRPL have done anything to dispose of their unsecured assets to defeat the claims of Edelweiss and Ecap. In fact, there have been realisations. We have noted this. The shortfall claim is not precisely ascertained, though it could have been. In these circumstances, we see no question of extending the stay in the Edelweiss Appeal.
64. Should there be any changed circumstances, liberty to all parties to apply to the learned single Judge.
65. Though these are Commercial Appeals, and an order of costs would have been the norm under the amendments to the CPC effected by the CCA, given that we have only partly modified one Page 43 of 44 13th October 2022 Future Corporate Resources Pvt Ltd v Edelweiss Special Opportunities Fund 905-906-COMAPL-31223-2022+.doc order and allowed the appeal for the other, we make no order of costs. Liberty to both sides to canvas their claims for courts at the final hearing of the Interim Applications.
(Gauri Godse, J) (G. S. Patel, J)
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