Delhi High Court
Vls Finance Ltd. vs Bms It Institute Private Limited & Ors on 5 May, 2015
Author: V.Kameswar Rao
Bench: V.Kameswar Rao
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on April 23, 2015
Judgment delivered on May 05 , 2015
+ O.M.P.(I) 114/2015 & IA No. 7506/2015
VLS FINANCE LTD.
..... Petitioner
Through: Mr. Jayant K. Mehta, Mr.
Nikhil Rohtagi, Mr. Saurabh
Dev, Mr. Karam Singh, Mr.
Sumit Khosla & Mr. Ashok
Kumar Sharma, Advocates
Versus
BMS IT INSTITUTE PRIVATE LIMITED & ORS
..... Respondents
Through: Mr. Anil Airi, Mr. Ravi
Krishan Chandna, Ms.
Sadhna Sharma, Mr. Aman
Madan & Mr. Gaurav Seth,
Advocates for respondent
Nos. 2, 3 & 10.
Mr. Ashish Aggarwal & Mr.
Arjun Sehgal, Advocates for
respondent Nos. 4 to 9.
Mr. A.K. Singla, Senior
Advocate with Mr. Amit
Saxena & Mr. Harsh Shahi,
Advocates for respondent
Nos. 11 & 12.
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.
1. The present petition is filed under Section 9 of the Arbitration & Conciliation Act, 1996 („Act‟ in short) seeking the following reliefs:- OMP114/2015 Page 1 of 51
"(i) Direct the Respondent Nos. 2 to 10 to jointly deposit in a no lien interest bearing account in a scheduled bank a sum of Rs.93,62,77,987/- as security for the amount awarded under the award dated 02.03.2015;
(ii) Alternatively to prayer (i), direct the Respondent Nos. 2 to 10, jointly and severally, to furnish a bank: guarantee from a scheduled bank for a sum of Rs.93,62,77,987/-
and direct them to furnish further bank guarantees monthly to secure the interest accrued on the awarded amount each month until execution of the award dated 02.03.2015;
(iii) Restrain the Respondent Nos. 2 to 10 from dealing with any of their movable and immovable properties as mentioned in Annexures P-4 (Colly), P-6 (Colly) and P-11 (Colly) including, in particular, those set out in paragraph 22 of the petition pending execution of the award dated 02.03.2015;
(iv) Restrain the Respondent No.12 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 47.5%) of constructed area in terms of the Conveyance OMP114/2015 Page 2 of 51 Deed dated 10.06.2013 and appoint a Court Receiver for the said share of Southend under the Conveyance Deed dated 10.06.2013 pending the execution of the award dated 02.03.2015;
(v) Restrain the Respondent No.1 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 44%) of constructed area in Property bearing no. C-
20, 1A/10, Block 'C' Sector 62 NOIDA in terms of the Collaboration Agreement with Premia Structures Ltd. and appoint a Court Receiver for the said share of BMS;
(vi) Extend and confirm the orders dated 27.04.2012 and 04.09.2012 passed in OMP No. 383/2012 and order dated 15.01.2015 passed in OMP Nos.570/2013 and 1197/2014;
(vii) Pass ex-parte ad interim orders in terms of the above prayers and confirm the same upon return of notice; and
(viii) Pass such other order or orders as this Hon'ble court may deem fit and proper in the facts and circumstances of the case."
Facts:
OMP114/2015 Page 3 of 51
2. The petitioner and the respondent Nos.1 to 10 had entered into two agreements dated July 12, 2007 and September 24, 2007 (hereinafter called "the Agreements"). In terms of these agreements, the petitioner invested an amount of `24.92 Crores in the equity capital of respondent No.1 on the terms and conditions contained therein including right to exit respondent No.1 at a pre-determined formula for computing exit consideration. The petitioner‟s investment in respondent No.1 was to be used entirely and solely for the purposes of the respondent No.1‟s project over a plot of leasehold land at Noida. It is the case of the petitioner that the investment made by the petitioner in respondent No.1 was fraudulently diverted and misappropriated by respondent Nos.2 to 10 through respondent No.11 by means of unsecured loans. The petitioner decided to exit the respondent No.1 and called upon respondent Nos.2 to 10 to pay the contractually agreed exit consideration. The said respondents failed to pay the exit consideration to the petitioner which led to the initiation of arbitration proceedings by the petitioner against respondent Nos.1 to 10.
3. In the year 2012 i.e. before the arbitration proceedings, the petitioner filed OMP 383/2012 under Section 9 of the Act before this Court.
OMP114/2015 Page 4 of 51
4. In this OMP the petitioner had also impleaded respondent No.11- NPMG Developers Ltd. and respondent No.12-Southend Infrastructure Pvt. Ltd., as according to the petitioner they are the entities owned and controlled by respondent Nos.2 to 10. No reply was filed by any of the respondents to this OMP. This Court in OMP 383/2012 passed an ex- parte interim order against respondent Nos.2 to 12 on April 27, 2012 which was confirmed on September 04, 2012 whereby the said respondents were restrained from alienating, selling, transferring, mortgaging, encumbering, disposing of or in any manner dealing with their immovable properties. On April 27, 2012 the respondents in the OMP were also directed to file their affidavits of assets and bank balances. Thereafter on September 04, 2012 the Court directed respondent Nos. 2 to 10 to file affidavits of their assets before the Arbitral Tribunal. It is the contention of learned counsel for the petitioner that the orders of this Court in OMP 383/2012 for filing affidavits of their assets were filed belatedly before the Arbitral Tribunal, which were not accepted by the Arbitral Tribunal. It directed to file proper affidavits. Pursuant thereto only respondent Nos.2, 3 and 10 had filed affidavits.
5. A contempt petition, Contempt Case (Civil) No.736/2012 was filed in this Court for disregarding the orders dated April 27, 2012 and OMP114/2015 Page 5 of 51 September 04, 2012.
6. In the mean time, the respondent No.1 through respondent No.2- Mr.D.K. Gupta entered into an arrangement with M/s Premia Structures Ltd. (PSL) whereby it had given the leasehold plot of land at Noida for development. It is the stand of the petitioner that a plot valued by the respondents at over `100 Crores was given to PSL for just `5 Crores.
7. It is also the case of the petitioner that the arrangement between the respondent No.1 and PSL was arrived at the back of the petitioner, the petitioner filed OMP 570/2013 wherein this Court on May 30, 2013 directed status quo till the next date of hearing as to title or possession of the leasehold land of the respondent No.1 i.e. C-20, 1A/10, Block-C, Sector-62, Noida, U.P.
8. The petitioner‟s case is also that the respondent Nos.2 to 10 in violation of orders dated April 27, 2012 and September 04, 2012 encumbered the only immovable asset of respondent No.12 being plot of land at B-319, Okhla Industrial Area, Phase-I, New Delhi by a Conveyance Deed dated June 10, 2013 in favour of M/s Wonder Space Properties Pvt. Ltd. and also they are reducing their shareholding in respondent No.12 with a view to render the petitioner unsecured and remediless. The petitioner filed a Contempt Case No.970/2013 against OMP114/2015 Page 6 of 51 respondent No.12 and Wonder Space Properties Pvt. Ltd. In the said contempt petition the respondent No.12 filed an application being IA No.10835/2014 in OMP 383/2012 seeking clarification that the order dated September 04, 2012 was not operating against it since it was not a party in the arbitration proceedings. It may be noted here that during the hearing of the IA 10835/2014 the respondent No.12 volunteered to provide an unconditional bank guarantee of `123 Crores. The respondent No.12 failed to furnish the unconditional bank guarantee. The application was dismissed on September 01, 2014. A further OMP No.1197/2014 was filed by the petitioner
9. On September 30, 2014, this Court injuncted respondent No.2 to 10 from dealing and/or transferring their shareholding in respondent No.1, respondent Nos.11 & 12. Additionally the respondent Nos.1, 11 & 12 were also injuncted from recording any transfer of shares held by respondent No.2 to 10 in them. By the same order the respondents were directed to file their affidavits of shares held by them in respondent Nos.1, 11 & 12.
10. The OMP Nos.570/2013 and 1197/2014 were disposed of vide order dated January 15, 2015, wherein this Court has said as under:-
"13. In the circumstances, the Court directs that OMP114/2015 Page 7 of 51 the interim order passed by the Court on 30th May 2013 in OMP No. 570 of 2013 directing the maintenance of the status quo with respect to the title and possession of the property at C-20, IA/10, Block-C, Sector 62, Noida, U.P., will not continue qua Respondents 13 and 14 but will continue qua Respondents 1 to 10 till one month after the pronouncement of the arbitral Award.
14. OMP No. 570 of 2013 is disposed of in the above terms.
15. As far as OMP No. 1197 of 2014, the Court continues the interim order passed by it on 30th September, 2014 till one month after the pronouncement of the Arbitral Award in the present proceedings. If the petitioner is aggrieved by non-compliance with such order it will be open to the petitioner to take such other remedies as may be available to it in accordance with law.
16. OMP No. 1197 of 2014 is disposed of."
11. As far as OMP No.1197/2014 the Court continues the interim order passed by it on September 30, 2014 till one month after the pronouncement of the arbitral award.
12. It may be noted here that the arbitration proceedings which were OMP114/2015 Page 8 of 51 held simultaneously resulted in an award dated March 02, 2015, wherein the Tribunal has directed respondent Nos.2 to 10 to jointly and severally pay to the petitioner a sum of `93,62,77,987/-inclusive of interest as on March 31, 2015, with future interest @ 15% p.a. It is the apprehension of the petitioner that the respondent Nos.2 to 10 neither have meaningful or adequate security securing the award amount payable by respondent Nos.2 to 10 jointly and severally. According to the petitioner, they have consistently encumbered and dealt with their movable and immovable properties to defeat the claims of the petitioner.
13. The respondent No.1, 2, 3 & 10 have filed their reply, so also respondent Nos.4 to 9. Respondent No.12 filed an application under Order 1 Rule 10 CPC seeking its discharge from the petition. The petitioner filed a common rejoinder to the reply filed by the respondents and also a separate reply to the application filed by respondent No.12 under Order 1 Rule 10 CPC.
14. In the application, the stand of the respondent No. 12 is as under:
"4. The applicant/respondent no. 12 submits that the name of the applicant is liable to be struck off from the array of the parties as Respondent no. 12 is neither a necessary nor a proper party nor any relief can be claimed against respondent no. 12 on the following facts and circumstances :OMP114/2015 Page 9 of 51
i. The respondent no. 12 is a Company incorporated under the Companies Act, 1956 and having its registered office at B-319, Okhla Industrial Area, Phase I, New Delhi. Respondent no. 12 as such is an independent legal entity, distinct from its shareholders. ii. The Respondent no. 12 on its own and as a absolute owner had purchased the property bearing plot no. B-319, Okhla Industrial Area, Phase -I, New Delhi on l/11/2006 i.e. much prior to the agreement executed between petitioner and respondent no. 1 to
10.
iii. The applicant/respondent no. 12 has various other shareholders having more than
73. 770/o shareholding in the said Company other than Respondent no. 2 & 3. The respondents 4 to 10 are not even shareholders of Respondent no. 12 Company.
iv. The applicant/respondent no. 12 Company is a third party to the agreement between petitioner and respondent no. 1 to 10 and is neither a signatory nor a privy to the same.
v. That there is no arbitration agreement between petitioner and respondent no. 12.
vi. The applicant/respondent no. 12 was not a party in the arbitration proceedings which were initiated by the petitioner and no award has been passed or could have been passed against respondent n. 12 applicant.
vii. That merely because respondent no. 2 & 3 hold 26.33°/o shareholding are shareholders.
holding a certain number of equity in the Company does not mean that respondent no. 12 has become a party to the disputes between petitioner and respondent no. 1 to 10.
viii. It is submitted that since the shareholders themselves have no right in the properties of OMP114/2015 Page 10 of 51 the respondent no. 12 Company, the question of their any creditor having any right in the properties of respondent no. 12 Company through the said shareholders does not arise.
ix. The petitioner by filing the petition under Section 9 of the Act cannot enlarge the scope of Section 9 by claiming any relief against properties /assets of a third party or claiming any independent right against respondent no.
12.
5. The applicant/respondent no. 12 submits that as per the award dated 2/3/15, the petitioner has right, if any against respondent no. 2 to 10. Since respondent no. 2 to 10 have themselves no right or entitlement in the assets owned and possessed by respondent no.
12 and respondent no. 4 to 10 are not even the shareholders, no order can be passed under Section 9 against the applicant/respondent no. 12 on any ground whatsoever.
Respondent no. 12 has no liability towards respondent no. 2 to 10 nor any amounts are due or payable by respondent no. 12 to the said respondents. Respondent no. 12 is not holding any asset for and on behalf of respondent no. 2 to 10.
6. The applicant/respondent no. 12 as such submits that respondent no. 12 is liable to be deleted from array of parties and petition under Section 9 as against applicant/respondent no. 12 is liable to be dismissed".
In view of the aforesaid submission in the application, the respondent No. 12 sought its deletion.
15. In the reply, the respondent Nos. 4 to 9 has taken a stand that the OMP114/2015 Page 11 of 51 respondent No. 1 company is the owner of the property bearing No.C-20, 1A/10, Block No. C, Sector 62, Noida, U.P. measuring 34275 sq. meters. It had entered into an collaboration agreement dated March 1, 2013 with Premia Projects Ltd. and Premia Structures Ltd. for construction and development of Noida plot and the share of the respondent in the project is 44%. It is also stated that respondent Nos. 4 to 9 own 47,55,000 shares in the respondent No. 1 company being 24.06% of the entire shareholding of the respondent No. 1 company and the respondent Nos. 2, 3 & 10 owned 94,05,000 shares which are valued at `75 Crores. There is an adequate security to protect the interest of the petitioner. The respondents have no objection if the order of this Court in OMP 1197/2014 restraining the respondent Nos. 2 to 10 from dealing in the shares of the respondent No. 1 company is further continued to secure the interest of the petitioner. It is also the stand of respondent Nos.4 to 9 that the respondent No. 2 is controlling the respondent No. 1 company. The agreements in question were never signed by any of the respondents at any time. They were assured that they need not worry about the proceedings or their investment in respondent No. 1 company. According to them, they are not the promoters of the respondent No. 1 company and are only the investors, having no control over the affairs of the OMP114/2015 Page 12 of 51 respondent No. 1. They plead ignorance about the agreements in question. They would also state that they have already filed affidavits on March 27, 2015. They would also state that they are not the shareholders/directors of respondent No.11 company and as such the allegation of diversion of funds of respondent No. 12 company are totally frivolous and mischievous.
16. The respondent Nos. 2, 3 & 10 have also filed their reply. According to them, the petitioner has mala-fidely impleaded respondent Nos. 1, 11 & 12. The respondent No. 1 was party to the agreement dated July 12, 2007 executed between the petitioner, respondent Nos. 1 & 2 and 10. No award has been passed against the respondent No. 1. The claim against the respondent No.1 need to be rejected. The petitioner cannot enlarge the relief granted under the award so as to claim any interim orders against respondent No. 1 or its assets. As regards respondent Nos. 11 & 12 are concerned, they are third party to the contract dated July 12, 2007. There is no arbitration agreement between the petitioner and respondent Nos. 11 & 12. The said respondents were also not the party before the Arbitral Tribunal and no relief has been granted against the said respondents. Under the garb of Section 9 of the Act, the petitioner cannot enlarge the scope of Arbitral Award and seek OMP114/2015 Page 13 of 51 orders against the said respondents. It is also their case that the petitioner is adequately secured as the petitioner till date is holding 56 lakhs shares of the respondent No. 1 company equivalent to 28% of the total issued and paid up capital. The petitioner itself has valued the said shares in 2007 at `24.92 Crores. The award at present is not executable and as such, no other and further security of any nature is required than the property in question which is the subject matter of the dispute. It is also averred that the petitioner, till date, recorded shareholders of the company cannot seek any security for the alleged sale consideration while also being the owner of the said security/property.
17. The respondents have also taken a stand that the respondents Nos.1, 11 & 12 are independent entities and the said entities cannot be owned and controlled by any person, such a contention is contrary to the fundamental principles of law governing the companies. According to them, a Shareholder or a Director has no right in the assets of the company by virtue of their shareholding. They would also state that one of the Directors of the petitioner company M.P.Mehrotra was actively involved in negotiation and preparation of the collaboration agreement executed by the respondent No. 1 with the Premia Group. The said Director duly signed as a witness to the collaboration agreement dated OMP114/2015 Page 14 of 51 March 1, 2013.
18. The respondent No. 1 in its reply has broadly taken the same pleas as has been taken by respondent Nos.2, 3 & 10 and are not repeated for the sake of brevity.
19. Mr.Ravi Gupta, learned Senior Counsel for the petitioner initially arguing for the petitioner has drawn my attention to various documents to contend that the petitioner does not have adequate security securing the award dated March 02, 2015. He would also state that the respondents have consistently disregarded and violated the orders passed by this Court and the Arbitral Tribunal so as to alienate, encumber, devalue their assets to render the petitioner unsecured and remediless. He would submit that the present petition is in the nature of an application under Order 39 Rule 1 or Order 38 Rule 5 of CPC but not objections under Order 21 Rule 58 against an execution petition. He would state that the petitioner‟s attempt is to show a prima facie case for seeking order(s) as prayed for in the present petition. He has taken me through various documents to show the attempt of respondent Nos.2 to 10 to reduce their shareholding in the respondent No.12. He would refer to page Nos. 152 and 153 of the documents to show the shareholding of respondent Nos.2 to 10 in respondent No.12. According to him, the shareholders at serial OMP114/2015 Page 15 of 51 Nos.1,3,4,5,7 & 8 are related to each other. According to him, between the persons named at pages 152 and 153, owned 98.88% of the shareholding as on September 30, 2009 and 25th September, 2010, which shareholding has been reduced to 87.16% with two fresh allotments made to M/s Lalwani Holidays and M/s.Chaurasiya Holidays as on September 26, 2011. According to him, the shareholding of the persons in total reduced to 67.30%. He has also drawn my attention to number of shares held by Dinesh Kr. Gupta-respondent No.2 in the present petition, whereby as on September 23, 2013 he held 2,63,250 shares which got reduced to 1,89,250 as on June 24, 2014 and the total number of shares also got reduced to 57.30%. He has also drawn my attention to page 174 of the documents which is part of the affidavit filed by Mr.D.K. Gupta on January 14, 2015, wherein he did not mention the date on which he has held the shares of the respondent Nos.1, 11 & 12. He has also referred to the affidavit filed in these proceedings on January 27, 2015 [para 3(iii)] to highlight that in the affidavit he has stated that he is holding 1,89,250 shares in respondent No.12 company. It is not known which figure is correct. He has once again referred back to page 174 to highlight that if the shares are counted on the basis of share certificates then the figure comes to 2,63,250. According to him, between the period January 14, OMP114/2015 Page 16 of 51 2015 to March 27, 2015 in a matter of two months it appears that Mr.D.K. Gupta has sold the shares despite the order dated September 30, 2014 of this Court restraining the respondent No.2 from dealing with the shares in respondent Nos.1, 11 & 12 and the said order having continued by this Court on January 15, 2015 till one month after the pronouncement of the arbitral award and the arbitral award having pronounced on March 02, 2015, which shows that before the expiry of one month his shareholding of the respondent No.12 got reduced.
20. He would also state that a conveyance deed dated June 10, 2013 for development rights was executed by the respondent No.2 on behalf of respondent No.12 with a Wonder Space Properties Pvt. Ltd. with regard to the land admeasuring 5.1588 acres situated at B-319, Okhla Industrial Area, Phase-1, New Delhi, despite order dated April 27, 2012 which was confirmed by the order dated September 04, 2012 wherein the respondent Nos.2 to 12 were restrained from alienating, selling, transferring, mortgaging, encumbering, disposing of or in any manner dealing with their immovable properties. The said order having been continued on September 04, 2012 till such time an application is filed before the learned Arbitrator for appropriate interim relief including variation/modification of the interim order dated April 27, 2012 passed OMP114/2015 Page 17 of 51 by the Court and no such application having been filed and the order having continued, such an agreement on the face of it, is a contemptuous act. According to him, this is the only asset of the respondent No.12 company. He would refer to page 212, which is part of agreement dated June 10, 2013 to highlight that the parties were to share revenue and the share of the respondent No.12 was 47.5%. He would also state that the respondent No.12 had received an amount of `178 Crores as a deposit out of which `133.50 Crores was only refundable. He would also state that the affidavits which have been filed by the respondents from time to time are misleading.
21. According to him, after the agreement had come to the knowledge of the petitioner, the petitioner filed CCP 970/2013 against respondent No. 12 and M/s. Wonder Space, wherein this Court on January 09, 2014 had passed the order directing the M/s Wonder Space to maintain status quo with regard to the development rights. Subsequently, on an application filed by M/s Wonder Space, the interim order dated January 09, 2014 was vacated.
22. He would also refer to an application filed by the respondent No. 12, IA 10835/2014 in OMP 383/2012, seeking clarification of order dated April 27, 2012. He has drawn my attention to order dated July 22, 2014 OMP114/2015 Page 18 of 51 in OMP 383/2012, wherein, the respondent No. 1 has agreed to furnish an unconditional bank guarantee of a schedule bank in the sum of `123 Crores for and on behalf of the respondent Nos. 1 to 10 in favour of the Registrar General of this Court. He had also drawn my attention to order dated July 31, 2014 to state that the respondent No. 1 had not furnished the bank guarantee as was agreed to. According to him, the application for clarification of order dated September 4, 2012 was dismissed. In the end, it was his submission that in terms of the award dated March 2, 2015, there is a direction against the respondent Nos. 2 to 10 to purchase from the petitioner 56 lakhs equity shares on paying jointly and severally the sum of `84,28,27,987/- due till the date of claim statement i.e. September 30, 2012 with simple interest @ 15% p.a. on the sum of `24,92,00,000/- from 01.10.2012 till the date of payment. The said award has now swelled to `93,62,77,987/- as on the date of the petition. He would state that the reliefs sought for by the petitioner are in the alternative and the same be considered by this Court appropriately.
23. Mr. A.K.Singla, learned Senior Counsel for the respondent No. 1 would broadly submit that in view of the directions given by the Arbitral Tribunal in favour of the petitioner, the present petition under Section 9 of the Act is liable to be dismissed as against the respondent No. 12 being OMP114/2015 Page 19 of 51 not maintainable. He would also state that a petition u/S 9 of the Act presupposes an existence of an agreement containing arbitration clause. There being no privity of contract between the petitioner and respondent No. 12, the petition qua respondent No. 12, which is an independent entity under the Companies Act, would not become a single entity in the transaction between the respondent No. 1 and the petitioner. The respondent No. 12 having no interest in the subject matter of the dispute is not amenable to the jurisdiction of the Court. He relied upon the judgment of the Supreme Court in the case of Indowind Energy Limited Vs. Wescare (I) Ltd. and Anr, (2010) 5 SCC 306. He also relies upon the judgment of the Privy Council on a proposition that a company is always distinct from the persons composing it. (Refer "Aveline Scott Bitchan Vs. James J. Millar" reported as AIR 1931 Privy Council 203). He would also state, mere impleadment of respondent No.12 in earlier petitions filed by the petitioner under Section 9 would not entitle the petitioner to continue impleadment in the instant petition and the direction given in the award in view of the judgment of this Court in Alpha Tiger's case decided by this Court on January 15, 2015 cannot be implemented against the respondent No.12. Additionally, it is his submission, in view of the record of proceedings taken in earlier OMPs, OMP114/2015 Page 20 of 51 no relief either prayed for or pursued against it, the doctrine of estoppel bars maintainability of instant petition. He would state, even though order dated April 27 2012 was passed before the commencement of the arbitration proceedings but the order dated September 4, 2012 excludes the applicability of the order on the respondent No. 12. He would rely upon the order dated August 24, 2012 passed in the contempt petition, more specifically, para 16 of the order. He would also state, that in OMP 570/2013, even though, respondent No. 12 was impleaded but no relief was prayed for. He also states that petition for interim relief against respondent No. 12 is barred in view of Section 11 of CPC, Explanation (V). He states, no relief on the principles of Order 21 Rule 41 CPC on the plea that respondent Nos.2 and 3 have shareholding in respondent No. 12 is available to the petitioner as the award would not be executable in terms of Order 21 Rule 30 CPC but the same would be covered by Order 21 Rule 32 CPC. He seeks dismissal of the petition.
24. Similarly, Mr.Anil Airi, learned counsel for the respondent Nos.1,2, 3 & 10 would submit that the reliefs claimed in the present petition by the petitioner cannot be granted as are contrary to each other. He would state that the petitioner in the proceedings under Section 9 after the passing of the award cannot enlarge the scope of the award; claim or OMP114/2015 Page 21 of 51 seek reliefs, which were not subject matter of the arbitration; claim reliefs against any party, who was before the Arbitral Tribunal but no relief was claimed in the arbitration proceedings; claim relief against the third party to the arbitration agreement, arbitration proceedings and award and against their assets; claim relief under Section 9 of the Act which would amount to enforcement of the award; nor the petitioner can claim relief which were passed on petitions under Section 9 of the Act filed before or during the arbitration proceedings. According to him, this Court in its order dated January 15, 2014 restricted the interim order till one month after the passing of the award or till passing of the award. He states that the passing of the order before or during the arbitral proceedings is on different considerations on the averments or claims raised when the Court is not aware of the reliefs/award to be passed by the Tribunal. The petitioner has to satisfy this Court in this petition that it is entitled to the interim order and not enforcement after the passing of the award.
25. He would state that the arbitral award was passed by the Tribunal against respondent Nos. 2 to 10 only and the award is for only specific performance of the agreement with respect to the movable property i.e. the shares, whereby the Tribunal has directed respondent Nos. 2 to 10 to purchase from the petitioner 56 lakhs equity shares by paying jointly and OMP114/2015 Page 22 of 51 severally a particular sum. According to him, no relief can be granted against the respondent No. 1 as there is no award against the respondent No. 1; no relief was sought in the arbitration against respondent No. 1; no averment in the petition that respondent No. 1 owes money to respondent Nos. 2 to 10; even if the award becomes executable, the said decree/award is incapable of execution against the respondent No. 1 or its assets; the company is an independent entity distinct from its shareholders or directors and competent to hold the property in its own name; the shareholders of the company irrespective of their quantum of shareholding have no right in the assets of the company; Order 2 Rule 2 CPC is applicable to the arbitration and all such reliefs which were not claimed by the petitioner in the arbitration are now barred and cannot be raised as such petitioner‟s right against respondent No. 1 stands extinguished; the petitioner has no prima facie case in its favour against respondent No. 1. He would state, that, the plea raised against the respondent No. 1 is to create prejudice. Further, he would state, that any order against respondent No. 1 would stall the development of the projects and extreme prejudice would be caused to respondent No. 1 as the same would reduce the value of the property, bring business of respondent No. 1 to halt, and the petitioner is aware that the development OMP114/2015 Page 23 of 51 of the project would have a positive bearing on the shares. He would state that the property of the respondent No. 1 is not the subject matter of the dispute nor any award has been passed against it; no execution can be filed against the respondent No. 1 as respondent No. 1 is not a judgment debtor.
26. Insofar as reliefs claimed against respondent Nos. 2, 3 & 10 are concerned, it is his submission that the award in question is an award granting specific performance of an alleged agreement to sell the movable property i.e. equity shares. As per the award the respondent no. 2 to 10 are liable to purchase 56 lacs shares held by petitioner as shareholder of respondent no. 1 company for the consideration determined by the arbitral tribunal. The said Award on the face of it is barred by law i.e. is against the public policy of India and liable to be set aside and for which the respondent would initiate appropriate proceedings. He would also state, from the bare look of the award it is apparent that it is unconscionable and illegal as Arbitral Tribunal has determined the value of the shares as more than `84,28,27,987/- in March 2015 on an investment of `24.92 crores in July 2007. The respondents shall raise such and all other and further objections to the said award in the appropriate application. According to him, the Award in question is OMP114/2015 Page 24 of 51 not a money award as the alternate relief sought by the Petitioner was not granted by the Arbitral Tribunal and cannot be enforced as such. The subject matter of the arbitration is 56 lakhs shares held by the Petitioner and which according to the Petitioner, respondent nos. 2 to 10 are liable to purchase at the consideration determined by the Arbitral Tribunal. The said subject matter of the arbitration i.e. equity shares, are protected and are preserved as the Petitioner till date is the recorded owner of the said shares. The said 56 lakhs shares are 28% of the equity of the Company. The Arbitral Tribunal has valued the said 56 lakhs shares for the sum of `84,28,27,987/-. The petitioner is holding on to the said shares and is recorded owner of the same. The petitioner as such is well protected and no additional security is required or can be sought.
27. According to him, since the award is not a money award, there is no requirement for the Petitioner either to approach this Court to secure any amount in dispute or for any such other interim order. He would also state, there is no averment that the respondents 2 and 3 are not people of means. It is submitted that the respondent no. 2 and 3 own sufficient immovable properties and list as submitted by the petitioner in the petition [ para 22] supports the said fact. The petition does not contain any averment which would satisfy the requirement of Order 38 rule 5 of OMP114/2015 Page 25 of 51 CPC.
28. According to him, merely because before and during the arbitral proceedings certain interim orders were passed does not mean similar orders can be sought post award. In post award Section 9 petition the award also has to be looked into, to ascertain the relief granted by the Tribunal, which the Court hearing the application under Section 9 before and during the arbitration proceedings had not the advantage of going through. The reliefs sought by the petitioner are seeking enforcement of the award whereas no enforcement can be sought at this stage when the award is incapable of enforcement. He relies upon the judgment of this Court reported as 2009 (3) Arb. LR 315 (Delhi) Value Advisory Services vs. ZTE Corporation & Ors, 2006 (4) Scale 39 Punjab State Industrial Development Corporation vs. PNFC Karamchari Sangh & Anr., CPI India Ltd. vs. BPTP Ltd. (FAO(OS) 538,507, 5082012 decided on November 09, 2012),
29. According to Mr.Ashish Aggarwal, learned counsel for the respondent Nos. 4 to 9, it is a settled proposition of law that for the purpose of Section 9 of the Arbitration and Conciliation Act, guidance should be taken from Order XXXVIII Rule 5 of CPC. He submits that admittedly under Order XXXVIII Rule 5 CPC, the defendant may be OMP114/2015 Page 26 of 51 called upon to furnish security in case the following conditions are satisfied:
a. The court is satisfied that the defendant with intend to obstruct or delay the execution of any decree:
i. Is about to dispose off the whole or any of his property or ii. Is about to remove the whole or any part of his property from the local limits of the jurisdiction of the court
30. He states that none of the aforesaid conditions are applicable qua the respondent nos.4 to 9. According to him, even the allegations of the petitioner are qua the respondent nos.2 and 3. He states that the averments of the petitioner do not point out to any wrong doing whatsoever on the part of the respondent nos.4 to 9. He would state, the respondent nos.4 to 9 have filed detailed affidavit of assets in the present petition on March 27, 2015. The said answering respondents had earlier also filed affidavits of their assets dated December 10, 2012 before the Ld. Tribunal and the earlier affidavits are from pages 87 to 98 of the paper book filed by the petitioner. Admittedly, none of the respondent no.4 to 9 have dealt with any of the assets as detailed in their earlier affidavits and all the said respondents have further stated in their present affidavits dated 27.03.2015 that they have not dealt with the assets OMP114/2015 Page 27 of 51 specified in the affidavit dated 27.03.2015 in any manner after the passing of the order dated 27.04.2012 in OMP No.383 of 2012. He would also state that the petitioner is sufficiently secured as the share of the respective parties in the equity share capital of the respondent no.1 company is as under:
Petitioner 28% approx.
Respondent nos.4 to 9 24.06%
Respondent nos.2, 3 & 10 47.64%
XXX XXX
31. According to him, a bare perusal of the agreement dated 12.07.2007 would reflect that respondent Nos. 4 to 9 have not signed the same. He relied upon the judgment of the Division Bench of this Court in FAO(OS) 203/2014, decided on September 01, 2014. He would also rely upon the judgment reported as 2007 (7) SCC 125 Aadhunik Steel vs. Orissa Magnese & Minerals Pvt. Ltd. and 2008 (2) SCC 302 Raman Tech & Process Engineering Company & Anr. vs. Solanki Traders.
32. In rejoinder to the submission made by the counsel Mr.A.K.Singla, Sr. Advocate for the respondent No. 12, the stand of Mr.Jayant Mehta is that respondentNo.12 has not filed any reply to the OMP. Instead, it has only filed an application for its deletion from the array of parties. An injunction upon respondent Nos.2 to 10 without any restraint on the asset OMP114/2015 Page 28 of 51 and substratum of respondent No.12 would mean that the value of the shareholding of respondent Nos.2 to 10 in respondent No.12 is unprotected. This would allow the respondents, who have consistently acted unfairly and fraudulently, to render the injunction upon their shareholding meaningless and valueless. Respondent No.12 is not only an alter-ego of respondent Nos.2 to 10 but was also a party to OMP Nos.383/2012; 570/2013 and 1197/2014. It did not file any reply to OMP No.383/2012. In the said OMP, this Court passed orders dated 27.04.2012 and 04.09.2012, both of which injuncted respondent No.12. In fact, the order dated 04.09.2012 was passed in its presence. However, no such issue was raised by it. The order dated 04.09.2012 attained finality. Respondent No.12 filed an I.A. No.10835/2014 in OMP No. 383/2012 on the same ground as made in its application under Order 1 Rule 10 CPC in the present case. Moreover, in the said I.A., it volunteered to pledge its property to secure the petitioner and in the course of its submissions, proposed to furnish an unconditional bank guarantee. The I.A. was, however, dismissed by this Court by the order dated 01.09.2014, which order also attained finality. As a consequence, the orders dated 27.04.2012 and 04.09.2012 continued to bind respondent No.12. The respondents are also facing proceedings for perjury under OMP114/2015 Page 29 of 51 Section 340 Cr.PC (vide IA No 10677/2014 in OMP no. 383/2012) for making false averments in its I.A. No. 10835/2014. Respondent No.12 was a party in OMP No.1197/2014 in which this Court passed an interim order dated 30.09.2014 in its presence. It did not file any reply in this OMP as well. The order dated 30.09.2014 was continued by the order dated 15.01.2015. Respondent No.12 did not challenge any of these two orders. They also attained finality. The manner of directorship and shareholding of respondent No.12 leaves no doubt that it is the respondent Nos.2 to 10 who are in control of its affairs. In essence, respondent No.12 is nothing but a quasi-partnership owned and controlled by respondent Nos.2 to 10. In fact, its property was sought to be given by respondent Nos.2 to 10as collateral security for the loans sanctioned to respondent No.1. The petitioner is not seeking to attach or appropriate the property of respondent No.12. However, if respondent No.12 further alienates / encumbers or deals with its sole immovable property, its substratum would be lost and the value of the shareholding of respondent Nos.2 to 10 in respondent No.12 would be adversely affected. Therefore, in order to ensure that the value of the shareholding of respondent Nos. 2 to 10 in respondent No.12 is not wasted or lost or otherwise dealt with so as to leave the petitioner and the award dated OMP114/2015 Page 30 of 51 02.03.2015 completely unsecured, respondent No.12‟s presence and an injunction against it is necessary. It is well settled that proceedings under Section 9 of the Act are maintainable against a party who may not be party to the arbitration agreement. The reliance by respondent No.12 on the judgment dated 04.12.2014 passed by a Single Judge of this Court in I.A. No.4181/2012 in Cont Cas (C) No.970/2013 is misplaced. The said judgment was passed not on any application of respondent No.12 but on the application of Wonder Space Properties Pvt. Ltd. Moreover, the principle and indeed only issue decided by the said judgment is whether in exercise of contempt jurisdiction, this Court is empowered to pass an interim order against a party, which was not subjected to any order. In fact, it was not the case of respondent No.12 that it was neither a party to nor bound by the order dated 04.09.2012. Such a case could never have been allowed to be set up inter alia in view of dismissal of its application being I.A. No.10835/2014 in OMP No.383/2012. In other words, respondent No.12 could not set up a case which stood rejected by another judicial order. The order dated 4.12.2014 has been obtained by concealing and suppressing the order dated 01.09.2014 in I.A. No. 10835/2014. In any event, the petitioner has appealed against the order dated 4.12.2014, which is pending adjudication. Any alienation made in OMP114/2015 Page 31 of 51 violation of court order is void, illegal, against public policy and abuse of process of law. Wrongdoer/Violators cannot take benefit of one‟s own wrong. Party violating court order is not entitled to plead equity. It is also well settled legal proposition that 'fraud vitiates all' and can be raised at any stage of proceedings.
33. In rejoinder to the submission made on behalf of respondent No. 1, the stand of Mr.Jayant Mehta is, respondent No.1 has already allowed respondent Nos.2 to 10 to misappropriate the investment of the petitioner. This has been clearly found by the Arbitral Tribunal. Respondent No.1 has already given away its sole asset and substratum to M/s.PSL. This was done to ensure that the value of respondent Nos.2 to 10‟s shareholding in respondent No.1 is artificially and fraudulently devalued. An asset claimed to be worth over `100 crores was given for `5 crores with one-side terms leaving little prospect of any foreseeable benefit to respondent No.1. Unless the substratum of respondent No.1 is protected from further misappropriation, the value of respondent Nos.2 to 10‟s shareholding in respondent No.1 would further reduce. In this regard, the foregoing submissions are reiterated. Respondent No.1 further argued that Arbitral Tribunal has valued the share price in terms of the award. This is a false submission. The Arbitral Tribunal has not valued the OMP114/2015 Page 32 of 51 shares but awarded the amount based upon the exit formula provided in the Agreement.
34. Similarly, in rejoinder to the submissions made on behalf of respondent Nos. 2 to 10, Mr.Jayant Mehta would contend, the submissions of respondent Nos.2 to 10 are also untenable and completely fallacious. Respondent Nos.2 to 10 admittedly have a liability of over `95 crores towards the petitioner under the award dated 02.03.2015. This liability is increasing with each passing day on account of future interest. They have neither pleaded nor shown as to in what manner the petitioner is meaningfully and adequately secured. Only conjectures and surmises are pleaded and argued. In fact, they have consistently acted with utter disdain to the judicial process and in a manner so as to overreach the process of law to render the petitioner unsecured and remediless. They have used the instrumentalities of respondent Nos.1, 11 and 12 to commit fraud upon the petitioner. In view of foregoing, respondent Nos.2, 3 and 10 have filed false and misleading affidavits before the Arbitral Tribunal and this Court. Respondent Nos.4 to 9 have gone further and completely disregarded the orders passed by this Court and Arbitral Tribunal. The effort of respondent Nos.2 to 10 is to overreach the award dated 02.03.2015 including by making factual submissions contrary thereto, OMP114/2015 Page 33 of 51 which is impermissible. Section 9 provides for a petition post award. In fact, with the award dated 02.03.2015, there is most and pressing need for meaningful and adequate security to the petitioner. The provisions of Order 38 Rule 5 CPC are included within the scope and purview of Section 9 of the Act.
35. According to him, respondent Nos.2 to 10 have sought to contend that an injunction upon their immovable properties would secure the petitioner. This is a dishonest argument. It is a matter of record that they have avoided to submit the original title deeds of any of their properties. The actual state, encumbrance and possession over any of their properties is, therefore, extremely doubtful. In fact, this argument is nothing short of red-herring. He would state, the records of respondent No.12 as filed with the ROC show that it has given to respondent Nos.2 and 3 substantial amounts as advances for properties. Respondent Nos. 2 and 3 have not disclosed this fact in their affidavit of assets. Which of their properties is proposed to be conveyed to respondent No.12 is unknown. A similar doubt as to exact and precise state of affairs of the properties of other respondents remains.
36. He would also state, the submissions of respondent Nos.2 & 3 in essence, is that the order dated 15.01.2015 provides adequate security to OMP114/2015 Page 34 of 51 the petitioner. This is false. There is no mechanism contemplated or provided by the said order to ensure that the value of the shareholding of respondent Nos.2 to 10 in respondent Nos.1, 11 and 12 as well as in other companies is not diminished in value. As regards BMS-respondent No.1 the order pertains to its share of developed area. Till date, there is no development on its leasehold land. Thus, its share is only a pipedream. He would also state, during pendency of the arbitration proceedings, respondent No. 2 sold 221,000 shares held by him in respondent No.12. As per his own affidavit filed in these proceedings, the value of his present shareholding of 189,250 shares is `120 crores. That being so, from the sale of 2,21,000 shares he has received a sum of `140 crores. Therefore, respondent No.2, on his own showing, ought to have sufficient liquid assets to provide an adequate, meaningful and liquid security to the petitioner, as has been prayed in the OMP. According to him, the reference to Order 21 Rule 46, CPC, in their legal submissions, is neither invoked nor has any relevance to the present proceedings. The petitioner is not seeking any garnishee order. Instead, what has been sought is security in accordance with Section 9 of the Act so as to ensure that the award dated 02.03.2015 is not rendered infructuous. He denied that subject matter of award dated 02.03.2015 are the shares and not any OMP114/2015 Page 35 of 51 property. This is misleading argument. The subject matter of award dated 02.03.2015 are not the shares but the contractual liability of respondent Nos.2 to 10 to pay the exit consideration to the petitioner. He would submit that the reliance of the respondents on the judgment in Indowind Energy Limited v. Wescare (India) Limited and another, (2010) 5 SCC 306 is misplaced in that the said judgment arose from a proceeding under Section 11 and dealt with an issue as to whether a non-party to the arbitration agreement can be bound by it. No such issue arises in the present case. This judgment does not deal with Section 9 which covers within its scope a relief against a third party. According to him, the reliance of the respondents on the judgment of this Court in Value Advisory Services v. ZTE Corporation and Ors., 2009 (3) Arb. LR 315 (Delhi) and Alpha Tiger Cyprus Investments Ltd. & Anr. v. Shakti Nath & Ors. [OMP (I) No.17/2015, decided on 11.02.2015] is equally misplaced. The said judgments support the petitioner. Value Advisory provides that Section 9 covers within its sweep a relief against a third party including for deposit of money. Alpha Tiger similarly holds that Section 9 is available to the petitioner. He would also state, the reliance of respondents of the judgment of this Court in C.V. Rao & Ors. v. Strategic Port Investments KPC Limited & Ors. [FAO (OS) 203/2014, OMP114/2015 Page 36 of 51 decided on 01.09.2014] is also misplaced inasmuch as in that case there was no prior history of litigation and nothing was shown to support an apprehension of injury. He would, therefore, pray that this Court may direct respondent Nos.2 to 10 to furnish a meaningful and adequate liquid security either by depositing the amount awarded under the award dated 02.03.2015 or by securing the same through the means of an unconditional bank guarantee. They may also be restrained from alienating any of their movable or immovable properties. As a corollary, respondent Nos.1, 11 and 12 are also liable to be enjoined from encumbering and/or dealing with any of their movable and immovable properties.
37. Before I deal with the submissions made by the learned counsel for the parties, I may point out when the matter was listed on March 26, 2015 this Court recording the statement made by the counsels for respondent Nos.1 to 10 had passed the following order:-
"Mr. Anil Airi Advocate for Respondent No. 1, 2, 3 & 10, Mr. Nikilesh, Advocate for Respondent No. 4 to 9, Mr.Amit Saxena, Advocate for Respondent No. 11 and Ms.Sanghitra Sawant, Advocate for Respondent No. 12 accept notice.OMP114/2015 Page 37 of 51
After hearing the counsels for some time, the learned counsels for respondents No. 1, 2, 3 & 10 and Respondent No. 4 to 9 submit that their clients shall not sell, encumber, create third party rights with regard to immovable properties mentioned in paragraphs no. 22(i) to (iv), (vi), (vii), (ix), (x), (xii),
(xiii) & (xiv).
Learned counsels for Respondent no. 2 to 10 also submit that the order dated 30.09.2014 in OMP No. 1197/2014 would continue to bind respondent no. 2 to
10. Similarly, the order dated 15.01.2015 of this court in OMP No. 570/2013 and OMP No. 1197/2014 would also continue to bind respondent nos. 1 to 10. Learned counsel for respondent no. 1 to 10 shall file appropriate affidavit in this regard. Mr. Anil Airi shall bring the same to the court and ensure that an advance copy is served on Mr. Jayant Mehta, Advocate during the course of the day.
Renotify on 27th March, 2015".
38. In terms of the order passed on March 26, 2015 the respondent Nos.2 to 10 had filed their affidavits. On March 27, this Court passed the following order:-
"Learned counsel for respondent Nos. 1, 2, 3 & 10 and OMP114/2015 Page 38 of 51 learned Senior Counsel for respondent Nos.4 to 9, on instructions, state that these affidavits are in terms of the order passed by this Court on 26th March, 2015. These affidavits are taken on record. Let these affidavits be scanned and uploaded on the computer.
Learned counsel for respondent Nos.1 to 3 & 10 and learned Senior Counsel for respondent Nos.4 to 9 state that the direction in para 13 of the order dated January 15, 2015 of this Court in OMP Nos. 570/2013 and 1197/2014 shall bind the said respondents till the next date of hearing. They would also state that even the order dated September 30, 2014 passed by this Court in OMP 1197/2014, wherein it was directed that the respondent Nos.2 to 10 shall not deal with the shares in respondent Nos.1, 11 & 12, shall also bind the respondent Nos.2 to 10. Learned counsels for respondent Nos.1 to 10 state that the restraint order passed by this Court in OMP 383/2012 on April 27, 2012 relates to the same properties which are mentioned in their affidavits.
It is made clear that till the next date of hearing, the respondent Nos.2 to 10 shall not sell, encumber, alienate, deal with the properties listed by them in their respective affidavits and also the equity shares of various companies mentioned in the said affidavits. The statements made by learned counsel for respondent Nos.1 to 3 & 10 and learned Senior Counsel for respondent Nos.4 to 9 relating OMP114/2015 Page 39 of 51 to order dated January 15, 2015 in OMP No. 570/2013 and OMP No. 1197/2014 and September 30, 2014 in OMP 1197/2014 are taken on record".
39. Insofar as the prayers made by the petitioner in the petition are concerned, Mr.Jayant Mehta, during his submissions has conceded that there is no contradiction in the prayers as the same are in the alternative. The said statement is taken on record.
40. On a reading of the orders passed by this Court in various petitions including the contempt petition, the following is noted. (1) The respondent Nos. 2 to 12 were restrained from alienating, selling, transferring, mortgaging, encumbering, disposing of or in any manner dealing with their immovable properties (vide order dated April 27, 2012) (2) The order was continued till such time the Arbitrator passes an order on an application filed by either of the party for modification/variation of the order. No such application was filed. In other words, the order dated April 27, 2012 continued till the award was passed by the Arbitral Tribunal on March 2, 2015, but not against respondent No. 12 in view of order dated December 4, 2014 in CCP 970/2013.
(3) The bank guarantee agreed to be furnished by respondent No. 1 of OMP114/2015 Page 40 of 51 `123 Crores was not honoured.
(4) Status quo order with respect to title and possession of property bearing No. C-20, 1A/10, Block C, Sector 62, Noida (U.P). (5) The respondent Nos. 2 to 10 were restrained from dealing with shares in respondent No. 1, 11 and 12 and no transfer will be registered by respondent No. 1, 11 and 12 (Ref. order dated September 30, 2014 in OMP 1197/2014) (6) The status quo order with respect to title and possession of the property bearing No. C-20, 1A/10, Block C, Sector 62, Noida (UP) was continued qua respondent Nos. 1 to 10 till one month after the pronouncement of the Arbitral award.
(7) The order dated September 30, 2014 continued till one month after the pronouncement of the Arbitral Award.
41. In the award, the Arbitral Tribunal has directed as under:
"I. Directing respondents No. 2 to 10 to purchase from the claimant 56,00,000 (Fifty Six Lakhs) equity shares on paying jointly and severally the sum of Rs. 84,28,27,987/- (Rupees Eight Four Crores Twenty Eight Lakhs Twenty Seven Thousand Nine Hundred and Eighty Seven only) due till the date of claim statement (30.09.2012) with simple interest at the rate of 15% per annum on the sum of Rs.24,92,00,000/- (Rupees Twenty OMP114/2015 Page 41 of 51 Four Crores and Ninety Two Lakhs only) from 01.10.2012 till the date of payment.
II. Directing the parties to bear their respective costs."
42. In this petition, the endeavour of the petitioner is to secure the amount of `84,28,27,987/- granted by the Tribunal with 15%. This amount, according to the petitioner has swelled to `93,62,77,987/- on the date of filing of the petition. There is no dispute, when a petition under Section 9 of the Act is filed, a party has to establish a prima facie case to seek the relief as prayed for.
43. There is also no dispute that the principles underlying in CPC for grant of interlocutory remedies must furnish a guide to Court when it determines an application under Section 9 of the Act. It has also been held that underlying basis of order 38 Rule 5 CPC has to be borne in mind while deciding an application under Section 9(ii)(b) of the Act. In so far as the judgment of the Division Bench in C.V. Rao (supra) is concerned, it is seen that the Division Bench after analysing the law in respect of Section 9 of the Act was of the view that the Single Judge had not gone into the question whether there is a danger of defeating, delaying or obstructing the execution of the arbitral award by the OMP114/2015 Page 42 of 51 appellants and whether the facts and circumstances of the case warrant preservation of the property which is the subject-matter of the arbitration clause under the investment agreement. The Division Bench has also held that even if prima facie case is made out, the same will not entitle an interim measure or protection unless it is also established that the appellants are intending to defeat the right of the party (respondent No.1 in that case) to enforce the arbitral award. The Court was of the view that the impugned order of the Single Judge of prohibitory injunction would not only harm the reputation and goodwill of the appellants in that case and its shareholders, but it will cripple the company leading to its eventual shut down. The Court was also of the view that the impugned order of the learned Single Judge had the effect of allowing the main OMP itself. Suffice it to state, the facts in the case in hand are different from the facts in C.V. Rao (supra) and the judgment would not be applicable to the case in hand keeping in view the past litigation between the parties, the impugned orders passed by this Court from time to time, the award which has been rendered by the learned Arbitrator. The learned counsel for the respondent Nos.4 to 9 had referred to many judgments in respect of grant of interim relief under Section 9 of the Act. I do not think that this Court needs to go into those judgments in view of the settled OMP114/2015 Page 43 of 51 position of law.
44. The question which arises is in view of the stand taken on behalf of respondent Nos.1, 11 & 12, can a relief be claimed against a third party, who is not a party to the agreement containing arbitration clause or party to the arbitration proceedings or even if a party to the agreement no relief was claimed nor granted by the Arbitral Tribunal. This question had come up for consideration before this Court on more than one occasion. In Value Advisory Services (supra), on which reliance was placed by Mr.Anil Airi, Advocate, this Court after analysing the provisions of CPC, was of the view when a third party denies the liability and such denial raises disputed questions of fact which cannot be adjudicated without trial the Court in such cases in its discretion can on a prima facie view of the matter, either refuse to exercise powers under Section 9 of the Act or pass appropriate order(s) to protect the interest of all parties concerned. It is a different issue, in the said case the Court refused to exercise the power under Section 9 of the Act. In a more recent judgment this Court in Dorling Kindersley (India) Pvt. Ltd. vs. Sanguine Technical Publishers & Ors. 2013 (3) Arb. LR 52 (Del.) held that the Court is not powerless to pass an interim order affecting a third party under the provisions of Section 9 of the Act. There may arise various situations OMP114/2015 Page 44 of 51 wherein the Court may have to pass an interim order affecting third parties. One of such situation is where the order is passed against the party who is claiming or deriving title through the party to an agreement. In such cases, if the endeavour is made by the party to the agreement to frustrate the contract, or resile from contractual obligations, the Court may pass interim orders to prevent abuse of the process, and affect the third party right. The Court followed the Division Bench judgment of the Bombay High Court in Girish Mulchand (supra) and held that the power under Section 9 of the Act has to be invoked by a party to the arbitration agreement. However, Section 9 nowhere limits the Court‟s power or jurisdiction to pass an order under this provision. On the contract, Section 9 provides that the Court shall have the same powers to pass interim order as it has for any other proceeding. Thus, it cannot be said that Section 9 puts any impediment on the jurisdiction of the Court in passing interim measures or orders affecting third parties. The Court can conveniently proceed to pass interim orders, which may affect a third party who is deriving title from the party to the agreement, unlike a third party having an independent right.
45. The aspect of grant of interim relief under Section 9, post award is also well settled. In Alpha Tiger Cyprus Investments Ltd. & Anr. OMP114/2015 Page 45 of 51 (supra), this Court was considering an application filed under Section 9, post award. The facts as noted by this Court were, there was an interim order in favour of the petitioner throughout the arbitral proceedings. The award was also in favour of the petitioner. The question arose whether pending the enforcement of the arbitral award which is proposed to be challenged under Section 34 of the Act, can the Court exercise jurisdiction under Section 9 of the Act? The Court noticing that the petitioner is seeking an interim order requiring the respondents to maintain status quo in relation to an immovable property and is not praying for the deposit of the whole or part of the awarded amount, had upheld, the maintainability of a petition of the act prior to the enforcement of the award under Section 36 of the Act. The Court went on to direct that the interim order passed by the Court to this effect, the respondents shall not create any third party right, interest in respect of the property till either the disposal of the petition under Section 34 of the Act if filed or in the event that the petition is dismissed or no such petition is filed in accordance with law till the enforcement of the award in a petition under Section 36 of the Act. In Veda Research Laboratories Vs. Survi Prosects 2009 (111) DRJ 566, this Court while considering a similar question was of the view that the language of Section 9 is clear in OMP114/2015 Page 46 of 51 empowering the Court to make interim measures even after the award is passed, till it is enforced. The Court could justifiably exercise the power, despite the pendency of the petition under Section 34, if the facts and circumstances necessitated the same. In the said case, the Court was also of the view, since the Arbitral Tribunal has passed a unanimous award, it was decided to be sufficient for the purposes of making out a prima facie case. The mere pendency of the application under Section 34 would not be an impediment to the grant of interim relief since the scope of interference under Section 34 is limited. The Court after satisfying itself that the balance of convenience and irreparable hardship was established, granted an order of injunction restraining the petitioner from alienating, encumbering, or parting with the possession of the factory premises.
46. A cumulative reading of the judgments referred above, it is clear that while considering a petition under Section 9 of the Act, the Court is within its right to pass order against the third party. It is also clear that when the jurisdiction of the Court is invoked post award by way of petition under Section 9, interim protection can be granted. The argument of the counsel for the respondents that some of them not being parties before the Arbitral Tribunal, the petition under Section 9 would not be maintainable, need to be rejected. The judgment of the Supreme OMP114/2015 Page 47 of 51 Court in the case of Indowind Energy Limited (supra), as relied upon by Mr.Singla, would not be applicable in the facts of this case wherein this Court is concerned with a petition under Section 9 of the Act and not under Section 11 of the Act. The Court should restrain itself from passing an order which has the effect of implementing the award. Such order, if made, would frustrate the challenge to the award under Section
34. The order should be such which would secure the interest of the party having the award in its favour so as to seek effective implementation, in the eventuality, the challenge to the award is rejected.
47. In the case in hand, it is noted that this Court vide order dated April 27, 2012 in OMP 383/2012 passed a restraint order against respondent Nos. 2 to 12, which was continued even on September 4, 2012 from alienating, selling, transferring, mortgaging, encumbering, disposing of or in any manner dealing with the immovable properties. The clarification application filed by the respondent No. 12 was dismissed. That apart, the respondent No. 1 through respondent No. 2, entered into an agreement with PSL whereby a lease hold plot of land at Noida, was given for development to PSL. That apart, vide order dated April 27, 2012, initially, the respondents were directed to file their affidavits indicating the list of their moveable and immovable properties OMP114/2015 Page 48 of 51 including bank balances.
48. Thereafter, on September 4, 2012, this Court directed the respondent Nos. 2 to 10 to file their affidavits of their assets before the Arbitral Tribunal. The respondent Nos. 2 to 10 did not file the affidavits of their assets. A contempt petition No. 736/2012 was filed. The affidavits filed were disregarded by the Arbitral Tribunal, as they were lacking particulars. It is noted, only respondent Nos. 2, 3 and 10 had filed affidavits. That apart, in OMP 1197/2014, this Court vide its order dated September 30, 2014 injuncted respondent Nos. 2 to 10 from dealing with or transferring their share holding in respondent No.1, respondent No.11 and respondent No.12 and additionally, respondent No. 1, respondent No. 11 and respondent No. 12 were injuncted from recording any transfer of the shares held by respondent Nos. 2 to 10 in them. According to the petitioner, the shareholding shown by respondent No. 2 was false and contrary to the record in that the annual return of respondent No. 12 showed that respondent No. 2 held only 1,89,250 shares on June 24, 2014 whereas the affidavit shows 263250 shares. The plea of error taken was also contested by the petitioner on the ground that the aggregate of the share certificates in the last column of the affidavit is 263250.
OMP114/2015 Page 49 of 51
49. Further considering the fact that the award also being in favour of the petitioner there is indeed a prima facie case in favour of the petitioner, balance of convenience is also in favour of the petitioner and keeping in view the earlier orders passed by this Court in the litigation between the parties, this Court is of the view that in the facts of this case, the following interim measures need to be granted in favour of the petitioner:
(i) The respondent Nos.2 to 10 shall not sell, encumber, alienate and deal with the properties and equity shares of various companies listed by them in their respective affidavits filed on March 27, 2015.
(ii) The respondent Nos.2 to 10 shall maintain status quo with respect to title and possession of the property at C-20, 1A/10, Block-C, Sector-62, Noida, U.P.
(iii) The respondent Nos.2 to 10 shall not deal with the shares of respondent Nos.1, 11 & 12 and also with respect to shares of respondent Nos.2 to 10 no transfer will be registered by respondent Nos.1, 11 & 12.
50. The aforesaid directions shall continue till either the disposal of the petition under Section 34 of the Act, if filed, or in the event that petition is dismissed or no such petition is filed in accordance with law, till the enforcement of the award in a petition under Section 36 of the Act. The OMP114/2015 Page 50 of 51 petition is disposed of.
51. No costs.
(V.KAMESWAR RAO) JUDGE MAY 05, 2015 km/akb OMP114/2015 Page 51 of 51