Full Judgment Text
2023:DHC:3566
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: May 23, 2023
+ O.M.P.(I) (COMM.) 136/2021, I.A. 4802/2022
VISTRA ITCL INDIA LIMITED
……Petitioner
Through: Mr. Sidhant Kumar,
Ms. Manyaa Chandok,
Mr. Gurpreet Singh Bagga and
Ms. Vidhi Udayshankar, Advs.
versus
ANSAL PROPERTIES AND INFRASTRUCTURES LIMITED
..... Respondent
Through: Mr. Ashwini Kumar Mata, Sr.
Adv. with Mr. Sujoy Datta,
Ms. Nishtha Khurana,
Ms. Mahima Shekhawat and
Mr. Karan Gaur, Advs. for R-1
AND
+ ARB.P. 389/2022
VISTRA ITCL INDIA LTD. ..... Petitioner
Through: Mr. Sidhant Kumar, Ms.
Manyaa Chandok, Mr.
Gurpreet Singh Bagga and Ms.
Vidhi Udayshankar, Advs.
versus
ANSAL PROPERTIES AND INFRASTRUCTURE
LTD. ..... Respondent
Through: Mr. Ashwini Kumar Mata, Sr.
Adv. with Mr. Sujoy Datta,
Ms. Nishtha Khurana, Ms.
Mahima Shekhawat and Mr.
Karan Gaur, Advs. for R-1
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
20:24:53
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CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
J U D G M E N T
V. KAMESWAR RAO, J
I.A. 4802/2022 in O.M.P.(I) (COMM.) 136/2021
This is an application filed by the petitioner seeking
condonation of 41 days‟ delay in filing the rejoinder-affidavit.
For the reasons stated in the application, the delay is condoned
and the rejoinder-affidavit is taken on record.
Application stands disposed of.
O.M.P.(I) (COMM.) 136/2021
1. The captioned petitions have been filed by the petitioners
under Sections 9 and 11 of the Arbitration and Conciliation Act, 1996
(„Act of 1996‟, hereinafter) respectively. As the petitions arise from the
same factual matrix, I shall proceed to decide them together.
2. The petitioner herein is Vistra ITCL (India) Private Limited,
formerly known as IL&FS Trust Company Limited and the respondent
is Ansal Properties & Infrastructure Limited („APIL‟, for short).
FACTS LEADING UP TO THE PETITIONS
3. A project was undertaken by the respondent involving
development of a Group Housing Project, spread over 41.16 acres
situated in Ghaziabad, Uttar Pradesh. The project was implemented by
Ansal Urban
an entity called Condominiums Private Limited
(hereinafter referred to as “Principal Borrower” and “AUCPL”
interchangeably). The Principal Borrower is majorly owned by,
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
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amongst other shareholders, Ansal Landmark Townships Private
Limited („ALTPL‟, for short) and Ansal Landmark (Karnal)
Townships Private Limited („ALKTPL‟, for short). ALKTPL is a
subsidiary of ALTPL and ALTPL is an associate of APIL/respondent.
4. By virtue of Debenture Subscription Agreement („DSA‟, for
short) dated July 28, 2015. Indostar Capital Finance Limited
(„Indostar‟, hereinafter), a non-banking financial corporation, agreed to
invest an amount of ₹150 crore in the Principal Borrower, by
subscribing to 1,50,00,000 secured, unlisted, redeemable, non-
convertible debentures at the face value of ₹100 each. The Principal
Borrower agreed and accepted to repay the amounts due, which
includes the subscription amount, interest, default interest on due dates.
5. It is the case of the petitioner that under Article 11.1 read with
Annexure 5 of the DSA, the debentures were to be redeemed in
th
tranches. On the last date of 24 month from the closing date, the
rd
Principal Borrower was to repay 1/3 amount of the outstanding face
value of the debentures along with accrued and unpaid interest till such
th
date. On the last date of 30 month from the closing date, 1/2 amount
of the outstanding face value of the debentures along with accrued and
th
unpaid interest till such date were to be paid and on the last date of 36
month of the closing date, the balance outstanding amount of face
value of the debentures along with accrued and unpaid interest till such
date were to be paid.
6. Further, Article 2.1.1 read with Article 2 (ii) of the Terms of
Debentures in Annexure 4 of the DSA contemplates that the Principal
Borrower shall pay interest on the outstanding face value of the
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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debentures at a pre-tax rate of 21.75% per annum, on and from the
expiry of 3 months from the closing date. The interest was payable at
the end of each quarter.
7. During the execution of DSA, a Debenture Trust Deed
(„DTD‟, for short) was also executed whereby the petitioner was
appointed as the trustee of the debentures to act on behalf of the
Debenture Holders which included Indostar or other holders of the
debentures from time to time including their transferees or assigns or
such other person who are for the time being, holders of the
debentures. The amounts were secured inter alia by a Deeds of
Personal Guarantee („DPG‟, for short) dated July 28, 2015, executed
by Gaurav Dalmia and Pranav Ansal and a Deed of Corporate
Guarantee („DCA‟, for short) dated October 23, 2015 by APIL.
8. The debentures being transferable, was subsequently sold by
Indostar to IIFL Income Opportunities Fund („IIFL‟, for short) by way
of a Debenture Purchase Agreement („DPA‟, for short) on October 27,
2015.
9. By December 2015, the Principal Borrower had redeemed
50,00,000 debentures held by IIFL leaving IIFL with 1,00,00,000
debentures, having a face value of ₹100/- each. In 2016, ICICI
Prudential Real Estate AIF-II („IPRU‟, for short), then another
Debenture Holder, informed the obligors including the respondent that
an amount of ₹6,23,25,599/- was due and payable on account of unpaid
interest on 57,00,000 debentures. The Principal Borrower was
accordingly called upon to make such payment within 7 (seven) days
to IPRU, however, it failed to do so. On July 31, 2017, Principal
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
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rd
Borrower was required to redeem l /3 of the outstanding face value of
the debentures along with accrued and unpaid interest. This deadline
was breached by the Principal Borrower which resulted in an „Event of
Default‟.
10. On October 16, 2017, IPRU issued a notice to obligors
including the respondent to repay an amount of ₹60,07,15,385/-, in
respect of unpaid interest and redemption amount within 7 days. In
response to the said letter on December 8, 2017, the respondent
requested further time to make payments citing a financial slump. On
December 15, 2017, on the occurrence of the „Event of Default‟, IPRU
accelerated the repayment of 83,00,000 debentures under the DSA and
called upon the Principal Borrower and each of the guarantors
including respondent herein to repay the entire outstanding face value
of debentures along with default IRR of 27% within 7 days. A similar
letter / reply was also sent by IIFL Yield Enhancement Fund („IIFL
YEF‟, for short) another debenture holder, on January 15, 2018.
11. On the account of failure by the Principal Borrower to make
payments, the petitioner on the instructions of the Debenture Holders
invoked the DPG by issuing a letter on February 12, 2018. Thereafter,
the petitioner, and Pranav Ansal and Gaurav Dalmia, (the personal
guarantors), entered into arbitration proceedings and a Sole Arbitrator
passed an award against the personal guarantors to jointly and
severally make payments of ₹187,50,93,000/-, along with default
annual IRR of 27% from December 11, 2018 till repayment. Between
2016 and 2020, the debentures were transferred to Palm Products Pvt.
Ltd., („Palm Products‟, hereinafter) i.e., the current Debenture Holder.
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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12. On August 24, 2020, SREI, another one of the Debenture
Holders, instructed the petitioner to ask the Principal Borrower and the
personal guarantors to repay the outstanding payments by August 31,
2020. However, only an amount of ₹22.5 crore has been deposited
with the Debenture Holder till the date of filing this petition.
13. Aggrieved by the non-payment of dues, the petitioner has
approached this Court seeking reliefs against the respondent.
SUBMISSIONS ON BEHALF OF THE PETITIONER IN
O.M.P.(I) (COMM.) 136/2021
14. It is the case of the petitioner that the respondent has been
alienating its assets with a view to defeat any decree that may be
passed against them.
15. Mr. Sidhant Kumar, learned counsel for the petitioner
submitted that the respondent on December 20, 2022, intimated the
Bombay Stock Exchange and the National Stock Exchange that it has
entered into an agreement to sell its entire shareholding of 66.24
percentage, in its subsidiary firm, i.e., Ansal IT City and Parks Ltd., to
Mahaluxmi Infra Home Pvt. Ltd., a part of MIGSUN Group. He also
stated that, through various media reports, the petitioner came to know
that the respondent has raised ₹35 crore by issue and allotment of
5,00,10,000 warrants to a non-promoter (public) investor.
Furthermore, an amount of ₹100 crore is also sought to be raised in the
same manner. It is his submission that therefore, the bank accounts
wherein the said amount of ₹35 crore has been realised by allotment
should be attached and should be secured in favour of the petitioner.
He also stated that the said amount has been raised to cut debts and
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
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overdue interest mounting over the respondent, therefore, the
attachment of such amount against the outstanding dues of the
petitioner would not prejudice the respondent. Further, if an urgent
order is not passed in the petition, the respondent is likely to succeed in
utilising the amount elsewhere, rather than fulfilling the debt owed to
the petitioner.
16. According to him, it is just and necessary that, pending the
commencement and hearing of the arbitration proceedings, the
respondent through its agents or otherwise, howsoever, be restrained
by an order and injunction, from dealing with, selling, transferring,
disposing off, alienating, encumbering, mortgaging, hypothecating,
charging or parting with possession of or inducting anyone else into or
creating any right, title, interest or license in favour of any third party
in respect of all the movable and immovable
assets/investments/properties of the respondent. Furthermore, he stated
that, it is imperative that the respondent should be directed to furnish
security as may be sufficient to satisfy the decree.
17. He has relied upon the judgment of the Supreme Court in the
case of Arvind Constructions Co. (P) Ltd. v. Kalinga Mining
1
Corporation and Adhunik Steels Ltd. v. Orissa Manganese and
2
Minerals (P) Ltd., wherein it was held that, where there is an
imminent threat that the respondent would defeat, delay or obstruct,
and the applicant has a prima facie case in its favour then the Court
1
(2007) 6 SCC 798
2
(2007) 7 SCC 125
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
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should exercise its discretion under Section 9 of the Act of 1996 in
granting interim relief.
18. As per Mr. Kumar, the relief under order XXXVIII Rule 5 of
the Code of Civil Procedure, 1908 („CPC‟, for short), requires only a
prima facie case and in the present matter, there is an attempt or danger
by the respondent frittering away its assets to defeat the enforcement of
any award passed by the Court. The respondent has not contested its
liability on the outstanding amount and that the petitioner has
established a robust prima facie case in its favour.
19. Mr. Kumar has relied upon the judgment of this Court in the
case of Landmark Property Development and Company Ltd. & Ors.
3
v. Ansal Properties & Infrastructure Ltd. & Ors. , wherein the
respondent has repeatedly flouted orders of this Court, and the Court
had estopped the respondent from disposing of, alienating,
encumbering or otherwise parting possession of its assets. Despite the
directions passed by this Court, the respondent has deliberately
transferred its shareholding from various companies and entered into
escrow agreements. In that regard, this Court has initiated contempt
proceedings against the respondent‟s liability to the tune of ₹200 crore.
Therefore, petitioner has prima facie case that there is a clear and
present danger of the respondent alienating its assets to defeat the
enforcement of any award passed in favour of the petitioner.
20. That apart, since the Annual Reports are published in the
public domain, it is clear that the respondent is trying to siphon off a
3
OMP (ENF.) (COMM.) 159/2019
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
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substantial sum of money and is an habitual defaulter in discharging its
liability towards its creditors. In support of his submission, he relied
upon the reports of independent auditors wherein, they have expressed
grave and material uncertainty on the respondent‟s ability to continue.
He also stated that the respondents have repeatedly defaulted in paying
its creditors and fixed deposit holders, which resulted in numerous
cases filed against the respondent before the Debt Recovery Tribunal
and this Court.
21. The respondent has made preferential payments of ₹ 4.9 crore
to the Dalmia Family Office Trust vide order dated June 6, 2022 by the
National Company Law Tribunal in Dalmia Family Office Trust v.
Ansal Properties and Infrastructure (IB), 639 (ND)/2021 . The
respondent has also failed to disclose particulars as per statutory
mandate of Form-16A, as directed by this Court vide order dated May
10, 2021.
SUBMISSIONS ON BEHALF OF THE PETITIONER IN ARB.P.
389/2022
22. It is the case of the petitioner that Palm Products is one of the
current Debenture Holders holding 1,00,00,000 debentures, by virtue
of which, it has acquired an interest in the DSA and the DCG,
including all rights of Indostar Capital Finance Limited. Therefore, the
petitioner is duty bound to exercise such rights of Palm Products on its
behalf and for its benefit.
23. The dispute between the parties relates to a default in
redeeming 1/3rd debentures at its face value along with accrued and
unpaid interest along with the interest by July 31, 2017. In view of
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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event of default, the Debenture Holders called upon the Principal
Borrower and each of the guarantors including the respondent to
jointly and / or severally make payment of the entire outstanding face
value of the debentures.
24. On account of the failure by the Principal Borrower to make
payments of the amounts claimed, the petitioner invoked the DPG on
February 12, 2018. However, even the personal guarantors failed to
make the payments. Therefore, the petitioner initiated arbitral
proceedings against the personal guarantors which culminated into an
arbitral award dated March 25, 2019, which is before this Court in
O.M.P. (ENF.) (COMM) No. 116/2019. Till date, only an amount of
₹25 crore has been deposited and substantial sums remain repayable to
the petitioner. The personal guarantors have challenged the award only
on the grounds that: (i) there is no valid arbitration agreement between
the parties and (ii) the requirements of Order XXXVIII, Rule 5 of the
Code have not been satisfied, and these objections are misconceived
because: (i) there exists a valid arbitration agreement between the
parties and (ii) Petitioner has satisfied the requirements of Order
XXXVIII, Rule 5 of CPC based on cogent material on record.
25. Thereafter, the petitioner restated and reaffirmed its earlier
invocation vide letter dated April 08, 2020 and an opportunity was
given to the respondent to pay the outstanding amounts along with
further default IRR of 27% vide letter dated April 23, 2020.
26. The petitioner also took steps to initiate Corporate Insolvency
Resolution Process in respect of the Principal Borrower under the
Insolvency & Bankruptcy Code, 2016, before the National Company
Signature Not Verified
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By:JYOTIRMOY GHOSH
DASTIDAR
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Law Tribunal, New Delhi. The said petition has been allowed vide
Order dated March 10, 2022 and a moratorium has been declared. The
petitioner has also initiated Corporate Insolvency Resolution Process
against the respondent being CP (IB) No.111/ND/2021 before the
National Company Law Tribunal, New Delhi, which is pending
adjudication.
27. It is the case of the petitioner that, as per the guarantee, in case
the Principal Borrower defaulted in repayment of the debt, the
respondent undertook to pay such default and liability. This is
independent and co-extensive with the liability of the Principal
Borrower.
28. That apart, he stated that the guarantee executed by the
respondent makes it liable to pay under the DCG, accumulated interest
for a sum of ₹ 364, 25, 73, 570/- („outstanding amount‟) as on January
31, 2022.
29. It is also the case of the petitioner that the dispute should be
adjudicated through arbitration and relied on Article 40 of the DCG, as
reproduced under:-
“40. Notwithstanding anything contained herein, it is agreed
that any dispute, controversy, claim or disengagement of any
kind whatsoever between or among the Parties in connection
with or arising out of this Guarantee or the breach,
termination or invalidity thereof shall be referred to and
finally resolved in accordance with the arbitration mechanism
as set out in the DSA.”
30. It is also the case of the petitioner as averred by Mr. Kumar
that the procedure for appointment under Article 40 of the DCG is
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
Signing Date:23.05.2023
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incorporated and specified in Article 19.4 of the DSA dated July 28,
2015, reproduced as under:-
“19.4 Arbitration
a. Any dispute arising out of or in connection with this
Deed (Including any dispute relating to arising from or in
connection with this Agreement and any dispute regarding the
existence, validity or termination of this Agreement)
("Dispute") Shall be referred to arbitration.
b. The arbitration shall be conducted by a sole arbitrator
appointed by the Subscriber / Debenture Trustee.
c. The seat of arbitration shall be at Delhi or such other
seat in India as may be agreed to by the Parties and the
arbitration shall be governed by the provisions of the
Arbitration and Conciliation Act, .1996. The language of the
arbitration proceedings shall be English. The award shall be
final, conclusive and binding on all parties concerned. The
arbitration tribunal may lay down from time to time the
procedure to be followed in conducting arbitration
proceedings and shall conduct the arbitration proceedings in
such manner as it considers appropriate.”
31. Mr. Kumar submitted that the DTD dated July 28, 2015 was
executed under DSA to appoint the petitioner as a Debenture Trustee
to act for the benefit of the Debenture Holders. He also stated that,
under DSA the debentures were secured including the DCG, where the
respondent guaranteed the repayment of the debts owed by the
Principal Borrower, failing which the respondent undertook to repay
the outstanding amount upon the demand.
32. He stated that Section 7(5) of the Act of 1996, permits parties
to incorporate an arbitration agreement contained in another agreement
which was priorly executed. Upon such incorporation, the arbitration
agreement is deemed to be a part of the subsequent agreement and in
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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the present case, the parties incorporated the arbitration agreement set
out in the DSA into the DCG. In this regard, he has relied upon the
judgment of the Supreme Court in the case of M.R. Engineers and
4
Contractors Pvt. Ltd. v. Som Datt Builders Ltd. and Chloro Controls
5
India Pvt. Ltd. v. Severn Trent Water Purification Ltd. .
33. Article 40 of the DCG specifically refers to the “arbitration
mechanism as set out in the DSA” , and that these words constitute
specific and particular reference to the arbitration agreement set out in
the DSA. He also stated that the plain words used clearly denote
conscious acceptance and incorporation of the arbitration agreement
contained in the DSA. The arbitration mechanism of the DSA therefore
stands incorporated into the DCG and upon such incorporation, the
arbitration agreement must be read as a part of the DCG itself by
operation of Section 7(5) of the Act of 1996. In support of his
submissions, he has relied upon the judgments of the Supreme Court in
6
UHL Power Company Ltd. v. State of Himachal Pradesh ; ACC Ltd.
7
v. Global Cements Ltd., and Bihar State Mineral Development
8
Corporation v. Encon Builders .
34. He also stated that in the petitions being OMP. (COMM)Nos.
265 & 290 of 2019, whereby the personal guarantors have challenged
the arbitral award, the issue was with regard to similar transactions
4
(2009) 7 SCC 696
5
(2013) 1 SCC 641)
6
(2022) 4 SCC 116)
7
(2012) 7 SCC 71)
8
(2003) 7 SCC 418)
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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concerning same document and the Arbitral Award, finds that, Article
39 of DPG independently records the „manifest intention‟ of parties to
submit their disputes to arbitration, and Article 39 of the DPG is
identical to Article 40 of the DCG. He has placed reliance upon the
judgment of the Supreme Court in the case of Sanjiv Prakash v.
9
Seema Kukreja and stated that, as per the law declared by the
Supreme Court, issues of novation or supersession of an arbitration
agreement cannot be looked into under the prima facie test of
existence.
35. Furthermore, he contested the submission of the respondent
that the said arbitration agreement is invalid because the DSA has been
superseded by the DPA and that the petitioner is not a party to the DPA
and therefore its rights under the DCG is superseded, is misplaced. He
stated that, assuming without admitting the supersession of the DSA, it
still does not discharge the DCG. The DTD is admittedly valid and
binding and reaffirms the obligations under the DCG and the
respondent in its Annual Reports for the years 2020 to 2021, has
admitted that the guarantee is valid and binding.
36. He also stated that the express terms of the DPA reaffirm and
ratify the rights and obligations under the DSA and the DCG. He stated
that the DPA reaffirms the validity of the DSA for the following
reasons: -
a. Article 1.1 (ix), DPA specifically defines DSA and
acknowledges it as Annexure 1 to the DPA itself. Further, Article
9
(2021) 9 SCC 732)
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Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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1.2(x) also state reference to the agreement which also includes its
Annexure. Upon a combined reading of these terms, the DSA
forms a part of DPA itself as it is an annexure to the DPA.
b. Article 5.3 (iv) is a representation stating the terms of the DSA
and other Transaction Documents as defined in the DSA are read
and understood by the petitioner.
c. Article 7.1 of the DPA records that the parties to it including
the petitioner i.e. Sponsor, confirm the rights and benefits
accruing inter alia under the DSA are available to the purchaser of
the said debenture
37. Furthermore, Article 19.18 of the DSA clearly stipulates that
the respondent will be bound by the terms of the DCG,
notwithstanding such transfer of debentures. He also stated that the
DPA was executed expressly for the sale of the debentures and that the
DSA in Article 19.16 envisions the debentures to be transferrable. He
also stated that the DPA stipulates the transfer or any change of
ownership of the debentures does not discharge the DSA, and under
Article 19.18 of the DSA, the respondent will be bound by the terms of
the DCG, notwithstanding such transfer of debentures.
38. It is his contention that Article 22(xiv) of the DCG stipulates
that, any amendment or modification of the Transaction Documents
including inter alia the DSA shall not discharge the guarantee and that
no amendment of modification is valid until signed by the petitioner
and the respondent. It is his case that the DTD reiterates and reaffirms
the obligations under the DCG, and that Article 5.2.1 (vii) read with
Article 5.10 of the DTD reiterate and re-affirm the rights and
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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obligations under DCG. He also stated that Article 12.14 of the DTD
states that any amendment or modification shall be done mutually by a
written agreement.
39. According to him, the stand taken by the respondent that
Article 12 of the DPA asserts all previous agreements including DSA
stand revoked, is contrary to Article 7.1 of the DPA. There is no
specific instrument or contractual term in writing which revokes the
DSA or the DCG. Furthermore, Article 19.18 of the DSA stipulates
that the respondent will be bound by the terms of DCG. He also stated
that, under Article 19.16 of the DSA, debentures are transferrable and
the transfer or any change in ownership of the debentures does not
discharge the DSA. It also records the principal terms of the debentures
include repayment obligation and applicable interest owed, and
therefore it is inconceivable that the DPA would revoke these
fundamental understanding of the debentures.
40. With regard to Article 22 (xiv) of the DCG, any amendment or
modification of the transaction documents including inter alia DSA
shall not discharge the DCG. Furthermore, no amendment or
modification of the DCG are valid and binding, until the repayment
obligations by the Principal Borrower are discharged and since such
obligations have not been discharged by the Principal Borrower, the
respondent and the Principal Borrower have co-existent liability upon
default in payment.
41. He also stated that the Principal Borrower has admitted that the
guarantee and the debentures are validly secured by the guarantee in its
Quarterly Compliance Report, which has been furnished in accordance
Signature Not Verified
Digitally Signed
By:JYOTIRMOY GHOSH
DASTIDAR
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with the reporting obligations stipulated under Article 9.2 of the DSA.
He also submitted that the respondent has published its Annual Report
in the public domain for the years 2019-2020 and 2020-2021, wherein
it has categorically listed the guarantee as a binding obligation of the
respondent, even the principal amount of ₹100 crore has been
mentioned as outstanding against the guarantee. Furthermore, he has
submitted that the statement of a company in its balance sheet and
other books of accounts is a complete admission of the liability and
that the respondent is foreclosed from disputing the binding force of
the DCG and the liability arising under the DCG.
42. He has relied upon the following judgments in support of his
submissions:
10
a) Rukmini Bai v. Collector Jabalpur
11
b) Punjab State v. Dina Nath
12
c) Jagdish Chander v. Ramesh Chander
13
d) Central Bank of India v. C.L. Vimla &Ors.
14
e) SBI v. Ramakrishnan
f) ESPN Software India Pvt. Ltd. v. Modi Entertainment
15
Network Ltd.,
10
(1980) 4 SCC 556
11
(2007) 5 SCC 28
12
(2007) 5 SCC 719
13
(2015) 7 SCC 337
14
( 2018) 17 SCC 394
15
(2012) 191 DLT 734
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16
g) Dena Bank v. C. Shivakumar Reddy,
17
h) Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd.
i) Raman Tech & Process Engg. Co. v. Solanki
18
Traders,
j) Gatx India Pvt. Ltd. v. Arshiya Rail Infrastructure
19
Ltd.
20
k) Savita Jain v. Krishna Packaging
43. He has sought appointment of an arbitrator to adjudicate the
disputes.
SUBMISSIONS ON BEHELF OF THE RESPONDENT
44. Mr. Ashwini Kumar Mata, learned senior counsel appearing
for the respondent stated that the petitioner has concealed that they and
the parties under the DSA have entered into another agreement being
the DPA, whereby the parties have expressly replaced and supplanted
the previous agreements, including the DSA, and the new agreement
has not referred to or incorporated the arbitration clause contained in
Article 19.4 of the DSA. Therefore, there is no arbitration agreement
between the parties.
45. He stated that the parties had adopted and applied a specific
reference to arbitration mechanism and agreement contained under
16
(2021) 10 SCC 330
17
(2013) 202 DLT 735
18
(2008) 2 SCC 302
19
2014 SCC OnLine Del 4181
20
2021 SCC OnLine Del 2417
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DSA, which has now been superseded. He also stated that, at the time
of drafting of DPA, the parties were conscious of the contents of the
DSA and chose to incorporate certain selected provisions of DSA into
DPA and thus the DPA replaced the DSA. Upon execution, the DPA
constitute the complete legal relationship and understanding between
the parties and there is a specific exclusion of other previous
agreements governing the debentures. Therefore, the parties and their
legal relationships are governed solely and exclusively by the DPA,
and the DSA was brought to an end in its entirety including the
arbitration clause contained therein.
46. He stated that, under Section 7(5) of the Act of 1996, it is clear
that, a mere reference to a document would have no effect on an
arbitration clause from that document which is a part of the contract.
Therefore, in the present case, there was no intention of the petitioner
to incorporate the said arbitration clause of DSA in the DPA. Hence,
there exists no valid arbitration agreement between the parties.
47. In support of his submission, he has relied upon the judgment
of the Supreme Court in the case of M.R. Engineers and Contractors
Pvt. Ltd. (supra), and stated that the parties did not incorporate the
dispute resolution clause as stipulated under DSA into DPA.
Therefore, there cannot be any reason to invoke the arbitration clause
which is contained in the DSA, as it has been superseded by the DPA.
48. He also stated that, it is a settled law that to determine the
intent of the parties of a commercial agreement, a comprehensive and a
holistic view must be taken from the clauses drafted by the parties,
including the sequence of agreements, what the parties chose to
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stipulate and to omit. In the present case, the parties while executing
the DPA consciously omitted the arbitration clause under the DSA, and
it is evident that the parties has entered into DPA and chose to
supplement and terminate the DSA.
49. His case is that the arbitration clause in the DSA cannot
survive when the latter agreement, i.e., the DPA, has superseded the
original agreement and the instant petition was filed by invoking
Article 40 of the DCG referring to Article 19.4 of the DSA and as
such, is not maintainable.
SUBMISSIONS ON BEHALF OF THE RESPONDENT IN OMP
(I) (COMM) 136/2021
50. Contesting the submissions of Mr.Kumar, Mr. Mata stated that,
it is a well settled law that, if a petition under Section 9 of the Act of
1996 is made before the Court, the Court will first have to be satisfied
that, there exists a valid arbitration agreement, and the petitioner
intends to take the dispute to arbitration. In support of this submission,
he has relied upon the judgment of the Supreme Court in Sundaram
21
Finance Ltd. v. NEPC India Ltd. , wherein the Supreme Court held
that, once it is satisfied that there exist a valid arbitration agreement,
then the Court will have the jurisdiction to pass orders under Section 9
of the Act of 1996.
51. He submitted that there is no express arbitration agreement in
terms of Section 7 of the Act of 1996, between the parties, and the
reference of the dispute for arbitration, thus, cannot have relevance
under Section 9 of the Act. Hence, the petition under Section 9 is not
21
(1999) 2 SCC 479
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maintainable.
52. The arbitration under Article 15.2 of the DPA cannot be used
to seek reference of any dispute between the parties, since the
mechanism as stated under the clause stipulates that, it can only be
invoked in case disputes arises between the seller and purchaser, and
not the parties herein.
53. He stated that, since a serious challenge has been raised on the
existence of the arbitration agreement, the interim relief ought to be
considered by the Arbitral Tribunal under Section 17 of the Act of
1996, and while considering the question at length with the benefit of
substantial pleadings by the parties.
54. In the present case, the petition has been filed at the very end
of the limitation period of three years from the date of invocation of
DCG and there exists no urgency requiring reliefs before the
constitution of the Arbitral Tribunal.
55. To buttress his arguments, he has relied upon the judgment in
22
Gujarat Bottling Co. Ltd. v. Coca Cola, wherein, the Apex Court
held that the scope of Section 9 of the Act of 1996 is pari materia with
the provisions of Order XXXIX of CPC, and the power vested with the
Court by virtue of Section 9 of the Act of 1996 must be exercised in
consonance with equity which tempers the grant of discretionary relief,
as the relief of interim injunction should be wholly equitable in nature.
Therefore, the principles for granting interim relief under Section 9 of
the Act of 1996 is the same that governs the exercise of power under
22
(1995) 5 SCC 545
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Order XXXIX of the CPC. In this regard, he has also relied upon the
judgment of this Court in the case of Sanrachna (India) Inc. v. AB
23
Hotels Ltd.
56. He submitted that the power under Section 9 of the Act of
1996, being of a drastic nature, a direction to secure the amount should
not be issued merely on the merits of the claim. The respondent has no
intention to defraud the petitioner and the petitioner will not suffer any
irreparable loss or hardship and still the interest of the petitioner will
be protected.
57. Mr. Mata contended that the petitioner has not led any
substantive evidence in support of the allegation that the respondent is
encumbering / systematically alienating its assets. The respondent has
only been carrying out ordinary business transactions and has not been
stripping assets with any motive to dispose of properties with the
intention of defeating any decree that may follow. He stated that the
interim order of attachment which is subject matter of arbitration is
ordered only in rare cases and here the petitioner has failed to provide
any evidence and steps taken by the respondent for disposing off its
properties.
58. He submitted that the sale of 66.27 % of shareholding of the
respondent in Ansal IT City and Park Ltd. to Mahaluxmy Infra Home
Pvt. Ltd. was not alienation of its assets but was part of a planned and
routine disinvestment at the behest and to give exit to HDFC India
Real Estate Fund for its investment made in Ansal IT City and Park
23
(128) DLT 694
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Ltd. in the year 2006, through 33% of equity share and debentures. He
stated that the said transaction was a routine business without any
intent to defeat any decree that may be passed. The respondent did not
raise ₹35 crore by way of issue and allotment to non promoter (public)
investors, and that it was only a proposal made by the Board of
Directors which never materialised. He has also denied the contention
of the petitioner that the respondent proposes to raise an amount up to
₹100 crore. He also stated that the respondents cannot be questioned
on how it runs its business or the manner of repayment of debts. The
payments to Dalmia Family Office Trust were made pursuant to the
settlement which was entered into by the parties and the repayment to
its lenders, is a business decision which has no bearing in the present
proceedings. He has vehemently denied the petitioner‟s allegation that
Uttar Pradesh Real Estate Regulatory Authority („UPRERA‟, for short)
found that the respondent had siphoned off ₹606 crore. He stated that
the findings of the UPRERA were vacated by a subsequent order dated
July 9, 2019, after detailed hearing of the promoter.
SUBMISSIONS ON BEHALF OF THE RESPONDENT IN ARB.
P. 389/2022
59. According to Mr. Mata, the DPA supersedes the entire
agreement clause and wiped away all the previous agreements between
the parties and that the DSA stood novated and the DCG stood
rescinded within the meaning given under Section 62 of Indian
Contract Act, 1872. He stated that it is a settled law that, in case of
novation of an agreement containing an arbitration clause, the
arbitration clause does not survive. In support of his submissions, he
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has relied upon the following judgments:-
(a) Air Liquide North India Pvt. Ltd. v. Inox Air Products
24
Pvt. Ltd.
(b) Gatx India Pvt. Ltd. (supra)
25
(c) Union of India v. Kishorilal Gupta & Bros.,
26
(d) Damodar Valley Corporation v. KK Kar,
(e) Young Achievers v. IMS Learning Resources Private
27
Limited,
(f) Sanjeev Prakash (supra)
(g) Sundaram Finance Limited (supra)
28
(h) M/s SBP and Co. v. Patel Engineering Ltd.,
(i) Pearl Hospitality and Events Pvt Ltd. v. Oyo Hotels
29
and Homes Pvt Ltd.,
(j) Gautam Landscapes Pvt. Ltd. v. Shailesh S Shah and
30
Anr.,
60. Mr. Mata has relied upon the judgment of the Supreme Court
in M.R. Engineers and Contractors Pvt. Ltd. (supra) to contend that a
reading of Section 7(5) of the Act of 1996 would reveal that a mere
reference to a document would not have the effect of incorporating an
24
2015 (2) RAJ 135
25
AIR 1959 SC 1362
26
(1974) 1 SCC 141
27
(2013) 10 SCC 535
28
AIR 2006 SC 450
29
O.M.P (I) COMM 123/2020
30
2019 SCC Online Bom 563
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arbitration clause contained in that document, a part of the contract.
His case is that the reference to the DSA in the DPA would not mean
that the arbitration clause contained in the DSA has been incorporated
in the DPA.
61. Furthermore, he contended that the judgment of the Supreme
Court in the case of UHL Power Company (supra), as relied upon by
the petitioner is misplaced as in the said case, the agreement stated that
“agreement shall mean this agreement together with all its appendices
and annexures..‟ which is entirely different from the definition of
agreement in the present case i.e. “Agreement” means this agreement
(as from time to time amended, modified or supplemented) @ Article
1.1 (i) and “In this Agreement ….. references to an agreement shall
include any recitals, annexures, schedules or attachments to it‟….
The interpretation of both clauses is completely different from
each other and the said judgment is misconstrued and in contrast with
the present case.
62. Mr. Mata, in response to Mr. Kumar‟s contention that the
respondent has admitted the validity of guarantee in its Annual Report,
stated that the listing of guarantee in the Annual Report of the
respondent was an inadvertent mistake on the part of the respondent
and mere listing of guarantee in the Annual Report does not make the
guarantee existing and subsisting, unless there is an existing contract or
agreement enforcing the guarantee.
63. That apart, according to him, the petitioner herein is not a
creditor to the subscriber / purchaser and under Section 126 of the
Indian Contract Act of 1872, contract of guarantee is a „contract to
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perform the promise or discharge the liability of a third person in case
of his default. The person who gives the guarantee is called the
“Surety”; the person in respect of whose default the guarantee is given
is called the “principal debtor” and the person to whom the guarantee
is given is called the “creditor”.
64. In the present case, the surety is the respondent, APIL, the
Principal Borrower, i.e., AUCPL and the creditor is the „Debenture
Holder‟ i.e. Palm Products. The DCG dated October 23, 2015 was
executed between the Guarantor, i.e., APIL in favour of the Debenture
Trustee instead of the creditor / the Debenture Holder. It is stated that
the DCG is not a valid contract of guarantee as per the Indian Contract
Act, 1872, as it is not executed between the guarantor and creditor
instead between a guarantor and a trustee.
65. He stated that the petitioner has filed the present petition in
representative capacity for the current Debenture Holders; however,
the rights conferred onto the present Debenture Holders have not been
disclosed by the petitioner and the agreement by which the debentures
have been transferred to them are suppressed and concealed.
Therefore, no transaction documents are on record showing transfer of
debentures to Palm Products, thus, there is no basis for the petitioner to
claim that the Debenture Holders have right to invoke DCG either by
themselves or through Debenture Trustees.
66. That apart, as per Article 12 of DPA dated October 27, 2015,
the DPA supersedes all previous agreements related to the subject
matter of those documents, which include DCG and DSA. He also
stated that certain securities were saved by DPA and specifically
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included in the DPA in terms of Article 7.2 r/w Schedule 3.However,
the DCG was not included and therefore ceased to exist. Even the
subsequent DPA dated March 3, 2016 in Schedule II updates the list of
existing securities to include securities created later but does not save
or mention the DCG.
67. Furthermore, he stated that DCG ceased to exist after
execution of the DPA on October 27, 2015. The said saved documents
would continue to be valid and binding for the benefit of the purchaser.
He stated that, it is critical to note that various instruments such as
mortgage, personal guarantee of promoters, corporate guarantee of
certain companies dated July 28, 2015 were enlisted and saved but the
DCG dated October 23, 2015 was not saved and was thus extinguished
on October 27, 2015.
68. Mr. Mata has submitted that the contention of Mr. Kumar that,
even if the DSA was superseded, Article 40 of the DCG would survive,
is misconceived as the DCG has been entirely superseded as submitted
above. Hence, neither Article 19.4 of the DSA nor Article 40 of the
DCG survives.
69. He stated that the Supreme Court in Sanjiv Prakash (supra)
does not espouse a general proposition that, an issue of novation
cannot be considered by the Court in Section 11 petition. Rather, the
decision is that, when the question of novation requires examination of
surrounding circumstances in which the agreements were entered is in
addition to an extensive reading of various clauses of the relevant
agreement and the exercise would be beyond the limited jurisdiction of
the Court and cannot be held to be a general proposition of law.
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70. That apart, Mr Mata submitted that the issue with regard to the
existence of DSA is under adjudication before this Court in OMP
(COMM) No. 290/2019. Since the existence of the arbitration
agreement is already under detailed review by this Court, this Court
may not restrict itself in the present case to mere prima facie review.
71. In support of this contention that this Court can hold a primary
inquiry/review and decide on the arbitrability of the dispute, he has
relied upon the following judgments:
1. DLF Home Developers Limited v. Rajapura
31
Homes Pvt. Ltd.
32
2. Vidya Drolia & Ors. v. Durga Trading
33
3. Indian Oil Corporation Limited v. NCC Ltd.
4. M/s Emaar India Ltd. v. Tarun Aggarwal
34
Projects LLP & Anr.
FINDINGS
72. Having heard the learned counsel for the parties and perused
the record, at the outset, I may state here, after judgment was reserved
in these petitions, on a mentioning made before this Court on
November 21, 2022, it was brought to the notice of the Court that an
Insolvency Resolution Professional qua the respondent has been
appointed by the National Company Law Tribunal, New Delhi, I
31
Arb.P. (Civil) 17 of 2020 (SC)
32
(2021) 2 SCC 1
33
2022 SCC OnLine SC 896
34
Civil Appeal No.6774 of 2022
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directed the listing of the matters on November 24, 2022 when Mr.
Ashwani Kumar Singla, the Insolvency Resolution Professional, was
present in the Court. He stated, he shall file an affidavit with regard to
the moratorium which has come into effect on November 16, 2022.
The affidavit dated November 28, 2022 filed by Mr. Singla in ARB.P.
389/2022 records as under:
“I, Ashwani Kumar Singla (UID: XXXX-XXXX- 3520)
aged about 67 years, S/o Shri Durga Dass Singla, R/o Flat
No. E 701 Park Grandeura Sector- 82 Faridbabd,
Haryana- 121007, do hereby affirm and declare as under:
1. That I have been appointed as an Interim Resolution
Professional, by the Hon'ble National Company Law
th
Tribunal, Delhi through its orders dated the 16
th
November 2022 (uploaded on the 17 November 2022) in
the matter of Bibhuti Bhushan Biswas and 125 others vs
Ansal Properties & Infrastructure Limited (IB)-
330(ND)/2021.
th
2. That on 24 November 2022, I was ordered by this
Hon'ble High Court of Delhi, at New Delhi, to clear my
stand whether this Hon'ble Court should proceed to
pronounce its Judgment in the above referred case, which
th
was already reserved by it before the order dated 16
November 2022 in (IB)-330(ND)/2021 passes by NCLT
Delhi.
3. Respectfully it is submitted that as per the consequence
of the moratorium in terms of Section 14(1)(a), (b), (c) &
(d) of the IBC 2016, the following prohibitions are
imposed, which must be followed by all and sundry:-
“(a) The institution of suits or continuation of
pending suits or proceedings against the corporate
debtor including execution of any judgment decree
or order in any court of law, tribunal, arbitration
panel or other authority:
(b) Transferring, encumbering alienating or
disposing of by the corporate debtor any of its assets
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or any legal right or beneficial interest therein:
(c) Any action to foreclose, recover or enforce any
security interest created by the corporate debtor in
respect of its property including any action under
the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002:
(d) The recovery of any property by an owner or
lessor, where such property is occupied by or in the
possession of the corporate debtor:"
4. That as per my knowledge, in the IBC, 2016, there is no
reference to the cases where the hearings have been
concluded and the orders have been reserved. To the best
of my knowledge it is so because it is not a pending case.
The hearings have already been concluded, no party can
advance any new evidence or argument. Reservation of
Judgment is only a procedural way to pronounce a
judgment which the Hon'ble Court has already arrived at.
5. I respectfully submit before this Hon'ble Court to
pronounce its Judgment as it will help the process of CIRP
to be saved from a predicament. In case this Hon'ble Court
does not pronounce its judgment, there is every likelihood
that the Petitioner in this case will lodge a financial claim
before the IRP. In case the IRP admits the financial claim
of the Petitioner, the Corporate Debtor may approach
NCLT and if the IRP rejects the claim of the Claimant
(Petitioner in this case), the Claimant/ Petitioner may
approach the NCLT.
6. That in both the above mentioned circumstances, the
NCLT, Delhi shall be adjudicating on matter which has
already been heard, adjudicated and Judgment reserved by
a superior Court i.e this Hon'ble Court.
7. That the Deponent has no interest either in the
Corporate Debtor or the claimants/ Petitioner or Petition
ARB. P. : 389/2022 filed before this Hon'ble Court.”
73. When the matters were listed on December 7, 2022 I passed
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the following order:
“1. Pursuant to the order dated November 24, 2022,
IRP Mr. Ashwini Kumar Singla has filed an affidavit which
is on record, paragraphs 4, 5 and 6 of the same read as
under:
“4. That as per my knowledge, in the IBC, 2016, there
is no reference to the cases where the hearings have
been concluded and the orders have been reserved.
To the best of my knowledge it is so because it is not a
pending case. The hearings have already been
concluded, no party can advance any new evidence or
argument. Reservation of Judgment is only a
procedural way to pronounce a judgment which the
Hon'ble Court has already arrived at.
5. I respectfully submit before this Hon'ble Court to
pronounce its Judgment as it will help the process of
CIRP to be saved from a predicament. In case this
Hon'ble Court does not pronounce its judgment, there
is every likelihood that the Petitioner in this case will
lodge a financial claim before the IRP. In case the
IRP admits the financial claim of the Petitioner, the
Corporate Debtor may approach NCLT and if the
IRP rejects the claim of the Claimant (Petitioner in
this case), the Claimant/ Petitioner may approach the
NCLT.
6. That in both the above mentioned circumstances,
the NCLT, Delhi shall be adjudicating on matter
which has already been heard, adjudicated and
Judgment reserved by a superior Court i.e this
Hon'ble Court.”
2. Mr. Singla reiterates the stand taken in the
affidavit that this Court can decide the petition which it
had reserved for judgment.
3. Accordingly judgment is reserved in this petition.”
74. From the aforesaid, it is clear that Mr. Singla, Insolvency
Resolution Professional, has stated that this Court can decide the
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petitions. Accordingly, I proceed to decide these petitions taking into
consideration the submissions made and filed on behalf of the
respondent.
75. Accordingly, I intend to deal with the petition under Section 11
of the Act of 1996 whereby the petitioner has sought appointment of an
arbitrator to adjudicate the disputes between the parties.
76. In support of the prayer for appointment of an arbitrator, Mr.
Sidhant Kumar has referred to Article 40 of the DCG and Article 19.4
of the DSA, which have already been reproduced above. The claim
raised by the Debenture Trustee on behalf of the Debenture Holder-
Palm Products is with regard to the failure on part of the Principal
Borrower, namely AUCPL, to pay the outstanding dues for which the
respondent has given a corporate guarantee. It is this corporate
guarantee which has been invoked in terms of DCG executed on
October 23, 2015.
77. Mr. Mata had contested the petition on the following
grounds:-
i. The parties herein and the parties under the DSA have
entered into another agreement being DPA, wherein the parties
have expressly replaced all previous agreements including DSA.
ii. The new agreement has not referred to or incorporated
the arbitration clause contained in Article 19.4 of the DSA.
Therefore, there is no arbitration agreement between the parties.
iii. At the time of drafting the DPA, the parties were
conscious of the contents of the DSA and chose to incorporate
certain selected provisions of DSA into DPA and thus DPA
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replaced DSA and upon execution, the DPA constitute the legal
relationship and understanding between the parties and there is a
specific exclusion of other previous agreements governing the
debentures.
iv. Under Section 7(5) of the Act of 1996, a mere reference
to the documents would have no effect of incorporation of the
arbitration clause from the document which is the part of the
first contract. .
v. It is settled law that to determine the intent of the parties
of a commercial agreement, a comprehensive or a holistic view
must be taken from the clauses drafted by the parties, including
the sequence of the agreements, what the parties chose to
stipulate and to omit.
vi. The arbitration clause/mechanism in the DSA cannot
survive when the latter agreement, i.e., the DPA, has superseded
the original agreement. The instant petition was filed by
invoking Article 40 of the DCG read with Article 19.4 of the
DSA.
vii. The DPA supersedes the „Entire Agreement” clause and
wiped away all the previous agreements between the parties.
The DSA stood novated and the DCG stood rescinded within the
meaning given under Section 62 of the Indian Contract Act,
1872. It is a settled law that, in case of novation of an
agreement containing an arbitration clause, the arbitration clause
does not survive.
78. Having noted the broad submissions made by the learned
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counsel for the parties, I may state here that the petitioner herein is
only a party to the DCG and DTD. It is not a party either to the DSA or
the DPA.
79. It is the case of the petitioner that, because of the failure on
part of the Principal Borrower to pay the outstanding amounts, it is the
obligation of the guarantors upon demand under the DSA and/or the
other transaction documents, to jointly and/or severally pay such
amounts to the Debenture Trustee.
80. From a bare perusal of Article 40 of the DCG, it is manifest
that the intent of the parties while entering into the DCG was to resolve
the disputes through the process of arbitration in terms of the
mechanism set out in the DSA. If that be so, it must follow that Article
40 by itself is an independent arbitration clause. The reference made to
the DSA in Article 40 is with regard to the procedure/mechanism of
appointment and constitution of the arbitral tribunal. The arbitration
mechanism as set out in the DSA which I have reproduced above is
that (i) the arbitration shall be conducted by a sole arbitrator appointed
by the Subscriber/Debenture Trustee; (ii) the seat of arbitration shall be
Delhi; (iii) other clauses related to the arbitration shall be governed by
the provisions of Act of 1996; and (iv) the arbitration shall be
conducted in English.
81. The submission of Mr. Mata is that the DPA supersedes the
“Entire Agreement” clause and wipes away all agreements between the
parties, and as such the DSA stood novated and the DCG stood
rescinded within the meaning given under Section 62 of Indian
Contract Act, 1872, and that there is no arbitration clause between the
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parties. As such, according to him, the petition is not maintainable.
82. I am not in agreement with this submission. Firstly, as stated
above, the petitioner is not a party to the DPA and the issue of
supersession/novation raised by Mr. Mata has no bearing on the DCG
and/or the DTD. Having said that, even if the submission of Mr. Mata
that the DSA stands superseded (though disputed by Mr. Kumar) is
accepted, as the DCG has an arbitration clause independent of the DSA
or DPA, under which the disputes arisen can be referred to arbitration,
surely the petition shall be maintainable.
83. This I say so, as it is a law well settled in terms of the
judgment of Supreme Court in the case of Mayavati Trading Private
35
Limited v. Pradyuat Deb Burman, that in a petition under Section
11, it is the existence of the arbitration agreement that need to be seen
for referring the parties to arbitration.
84. One of the submissions of Mr. Mata is that Article 12 of the
DPA supersedes all previous agreements relating to the subject matter
of the DCG and the DSA. He stated that certain securities have been
saved by specific reference in the DPA in terms of the Article 7.2 read
with Schedule 3. However the security with regard to the present DCG
was not included therein. Similar is the case in the second DPA
wherein Schedule II sets out the list of existing securities and even
securities to be created later, but does not save the present DCG.
Therefore, according to him, it must be held that the DCG has been
consciously been brought to an end by the parties.
35
(2019) 8 SCC 714
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85. Suffice it to state, the invocation of the arbitration and the
reference that is being sought is with regard to a dispute that has arisen
under the DCG and the DTD. For the purposes of adjudicating the
present petition, the terms of the DPA and its applicability need not be
gone into by this Court. Even otherwise, this is an issue on the merits
of the dispute and surely this Court while exercising the jurisdiction
under Section 11 of the Act of 1996 would not examine the same.
Appropriate shall be for this Court to leave the issue for determination
by the Arbitral Tribunal. As a result, this submission of Mr. Mata is
also rejected.
86. At this juncture, it is apposite to refer to the decision of the
Supreme Court in Bharat Sanchar Nigam Limited and Anr. v. Nortel
36
Networks India Private Limited , wherein it was held that it is only in
a very limited category of cases, where there is not even a vestige of
doubt that the claim is ex facie time-barred, or that the dispute is non-
arbitrable, that the Court may decline to make the reference. If there is
even the slightest doubt, the rule is to refer the disputes to arbitration,
otherwise it would encroach upon what is essentially a matter to be
determined by the Tribunal.
87. It is also necessary to state here that similar issues arose for
consideration in two petitions under Section 34 of the Act of 1996 filed
by the personal guarantors against the arbitral award dated March 25,
2019. This Court has rejected the arguments made by Mr. Mata
therein, in the following manner:-
36
(2021) 5 SCC 738
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(i) There exists a separate arbitration clause in the DPG
(which is pari materia to the DCG) evidencing the intent of the
parties therein to refer disputes to arbitration.
(ii) The reference to Article 19.4 of the DSA in the DPG is
only with respect to the procedure/mechanism to be employed
for constituting the Tribunal.
(iii) Such procedure under Article 19.4 of the DSA has been
incorporated into the DPG by specific reference.
(iv) Vistra ITCL was not a party to the DPA and is not
bound by the terms of the DPA.
(v) Even assuming DPA has novated the DSA, the right of
Vistra ITCL to invoke the personal guarantees would not be
taken away.
88. As has become apparent from the above, the deeds of
guarantee – both the DPGs in case of personal guarantors and the DCG
of APIL in the instant case, comprise of independent arbitration
clauses, which are pari materia . The reference made to Article 19.4 of
the DSA in the DCG is with regard to the mechanism / procedure to be
adopted for constituting an arbitral tribunal when disputes are referred
for arbitration. The procedure contemplated by Article 19.4 of the
DSA for constituting the tribunal has been incorporated by specific
reference into the DCG. If that be so, even if the argument of Mr.
Mata that the DSA has ceased to exist upon the execution of the DPA
was to be accepted, it would have no bearing on the invocation of
arbitration and constitution of an arbitral tribunal, as contemplated by
the DCG. The mechanism / procedure as found in DSA having been
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incorporated in the DCG, would continue to survive notwithstanding
any changes made to the DSA.
89. In any case, the petitioner herein has approached this Court for
appointment of an arbitrator pursuant to invocation of the valid
arbitration clause of the DCG. As such, it has become incumbent upon
this Court to decide upon the procedure for appointing an arbitrator.
The procedure contemplated by the DSA, incorporated by reference
into the DCG, has no more bearing in so far as the present lis is
concerned.
90. Mr. Mata has placed reliance upon the following judgments for
the corresponding propositions of law:
(i) M R Engineers and Contractors Pvt. Ltd. (supra) to contend
that a mere reference to a document would not incorporate the
arbitration clause contained therein.
(ii) Sundaram Finance Ltd. (supra) to contend that the Court has
to first satisfy that there exist a valid arbitration agreement to exercise
the jurisdiction under Section 9 of the Act of 1996.
(iii) Gujarat Bottling Co. Ltd. (supra) and Sanrachna (India) Inc.
(supra) to contend that the scope of Section 9 of the Act of 1996 is
pari materia to Order XXXIX of CPC.
(iv) Air Liquide North India Pvt. Ltd. (supra), Gatx India Pvt.
Ltd. (supra), Kishorilal Gupta & Bros. (supra), Damodar Valley
Corporation (supra), Young Achievers (supra), Sanjeev Prakash
(supra), Sundaram Finance Limited (supra), M/s SBP and Co.
(supra), Pearl Hospitality and Events Pvt. Ltd. (supra) and Gautam
Landscapes Pvt. Ltd. (supra) to contend that the arbitration clause
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contained in a contract does not survive novation of that contract.
(v) DLF Home Developers Ltd. (supra), Vidya Drolia & Ors.
(supra), Indian Oil Corporation Limited (supra) and M/s Emaar
India Ltd. (supra) to contend that this Court can conduct a preliminary
inquiry and decide the arbitrability of the claims even under Section 11
of the Act of 1996.
91. While there is no dispute to the proposition of law laid down in
the above judgments, in view of my discussion above, the judgments
shall have no applicability in the peculiar facts of this case.
92. In view of the foregoing discussion and in view of the settled
law in terms of the judgments of Bharat Sanchar Nigam Limited
(supra) and Mayavati Trading Private Limited (supra) , this Court is
of the view that the parties need to be referred to arbitration.
93. Accordingly, this Court appoints Justice M.R. Shah, a former
Judge of the Supreme Court of India, as the Sole Arbitrator for
adjudication of disputes between the parties herein. The fee of the
learned Arbitrator shall be in accordance with Fourth Schedule of the
Act of 1996. The learned Arbitrator shall make disclosure in terms of
Section 12 of the said Act. A copy of this order be sent to the learned
Arbitrator for information. The parties shall be at liberty to raise all
pleas available to them, both on facts and in law, before the learned
Arbitrator.
94. The petition bearing ARB.P. 389/2022 is disposed of.
95. Insofar as the petition under Section 9 is concerned, I note that
the same has been filed with the following prayers:-
“a) Pass an order directing the Respondent to deposit an
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amount of Rs.288,22,95,200/- (INR Two Hundred Eighty
Eight Crores Twenty Two Lakhs Ninety Five Thousand Two
Hundred Only) with the Hon‟ble Court towards preservation
of claims and interest of the Petitioner as on 31 January
2021;
b) Alternatively, direct the Respondent, to furnish a bank
guarantee from a scheduled commercial bank for an amount
equivalent to the amount mentioned in prayer (a), to secure
the claims and interests of the Petitioner;
c) In the meantime, pending deposit of the said amount of
Rs. Rs. 288,22,95,200/- (INR Two Hundred Eighty Eight
Crores Twenty Two Lakhs Ninety Five Thousand Two
Hundred Only) and/or furnishing of Bank Guarantees, as
the case may be:
i. Restrain the Respondent from operating any of its
bank accounts;
ii. Restrain the Respondent, its agents and
representatives from alienating, encumbering,
transferring, selling, disposing off, parting with
possession of or creating any third party right, title or
interest of any nature whatsoever in respect of their
respective immovable and movable assets, investments,
entitlements, properties of any nature, in favor of any
third party;
iii. Pass an order directing the attachment of the
properties and all other movable / immovable
properties, investments, assets, entitlements including
all the bank accounts of the Respondent including
without limitation incomes from rent receivables and
Bank Accounts and its entitlement and or receivables
from third parties including from companies,
partnership firms in which the Respondent is a
shareholder or from trusts in which it is a beneficiary,
so as to secure the amounts due and payable by the
Respondent to the Petitioner which, as on 31 January
2021 amounts to Rs. 288,22,95,200/- (INR Two Hundred
Eighty Eight Crores Twenty Two Lakhs Ninety Five
Thousand Two Hundred Only) and carries a further
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interest of 27% p.a. compounded quarterly thereon till
the date of actual payment; and
iv. Pass an order directing the Respondent to disclose
on oath all properties and
investments/assets/receivables/entitlements of the
Respondent (both movables and immovable and, in case
of encumbered properties and assets, the extent of
encumbrance) including without limitation incomes from
rent receivables and Bank accounts and all particulars
of its entitlement and or receivables from third parties
including from companies in which it is a shareholder or
from trusts in which the Respondent is a beneficiary in
form and manner notified by the Delhi High Court in the
matter of Bhandari Engineers & Builders Pvt. Ltd. v.
Maharia Raj Joint Venture reported in 2019 SCC
OnLine Del 1 1879 or in Form 16A, Appendix E under
Order XXI Rule 41 (2) of the Code of Civil Procedure
within 10 days;
v. Pass an order directing the Respondent to file bank
statements from the date of DSA i.e., from 28 July 2015
upto the date of filing of the present petition;
vi. Pass ad-interim ex-parte orders in terms of the
prayers;
d. Pass such other order(s), direction(s) as deemed fit and
proper in the facts and circumstances of the case and in the
interest of justice and equity.”
96. Since, I have referred the parties to arbitration to be conducted
by Justice M.R. Shah (Retd.), I deem it appropriate to direct that this
petition under Section 9 of the Act of 1996 shall be treated as an
application under Section 17 of the Act for a decision by the learned
Arbitrator. The parties shall be at liberty to raise all pleas available to
them, both on facts and in law, before the learned Arbitrator.
97. The petition stands disposed of in the above terms.
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98. Let a copy of this order be sent to Justice M.R. Shah (Retd.)
for information.
V. KAMESWAR RAO, J
MAY 23, 2023 /aky
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