TMI Blog2020 (8) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... scribes grant of interim measures, by the Court, consequent on constitution of the arbitral tribunal, save and except where the Court finds that circumstances exist, which may not render the remedy, under Section 17, to be efficacious. The Court, while exercising jurisdiction under Section 9, even at a pre-arbitration stage, cannot, therefore, usurp the jurisdiction which would, otherwise, be vested in the arbitrator, or the arbitral tribunal, yet to be constituted. There is no whisper of any denial, in the aforesaid response, dated 8th July, 2020, from the petitioner to the Respondent, of the allegations that the petitioner had failed to maintain the Required Security Cover, and to liquidate all Outstanding Amounts by the final Redemption Date, i.e. 10th July, 2019. The fact of failure, on the part of the petitioner, to pay the Outstanding Amounts by the cutoff date of 10th July, 2019, stands, in fact, expressly acknowledged and admitted, by the petitioner, in its letter dated 30th June, 2020. The approach of the petitioner, in its response dated 8th July, 2020, was to maintain a studied silence thereon, and, instead, to allege market manipulation by KKR and its confederates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra, Sneha Jaisingh, Anurag Tandon and Aniruddha Banerji, Advs. For Respondents: Rajiv Nayar, Sr. Adv., Manmeet Singh, V.P. Singh, Kartik Nayar, Anugrah Robin Frey, Kartik Bajpai, Anindita Roychowdhury and Raghav Chadha, Advs. JUDGMENT C. Hari Shankar, J. O.M.P.(I) (COMM.) 177/2020 I.As. 5463-65/2020, 5664-67/2020 1. This petition, under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 1996 Act ), seeks pre-arbitration interim relief. Facts 2. The petitioner, Avantha Holdings Ltd., was in need of finances during 2016-2017. The Board of Directors of the petitioner, on 11th November, 2016, approved the borrowing of ₹ 1400 crores, by issuance of secured/unsecured non-convertible debentures on private placement basis. Consequent thereupon, the respondent M/s. Vistra ITCL (India) Ltd. was appointed as Debenture Trustee, vide Debenture Trust Deeds dated 5th January, 2017. 3. On the same day, i.e. 5th January, 2017, two Debenture Trust Deeds, were executed, whereby 5650 non-convertible debentures, each with face value of ₹ 10 lakhs, and 7000 debentures, each with face value of ₹ 10 lakhs, were issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the terms of the Transaction Documents, the Company shall ensure that the Pledged Reference Entity Shares shall provide a Security Cover which shall at least be equal to the Required Security Cover. 3.4.2 If at any time the Security Cover falls below the Required Security Cover then, the Company shall within 7 (seven) Business Days of either becoming aware of, or being notified of the same, either (a) pledged an additional number of Reference Entity Shares ( Top Up Shares ) such that the Security, after such additional pledge is at least equal to the Required Security Cover; or (b) provide Security, in a form acceptable to the Debenture Trustee ( Additional Cash Security ) so that after aggregating the Pledged Reference Entity Shares Value with the Additional Cash Security, the Security Cover is equal to or greater than the Required Security Cover. Required Security Cover was defined, in Clause 1.1.100, somewhat enigmatically, as meaning Security Cover of at least two times . (iv) Obligations were defined, in Clause 1.1.70 of the Debenture Trust Deed, as including all debts and liabilities, due or payable by the petitioner, under or in connection with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the petitioner, by the Debenture Holders, for refinancing the Debts, other liabilities of the petitioner, and other purposes as approved by the Debenture Trustee, as per instructions of the Debenture Holders (which were defined as Approved Instructions , by Clause 1.1.8 of the Debenture Trust Deed). The date on which any portion of the Tranche Investment Amount was released, for utilisation by the petitioner, in accordance with Clause 2.4, was defined as the Utilisation Date , vide Clause 1.1.128. (ix) Redemption of the said debentures was covered by the various sub-Clauses of Clause 2.5 which, at the very outset, prohibited redemption of the Debentures, by the petitioner, in any other manner. The Debenture Trust Deed envisaged Early Redemption , Mandatory Redemption and Final Redemption , of the Debentures. (x) Early Redemption was covered by Clause 2.5.1, and was permissible at the option of the petitioner. The petitioner was permitted, by this Clause, to repay, in part or in full, the Outstanding Amounts, any time within a period of 30 months from the first Deemed Date of Allotment (which period was defined, in Clause 1.1.122, as the Tenure ). The First Deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited in the AHL Designated Bank Account by the petitioner, in accordance with Clause 2.5.3 (a). (xiv) Clause 25.1 required all payments and repayments to be made, by the petitioner, in accordance with the terms of the Transaction Documents, to be deposited into the AHL Designated Bank Account, at least seven days prior to the respective due dates, so that the said payments could be transferred, by the Debenture Trustee, to the Notified Accounts of the Debenture Holders, on the respective due dates for such payments. (xv) Upon satisfaction, in full, of the Outstanding Amounts, relating to the Identified Debt, and on a written request by the petitioner, the Debenture Trustee was required, by Clause 8.1, to unconditionally permit release and transfer-out, of all Secured Assets held in the Designated DP Account and amounts standing to the credit of the Designated Bank Accounts. Designated DP Account was defined, in Clause 1.1.36, as meaning the dematerialised securities account of the petitioner, maintained with PNR Securities Ltd. and to be operated in accordance with the terms of the Debenture Trust Deed. (xvi) Clause 4.3.1 required the petitioner to constitute a subco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Strategy Committee in the event of a tie, until the Final Settlement Date or (b) any of the Target Events have not occurred as of the Target Date and on and from the Strategic Committee Target Date the representative of the Debenture Trustee on the Strategy Committee does not have the casting vote with respect to decisions/recommendations of the Strategic Committee in the event of a tie, until the Final Settlement Date; 27. The Company fails to fulfil its obligations to credit Pledged Reference Entity Shares in the Designated DP Account within the time period set out herein; ***** 31. Any default, breach or violation of any term of any transaction document entered into by the Company or any of its subsidiaries in relation to any portion of the Identified Date, which is considered to be an event of default under such transaction Document; (xviii) The sequelae, to the happening of an Event of Default, were contained in Clauses 9.1 to 9.6, which merits reproduction, in extenso, thus: 9.1 Upon the occurrence of an Event of Default, the Company shall immediately inform the Debenture Trustee in writing of such occurrence, together with all details related theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument) as is proportionate to such Debenture Holder's pro rata share of the total Outstanding Amounts or any portion thereof ( Enforcement Right ) by issuing a written notice to the Debenture Trustee. In the event that a Debenture Holder has exercised its Enforcement Right in respect of a portion of the total Debentures held by it, then such Debenture Holder shall be entitled to the proceeds of the enforcement to the extent that such enforcement corresponds to such Debentures in respect of which the Enforcement Right has been exercised. 9.3.2. If the Enforcement Notice requires the sale of the Secured Assets (including the pledged Reference entity Shares)(or part thereof), the Company shall, promptly but in any event within 3 (three) Business Days after the date of any Enforcement Notice, sell the Secured Assets including the pledged Reference entity Shares or part thereof as instructed in the Enforcement Notice) in one or more lots and procure that the proceeds from all such sales (collectively, the Share Sale Proceeds ) are directly credited only to the AHL Designated Bank Account or such account as may be notified from time to time by the Debenture Trustee (acting purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereto. (xx) Clause 41.2 constituted the Arbitration Agreement, between the petitioner and the respondent, and read thus: 41.2. Arbitration (a) Subject to Debenture Trustee's/Debenture Holder's right to exercise any remedies under the DRT Act or the SARFESI Act, the Parties agree that at the option of the Debenture Trustee, any Dispute may be referred to arbitration by the Debenture Trustee, which decision shall be binding on the Company. (b) If the Parties choose that any Dispute is to be resolved by arbitration under this Clause, the Debenture Trustee (it being hereby clarified that any costs required to be borne by the Debenture Trustee in relation thereto shall be borne by the Debenture Holders (but nevertheless recoverable by the Debenture Holders as per the provisions of the Transaction Documents) on the one hand shall appoint 1(one) arbitrator, the Company shall appoint the second arbitrator and the 2(two) arbitrators so appointed shall appoint the third arbitrator who shall act as the presiding arbitrator. In the event a party fails to appoint their arbitrator for any reason whatsoever within 15(fifteen) days of another party appointing the arbitrator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ornate fashion, as a sinister sequence of events , engineered and managed by KKR, as the lead Debenture Holder under the Debenture Trust Deeds, thus: 6.1. As required by Clause 4.3 of the Debenture Trust Deeds, a Strategic Committee , on the BOD of the petitioner, was constituted, in which Mr. B.V. Krishnan, then CEO, KKR India Financial Services private limited, was appointed, by the respondent, as Debenture Trustee, as its nominee. At this stage, it becomes necessary to reproduce Clauses 4.3.4 to 4.3.6 of the Debenture Trust Deeds: 4.3.4. During the first 18 (eighteen) months from the first Deemed Date of Allotment, in the event there is a tie in the decision of the members of the Strategic Committee, the nominee of the Company will have a casting vote with respect to decisions/recommendations of the Strategic Committee. 4.3.5. Notwithstanding Clause 4.3.4, if (i) on the Target Date any of the Target Events have not occurred to the satisfaction of the Debenture Trustee (acting on the Approved Instructions) then on the Strategic Committee Target Date, the nominee of the Debenture Trustee on the Strategic Committee will have the casting vote with respect to decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 4.3.1, was absolute, not limited to achieving of the Identified Events.) 6.3. Admittedly, payment of all Outstanding Amounts , could not be effected, by the petitioner, by the expiry of 18 months from the First Deemed Date of Allotment, as a result whereof, by operation of Clause 4.3.6 supra, Mr. B.V. Krishnan, as the nominee of the Debenture Trustee in the Strategic Committee, acquired a casting vote. 6.4. The Strategic Committee met on 12th July, 2018. It was observed, in the said meeting, that the value of CGP had declined, significantly, over several months, and that preservation of the value of CGP, as also enhancement thereof, so as to create liquidity, with regard to the holding of the petitioner in CGP, was of the essence. Mr. Krishnan, as the nominee of the Debenture Trustee on the Strategic Committee, suggested that an external, independent individual, be appointed as a resource, who would work with the Chief Financial Officer, CEO and other executives of CGP, to implement objectives relating to value creation in CGP. The Strategic Committee agreed to implement the recommendation. 6.5. Following on the above recommendation, in the next meeting of the Stra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h March, 2019, an oral agreement was entered into, between the petitioner and KKR, in which KKR represented the debenture holders and the respondent, and that, vide the said agreement, the petitioner, the Debenture Trustee and KKR (on behalf of the debenture holders), agreed to extension of the redemption period of the debentures by 18 to 24 months, and ceasing of the accrual of redemption premium, after 31st March, 2019. The said oral agreement also, purportedly, agreed for transfer of the pledged shares of CGP, in the name of the Debenture Trustee, with the understanding that the shares would be released in favour of the petitioner, upon payment of the redemption amount as negotiated and within the time as extended by the parties. As such, the petitioner contends that the pledged shares of CGP, which were earlier in the name of the petitioner, were transferred to the name of the Debenture Trustee, i.e. Respondent No. 1. The petitioner has placed on record, a communication, dated 10th March, 2019, addressed by the petitioner to the National Stock Exchange of India Ltd. (NSE), the Bombay Stock Exchange Ltd. (BSE) and CGP, whereunder intimation has been provided, as required by Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, capital restructuring and other similar matters, so as to enable CGP to leverage strong growth in its industrial and railways businesses. 6.10. On 24th April, 2019, the Operations Committee appointed a law firm, namely M/s. Vaish Associates (hereinafter referred to as Vaish ), purported to investigate transactions, entered into, purportedly without proper authorisation by CGP. The petition further asserts that, on 21st June, 2019, CGP proposed appointment of Tranzmute to help CGP in a capital restructuring exercise. 6.11. The petition alleges that on 5th August, 2019, Vaish tabled a Preliminary Report, resulting in a misleading disclosure, by CGP to NSEI and BSE. On 29th August, 2019, Mr. Gautam Thapar was removed as Chairman of the BoD of CGP. 6.12. It is submitted by Mr. Mukul Rohatgi, learned Senior Counsel and Mr. Jayant Mehta, learned counsel appearing on behalf of the petitioner, that this Preliminary Report was part of a plan, devised by KKR to ensure that the value of the shares of CGP, which stood transferred to the name of the Debenture Trustee, i.e. the respondent, plummeted, so that they could later purchase the shares at a pittance. 6.13. As a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliability of the report of Vaish. For reasons which would become apparent hereinafter, however, I do not deem it necessary to allude, in any greater detail, to the observations and findings of the learned NCLT. 6.16. It is alleged, by the petitioner, that there could be no occasion for invoking and selling the pledged shares of CGP, prior to the expiry of 30 months from 5th January, 2017, i.e. prior to 6th July, 2019. Instead of doing so, it is alleged that the respondent illegally transferred the pledged shares of CGP in its name, in March, 2019, creating a situation in which the value of the shares fell in the market and, thereafter, sold the shares in September, 2019, at a pittance. This, it is submitted, was entirely illegal. 6.17. On 30th June, 2020, the respondent wrote to the petitioner, alleging that, starting 28th September, 2018, several notices have been issued, by the respondent to the petitioner, pointing out that the required security cover, as per Clause 3.4 of the Debenture Trust Deeds, was not being maintained, and highlighted other breaches. It was also pointed out, in the said communication, that as per the covenants of the Debenture Trust Deeds, all Outst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor. 6.19. The petitioner responded, to the above communication, vide letter dated 8th July, 2020, addressed by counsel, asserting that it had been agreed, between the petitioner and KKR, (who was acting on behalf of the Debenture Holders), that the pledged CGP shares, after being moved to the DEMAT account of the respondent, would continue to be held as collateral, to enable the petitioner to repay the Outstanding Amounts under the Debenture Trust Deeds. The sale of the CGP shares, between July and September, 2019, it was alleged, was in stark violation of the said agreement and understanding. The manner in which the debenture holders had acted, it was alleged, reflected market manipulation, using the petitioner as a scapegoat. In view thereof, it was submitted that the Debenture Trust Deeds and the Memoranda Of Pledge stood vitiated and the petitioner, had no liability under the debenture trust deeds, which stood, accordingly rescinded. The petitioner has also pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is further asserted that the facts made it apparent that a similar modus operandi was being engineered, by the respondent, in respect of the pledged BILT shares, by artificially depressing the value of the shares and obtaining a controlling stake in BILT. The petitioner has, therefore, expressed serious apprehension that the debenture trustee, i.e. respondent, in collusion with the debenture holders, would invoke the pledge and sell the pledged BILT shares, as threatened, in the notice dated 30th June, 2020 supra, thereby rendering all rights of the petitioner infructuous. This, it is submitted, is bound to result in irreparable loss and prejudice to the petitioner. The petitioner has, in its written submissions, highlighted the intrinsic value , of the pledged BILT shares; however, for the purposes of disposal of the present petition, I do not deem it necessary to advert thereto. 11. This petition was initially listed, before this Court, on 10th July, 2020, and was renotified for 16th July, 2020. Mr. Mukul Rohatgi, learned Senior Counsel appearing for the petitioner, pointed out, on 16th July, 2020, that, even while the matter was thus pending before this Court, 50% of the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he default. It is alleged that these notices, too, have been suppressed in the petition, though, on 6th March, 2019, the petitioner acknowledged receipt of the shortfall notices, and intimated the respondent that it would remedy the breaches and ensure repayment of the Outstanding Amounts. Reference has been invited, by Mr. Nayar, to the said communication dated 6th March, 2019, of the petitioner (which is on record), in para 3 of which the petitioner admitted breach, on its part, in payment of the Outstanding Amounts under the Transaction Document. The said document deserves to be reproduced in extenso thus: March 6, 2019 From Avantha Holdings Limited Thapar House 124 Janpath, New Delhi-110001 Facsimile: +91 11 23368729 Email: rajendra.mangal@avanthaholindgs.com s.khandelwal@avanthaholdings.com Attention: Mr. Rajendra Mangal and Mr. S. Khandelwal Salient Financial Solutions Limited Thapar House, 124, Janpath, New Delhi-110001. Facsimile +91 11 23368729 Email:rajendra.mangal@avanthaholdings.com s.khandelwal@avanthaholdings.com Attention: Mr. Rajendra Mangal: Mr. S. Khandelwal To Vistra ITCL (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. We therefore request you to refrain from accelerating the payment of the Outstanding Amounts under the Transaction Documents, and from any sale of the Pledged Reference Entity Shares at the present time in consideration for which and as an alternative to an immediate sale of the Pledged Reference Entity Shares, we request you as the Debenture Trustee: 5.1 to move to the demat account of the Debenture Trustee, up to all of the pro-rata share of the Debenture Holders as identified in Annexure 1 of your Notice of the equity shares of CG Power and Industrial Solutions Limited that have been pledged in favour of the Debenture Trustee in terms of the Transaction Documents ( Pledged Reference Entity 1 Shares ), as collateral for the benefit of the Debenture Holders as identified in Annexure 1 of your Notice, pursuant to an invocation of the pledge created by AHL over such Pledged Reference Entity 1 Shares in favour of the Debenture Trustee; and 5.2. to assume, retain and exercise all rights, including all voting rights, in respect of any such Pledged Reference Entity 1 Shares so invoked and transferred to the Debenture Trustee, as collateral, until the payment of the Outstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g anything contained in this letter, the Debenture Trustee and the Debenture Holders shall continue to be entitled to exercise all rights available to the Debenture Trustee and the Debenture Holders, including all rights and remedies under any of the Transaction Documents, or under law or in equity, including the right to transfer and/or sell any of the Pledged Reference Entity Shares to recover any or all of the Outstanding Amounts due to the Debenture holders under the Transaction Documents upon the occurrence of an Event of Default. 9. We request you to kindly counter-sign this letter to indicate your agreement with the terms hereof, following which this letter (and the covenants contained herein) shall be binding on us, and shall be a Transaction Document , as such term is defined under the Transaction Documents. Yours sincerely, For Avantha Holdings Limited Sd/- Authorised Signatory For Salient Financial Solutions Limited Sd/- Authorised Signatory For Vistra ITCL (India) Limited 17. All Outstanding Amounts, Mr. Nayar points out, were required to be paid on or before 6th July, 2019, in which respect, too, the petitioner default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oo, it is submitted, would militate grant of any interim relief to the petitioner. Analysis 23. Having heard learned Senior Counsel for the parties, and perused the material on record, I am of the firm opinion that the present petition is nothing more than a shot in the dark and is clearly bereft of any sustainable cause of action. Scope of Section 9 of the 1996 Act 24. Section 9 of the 1996 Act contemplates interim measures, etc. , by the Court. The expression etc. , used at the end of a definition clause has been held, in several decisions, to be required to be interpreted noscitur a sociis and ejusdem generis (the latter principle applying where the words, preceding the word etc. , constituted a genus, and the former principle applying more universally, in all cases), the words preceding it. Rajagopala Pandarathar v. Thirupathi Pillai, AIR 1923 Mad 511; CIT v. Maulane Tea Co, (2000) 244 ITR 589 (Ker); KV. Mathew v. District Manager, Telephones Ernakulam, AIR 1984 Ker 40, Bombay Municipal Corporation v. Daily Taj Pvt. Ltd., AIR 2001 Bom 263 Measures, put in place by the Court, in exercise of the jurisdiction vested by Section 9 has, therefore, to be in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the mere satisfaction of these criteria does not, ipso facto, make out a case for ordering interim measures under Section 9. Additionally, the Court is also required to satisfy itself that the relief, being sought under Section 9, cannot await the constitution of the arbitral tribunal, or the appointment of the arbitrator, and the invocation, before such arbitrator or arbitral tribunal, of Section 17. Emergent necessity, of ordering interim measures is, therefore, an additional sine qua non, to be satisfied before the Court proceeds to grant relief under Section 9 of the 1996 Act. While passing orders under Section 9, therefore, the Court is required to satisfy itself that (i) the applicant, before it, manifestly intends to initiate arbitral proceedings Sundaram Finance Ltd. v. NEPC India Ltd., (1999) 2 SCC 479, (ii) the criteria for grant of interim injunction, which apply to Order 39 of the CPC, stands satisfied, and (iii) circumstances also exist, which renders the requirement of ordering interim measures an emergent necessity, which cannot await a Section 17 proceeding, before the arbitrator, or arbitral tribunal. In assessing whether such an emergent necessity exists, or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the contract pending the arbitration. The Court of Appeal thought that it was an appropriate case for an injunction but that it had no power to grant injunction because of the arbitration. In further appeal, the House of Lords held that it did have the power to grant injunction but on facts thought it inappropriate to grant one. In formulating its view, the House of Lords highlighted the problem to which an application for interim relief like the one made in that case may give rise. The House of Lords stated at AC p. 367: (All ER p. 690g-h) It is true that mandatory interlocutory relief may be granted even where it substantially overlaps the final relief claimed in the action; and I also accept that it is possible for the court at the pre-trial stage of a dispute arising under a construction contract to order the defendant to continue with a performance of the works. But the court should approach the making of such an order with the utmost caution, and should be prepared to act only when the balance of advantage plainly favours the grant of relief In the combination of circumstances which we find in the present case I would have hesitated long before proposing that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it, is also instructive. In the case before it, M/s. Orissa Manganese and Minerals (P) Ltd.(hereinafter referred to as OMM ) entered into an agreement, dated 14th May, 2003, with Adhunik Steels (hereinafter referred to as Adhunik ), for raising manganese ore on its behalf. The agreement was to subsist for 10 years, w.e.f. 18th May, 2003, with the option, to Adhunik, to seek renewal for a further term. Pursuant to the agreement, Adhunik mobilised huge resources, and incurred considerable expenditure. Just six months after entering into the agreement, on 24th November, 2003, OMM issued a notice, to Adhunik, purporting to terminate the agreement. The justification, cited by OMM for doing so, was that it had realised that the contract was in violation of Rule 37 of the Mineral Concession Rules, 1960, and that, therefore, OMM was in danger of losing its right is the lessee, necessitating termination of the contract. As Adhunik had incurred considerable expenditure, as well as losses, it moved the District Court, under Section 9 of the 1996 Act, for an injunction, restraining OMM from terminating the contract and from dispossessing it from the site. Vide order dated 18th August, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct OMM Private Limited not to enter into a contract for mining and lifting of minerals with any other entity until the conclusion of the arbitral proceedings. 25. At the same time, we see no justification in preventing OMM Private Limited from carrying on the mining operations by itself. It has got a mining lease and subject to any award that may be passed by the arbitrator on the effect of the contract it had entered into with Adhunik Steels, it has the right to mine and lift the minerals therefrom. The carrying on of that activity by OMM Private Limited cannot prejudice Adhunik Steels, since ultimately Adhunik Steels, if it succeeds, would be entitled to get, if not the main relief, compensation for the termination of the contract on the principles well settled in that behalf. Therefore, it is not possible to accede to the contention of learned counsel for Adhunik Steels that in any event OMM Private Limited must be restrained from carrying on any mining operation in the mines concerned pending the arbitral proceedings. (Emphasis supplied) 29. Arvind Constructions Ltd. v. Kalinga Mining Corporation MANU/SC/7697/2007 : (2007) 6 SCC 798 reiterated the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of protection as may appear to the court to be just and convenient -specifically the ambit of the expression just and convenient -constitutes subject matter of the following enunciation of the law, by Banumathi, J. (as she then was), speaking for the High Court of Madras, in V. Sekar v. Akash Housing AIR 2011 Mad 110: (2011) 3 Arb LR 327 (DB): The purpose of Section 9 is to provide an interim measure of protection to the parties to prevent the ends of justice from being defeated. Section 9(2)(e) vests the Court with the power to grant such interim measures of protection as may be just and convenient. The jurisdiction under the just and convenient clause is quite while in amplitude, but must be exercised with restraint. Interim measures are to be granted by the Court so as to protect the rights in adjudication before the arbitral tribunal from being frustrated. It does not allow the Coach the discretion to exercise on restrained powers and frustrate the very object of arbitration. (Emphasis supplied) The cause of action, and the prayers, in the petition 32. Tested on the touchstone of the above principles, it becomes apparent that none of the prayers, in this peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rices. In actual fact, the respondent would seek to contend, the transfer of the pledged CGP shares to the DEMAT account of Respondent was, actually, a transfer simpliciter, accompanied by an oral agreement -the existence of which the respondent emphatically denies-but was by way of invocation, of the pledged shares, in accordance with Clauses 9.1 to 9.3 of the Debenture Trust Deeds, as the failure, on the part of the petitioner, to maintain the requisite Security Cover constituted an Event of Default , within the meaning of Clause 1.1.41 of the Debenture Trust Deeds, read with Schedule 3 thereto. 35. That, however, is a dispute which must, necessarily, fall to the arbitrator, or arbitral tribunal, which would, some day, be seized of the matter. I refrain from expressing any opinion thereon, lest the arbitral proceedings-if and when they take place-are prejudiced. Suffice it to state, for the purposes of the present petition, that no interim direction can, in the above circumstances, be issued, to transfer the pledged CGP shares into the DEMAT account of the petitioner, as all the shares stand invoked, and a majority thereof stands sold in the open market, wherefrom they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Debenture Trust Deeds and the Transaction Documents. Accordingly, pursuant to the Debenture Trust Deeds, the Pledge Memoranda and other Transaction Documents, we hereby wish to inform you as below: a. The Company is hereby called upon to immediately, and in any event not later than 10 (ten) days from the receipt of this letter to make payment, to the Debenture Holders listed at Annexure 1, of the entire amount of all Outstanding Amounts owed to such Debenture Holders listed at Annexure 2 in accordance with the Transaction Documents forthwith; and b. In the event that all Outstanding Amounts required to be paid to the Debenture Holders listed at Annexure 1 are not paid to the Debenture Holders in their entirety, then the Debenture Trustee shall, without prejudice to any and all rights available to the Debenture Holders and the Debenture Trustee under the Transaction Documents, take all necessary steps to enforce such rights and remedies as are available to the Debenture Trustee and the Debenture Holders in respect of the Pledged Reference Entity 2 Shares set out in Annexure 1, including but not limited to the invocation and sale of such Pledged Reference Entity 2 Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween July 2019 and September 2019. These facts were also pointed out to you by our letter of 11 September 2019 seeking KKR's intervention, to which we received no response. 5. Instead, on 16 September 2019, KKR India Financial Services Limited purchased 5,07,28,829 Pledged Reference Entity 1 Shares and KKR India Debt opportunities Fund II purchased 1,19,45,780 Pledged Reference Entity 1 Shares at ₹ 14.62 per share amounting to 10% of CG Power. On 4 November 2019, L T Finance Ltd. purchased 62,600,000 Pledged Reference Entity 1 Shares at ₹ 14.65 per share amounting to 9.9% of CG Power. 6. As events have unfolded, it appears that the debenture holder's actions were part of market manipulation and putting CG into play, using AHL as a scapegoat. 7. In this context, it is also relevant to note that in mid-2018, the debenture holders had the option of convening its debt into equity shareholding of CG Power, the share price of which at the relevant time was approximately ₹ 64/- per share. CG Power's operational profitability was also increasing across India and other offshore subsidiaries. However, at that time, KKR suggested appointing one Tranzmu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Debenture Trust Deeds and Memoranda of Pledge stand vitiated and AHL has no liability under the Debenture Trust Deeds which stand rescinded. 16. This letter is issued without prejudice to AHL's rights in equity, law and contract including AHL's right to claim damages. Yours faithfully, Bharucha Partners (Sd/-) Partner Cc.: 1. KKR India Financial Services Private Limited 2nd Floor, Piramal Tower, Peninsula Corporate Park, Ganpatrao Kadam Marg Lower Parel (W), Mumbai 400013, India Facsimile number: + 91 22 4355 1301 Email: naozad.sirwalla@kkr.com: jigar.shah@kkr.com Attention: Mr. Naozad Sirwalla/Mr. Jigar Shah 2. KKR India Debt Opportunities Fund II KKR Capital Markets India Private Limited (in its capacity as Sponsor to KKR India Debt Opportunities Fund II) 2nd Floor, Piramal Tower, Peninsula Corporate Park, Ganpatrao Kadam Marg Lower Parel (W), Mumbai 400013, India Facsimile number: + 91 22 4355 1301 E-mail: naozad.sirwalla@kkr.com: jigar.shah@kkr.com Attention: Mr. Naozad Sirwalla/Mr. Jigar Shah (Emphasis as in original) 39. Significantly, there is no whisper of any denial, in the aforesaid res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g thereon, the apprehension , voiced by the petitioner, regarding a similar treatment being accorded to the BILT shares, is merely an apprehension, and nothing more. Even if there were any legitimate ground, for the petitioner to entertain such an apprehension, and the respondents were, arguendo, to resort to such market manipulation , to purchase the BILT shares after artificially depressing their value, that cannot justify grant of any interim directions, by this Court, against invocation, by the respondents, of the pledged to BILT shares, where the alleged defaults, on the part of the petitioner, have not been controverted or denied. The assertion, of the petitioner, in para 15 of the afore-extracted response, dated 8th July, 2020, to the Respondent, that, owing to the alleged machinations of the respondents, the Debenture Trust Deeds and Memoranda of Pledge stand vitiated , and that the petitioner has no liability under the Debenture Trust Deeds which stands decided has no legs, whatsoever, to stand on. Purchasing the pledged shares from the open market, after their price had fallen and, thereby, gaining control over CGP and BILT, are not contemplated, in the Debenture Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited, particularly, to para 71 of the report, which does hold that the financial institutions, namely, the lenders owe a duty to act fairly and in good faith . There can be no gainsaying this proposition. In my opinion, however, it is completely irrelevant to the issue at hand. The dispute, between the petitioner and the respondent, which could legitimately form the basis of an arbitral proceeding and, consequently, of the present proceedings under Section 9 of the 1996 Act, is the alleged infraction, by the petitioner, of the covenants of the Debenture Trust Deeds, and the right of the respondents, on that basis, to proceed against the shares, pledged by the petitioner by way of security. That dispute has nothing to do with good faith or bad faith. The want of good faith , on the part of the respondents-as alleged by the petitioner-is in the manner in which the respondents allegedly depressed, artificially, the price of the CGP shares, before purchasing them in the open market. Even if it were to be assumed that there was any want of good faith , on the part of the respondents in that regard, such a dispute would be entirely foreign to the arbitration agreement between the part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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