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2016 (5) TMI 884 - BOMBAY HIGH COURT

2016 (5) TMI 884 - BOMBAY HIGH COURT - TMI - Winding up - failure to replay the loan and interest thereon - Inter Corporate Deposits (ICD) Agreement as a subject matter of Arbitration - Held that:- In view of the chronology of events in respect of arbitration application file under Section 11, it can be seen that the Respondents herein were not impleaded as party to the arbitration application and had not accepted that there was arbitration agreement between the Appellants herein and the Respond .....

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of Mr. Dwarkadas, the learned Senior Counsel appearing on behalf of the Appellants therefore cannot be accepted. The question No.(i) is therefore answered in the negative.

Whether ICDs form part of the larger transaction of investment by the Urban Group in the joint venture business and therefore amounts under ICDs are payable only out of the profits earned by the joint venture business or whether it is a standalone transaction? - Held that:- The fact, that supplemental agreement whi .....

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se of the Appellants. Defence of the Appellants is neither bonafide nor substantial defence. We are of the view that finding given by the learned Single Judge on this issue is neither perverse nor unreasonable and, therefore, we do not propose to interfere with the said finding while exercising our appellate jurisdiction under Clause 15 of the Letters Patent Act. In our view, there was no suppression of fact by the Respondents/original Petitioners since the ICDs were separate and independent agr .....

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case on merits but having held that the defence of the Company is sham and bogus has given an opportunity to the Company to pay the amount, failing which the Company Petition would stand admitted. The learned Single Judge therefore has not passed any decree in favour of the Respondents/original Petitioners. It is now well settled that such an order could be passed by the Company Court directing the Company to make payment of money to the petitioning creditor.

Whether any interference .....

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ing of the learned Single Judge is neither perverse nor is based on the material which is not there on record. The question is therefore answered in the negative. - Appeal No. 100, 102, 109 of 2015, Company Petition No. 38, 31, 33 of 2013 - Dated:- 9-3-2016 - V. M. Kanade And Revati Mohite Dere, JJ. For the Petitioner : Mr. Janak Dwarkadas, Senior Counsel alongwith Mr. Parimal Shroff, Mr. D.V. Deokar For the Respondent : Dr. Virendra Tulzapurkar Senior Counsel alongwith Mr. Arif Doctor i/b Junna .....

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etitioners. 2. Few facts as are necessary to decide the aforesaid appeals are as under : At the outset, it may be noted that the facts in the aforesaid three appeals are substantially similar and that only the amounts in each appeal differs. The learned Single Judge, in the impugned order, has referred to the facts in Company Petition No. 31 of 2013, which is appeal No. 102 of 2015. 3. The respondents/original petitioners' case as disclosed in the company petitions broadly is as under : Acco .....

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,00,000/- and ₹ 19,80,00,000/-, together with interest at the rate of 15% per annum from the period mentioned in the company petitions. According to the respondents/petitioners, at the request of the said appellant companies, short term loans by way of inter corporate deposits (ICDs) of ₹ 14,84,00,000/-, ₹ 24,80,00,000/- and ₹ 19,80,00,000/- were granted to the said companies. The respondents/petitioners have relied on the demand promissory note dated 31st March, 2010 exe .....

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e stipulated date mentioned therein, and also provides for interest at the rate of 15% per annum and delayed rate of interest of 18% per annum. According to them, as the appellant companies failed and neglected to pay the aforesaid amounts and interest despite several requests, the respondents/petitioners vide letter dated 14th March, 2012, recorded the appellant companies' default and called upon the appellant companies to pay the aforesaid principal amounts along with interest. Since the A .....

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t term loan and payment of the accrued interest was wrongly disputed by them. A reply was sent by the respondents/petitioners to the reply sent by the appellant companies to the statutory notice. The respondents/petitioners in the said letter contended that the appellant companies were trying to confuse the matter with a view to avoid their liability, by referring to unconnected and unrelated transactions. The Respondents filed three Company Petitions. 4. The appellants case, in brief, is as und .....

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estate development all over India. The said Neelkanth Group is stated to be controlled by Mohan V. Patel and his family. 5. On the other hand, the Urban Infrastructure Venture Capital Limited ( UIVCL ), one of the several companies and entities, is described by the appellants as the Urban Group . We may note here, that the said description of the Urban Group is not accepted by the respondents. The said Urban Group is stated to be controlled by Anand J. Jain and his associates. Since the appella .....

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n the year 2005 and was providing estate management and financial advisory services. In March, 2006, the UIVCL was appointed as an Investment Manager to the Urban Infrastructure Opportunities Fund ( UIOF ). UIOF was a Scheme, which was established by the Urban Infrastructure Venture Capital Fund ( UIVCF ), a domestic venture capital fund and UIOF was to raise money for deployment in different real estate projects. In February, 2007, UIVCL was also appointed investment adviser to the investment m .....

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d agreed to invest in the Neelkanth Group's special purpose vehicles by subscribing to equity shares/debentures. Accordingly, the Urban Group is stated to have nominated UIVCL as a lead company with Parag Parekh as its representative, while the Neelkanth Group was represented by Mohan Patel. According to the appellants, it is not in dispute that in 2007, a supplemental agreement was drawn up, and that the said document was never formally executed. Although the appellants have relied upon the .....

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arti with NMIPL and between September, 2007 and November, 2007, ₹ 84 crores were placed on ICDs with NMIPL by one Vinamra Universal Traders Private Limited ( Vinamra'), another Urban Group entity. The ICDs placed by Dharti were completely repaid by NMIPL. Out of the amount of ₹ 84 crores, NMIPL repaid Vinamra ₹ 20 crores in February, 2007 and the balance amount of ₹ 60 crores which was due to Vinamra was repaid in February/March, 2010. In February and March, 2010, res .....

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joint ventures or Neelkanth Group companies to suit the Urban Group. Whereas, the Urban Group contended that the ICDs were completely independent and had nothing to do with the share subscription commitments or realty investments. According to the respondents, the ICDs were unrelated to any investments made by the Urban Group's domestic and foreign funds and that the inter-corporate deposit agreements ( ICDAs') were stand alone documents, having no nexus between the deposits and the inve .....

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Neelkanth Group, NMIPL is the lead or flagship company of the Neelkanth Group, having three subsidiaries; Neelkanth Somnath Private Limited ( Neelkanth Somnath ); Neelkanth Ricelands Private Limited ( Neelkanth Ricelands ); and Nilayami Realtors Private Limited ( Nilayami Realtors ). The inter-locking relationship is of some relevance because around the same time, when the respondents were asked to place the ICDs with three respondent companies, the Neelkanth Group restructured its internal hold .....

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to UIVCL, after which, UIVCL placed the three ICDs in question with Neelkanth Devansh (Rs.19.80 crores); Neelkanth Kalindi (Rs. 24.80 crores); and Neelkanth Soham (Rs. 14.34 crores). It may also be noted that corresponding to each of these three ICDs in the three appellant companies, separate ICDA's were executed and that these ICDAs deposits stated the principal amounts and their due dates. It may also be noted that these are the only contractual documents between UIVCL and the aforesaid c .....

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ltaneously. However, according to the appellants, these disputes were related to the ICDAs, whereas, according to the respondents, the disputes were completely independent and unrelated in any way to the ICDAs. 12. The learned Single Judge by the impugned order held that the defence of the Appellants herein/original Respondents was neither bonafide nor substantial and came to the conclusion that the Company was under an obligation to pay its debts and ordered winding-up. He, however, gave a furt .....

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ban Group in the joint venture business and therefore amounts under ICDs are payable only out of the profits earned by the joint venture business or whether it is a standalone transaction? (iii) Whether the impugned order directing the Company to pay a sum of ₹ 23,04,59,942/- amounts to a decree when the Company Court was not justified in passing the said Order? (iv) Whether any interference is called for with the order passed by the learned Single Judge in an appeal filed under Clause 15 .....

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ed Single Arbitrator, ICD is a subject matter of arbitration is without any substance for the following reasons. 16. It is necessary to examine brief chronology of events in respect of arbitration proceedings:- (A) After the impugned order was passed by the learned Single Judge, the Appellants alongwith NMIPL, Neelkanth Devansh Developers Pvt. Ltd., Neelkanth Kalindi Realtors Pvt. Ltd. issued notice for Arbitration dated 08/09/2014. (B) Thereafter, an application was filed in the Apex Court vide .....

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alf of the Respondents in accordance with Clause 19 of the Six Subscription cum Shareholders Agreements. (c) In the alternative to Prayer (a) and (b), appoint the said Mr. Justice F.I. Rebello (Retd) as sole Arbitrator in accordance with Clause 19 of the said Six Subscription cum Shareholders Agreements. (d) Costs of this Application and the order to be made thereon be provided for; and (e) Pass any such other or further orders and directions which this Hon'ble Court may deem just, fit and p .....

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d, secondly, that the ICD Agreement was a separate, distinct and independent Inter Corporate Deposit Agreement which does not have the arbitration clause. The contention that the Respondents/Petitioners are members of the Urban Group was denied. (F) No order was passed on the impleadment application filed by the Appellants. (G) Respondent Nos. 1 and 2 in Arbitration Application No.12 of 2015 gave their consent for appointing Mr. Justice R.M. Lodha, a former Chief Justice of India as a sole arbit .....

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greement between the Appellants herein and the Respondents and further had not accepted that the claim of the original Petitioners that the winding up Petition was required to be adjudicated upon by the Arbitrator. No decision was given by the Apex Court in the said application since it was withdrawn and, therefore, it cannot be said that the Apex Court had given any ruling on the basis of the judgment in Chloro Controls (India) Pvt. Ltd. vs. Severn Trent Water Purification Incorporated and Othe .....

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venture business or whether it is a standalone transaction? 19. Taking into consideration the documents on which reliance was placed by both sides, we are of the view that the learned Single Judge has correctly held that ICDs do not form part of the larger transaction of investment or that ICD are payable only out of profits earned by the joint venture business. ICDs, in our view, are independent transactions, not governed by the supplemental agreement. 20. For deciding this question, it will be .....

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espondents viz Urban Infrastructure Ventures Capital Ltd. (UIVCL) is a lead Company of the group which is known as Urban Group. According to him Respondents are part of the following Companies, Trusts, Funds and Entities viz. 1) Urban Infrastructure Real Estate Fund ( UIREF ) 2) Urban Infrastructure Trustees Ltd. ( UITL ) 3) Urban Infrastructure Venture Capital Fund ( UIVCF ) 4) Urban Infrastructure Ventures Capital Ltd ( UIVCL ) i.e. the Respondents herein. 5) Jai Corp. Ltd., ( Jai Corp ) 6) Sh .....

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ties without revaluation and the Urban Group was to bring the capital. Secondly, according to the Appellants, Neelkanth Group was to set up projects for development through SPVs/JVs and the Urban Group would invest in such SPVs/JVs by subscribing the equity shares and the profit sharing ratio between the two would be 60% by the Neelkanth Group and 40% by the Urban Group. According to the Appellants, SPVs/JVs of Neelkanth Group were as under:- (i) Asim Realty Pvt. Ltd., a Group Company floated in .....

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this excess capital investment by UG would be repayable from such surplus capital of SPV/JV which was not required for Joint Venture business. It is the case of the Appellants that the understanding was recorded in the Supplemental Agreement to the Shareholders Agreement of the Joint Venture Companies though it was not executed but was implemented and acted upon by both the parties. 23. Mr. Dwarkadas, the learned Senior Counsel for the Appellants submitted that on the basis of the said understa .....

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pex Court and High Courts and reliance was also placed on compilation of documents in respect of conduct of parties through E-mail, which, according to him, showed that they acted as a Group. Reliance was also placed on the proceedings of mediation of Mr. K.G. Kirshnamurthy. He also submitted that there was a gross suppression of facts by the original Petitioners in the Petition. In support of the said submission, he relied on E-mails dated 24/03/2010, 25/03/2010, 26/03/2010 and 27/03/2010. He a .....

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the ICDs form part of an integral part of the web of transactions is not borne out by any document. He submitted that this agreement of understanding was supposedly oral. He pointed out the entire history as to how ICDs came to be executed from paragraph 15 of the affidavit-in-rejoinder which is found at pages 391 to 394 of Vol-III of Appeal No.102/2015. He submitted that no reliance could be placed on the supplemental agreement since it was unexecuted and bears the endorsement draft for discuss .....

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stment Advisor to the Investment Manager of the foreign Fund Urban Infrastructure Real Estate Fund (UIREF) is entirely distinct and separate. He submitted that UIVCF has separate set of domestic beneficiaries/investors and UIREF has separate set of foreign beneficiaries/investors and both are separate and distinct. He submitted that if ICDs were to be part of the investment in the joint venture business, then there would have been a proper agreement recording the same. Secondly, there was no nee .....

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are party and which contain independent provisions of arbitration (Vol- III pages 391 to 394 of Appeal No.102/2015). 26. Dr. Tulzapurkar, the learned Senior Counsel appearing on behalf of the Respondents/original Petitioners took us through the Inter Corporate Deposit Agreement and the Promissory Note executed by the Company in favour of the Respondents/Petitioners. He submitted that the execution of documents was admitted by the Company but the liabilities were denied. He also relied on various .....

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greements there is a reference to parties, which, in turn, includes the definition of the term Affiliate'. It is obvious that the term 'Affiliate' is a defined term in relevant Shareholders Agreement and it cannot be read in isolation and, secondly, it has to be noted that Shareholders Agreement is not signed by the original Petitioners. In our view, therefore, there is no material on record to indicate that the ICDs were part of the larger web of transactions between the parties. Th .....

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ference to the ICDs. 28. Dr. Tulzapurkar, the learned Senior Counsel appearing on behalf of the Respondents/original Petitioners has relied upon two judgments of this Court; one in J.K. Corporation Ltd. vs. Ensource Finance Ltd. [2001] 33 SCL 143 (BOM) and the other in Marine Container Services (India) Pvt. Ltd. vs. Shaheel Bearings Pvt. Ltd. 1999(4) Bom. C.R. 453 In the said two cases also, a defence was set up that the ICDs in both the cases were part of a larger interconnected transactions. I .....

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s/original Petitioners to the Appellants and there was no other written material/agreement/contract to show that it was supposed to be part of the arrangement which was specifically averred by the Appellants in their affidavit-in-reply. It is well settled that if there is a written contract, reliance will have to be placed on the written contract and no oral evidence could be led which is in variance of the written contract. 30. At no point of time, the contention of the Appellants that this was .....

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treated as separate and distinct transaction. Moreover, if the contention of the Appellants was to be accepted then there was no need to enter into new ICDs. The flow chart and the correspondence between the parties does not establish the case of the Appellants. 31. We therefore confirm the finding of the learned Single Judge and are of the view that defence of the Appellants is neither bonafide nor substantial defence. We are of the view that finding given by the learned Single Judge on this i .....

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(ii) is therefore answered in the negative. 32. The third question which falls for consideration before this Court is as under:- (iii) Whether the impugned order directing the Company to pay a sum of ₹ 23,04,59,942/- amounts to a decree when the Company Court was not justified in passing the said Order? 33. The said submission of the Appellants is without any substance. The learned Single Judge in his order has clearly observed that he is not deciding the case on merits but having held tha .....

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con Industries Ltd. vs. Itesa Sanpaolo S.P.A in Appeal (L) No.29 of 2014 in Company Petition No.528 of 2012 has also upheld the similar order passed by the Company Judge. The question No.(iii) is therefore answered in the negative. 34. The last question which falls for consideration before this Court is as under:- (iv) Whether any interference is called for with the order passed by the learned Single Judge in an appeal filed under Clause 15 of the Letters Patent Act? 35. The Apex Court in Wander .....

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ed principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if .....

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