Calcutta High Court
Aditya Khaitan And Ors vs Il And Fs Financial Ltd on 30 July, 2020
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
OD-1
ORDER SHEET
AP 206 of 2020
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
ADITYA KHAITAN AND ORS
Versus
IL AND FS FINANCIAL LTD
BEFORE:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
Date : 30th July, 2020.
[Via Video Conference]
Appearance:
Mr. Joy Saha, Sr. Adv.
...for the petitioners
Mr. Ratnanko Banerjee, Sr. Adv.
...for the respondent
The Court : In this application under Section 9 of The Arbitration and Conciliation Act, 1996, the 7 petitioners seek an injunction on the respondent, a public financial institution, from selling the shares which belong to the petitioners. The petitioners claim that a substantial number of such shares were sold by the respondent after filing of the present petition and before the matter could be taken up for hearing.
Mr. Joy Saha, senior counsel appearing for all the petitioners, submits that the debt with regard to the pledged shares has been substantially 2 discharged. Counsel submits that the debt was outstanding since March, 2018 but that the respondent decided to sell the shares pursuant to a notice of invocation and sale dated 2nd July, 2020 only in the last few days. It is further submitted that the petitioners do not have particulars of the number of shares sold by the respondent or the value of such and that there should be an interim order of injunction restraining the respondent from selling the balance shares for protecting the petitioners' rights before arbitration proceedings are commenced by the petitioners. It is submitted that the respondent has been sufficiently protected by orders of 3rd September, 2019 and 25th September, 2019 which have restrained certain entities (respondents in the injunction application filed by the respondent herein) from transferring or alienating any of the tangible or intangible assets of the respondent.
Mr. Ratnanko Banerjee, senior counsel representing the respondent relies on the notice of invocation and sale of shares dated 2nd July, 2020 which mentions certain Pledge Agreements, Subscription and Shareholders Agreement and a Put Option Agreement all executed on 27th March, 2018. Counsel submits that the petitioners jointly owe Rs.133 crores to the respondent and that the shares were sold in exercise of the respondent's rights under the agreements mentioned in the Notice dated 2nd July, 2020. Counsel relies on an order passed by a learned Single Judge on 3rd September, 2019 in a suit filed by the respondent which records the assertion of the petitioners that the respondent is free to sell the shares of the respondent nos.6 and 9 (in the suit) which are pledged with the petitioner (the respondent herein). Counsel argues that the 3 petitioners have failed to disclose a large number of documents including the agreements mentioned in the notice of invocation and sale of shares as well as letters of May and October, 2019 which would indicate the respondent's position.
Counsel urges that the respondent cannot be restrained from exercising its rights under the agreements pursuant to which the shares were sold.
On hearing learned counsel appearing for the parties, this Court is of the view that the dispute involves contentious issues which should be decided only upon considering all the relevant documents disclosed by way of affidavits. The primary issues whether the respondent has a right to sell the shares and whether the debt has been fully discharged by the petitioners are disputed questions which can only be decided upon a complete disclosure of all the relevant documents. Since it has been stated that the shares have already been sold, it is only fit that the parties are directed to file their affidavits within a short period of time. Affidavit-in-opposition within a week from date and reply thereto within three days thereafter. All the relevant agreements and documents should be disclosed.
On perusing the orders passed by the learned Single Judge as well as the Division Bench, it appears that the protection given to the respondent with regard to its tangible and intangible assets continues till date. The order of the Division Bench modified the order of the Single Bench only to the extent of vacating the same in respect of the defendant nos.6 and 9, namely, McLeod Russel and Eveready, who are not parties to the present application. The 4 injunction remained with regards to the other defendants in the suit. Since the matter will be heard after filing of affidavits, the interest of the parties should be preserved till the disputed questions are fully heard out. Section 9 of The Arbitration and Conciliation Act, 1996 contemplates interim protection even before arbitration proceedings are commenced. Hence some amount of protection is called for with regard to the unsold shares so that the arbitration proceedings are not rendered infructuous. The balance of convenience also demands that till the Court hears the parties on all the relevant issues and upon considering significant factors such as the number and value of the shares which have already been sold, the respondent should refrain from selling any further shares (the balance shares) which form the subject matter of the Notice of Invocation and Sale of Shares dated 2nd July, 2020. From the submissions made, it can be presumed that the last sale took place after filing of this application and before this matter was taken up for hearing today.
This interim order of injunction shall remain in place till 15th August, 2020. List the matter on 12th August, 2020.
(MOUSHUMI BHATTACHARYA, J.) sp3