JET AIRWAYS (INDIA ) LTD. vs. SAHARA AIRLINES LTD. & ORS.

2011:BHC-OS:7578
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
EXECUTION APPLICATION NO.161 OF 2009
WITH
CHAMBER SUMMONS NOS.551/09, 729/09, 603/10 & 477/11
AND
NOTICE NO.734 OF 2009
IN
ARBITRATION AWARD DATED 12 APRIL 2007
Jet Airways (India) Limited. ...First Claimant/
   Judgment Debtor.
                        Vs.
Sahara Airlines Limited & Ors. ...Second Claimants.
                                ....
Mr.Harish Salve, Senior Advocate with Mr.Janak Dwarkadas,
Senior Counsel, with Mr.Zal Andhyarujina, Ms.Chetna Rai,
Mr.R.J.Gagrat, Mr.Suman Khaitan, Ms.Sheetal D.Sabnis,
Mr.Mohan Salian, Mr.G.T.Mestha, Ms.Ipsita Sen and Ms.Neha
Mirajgaokar i/b. Gagrats for the First Claimant/ Judgment Debtor.
Mr.Fali Nariman, Senior Advocate with Mr.Percy J.Pardiwala,
Senior Advocate, Mr.Pradeep Sancheti, Senior Advocate,  Mr.Satish
Kishanchandani, Mr.Jatin Pore, Ms.Neha Shah and Ms.Tanu Banerji
i/b. DSK Legal for the Second Claimant Nos.2 to 8.
                                .....
                                 CORAM : DR.D.Y.CHANDRACHUD, J.
                                              May 4, 2011 .
JUDGMENT :
1. The proceedings arise in execution of a consent award of
12 April 2007 of an Arbitral Tribunal.
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I   Facts
2. On 18 January 2006, a Share Purchase Agreement (SPA)
was entered into between Sahara India Commercial Corporation
and six others, (“the selling shareholders”), Jet Airways (India)
Limited (“Jet”) as purchaser and Sahara Airlines Limited.   By an
amendment agreement dated 29 March 2006, time to fulfill certain
conditions precedent was extended upto 21 June 2006.
3. The salient features of the agreement were as follows:
(i) Subject to the provisions of the SPA, including the
disclosed liabilities on the closing date, the selling shareholders
shall sell, transfer and deliver to the purchaser and Sahara Airlines
Limited shall accept from the vendors, free from all encumbrances,
all the rights, title and interest of the vendors in the ‘sale shares’.
The sale shares were the existing equity and preference shares,
representing the entire issued and paid up share capital of Sahara
Airlines Limited (Clause 2.1);
(ii) The obligation of the purchaser to acquire the shares was
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conditional upon the fulfillment of certain conditions mentioned in
clause 3.  Parties agreed to exercise all reasonable endeavours to
ensure  satisfaction of the conditions precedent not later than sixty
five days from the effective date (18 January 2006) i.e. by 23
March 2006 (Clause 4.2);
(iii) The gross total consideration was Rs.2,000/ crores
together with interest accrued until the closing date (Clause 5.1);
(iv) The total consideration was to be deposited by the
purchaser simultaneously with the execution of the SPA with an
escrow agent (Clause 5.4);
(v) Since the conditions precedent were not fulfilled within
sixty five  days of the effective date, time was extended by ninety
days  by the amended agreement of 29 March 2006; and
(vi) An amount of Rs.500 crores out of the total
consideration of Rs.2,000/ crores deposited by Jet with the escrow
agent was released by consent to Sahara against a personal
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guarantee.
4. According to  Jet, the SPA came to an end as a result of
the nonfulfillment of the conditions precedent upon which it
addressed a letter dated 19 June 2006.
5. Several proceedings were initiated in Court.  One of the
selling shareholders moved the District Court at Lucknow under
Section 9 of the Arbitration and Conciliation Act, 1996 for an
injunction restraining the escrow agent from releasing and Jet
seeking the release of the consideration of Rs.1,500/ crores.  Other
selling shareholders also filed an Arbitration Petition at Lucknow.
Jet filed an Arbitration Petition under Section 9 in this Court for
injunctive relief.  On a transfer petition by Jet, on 28 August 2006,
the Supreme Court transferred the Arbitration Petitions filed at
Lucknow to this Court.  Jet, in the meantime, instituted a Summary
Suit in this Court for the recovery of an amount of Rs.500/ crores
based on a personal guarantee executed by Shri Subrata Roy
Sahara.  This Court passed an order on 22 September 2006 on Jet’s
application by consent, permitting Jet to withdraw an amount of
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Rs.500/ crores from the escrow account upon furnishing a Bank
Guarantee for the amount.
6. Arbitral proceedings took place before an arbitral
Tribunal consisting of Lord Steyn as Presiding Arbitrator, Mr.Justice
S.P.Bharucha, former Chief Justice of India and Mr.Justice
B.P.Jeevan Reddy, former Judge of the Supreme Court. On 12
April 2007, Consent Terms were filed before the arbitral tribunal.
The consideration for the purchase of the shares of Sahara Airlines
Limited was reduced from Rs.2,000/ crores to Rs.1,450/ crores.
Under the Consent Terms, Jet was liable to pay four annual
instalments each of Rs.137.50 crores, “without any deduction and
set off” on or before 30 March 2008, 30 March 2009, 30 March
2010 and 30 March 2011, time being of the essence.   In the event
of any default by Jet in the payment of the instalments, the
concession was to stand “automatically withdrawn” and the
consideration would stand restored from Rs.1,450/ crores to Rs.
2,000/ crores.  In that event, the Consent Terms stipulated that Jet
will become liable to pay and “do pay” to the selling shareholders
the price originally agreed of Rs.2,000/ crores.
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7. The arbitral tribunal passed a consent award on 12 April
2007, recording that under the Consent Terms parties had
managed to resolve all the disputes existing between them and all
the issues that arose in the arbitration.  Accordingly, (i) All claims
and counter claims were withdrawn; and (ii) An award was passed
in terms of the Consent Terms. On 20 April 2007, the Consent
Terms were implemented. All shares were transferred and
management came from Sahara to Jet.
8. For Assessment Year 200405, a notice of demand was
issued on 23 August 2007 by the Income tax authorities under
Section 156 of the Income Tax Act, 1961 for a sum of Rs.444.5
crores. (This assessment has subsequently been annulled by the
order of the Commissioner of Income Tax (Appeals) on 17 June
2009).  On 26 March 2008, a letter was addressed by Jet to Sahara
stating that the Chief Commissioner of Income Tax  had agreed to
keep the demand for Assessment Year 200405 in abeyance  subject
to certain conditions stipulated in a letter dated 5 March 2008.  By
his letter of 5 March 2008, the Chief Commissioner of Income Tax
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had directed that an amount of Rs.107.08 crores should be paid in
three instalments of Rs.37.08 crores, Rs.35 crores and Rs.35 crores
by 20 March 2008, 15 April 2008 and 15 May 2008 respectively.
The balance of the demand was held in abeyance.  Jet by a letter
dated 26 March 2008, informed Sahara that it had paid an amount
of Rs.37.08 crores on 24 March 2008, and  that :
“Tax dues for the past are the liability of the selling
shareholders in their entirety as stipulated in the
aforesaid SPA and we are entitled to be reimbursed
forthwith  to the extent of the said amount paid by us on
your behalf”.
By its letter, Jet while acknowledging that under the Consent
Terms and the consent award, the first instalment of Rs.137.5
crores was payable by it to the selling shareholders on or before  30
March 2008 intimated Sahara that in the event that reimbursement
for the amount of Rs.37.08 crores is not received by that date, Jet
would be adjusting Rs.37.08 crores paid to the Income Tax
authorities.
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9. By a letter dated 28 March 2008, Sahara in its response
stated that under the consent award, Jet was required to pay the
amount payable without any deduction or set off. According to
Sahara, (i) Since the income tax liability did not exceed the
threshold of Rs.50 crores (laid down in the SPA), the selling
shareholders were not liable to indemnify Jet Lite; and (ii) The
sum of Rs.37.08 crores could not be adjusted from the amount
payable under the Consent Award. Accordingly, Jet was requested
to remit the first instalment of Rs.137.5 crores in full under the
Consent Award. On 29 March 2008, Jet addressed a reply to
Sahara, requesting the latter “to reimburse the said sum of Rs.
37.08 crores immediately so as to obviate any adjustment from the
annual instalment payable under the Consent Terms.” On 29
March 2008, Sahara by its response reiterated that the award did
not authorise Jet to make any deductions or adjustments from the
monies payable by it to the selling shareholders; that the award
required Jet to make the payment without any deduction or set off
and hence, the entire amount would have to be paid in full.
10. By a letter dated 31 March 2008 written to Sahara, Jet
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asserted that since Sahara had wrongfully denied its liability to
indemnify Jet under the SPA with respect to the income tax
liability, Jet was constrained to adjust a sum of Rs.37.08 crores
(already paid by Jet to the Income Tax Department on behalf of
Sahara) from the first annual instalment. Jet stated that it would be
remitting a sum of Rs.100.42 crores towards the first annual
instalment in accordance with the Consent Terms and award.   An
amount of Rs.100.42 crores was credited to the account of Sahara
by Jet by an electronic transfer of funds on 31 March 2008 (30
March 2008 being a Sunday).
By a further letter dated 2 April 2008, Jet asserted thus :
“We would like to point out that we were entitled to
withhold the entire amount of the income tax assessed,
since we have not received any security against a
potential liability in excess of Rs.300 crores.  However, as
a gesture, we have withheld only a sum of Rs.37.08
crores from this instalment, in the expectation that you
will make suitable arrangements for the balance liability
forthwith.”
Sahara submitted a denial by its response dated 8 April 2008.
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11. On 22 July 2008  an order of assessment was passed by
the Income Tax authorities for Assessment Year 200506.  A notice
of demand was issued to Jet Lite (India) Limited for a sum of Rs.
520.63 crores. According to Sahara, the demand notice was
annexed by Jet to Chamber Summons 685 of 2009, but no notice of
demand (under Clause 16.3 of the SPA) was sent to Sahara.
According to Sahara, it has asserted in paragraph 10 of its affidavit
in reply dated 29 April 2009 in the Chamber Summons that no
claim or demand was made by Jet since an appeal had been filed
and in view of a letter dated 23 February 2009 stating that the
Income Tax authorities had agreed not to treat Jet as an assessee in
default.  According to Sahara, paragraph 22 of Jet’s rejoinder dated
5 May 2009 does not specifically deny the letter of the Income Tax
authorities dated 23 February 2009.  On 15 January 2009, a notice
of demand was issued by the Assessing Officer to Jet Lite raising a
demand of outstanding dues of Rs.1,135/ crores  for Assessment
Years 200102 to 200506.    On 6 April 2009, Jet made a demand
upon Sahara of a sum of Rs.1,135/ crores.
12. On 26 March 2009, Execution Application 161 of 2009
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was filed by Sahara for the execution of the decree in the amount
of Rs.999.58 crores on the footing that the original purchase price
of the shares stood restored. On 30 March 2009, a warrant of
attachment was issued for the attachment of movable assets by Jet
Airways. On 30 March 2009, Jet addressed a letter to Sahara
recording that it had “received a huge demand towards income tax
payable for the period prior to its take over by Jet Airways” and
that pending a final adjudication of the tax payable, an amount of
Rs.50 crores had been deposited with the tax authorities in
deference to the demand. Jet stated that it had adjusted the
aforesaid sum of Rs.50 crores against the second annual instalment
of Rs.137.5 crores payable to Sahara under the SPA read with
award and the balance of Rs.87.5 crores had been remitted.
13. On 31 March 2009, a Learned Single Judge of this Court,
Mr.Justice S.C.Dharmadhikari, directed that without prejudice to
the rights and contentions of the parties and on Jet furnishing an
undertaking that it would not create any further encumbrance,
alienate or transfer its movable and immovable assets and
properties, the warrant of attachment dated 30 March 2009 would
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not be executed until the disposal of the Chamber Summons. The
attachment made until the date of the order was to remain
unaffected.
II The proceedings before the Court :
14. (1) Execution Application 161 of 2009 has been filed by
Sahara for the payment of a decretal amount of Rs.999.58 crores.
This comprises of the original price of Rs.2000/ crores, less the
following amounts paid by Jet to Sahara:
(i) Rs.500/ crores which was paid on 29 March 2006,
when an extension of time for the completion of conditions
precedent under the SPA was agreed upon;
(ii) Rs.400/ crores paid upon the delivery of all shares of
Sahara Airlines Limited on 20 April 2007 pursuant to the Consent
Terms dated 12 April 2007; and
(iii) Rs.100.42 crores (i.e. Rs.137.50 crores, less Rs.37.08
crores) paid by Jet on 30 March 2008 as payment against the first
instalment. The mode in which the assistance of the Court is
required, is by issuing a warrant of attachment of movable
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properties under Order 21 Rule 43 of the Code of Civil Procedure,
1908 against Jet and thereafter, by the issuance of a warrant of sale
under Order 21 Rule 64;
(2) Jet has taken out Chamber Summons 551 of 2009 in
Execution Application 161 of 2009 on 31 March 2009, praying
that:
(i) Jet “were and are entitled to deduct and/or set off all
undisclosed income tax liabilities incurred and/or suffered by
Sahara Airlines Limited, after the consent award being passed on
12 April 2007”;
(ii) That Jet has “not committed any default, nor (has it)
failed to pay instalment No.1 of Clause 3(c) of the Consent Terms
by deducting and/or setting off from the instalment of Rs.137.5
crores  payable on or before March 31, 2008 .. a sum of Rs.37.08
crores deducted and paid to the Income Tax Department ‘for and
on behalf of’ Sahara Airlines Limited”;
(iii) That the  concession in the sum of Rs.550/ crores
from the originally agreed price of Rs.2,000/ crores does not stand
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withdrawn; and
(iv) That Sahara has not become entitled to execute the
award for the recovery of the sum claimed by it in Execution
Application 161 of 2009;
(3) Execution Application 180 of 2009 filed by Jet on 23
April 2009 for the recovery of an amount of Rs.821/ crores.  This
amount is computed on the basis of a demand of Rs.103.24 crores
made by the Income Tax authorities in the Assessment Order for
Assessment Years 200203, 200405 and 200506. Out of this
demand, an amount of Rs.908/ crores is claimed to represent
undisclosed liability.  After giving due credit for the amount of Rs.
87.08 lakhs deducted from the instalment due and paid to Sahara,
a net claim of Rs.821/ crores  has been made by Jet upon Sahara;
( As recorded later, Execution Application 180 of 2009 was
withdrawn by Jet on terms set out in an order of this Court ).
(4) Chamber Summons 685 of 2009 filed on 23 April 2009
by Jet in Jet’s Execution Application 180 of 2009, seeking relief to
the effect that there has been no failure on the part of  Jet to pay
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the instalment on the due date and for a direction to Sahara to
forthwith pay/reimburse to Jet an amount of Rs.821/ crores, being
the tax liability incurred/suffered in respect of Assessment Years
200405 and 200506;
(5) Chamber Summons 729 of 2009 filed by Jet on 29 April
2009 in Execution Application 161 of 2009 for satisfaction being
recorded on the decree under Order 21 Rule 2(1) of the payment of
Rs.87.50 crores (the second instalment) to Sahara on 30 March
2009 and Rs.50/ crores to the Income Tax Department as
adjustment of the second instalment under the consent award of 12
April 2007;
(6) Chamber Summons 603 of 2010 taken out by Jet on
19 March 2010 in Execution Application 161 of 2009 to the effect
that this Court should release and discharge Jet of the undertaking
given on 2 April 2009 not to create further encumbrance on,
alienate or transfer its movable and immovable assets and
properties as a condition for not executing the warrant of
attachment levied by Sahara on 30 March 2009;
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(7) During the pendency of the proceedings, Jet has also
taken out Chamber Summons 477 of 2011 for permission to enter
into a development agreement with Godrej Properties Limited in
pursuance of an MoU dated 26 May 2010.
III   Submissions :
15. The parties have filed extensive written submissions. In
the interests of brevity, a  detailed narration  of  those submissions
is not made at this stage.   The arguments urged at the Bar and in
the submissions would be addressed during the course of the
judgment. Sahara’s case has been summarized in  its submissions as
follows :
SAHARA’s  submissions :
1. Clause 15.1.1A and Clause 16 of the SPA have not been made
a part of the consent terms. Hence the Award in terms of the
consent terms would not include any decretal obligation to
reimburse all income tax liabilities incurred or suffered in
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excess of Rs.50 Crores arising out of transactions or events
before 18 January 2006, the effective date. Clause 15.1.1A
and clause 16 form a part of the SPA and not the consent
terms and there is no award for reimbursement of past
income tax liabilities;
2. Under the SPA Jet had no right to direct the Escrow Agent
not to pay over any part of the purchase price lying with it to
Sahara so as to ensure the fulfilment of Sahara’s indemnity
obligation under clause 15.1.1A read with clause 16 of the
SPA. On closing, Sahara was entitled to receive from the
Escrow Agent the full amount of Rs.1500 Crores (Rs.2000
Crores less Rs.500 Crores released on 29 March 2006) even
though the assessments for A.Ys. 200304, 200405, 200506
and 200607 had not been completed and though there was a
possibility of tax liabilities, which were not disclosed tax
liabilities arising as a result of assessment orders that may be
passed in future;
3. The consent terms do not make any alteration of this
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position. They provide for a concession in the purchase price
from Rs.2000 Crores to Rs.1450 Crores and provide for the
payment of a balance of Rs.550 Crores of the concessional
purchase price in four annual instalments if paid in time.
Time was of the essence. If the instalments were not paid in
time, the concession agreed to would stand automatically
withdrawn and the consideration would stand automatically
restored to Rs.2000 Crores which would become payable
forthwith and the decree for Rs.2000 Crores would become
executable forthwith;
4. The only additional right which Jet did not possess under the
SPA, which is granted under the consent terms is that
notwithstanding that the additional sum of Rs.550 Crores
becomes due and payable forthwith and the Award would
become executable forthwith, Jet would be liable to pay the
additional sum of Rs.550 Crores only if Sahara had
performed its indemnity obligations under clause 15.1.1A
read with clause 16 of the SPA at the time when the amount
of Rs.550 Crores had become due and payable;
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5. This additional right conferred on Jet by the second
paragraph of clause 5 of the consent terms is not made
applicable to clause 3. Hence the right of Sahara to receive
Rs.1450 Crores is not linked to the fulfillment of Sahara’s
indemnity obligation under clause 16 read with clause
15.1.1A of the SPA. The reciprocity of obligations relied
upon by Jet is limited only to the payment of the additional
sum of Rs.550 Crores and not the sum of Rs.1450  Crores;
6. Since the right of Jet to withhold payment of the additional
sum of Rs.550 Crores arises only as a consequence of a
default on the part of Jet to pay the instalments as stated in
clause 3(c)  of the consent terms,  Jet’s right to hold back the
payment of Rs.550 Crores has to be confined only to the
performance by Sahara of its indemnity obligations on the
date of default. Jet cannot withhold the sum of Rs.550
Crores till the liabilities for assessment years 200304,
200405, 200506 and part of 200607 (upto 18 January
2006) have been finally determined. The consent terms  do
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not give Jet a right to retain the additional sum of Rs.550
Crores until all assessment proceedings, noted earlier, have
become final.
Submissions of  Jet
16. Jet has urged that: (i) The Consent Terms and the
Consent award involve reciprocal obligations.  The Consent award
is not a money decree simpliciter, but is a decree in terms of the
Consent Terms involving mutual obligations;
(ii) Reciprocal obligations are capable of execution;
(iii) Clauses 15.1.1A and 16 of the SPA embody a warranty
and an indemnity in a contract  for the  acquisition of an enterprise.
The enterprise value was determined on the basis of the tax liability
being within the normal anticipated assessment pattern;
(iv) The warranty in Clause 15.1.1A is in respect of liabilities
incurred or suffered.  Liability to pay tax is fundamentally different
from the notion of payment of tax. Tax liability is incurred at
various stages: (a) theoretically when a taxable event occurs; (b)
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when an order of assessment is made, which crystalises the
liability; and (c) when a notice of demand is served under Section
156 of the Income Tax Act, 1961. Contextually construed, the
expression ‘reimbursed’ which is  sometimes  used as an alternative
for “indemnified” must mean that when a liability is incurred, the
warranty is that this liability incurred would be reimbursed.  The
word ‘reimbursed’ is used in a wider sense of making appropriate
arrangement to ensure that the liability to tax does not lead to any
damnification of Jet;
(v) Clause 16 of the SPA incorporates an indemnity in favour
of the purchaser and the Company against all “losses” which may
be incurred or suffered by the purchaser  and which may arise inter
alia from any breach of warranty. Jet’s interpretation is that (a)
There is a warranty which is triggered when the liabilities are
incurred or suffered; (b) When the warranty is triggered, the
consequence is that the selling shareholders shall ensure that the
purchaser shall be reimbursed without dispute or delay; and (c) If
the purchaser is not reimbursed immediately, then an  indemnity
arises in its favour;
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(vi) Clause 19 of the Consent Terms provides that clause 16
of the SPA shall remain applicable only in respect of “(i) tax
matters as set out in Clause 15.1.1A” of the SPA.  The entirety of
Clause 16 of the SPA is saved in relation to tax matters.  This would
include the indemnity in clause 16.1(c) of the SPA to the extent
that losses arise out of unknown liabilities relating to tax matters;
(vii) While it is true that the time for the payment of an
installment under Clause 3(c) of the Consent Terms and Award is
of the essence of the contract, the obligation of the selling
shareholders to reimburse any income tax liability incurred or
suffered by the Company without dispute or delay, is peremptory
and is required to be performed forthwith.  Under Clause 15.1.1A
of the SPA, neither the amount nor the time could be
predetermined because the liability/obligation was of a contingent
nature depending upon the tax liability being incurred or suffered
by the Company.  The obligation to reimburse is absolute and has
to be performed forthwith;
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(viii) There may be there different situations : (i) If the
contingent event contemplated by Clause 15.1.1A arises on the
date of the performance of the obligation under clause 3(c) of the
Consent Terms, both parties were required to perform their
obligation simultaneously; (ii) If the contingent event arises
subsequent to the date for the payment of instalments in clause
3(c), the purchaser would be required to perform its obligation on
the date mentioned in clause 3(c) of the Consent Terms; (iii) If the
contingency arises at a time prior to the date of performance
stipulated by Clause 3(c), the Vendors were required to perform
their obligations first and in the event of their failure, they would
lose the right to claim performance of the purchaser’s obligation
under Clause 3(c);
(ix) As on 30 March 2008, income tax liabilities were well in
excess of Rs.50 crores, being Rs.444.54 crores under the notice of
demand dated 23 August 2007 for A.Y. 200405. Alternatively, the
liability was Rs.107.08 crores under a letter dated 5 March 2008 of
the Chief Commissioner of Income Tax. The keeping in abeyance
during the pendency of appeals or challenges to income tax
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assessment do not affect the pending nature of the liability.
Pursuant to the letter of the tax authorities dated 23 February
2009, Jet paid Rs.50 crores by five challans each of Rs.10 crores;
(x) The intention of the parties in Clause 15.1.1A of the SPA
was to provide for immediate payment in the event that income tax
liabilities are incurred or suffered. The language of
“reimbursement” is incidental thereto.  Clause 16 of the SPA must
be harmoniously read together with Clause 15.1.1A.  Clauses 16.1
and 16.4 deal with losses which may be incurred or suffered and
not with reimbursement. Clause 19 of the Consent Terms continues
to make Clause 16 applicable in respect, inter alia, of tax matters as
set out in Clause 15.1.1A. Clause 16.4 of the SPA, therefore,
remained applicable and operative;
(xi) It is a settled principle of law that once the indemnified
has incurred a liability and that liability is absolute, it is entitled to
call upon the indemnifier to save it from that liability and to make
payment.  The order under Section  220(6) of the Income Tax Act,
1961, which was made on 5 March 2008, casts an obligation upon
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the Company to pay a sum of over Rs.100 crores though in
instalments. The liability to pay was intact and the Company was
only saved of coercive recovery and penal interest if it complied
with the order.
IV The Consent Terms :
17. The heart and substance of the present case turns upon
the Consent Terms which were arrived at between Jet and Sahara
on 12 April 2007. The Consent Terms form the basis and
foundation of the award of the arbitral tribunal. The salient
features of the Consent Terms have to be analysed.  The Consent
Terms contain in clause (1) an agreement and declaration that the
Share Purchase Agreement dated 18 January 2006 read with
agreements dated 23 March 2006 and 29 March 2009 as modified
therein, is valid, subsisting and binding.  Clause (2) of the Consent
Terms stipulates that Jet do purchase and the selling shareholders
do sell to Jet, the entire existing equity and preference shares of
Sahara Airlines Limited. Clause (3) of the Consent Terms is
reflective of the position that the original purchase price of the
shares under the SPA was Rs.2000/ crores.  There was a dispute
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whether the conditions precedent had been satisfied and the
amount had become due and owing.  Parties arrived at a reduced
consideration of Rs.1450/ crores which the terms order “that Jet
do pay to the selling shareholders ” in the manner indicated.  Rs.
500/ crores was paid by Jet prior to the signing of the Consent
Terms, while Rs.400/ crores was to be paid on the closing date.
Clause 3(c) of the Consent Terms envisages that the balance of Rs.
550/ crores would be paid on the dates stipulated therein
“ without any interest and without any deduction and set off” .
Instalments each of Rs.137.50 crores were thus to be paid on or
before 30 March 2008, 30 March 2009, 30 March 2010 and 30
March 2011.  Clause (5) of the Consent Terms stipulates that the
time mentioned in clause (3), is of the essence of the contract
contained in the Consent Terms.  The Consent Terms then stipulate
the consequence of the default. The consequence is that “the
concession (i.e. reduction in price) agreed to between the parties
hereto, in the sum of Rs.550/ crores from the originally agreed
price of Rs.2,000/ crores, shall stand automatically withdrawn
and the consideration hereunder shall stand automatically
restored from Rs.1,450/ crores  to Rs.2,000/ crores”.   Jet would
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VBC 27 exe.appln161.09
then become liable to pay and the terms order that Jet “do pay” to
the selling shareholders, the full originally agreed price of Rs.
2,000/ crores, by making a payment of Rs.550/ crores in addition
to the amounts mentioned in clause 3(a), (b) and (c). Moreover, it
has been agreed that if Jet fails to pay on the due date any of the
instalments mentioned in clause 3(c), the entire amount remaining
unpaid under clause 3(c) as well as the amount of Rs.550/ crores,
in addition, would become forthwith due and payable and “the
selling shareholders shall be entitled to forthwith execute the
award for recovery of the sum due pursuant to this clause”.
However, the liability of Jet to pay an additional amount of Rs.
550/ crores, was to arise only if the selling shareholders have
performed their indemnity obligation in the SPA as amended and
the obligation to transfer new preference shares to Jet.
18. Clauses 3 and 5 of the Consent Terms lead to the
following position:
(i) The originally agreed price for the sale of the equity and
preference shares of Sahara Airlines Limited to Jet was Rs.2,000/
crores;
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VBC 28 exe.appln161.09
(ii) In order to resolve the disputes which had arisen
between the parties, a concession was made available to Jet under
which the price would be reduced to Rs.1,450/ crores;
(iii) The concessional price was subject to the payment being
made in the manner and in accordance with the stipulations
contained in clause 3;
(iv) Clause 3 contains a positive command ordering that Jet
do pay to the selling shareholders a sum of Rs.1,450/ crores in the
manner indicated;
(v) The balance of Rs.550/ crores under clause 3(c) had to
be paid in four installments each of Rs.137.5 crores on the dates
indicated – on or before the thirteeith days of March of 2008, 2009,
2010 and 2011;
(vi) Each instalment of Rs.137.5 crores was liable to be paid
without any deduction and set off;
(vii) Time for the payment of the instalments set out in clause
3 of the Consent Terms was of the essence of the contract;
(viii) In the event that Jet failed to pay by the due date any of
the instalments referred to in clause 3(c), the concession granted of
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VBC 29 exe.appln161.09
the reduction in price would stand automatically withdrawn and
the consideration would automatically stand restored to Rs.2,000/
crores;
(ix) Upon default, Jet would become liable and it was
ordered that it do pay to the selling shareholders, the full originally
agreed price of Rs.2,000/ crores by making a payment of an
additional amount of Rs.550/ crores, over and above the amount
mentioned in clause 3(a), (b) and (c);
(x) The liability of Jet to pay the additional amount of Rs.
550/ crores would only arise if the selling shareholders had
performed their indemnity obligation under the SPA as amended by
the Consent Terms and the obligation to transfer new preference
shares to Jet;
(xi) The performance of the indemnity obligation is a
condition which attaches to the liability to pay the enhanced
consideration of Rs.550/ crores and does not attach to the reduced
price of Rs.1,450/ crores. As regards the latter, under clause 3(c)
of the Consent Terms, the balance of Rs.550/ crores had to be paid
so as to make up the concessional price of Rs.1,450/ crores and
that payment had to be made without any interest and without any
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VBC 30 exe.appln161.09
deduction and set off.
19. Clause 6 of the Consent Terms stipulates that all the
conditions precedent mentioned in the SPA as amended or
otherwise had been fulfilled and/or waived by Jet.
Clause 16 of the Consent Terms provides as follows:
“It is hereby agreed and declared that save and except
the representations and warranties mentioned in (1)
Clauses 15.1.1A and 15.7 pertaining only to tax matters,
(2) Clauses 15.1.5 to 15.1.9 (except as contemplated
herein and the pledge created in favour of JET) and (3)
15.3.1 to 15.3.3 all other representations and warranties
contained in Clause 15 of the SPA (as amended) and
Annexure 11 have been satisfied and/or waived by JET
and in any event do not survive.”
20. Clause 16 of the Consent Terms saves the representations
and warranties mentioned in Clause 15.1.1A and Clause 15.7 of the
SPA pertaining only to tax matters. Hence, in order to appreciate
the ambit of Clause 16 of the Consent Terms, it would be necessary
to advert to the representations and warranties mentioned in
Clauses 15.1.1A and 15.7 of the SPA, pertaining to tax matters.
Clause 15 of the SPA is titled “representations and warranties”.
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Under Clause 15.1.1A, the selling shareholders represented to Jet
that subject to disclosed liabilities:
“all Income tax liabilities incurred or suffered in excess of
Rs.50/ crores of the Company, including any fines and
penalties relating thereto, arising out of any transactions
or events done before effective date shall be reimbursed
(without dispute or delay) by the Vendors”.
Under Clause 15.7 of the SPA, all warranties were to survive only
until 30 June 2007, except those relating to tax matters of the
Company which would survive for a period of six years from the
relevant Assessment Year or such longer period as prescribed in the
relevant statutes in force.
21. Clause 16 of the SPA deals with indemnification.  Clauses
16.1, 16.3 and 16.4 were to the following effect:
“16.1 The Vendors hereby jointly and severally
indemnify, defend and hold harmless the Purchaser and
the Company from and against any and all Losses which
may be incurred or suffered by the Purchaser or the
Company, and which may arise out of or result from:
(a) any breach of any Warranties (of the Vendors and/or
the Company), obligations, covenants or agreement of
the Vendors contained in this Agreement; or
(b) any liability or claim relating to the period on or
before the Effective Date which are not Disclosed
Liabilities;
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VBC 32 exe.appln161.09
(c) any Losses, liability or claim relating to (i)
Transferred Employees as stipulated in Clause 12.2 or,
(ii) any Losses of the Company or any undisclosed or
unknown liability or Losses (other than Disclosed
Liabilities), including those pursuant to any order or
judgment of any court or judicial authority relating to a
period or event or circumstance which occurs before the
Effective Date.
16.3 The Purchaser or the Company to claim
indemnification for any Losses from the Selling
Shareholders under this Clause, shall promptly provide a
written notice of the same to the Selling Shareholders
along with all the documents if any available with it, in
respect of the Losses claimed. The Selling Shareholders
shall within 15 (fifteen) days of the Purchaser or the
Company incurring or suffering any Losses, make
payment to the Purchaser or the Company, as the case
may be for such Losses. The Purchaser shall not be
entitled to claim indemnification from the Selling
Shareholders until and unless the amount of Losses
(whether arising from a single claim or multiple claims)
exceeds an amount of Rs.5,00,00,000 (Rupees Five
Crores only).
Provided however, the said provision shall not apply to a
claim arising due to a material breach of the obligations
under Clause 12.
16,4 Notwithstanding anything contained herein,
the Purchaser shall not be entitled to claim any
indemnification from the Selling Shareholders for any
Losses incurred or suffered by the Purchaser in respect of
the Tax matters, contained in paragraph E of Annexure
11 hereto, until and unless the amount of Losses arising
therefrom exceeds Rs.50,00,00,000/ (Rupees Fifty
Crores only).”
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Under paragraph E of Annexure 11 to the SPA, there was a
representation and warranty that the tax returns have been correct
and made on a proper basis and none of the returns, accounts or
information provided therewith had been disputed by the fiscal
authority concerned.
22. The liability of Jet to pay the originally agreed
consideration of Rs. 2,000/ crores (involving the payment of
additional sum of Rs.550/ crores over and above the reduced
consideration of  Rs.1,450/ crores) in the event of default, was to
arise only if the selling shareholders had performed their indemnity
obligation in the SPA.  The indemnity obligation extended to any
losses which may be incurred or suffered by the purchaser or the
Company which may arise out of or result from a breach of any
warranty, obligation, covenant or agreement of the Vendors
contained in the agreement. It also covered “any losses of the
company or undisclosed or unknown liability or losses (other than
disclosed liabilities).
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VBC 34 exe.appln161.09
23. Now, it is in the background of these Consent Terms  that
it would be necessary for the Court to make an evaluation of the
facts as they have come on the record.
24. According to Sahara, the amount which has been claimed
in Execution Application 161 of 2009 has become payable on
account of the occurrence of two conditions, namely:  (i) A failure
on the part of Jet to comply with its obligation to pay without any
deduction and set off, the amount of Rs.550/ crores (being part of
the concessional amount remaining payable for the purchase of the
shares) under Clause 3(c) of the Consent Terms; and (ii) There
being no failure on the part of Sahara to perform as on 30 March
2008, its indemnity  obligation as required under Clause 5 of the
Consent Terms.
V     The obligation to pay without deduction or set off
25. Now, the admitted position before the Court is that on 31
March 2008 (the previous day – 30 March 2008 – being a Sunday),
Jet paid an amount of Rs. 100.42 crores.  Out of the instalment of
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VBC 35 exe.appln161.09
Rs. 137.5 crores that was due on or before 30 March 2008, Jet
deducted and adjusted an amount of Rs. 37.08 crores which was
deposited with the Income Tax authorities. The amount of Rs.
550/ crores was liable to be paid by Jet to Sahara under clause
3(c) of the Consent Terms  without any interest and without any
deduction and set off on or before the date stipulated.  Time was
the essence of the contract.  Upon the failure of Jet to pay the first
instalment of Rs. 137.5 crores on or before 30 March 2008, the
consequence envisaged in the Consent Terms had to inexorably
ensue (subject to the selling shareholders’ compliance with
indemnity obligations).  The plain consequence of the default was
that the concession stood withdrawn and the originally agreed
price of Rs.2,000/ crores stood restored automatically. The
Consent Award directed Jet to pay (“do pay”) the originally agreed
price of Rs.2,000/ crores.
26. However, it has been sought to be urged on behalf of Jet
that the obligation to pay without any deduction or set off, was
other than that contemplated by the clauses contained in the
representations and warranties made on behalf of the selling
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VBC 36 exe.appln161.09
shareholders as well as the indemnity obligations undertaken by
them. This contention is set out in Chamber Summons 551 of 2009
taken out by Jet in the following extract:
“24. On a conjoint reading of the SPA and of the
Consent Award as well as the aforesaid provisions
contained in the SPA, it is submitted that the words “and
without any deduction and set off “ appearing in Clause
3(c) of the Consent Award must and ought to mean: any
deductions or setoff “without any deductions and set
off” other than those contemplated by the Clauses
containing the Representations and warranties made on
behalf of all the Selling Shareholders as well as the
indemnity obligations undertaken by the Selling
Shareholders, including Second Claimant No.8.
(Sahara)”
This submission, which has been urged on behalf of Jet, is plainly
erroneous. Under the last part of Clause 5 of the Consent Terms, it
has been provided thus:
“It is agreed and clarified that the liability of Jet to pay
the additional sum of Rs.550 crores mentioned in this
clause shall arise only if the Selling Shareholders have
performed their indemnity obligations in the SPA as
amended by these Consent Terms and the obligation to
transfer the new preference shares to Jet under Clause 12
herein.”
The concluding part of Clause 5 of the Consent Terms extracted
above, applies only to the payment of the additional amount of Rs.
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VBC 37 exe.appln161.09
550/ crores, this being in addition to the payment of Rs.1,450/
crores under Clauses 3(a), (b) and (c).  Evidently, the concluding
part of Clause 5 of the Consent Terms does not apply to the
payment of an amount of Rs.550/ crores covered in the four
instalments stipulated in Clause 3(c).   Compliance of  indemnity
obligations is a condition which parties attached to the restoration
of the originally agreed consideration of Rs.2,000/ crores by the
payment of an amount of Rs.550/ crores, over and above the
reduced consideration of Rs.1,450/ crores. Accepting the
contention of Jet would fly in the face of the contractual
stipulation that the payment of the instalments stipulated in Clause
3(c) was to be effected without any deduction or set off. If the
amounts which were liable to be paid under Clause 3(c) were
subject to a deduction at the behest of Jet, then the last part of
Clause 5 of the Consent Terms  would have been a mere surplusage
and wholly unnecessary.
27. The Court would  have to attribute a commercial sense to
the use of the words “without any deduction and set off”. In
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VBC 38 exe.appln161.09
1
Aiyer’s Major Law Lexicon, the significance of the use of the
expression “without any” is explained thus:
“When ‘any’ is preceded by a negative, expressed or
implied, the two are together equivalent to an emphatic
negative, ‘none at all’, ‘not even one’, as there has never
been any doubt about that.”
Hence, on the first aspect of the case, the conclusion which would
have to be arrived at by the Court is that Jet was in default of its
obligation under Clause 3(c) to pay an amount of Rs. 137.5 crores
on or before 30 March 2008 without any deduction or set off.  By
deducting an amount of Rs.37.08 crores and paying over an
amount of Rs.100.42 crores, Jet clearly acted in breach of its
obligation under Clause 3(c) of the Consent Terms.
VI Indemnity obligations
28. The next aspect of the case which merits analysis is
whether there was a failure on the part of Sahara to perform its
indemnity obligations on 30 March 2008.  The liability of Jet to pay
the additional amount of Rs.550/ crores would arise only if the
selling shareholders had performed their indemnity obligations
th
1 4 edition, 2010 – Page 393
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VBC 39 exe.appln161.09
under the SPA as amended by the Consent Terms.  Clause 19 of the
Consent Terms  stipulates that clause 16 of the SPA would remain
applicable only to the extent stipulated therein.  Clause 16 was to
remain applicable in respect of the tax matters as set out in Clause
15.1.1A
29. Clause 15.1.1A stipulates that “ all Income tax
liabilities ” “ incurred or suffered ” in excess of Rs.50/ crores
arising out of any transactions or events done before the effective
date “shall be reimbursed” without dispute or delay, by the
Vendors. The obligation of the Vendors was to reimburse . The
reimbursement was to be of income tax liabilities incurred or
suffered in excess of Rs.50/ crores. The terms ‘reimburse’ and
‘incurred’ or ‘suffered’ fall for consideration. The words
‘reimbursed’, ‘incurred’ or ‘suffered’ which are used in Clause
15.1.1A of the SPA must be harmoniously construed and the clause
must be read as a whole. In Laxminarayan vs. Returning
2
Officer , the Supreme Court construed the meaning of the
expression ‘incurred’ in Sections 96 and 119 of the Representation
2 (1974) 3 SCC 425
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VBC 40 exe.appln161.09
of the People Act, 1951. The Supreme Court held that the
expression ‘incurred’ means “actually spent”.  In State of Madhya
3
Pradesh vs. Indore Iron & Steel Mills Pvt. Ltd. , the Supreme
Court while construing the meaning of the expression ‘suffered’ in a
notification issued by the State in exercise of powers conferred by
Sales Tax Legislation held as follows :
“In our view, the words of the said notification under the
State Sales Tax Act are so clear that they leave no doubt
whatsoever and cannot be subjected to any construction
but one, namely, that only goods upon which the entry
tax under the Entry Tax Act has been paid are entitled to
the exemption thereunder. There has to be actual
payment.  The impact of the entry tax upon the goods for
which the exemption is sought has to be felt; only then is
the exemption available.  The use of the word “suffered”
makes this plain.”
The expression ‘reimbursed’ has similarly arisen for interpretation
in several decided cases.  In Tata Iron and Steel Co Ltd. vs. Union
4
of India , the Supreme Court interpreted the words “reimbursed to
the exporter” in the context of the International Price
Reimbursement Scheme.   The Supreme Court held as follows:
“In common acceptation the word “reimburse” means
and implies “to pay back or refund”: As a matter of fact it
denotes restoration of something paid in excess; as
3 (1998) 6 SCC 416
4 (2001) 2 SCC 41
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VBC 41 exe.appln161.09
regards the respondent Union of India it cannot but
mean to indemnify having regard to the common
grammatical meaning of the word “reimbursement”.
Reimbursement has to mean and imply restoration of an
equivalent for something paid or expended.
Reimbursement presupposes previous payment.”
The Supreme Court held that as a matter of fact, there could be no
reimbursement for expenses which had never been incurred.
30. In a judgment of a Division Bench of the Patna High
5
Court in Nandlal Singh vs. Ram Kirit Singh, the Court made a
distinction between the words ‘reimburse’ with ‘contribute’ or
‘contribution’ in Section 43 of the Contract Act, 1872. In the
context of the Fertilizer Control Order, 1985 issued under the
provisions of the Essential Commodities Act, a Division Bench of
the Delhi High Court in Deepak Fertilizer & Petrochemicals
6
Corporation Ltd. vs. Union of India , held that ‘reimbursement’
means “in ordinary parlance repayment of what has been spent”.
In a judgment of the Rajasthan High Court in Rajasthan State
7
Electricity Board vs. Employees’ State Insurance Corporation ,
5 AIR 1950 Patna 212
6 1996 (38) DRJ 229
7 1975 WLN (UC) 261
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VBC 42 exe.appln161.09
the expression ‘reimburse’ has been construed to mean “to repay, to
pay in equivalent to for loss or expense”.
8
31. Black’s Law Dictionary defines the expression
‘reimburse’ as follows:
“Reimburse.  To pay back, to make restoration, to repay
that expended; to indemnify, or make whole.  Los Angles
County v. Frisbie, 19 Cal.2d 634, 122 P.2d 526.”
9
In P.Ramanath Aiyer’s The Law Lexicon , the meaning of the
expression ‘reimburse’ has been defined thus:
“To reimburse is to pay back, and this primary meaning
to the word is to be imputed to it, where the meaning is
not controlled by context or contract stipulations.
The primary meaning of the word “reimburse” is to pay
back; to make return or restoration of an equivalent for
something paid, expended, or lost; to indemnify; to make
whole.”
10
Justice C.K.Thakker’s, Encyclopaedic Law Lexicon adverts to
the meaning of expression ‘reimbursement’ as :
“To pay back an equivalent for what has been spent or
lost, to indemnify, to refund to recompense, to return the
8 Sixth Edition
nd
9 2 Edition page 1641
10 Vol.4 page 4038
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VBC 43 exe.appln161.09
money.”
32. In its letter dated 26 March 2008, Jet understood the
expression “reimbursement” to mean a repayment by Sahara of an
amount which had been actually expended by Jet:
“Since the aforesaid sum of Rs.37.08 Crores has already
been remitted by us on your behalf, please note in case
the reimbursement is not received on or before that date,
we would be adjusting the sum of Rs.37.08 crores paid to
Income Tax ....”
In an affidavit dated 31 March 2009 filed in Chamber Summons
551 of 2009, Jet’s understanding of the provision appears from the
11
following extract:
“14. The First Claimant consequently put the
Second Claimant No.8 to the notice of their making this
payment of such tax dues, the liability for which was that
of Second claimant Nos.2 to 8. The First Claimant
further expressly pointed out to the Second Claimant No.
th
8 that although as per the Arbitral Award dated 12
April, 2007, a first instalment of Rs.137.5 crores was
payable since the aforementioned sum of Rs.37.08 crores
had been paid by them towards the aforementioned tax
dues and if the First Claimant did not receive
th
reimbursement on or before 30 March, 2008 they would
be adjusting the sum of Rs.37.08 crores paid to the
Income Tax Department.”
12
In its subsequent affidavit dated 23 April 2009, Jet claims that it
11 Para 14 page 8 of Chamber Summons 551/09
12Para 41, page 19 in Chamber Summons 685/09
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VBC 44 exe.appln161.09
was “labouring under the mistaken belief” that it “was entitled to
reimbursement of only those tax liabilities against which the actual
payments had been made”, though on a true and correct
interpretation of Clause 15.1.1A  of the SPA, it was entitled to be
reimbursed all tax liabilities incurred or suffered in excess of Rs.50
crores.
33. While interpreting the meaning of an expression used in
a commercial document the Court would be justified in placing
reliance on contemporaneous statements made by the parties as
indicative of their intent.  That such a course of action is open to
the Court as a matter of principle is founded on the judgment of
the Supreme Court in Godhra Electricity Co.Ltd. vs. State of
13
Gujarat .   Mr.Justice K.K.Mathew, speaking for the Supreme Court
held thus:
“When both parties subsequently say that by the word or
phrase which, in the context is ambiguous, they meant
this, it only supplies a glossary as to the meaning of the
word or phrase.  After all, the inquiry is as to what the
intention of the parties was from the language used.
And, why is it that parties cannot clear the latent
ambiguity in the language by a subsequent interpreting
statement? If the meaning of the word or phrase or
13AIR 1975 SC 32
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VBC 45 exe.appln161.09
sentence is clear, extrinsic evidence is not admissible.  It
is only when there is latent ambiguity that extrinsic
evidence in the shape of interpreting statement in which
both parties have concurred should be admissible.  The
parties themselves might not have been clear as to the
meaning of th word or phrase when they entered into the
contract. Unanticipated situations might arise or come
into the contemplation of the parties subsequently which
would sharpen their focus and any statement by them
which would illuminate the darkness arising out of the
ambiguity of the language, should not be shut out.  In the
case of an ambiguous instrument, there is no reason why
subsequent interpreting statement should be
inadmissible.”
In a judgment of the Court of Appeal in the U.K., Lord Denning
made the following observations in Amalgamated Investment &
14
Property Co. Ltd. vs. Texas Commerce International Bank Ltd . :
“If parties to a contract, by their course of dealing, put a
particular interpretation on the terms of it, on the faith of
which each of them to the knowledge of the other acts
and conducts their mutual affairs, they are bound by that
interpretation just as if they had written it down as being
a variation of the contract.  There is no need to inquire
whether their particular interpretation is correct or not,
or whether they were mistaken or not, or whether they
had in mind the original terms or not.  Suffice it that they
have, by the course of dealing, put their own
interpretation on their contract, and cannot be allowed
to go back on it.”
14 1981 3 All E.R. 577
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VBC 46 exe.appln161.09
34. The liability of Jet to pay an additional sum of Rs.550/
crores mentioned in Clause 5 of the Consent Terms would arise
only if the selling shareholders had performed their indemnity
obligations in the SPA as amended by the Consent Terms. The
effect of clause 5 is firstly, to make time of the essence of the
contract for compliance with the obligation in Clause 3 to make
payment to the selling shareholders on the stipulated date.
Secondly, upon a default by Jet the concession stands automatically
withdrawn and the consideration stands automatically restored to
Rs.2,000/ crores which is the price that was originally agreed upon
between the parties. Thirdly, Jet becomes liable to pay and is
commanded to pay the full price of Rs.2,000/ crores. The
clarification contained in the last part of Clause 5, however, is that
the liability of Jet to pay the additional sum of Rs.550/ crores
mentioned in the clause, shall arise only if the selling shareholders
have performed their indemnity obligations in the SPA. If the
selling shareholders have not complied with their indemnity
obligations, Jet is not liable to pay the additional consideration and
in that case, the consideration payable would be pegged at Rs.
1,450/ crores. There was, in the present case, a breach by Jet of
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VBC 47 exe.appln161.09
the obligation to pay the amount of Rs. 137.5 crores without
deduction or set off on or before 30 March 2008.  The liability of
Jet to pay an additional consideration of Rs.550/ crores as
stipulated in Clause 5 arises only if the selling shareholders had
fulfilled their indemnity obligations.
35. Clause 15 of the SPA sets out representations and
warranties, while clause 16 provides for a covenant of indemnity.
Now, what clause 16 of the Consent Terms  does is to provide that
the representations and warranties mentioned in Clause 15.1.1A
and Clause 15.7, pertaining only to tax matters would survive.  The
indemnity obligations of the Vendors are stipulated in Clause 16 of
the SPA.  In Clause 16.1 the Vendors indemnify both the purchaser
and the Company against “any and all losses which may be
incurred or suffered” and which may arise out of or result from (a)
any breach of any warranties, obligations, covenants or agreement
of the Vendors; (b) any liability or claim relating to a period prior
to the effective date which are not disclosed liabilities; and (c) any
losses, liability or claim relating inter alia to .. “any losses of the
company or any undisclosed or unknown liability or losses (other
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VBC 48 exe.appln161.09
than disclosed liabilities)”. The expression “losses” has been
defined in clause 1.1.26A of the SPA to mean all losses, liabilities,
costs, charges, expenses, taxes, claims, and demands among other
things. Clause 16.3 mandates that in order to claim
indemnification for losses, the purchaser or the Company must
provide a written notice to the selling shareholders together with
documents and the selling shareholders shall within fifteen days of
the purchaser or the Company incurring or suffering any losses
make payment to the purchaser or the Company, as the case may
be. Unless the amount of loss exceeds Rupees Five crores, the
purchaser is not entitled to claim indemnification. However, Clause
16.4 which has a nonobstante provision stipulates that in respect
of the tax matters contained in paragraph E of Annexure 11, the
purchaser cannot claim indemnification unless and until the
amount of losses exceeds Rupees fifty crores.
36. Now, in the present case, the material on the record
indicates that on 5 March 2008, the Chief Commissioner of Income
Tax (Central) had called upon Jet Lite to deposit an amount of Rs.
107.08 crores in three instalments by 20 March, 15 April and 15
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May 2008.  The balance of the demand of Rs. 262.46 crores was
kept in abeyance till the disposal of the appeal.  On 26 March 2008,
the attention of Sahara was drawn to the order of the Chief
Commissioner of Income Tax and to the fact that Jet had made
payment of Rs. 37.08 crores under legal advice on 24 March 2008.
Jet claimed a reimbursement of an amount of Rs. 37.08 crores
placing reliance on Clause 16 of the SPA.  The response of  Sahara
on 28 March 2008 was that since the payment made towards
income tax liability did not exceed Rupees fifty crores, the selling
shareholders were not liable to indemnify Jet Lite.  On 29 March
2008, Jet recorded that the language of the SPA was clear – if the
liability exceeded Rupees Fifty Crores, it would fall within the
scope of the indemnity.  Jet's case was that the sum of Rupees fifty
crores was descriptive of the nature of the liability and did not
change with any instalments that may be given in discharge of the
liability.  Jet reiterated its claim based on the indemnity obligations
under the SPA. Sahara's contention in a letter dated 29 March
2008 was that Jet had not suffered or incurred an income tax
liability in excess of Rupees fifty crores and hence, the selling
shareholders were not liable to indemnify Jet under the SPA.  Jet's
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communication dated 2 April 2008 stated its position that the
Consent Terms cast reciprocal obligations and a refusal to pay
upon the indemnity clause in the face of a statutory order raising a
liability entitles it to deduct the sum claimed under the indemnity.
As already held earlier, Jet was not entitled to deduct or set off the
sum of Rs.37.08 crores  as it purported to do from the instalment
that was payable by 30 March 2008.  But the question still survives
as to whether Sahara had wrongfully repudiated its obligation to
indemnify Jet. Sahara in its letter dated 8 April 2008 contended
that since the payment did not exceed Rupees fifty crores, the
selling shareholders were not liable to indemnify Jet.
37. Clause 16 of the SPA attaches to all losses which are
incurred or suffered inter alia out of the breach of any warranties
or of any losses of the Company other than disclosed liabilities.
Losses as defined by the parties include taxes and demands. Under
Clause 15.1.1A, the obligation of the selling shareholders is to
reimburse any income tax liability incurred or suffered by the
Company without dispute or delay. The expression “liability” is
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15
defined by Black's Law Dictionary as meaning “the quality or state
of being legally obligated or accountable; legal responsibility to
another or to society, enforceable by civil remedy or criminal
punishment”. A liability contemplates a financial or pecuniary
16
obligation. In First National Bank Ltd. vs. Seth Sant Lal , a
Learned Single Judge held that :
“15. The term “liability” is of large and comprehensive
significance, and when construed in its usual and
ordinary sense, in which it is commonly employed, it
expresses the state of being under obligation in law or in
justice”
In Superintendent and Remembrancer of Legal Affairs to
17
Government of West Bengal vs. Abani Maity , the Supreme
Court observed thus, while construing the expression “liable”:
“It is true that ordinarily, the word “liable” denotes: (1)
“Legally subject or amenable to”, (2) “Exposed or subject
to or likely to suffer from (something prejudicial)”, (3)
“Subject to the possibility of (doing or undergoing
something undesirable)” (Shorter Oxford Dictionary).
According to Webster’s New World Dictionary, also, the
word “liable” denotes “something external which may
befall us”.
15 Eighth Edition page 932
16AIR 1959 Punjab 328
17 (1979) 4 SCC 85
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In certain statutes, noted the Supreme Court, the expression
“liable” has been held as importing even a possibility of attracting
an obligation or penalty. P.Ramanatha Aiyar’s Advanced Law
18
Lexicon inter alia provides the following definition of the
expression :
“A broad term; it may be employed as meaning the state
of being liable, that for which one is responsible or liable,
obligation in general; that condition of affairs which
gives rise to an obligation to do a particular thing to be
enforced by action; responsibility; legal responsibility.”
“Liability” as defined means  responsibility to  law, a duty which is
enforceable by law. In Kapur Chand Pokhraj vs. State of
19
Bombay , the Supreme Court while construing the expression
“liability incurred” in Section 48(2) of the Bombay Sales Tax Act,
1953 held that the expression is general and comprehensive and
would cover both a civil and criminal liability.  Hence, there was no
conceivable reason to impute to the Legislature the intention to
wipe out  offences committed under the repealed Act, when it had
retained the same offences under the repealing Act.
rd
18 2009 Reprint 3 Edition page 2721
19 AIR 1958 SC 993
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38. On 5 March 2008, an order was passed under Section
220(6) of the Income Tax Act, 1961, which cast an obligation on
Jet Lite to pay a sum over Rs.100/ crores. The order allowed
instalments of payment but what was significant is that Jet Lite was
under an obligation enforceable in law to make a payment of an
amount in excess of Rs.50/ crores. The provisions of Section
220(6) of the Income Tax Act, 1961 would show that as a matter of
law, the order of the Chief Commissioner merely put Jet Lite
outside the category of an assessee in default if it complied with the
terms of the order. The liability to pay, as Jet submits correctly
before the Court, was intact and it was spared of a coercive
recovery and additional penal interest if it complied with the
order.
39. In this context, it would be appropriate to refer to the
judgment of the Supreme Court in Kedarnath Jute Manufacturing
20
Co. Ltd. vs. Commissioner of Income Tax (Central), Calcutta .
In that case  a liability on account of tax   had been quantified and
a demand had been created and communicated by a notice.  During
20 (1972) 3 SCC 252
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the pendency of assessment proceedings before the Income Tax
Officer and finalization of assessment, the Supreme Court held that
“it is not possible to comprehend  how the liability would cease to
be one because the assessee has taken proceedings before  higher
authorities for getting it reduced or wiped out so long as the
contention of the assessee did not prevail with regard to the
quantum of liability”.  The Supreme Court affirmed the view of the
Madras High Court in Pope The King Match Factory Vs.
21
Commissioner of Income Tax , Madras , to the effect that an
assessee  incurs an enforceable legal liability on and from the date
on which he received the Collector's demand for payment and that
his endeavour to get out of that liability by preferring appeals
could not detract from or retard the efficacy  of the liability which
has been imposed upon him by the competent Excise authority.
40. Jet has submitted before the Court that under general
principles of law, once a person who has been indemnified has
incurred liability and that liability is absolute, he is entitled to call
upon the indemnifier to save it from that liability and to make
21 (1963) 50 ITR 495 (Mad).
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payment. This is premised on the fact that an indemnity may be
worth little if the indemnified cannot enforce an indemnity till he
actually pays the liability. The first judgment on the subject to
which it is necessary to turn, is a judgment of Mr.Justice M.C.
Chagla (as the Learned Chief Justice then was) in Gajanan
22
Moreshwar Parelkar vs. Moreshwar Madan Mantri . In that
case, the Defendant to a suit for declaration that was instituted on
an indemnity, urged that unless the indemnified suffered a loss, he
was not entitled to sue the indemnifier and in that connection,
reliance was placed on Sections 124 and 125 of the Contract Act.
The Plaintiff to the suit, had been furnished an indemnity by the
Defendant of discharging two mortgages. In that context, it was
argued on behalf of the Defendant that unless the mortgagee filed a
suit against the Plaintiff and obtained a judgment which the
Plaintiff was compelled to satisfy, the Plaintiff was not entitled to
sue the Defendant. Justice Chagla held that the Indian Contract
Act is an amending and consolidating legislation and is not
exhaustive of the law of contract to be applied by Courts in India.
The Learned Judge held that if the indemnified has incurred a
22 44 BLR 704 (1942)
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liability which is absolute, he is entitled to invoke the indemnity by
calling upon the indemnifier to pay the demand. In a subsequent
judgment, Justice P.B. Gajendragadkar (as the Learned Chief
Justice of India then was) spoke for a Division Bench of this Court
23
in Khetarpal vs. Madhukar Pictures , and while affirming the
principle enunciated by Justice Chagla in Gajanan Moreshwar that
Sections 124 and 125 are not exhaustive of the rights of an
indemnity holder held as follows:
“On this view, an indemnityholder is entitled to sue the
indemnifier even before he has incurred any damage,
provided of course the indemnityholder is able to satisfy
the Court about the existence of a clear enforceable claim
against him and is able to show that it is in respect of
such a clear enforceable claim that a contract of
indemnity has been executed.
...
We are, therefore, disposed to take the view
that the rights of the indemnityholder should not and
need not be confined to those mentioned in S.125,
Contract Act. Even before damage is incurred by the
indemnityholder, it would be open to him to sue for the
specific performance of the contract of indemnity,
provided of course it is shown that an absolute liability
has been incurred by him and that the contract of
indemnity covers the said liability.”
The law on the subject has similarly been considered in a judgment
23 AIR 1956 Bom. 106
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of the Calcutta High Court in Osman Jamal & Sons Ltd. vs.
24
Gopal Purshattam .   The Court cited the judgment of Buckley L.J.
in re: Rechardson Ex parte The Governors of St.Thomas’s
25
Hospital ,    to the following effect :
“Indemnity is not necessarily given by repayment after
payment. Indemnity requires that the party to be
indemnified shall never be called to pay.....”
41. In the present case, there was a liability imposed upon
Jet Lite by the Income Tax authorities on 5 March 2008.  That was
in the amount of Rs. 107.08 crores.   It was in respect of a clear
enforceable claim that the contract of indemnity had been
executed. The indemnity covered losses which may be incurred
and losses were defined clearly to include taxes, claims and
demands.  After the Consent Terms  were entered into between the
parties, the warranty contained in Clause 15.1.1A of the SPA
survived in respect of tax matters. The warranty was triggered
when a liability was incurred or suffered.  Once the warranty was
triggered, the consequence was that the selling shareholders had to
ensure that the purchaser shall be reimbursed without dispute or
24 (1928) ILR 56 Calcutta 262
25 (1911) 2 K.B. 705
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delay. If they were not reimbursed immediately, an indemnity
arose in their favour which Jet was entitled to and has lawfully
invoked.  The instalments granted to Jet by the Chief Commissioner
of Income Tax did not alter the nature of the liability, the
instalment being only a facility for payment.  The liability  was  in
excess of Rupees Fifty  Crores.   Jet had in fact paid an amount of
Rs.37.08 Crores to the Income Tax authorities and claimed
reimbursement of that amount on 26 March 2008. Jet was
entitled to demand reimbursement as it did from the selling
shareholders.  Sahara was in breach of its indemnity obligations on
30 March 2008 inasmuch as it repudiated the obligation to
indemnify on the fallacious reasoning that the liability was less
than the threshold of Rs.50 crores.  Once the Court comes to the
conclusion that there was a failure on the part of Sahara to fulfill its
indemnity obligations in the SPA, as amended by the Consent
Terms, the liability of Jet to pay the additional sum of Rs.550/
crores did not arise.
VII The current position : A.Ys. 200405, 200506,
200607
42. In an affidavit dated 26 April 2011 filed on behalf of Jet,
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a tabulated statement has been furnished regarding income tax
liabilities for Assessment Years 200405, 200506 and 200607.
The tax liability including interest, under those assessment
orders/orders of penalty was originally computed at Rs.1,233.99
crores. The tax liability after giving effect to orders passed in
appeal by the Commissioner of Income Tax (Appeals), has been
reduced to Rs.2.84 lakhs comprising of penalties for Assessment
Years 200405 and 200506. Consequently, it has been stated that
tax payment effected by the Company aggregating to Rs.240.48
crores has since been refunded by the Income Tax Department,
consequent to the orders passed by the C.I.T. (Appeals). The
tabulated statement indicates that the Income Tax Department has
filed an appeal before the Income Tax Appellate Tribunal against
the order of the C.I.T.(Appeals) for Assessment Year 200405 and
that “going by the past precedent, it is likely that the Income Tax
Department may file an appeal” to the Tribunal for Assessment
Years 200506 and 200607. In view of this factual position, Jet
has through its Senior Counsel informed the Court that it is not
pressing Execution Application 180 of 2009 but with liberty to
adopt proceedings in future if the occasion so arises. By a separate
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order passed by the Court on 26 April 2011, Execution Application
180 of 2009 has accordingly been disposed of as not pressed, with
liberty reserved as prayed.  In the event that a fresh proceeding is
initiated by Jet, all the rights and contentions of the parties have
been kept open in terms of the request made before the Court by
Counsel for the contesting parties.

VIII The Deposit of Rs.275 Crores : whether in
satisfaction of the decree
43. During the pendency of the Execution Application, Jet
has deposited two instalments each of Rs. 137.5 crores in Court.
An order permitting the first deposit of Rs.137.5 crores was passed
by the Court on an application by Jet, on 30 March 2010. A
request was made on behalf of the Second Claimant Nos.2 to 8 for
permission to withdraw the amount deposited.   Jet asserted that
withdrawal cannot be permitted without furnishing security,
whereas it was asserted on behalf of Second Claimant Nos.2 to 8
that withdrawal should be allowed without security since it would
enure to the benefit of the consent award.  By an order of 15 April
2010 the Second Claimant Nos. 2 to 8 were permitted to withdraw
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the amount subject to furnishing solvent security. Second
Claimant Nos. 2 to 8 did not furnish security. Directions were
issued by the Court for the investment of the amount deposited in a
fixed deposit of a Nationalized Bank by the Prothonotary and
Senior Master.  Similar orders have been passed by the Court on 25
March 2011 for the deposit and investment of a further sum of Rs.
137.50 crores by Jet.
44. Order 21 Rule1 of the Code of Civil Procedure 1908
prescribes the modes in which money under a decree can be paid.
All money payable under a decree is required by sub rule (1) to be
paid (a) by deposit into the Court whose duty it is to execute the
decree, or by sending it to that Court by postal money order or
through a bank; or (b) out of Court, to the decree holder by  postal
money order or through a bank, or by any other mode wherein
payment is evidenced in writing; or (c) otherwise, as the Court,
which made the decree, directs. Under sub rule 2 where any
payment is made under clause (a) or clause (c) of sub rule (1), the
judgment debtor has to furnish notice to the decree holder.  Under
sub rule (3) where money is paid by postal money order or
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through a bank under clause (a) or clause (b) of sub rule (1)
particulars have to be stated including inter alia how the money
remitted is to be adjusted, that is to say, whether towards the
principal, interest or costs. Sub rule (4) stipulates that on any
amount paid under clause (a) or clause (c) of sub rule (1), interest,
if any, shall cease to run from the date of service of the notice
under sub rule (2). Under sub rule (2A) no payment or
adjustment shall be recorded at the instance of the judgment
debtor unless (a) the payment is made in the manner, provided in
rule 1; or (b) the payment or adjustment is proved by documentary
evidence; or (c) the payment or adjustment is admitted by, or on
behalf of, the decree holder in reply to a notice under sub rule (2)
of rule 1, or before the Court. A payment or adjustment which has
not been certified or recorded as aforesaid, is not to be recognized
by any Court executing the decree.
45. In P.S.L. Ramanathan Chettiar vs. O.R.M.P.R.M
26
Ramanathan Chettiar, the Supreme Court has held that the
effect of the deposit of money in Court is to place the money
26 AIR 1968 SC 1047
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beyond the reach of the parties pending the disposal of the
proceedings. The Supreme Court held that in such a case, the
decree holder would take out or withdraw the money only
against furnishing security and as a result, the payment would not
be in satisfaction of the decree. In paragraphs 12 and 13 of the
judgment, it was observed thus:
“(12) On principle, it appears to us that the facts of a
judgmentdebtor’s depositing a sum in court to purchase
peace by way of stay of execution of the decree on terms that
the decreeholder can draw it out on furnishing security, does
not pass title to the money to the decreeholder.  He can if he
likes take the money out in terms of the order; but so long as
he does not do it, there is nothing to prevent the judgment
debtor from taking it out by furnishing other security, say, of
immovable property, if the court allows him to do so and on
his losing the appeal putting the decretal amount in court in
terms of Order 21 Rule 1 C.P.C. in satisfaction of the decree.
(13) The real effect of deposit of money in court as was
done in this case is to put the money beyond the reach of the
parties pending the disposal of the appeal.  The decreeholder
could only take it out on furnishing security which means that
the payment was not in satisfaction of the decree and the
security could be proceeded against by the judgmentdebtor
in case of his success in the appeal. Pending the
determination of the same, it was beyond the reach of the
judgmentdebtor.”  [emphasis supplied]
46. In the present case, for the reasons already indicated
earlier in view of the judgment of the Supreme Court in
Ramanathan Chettiar (supra), the effect of the deposit of money
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in Court was to put it beyond the reach of the parties pending the
disposal of the present proceedings.  The decree holder could take
out the money only upon furnishing security.  This in view of the
law laid down by the Supreme Court meant that the payment was
not in satisfaction of the decree. As a matter of fact, the
withdrawal of the amount by the decree holder was opposed by Jet,
save and except on condition that security be directed to be
furnished for withdrawal.
IX Liability to pay interest
47. The function of the executing Court is to execute the
decree as it stands.  On behalf of Jet it was urged that the decree
does not provide for the payment of interest and hence there is no
ascertained liability for the payment of interest which can be the
subject matter of execution. Hence, it was urged that the
executing Court cannot award interest unless the decree provides
for the award of interest.
48. This submission, however, cannot be accepted in view of
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the specific provisions which have been made in sub section (7) of
Section 31 of the Arbitration and Conciliation Act 1996. Sub
section (7) of Section 31 provides as follows :
“(7)(a) Unless otherwise agreed by the parties, where
and insofar as an arbitral award is for the payment of
money, the arbitral tribunal may include in the sum for
which the award is made interest, at such rate as it
deems reasonable, on the whole or any part of the
money, for the whole or any part of the period between
the date on which the cause of action arose and the date
on which the award is made.
(b) A sum directed to be paid by an arbitral award shall,
unless the award otherwise directs, carry interest at the
rate of eighteen per centum per annum from the date of
the award to the date of payment.”
Clause (b) of sub section (7) statutorily incorporates a provision by
which, unless an award has otherwise directed, the sum directed to
be paid by an arbitral Tribunal shall carry interest at the rate
stipulated therein from the date of the award to the date of
payment.  In the present case, the award is silent in regard to the
payment of interest.  Jet’s contention is that in the present case the
award must be regarded as having “otherwise directed” inter alia
having regard to the fact that though the award prescribed the
consequences of a default (the restoration of the original
consideration) no interest was stipulated.  This submission cannot
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be accepted.   No part of the award contains either expressly or by
necessary implication a direction that interest shall not be paid.
The liability to pay interest  arises under clause (b) of sub section
(7) of Section 31.  The liability to pay interest becomes a part of
the decree under the law.
X Apportionment between interest and principal
49. On behalf of Second Claimant Nos.2 to 8 it was urged
that the payments which have been made by Jet would have to be
apportioned first between interest and then against principal.  This
is disputed in the submissions which have been urged on behalf of
Second Claimant Nos. 2 to 8 who urged that (i) Jet had made it
clear, whilst making payments that they were being effected
towards the installments under the consent award to which there
was no objection or demur; and (ii) An appropriation was made by
Second Claimant Nos.2 to 8 towards principal.
50. On this aspect of the matter, the law is clear. The
position emerges from the judgment of the Supreme Court in
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Industrial Credit & Development Syndicate v. Smithaben H.
27
Patel .  In that case in a suit filed by the appellant a decree was
passed on the basis of a mortgage deed executed by the
respondents.  The decree provided for the payment of a certain sum
together with future interest.  The judgment debtors having failed
to pay the full amount the appellant filed an execution petition in
which the executing Court held that the decree holder was entitled
to initiate steps for the recovery of the balance.  The assertion of
the judgment debtor that the payment made was in liquidation of
the principal and not towards the costs and interest was negatived.
A revision was filed by the judgment debtors in the High Court in
which the order of the Trial Court was set aside. The Supreme
Court held that no payment or adjustment can be recorded at the
instance of a judgment debtor unless it is made in the manner
provided by rule 1 of Order 21 or  the payment or adjustment is
proved by documentary evidence or is admitted by the decree
holder.  The Supreme Court held that in the absence of payment
having been made in accordance with the mode prescribed or the
satisfaction recorded under rule 2 the judgment debtor cannot
27 (1999) 3 SCC 80.
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claim the benefit of adjustment in the manner insisted upon by
him. The judgment debtor, however, sought to rely on the
provisions of Sections 59 and 60 of the Contract Act. The Supreme
Court held that Section 59 refers to a situation where several
distinct debts are payable by a person and not to various heads of
one debt. The principal and interest due on a single debt or a
decree based on such debt carrying subsequent interest cannot, it
was ruled, be held to be several distinct debts. The law on the
subject has been formulated in the judgment of the Supreme Court
as follows :
“We hold that the general rule of appropriation of
payments towards a decretal amount is that such an
amount is to be adjusted firstly, strictly in accordance
with the directions contained in the decree and in the
absence of such direction, adjustments be made firstly in
payment of interest and costs and thereafter in payment
of the principal amount. Such a principle is, however,
subject to one exception, i.e., that the parties may agree
to the adjustment of the payment in any other manner
despite the decree. As and when such an agreement is
pleaded, the onus of proving is always upon the person
pleading the agreement contrary to the general rule or
the terms of the decree schedule. The provisions of
Sections 59 to 61 of the Contract Act are applicable in
cases where a debtor owes several distinct debts to one
person and do not deal with cases in which the principal
and interest are due on a single debt.”
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51. This judgment of the Supreme Court has been reaffirmed
in a subsequent judgment of a Constitution Bench in Gurpreet
28
Singh v. Union of India . The judgment in Industrial Credit &
Development Syndicate (supra) is cited in paragraph 20 of the
judgment of the Constitution Bench. The judgment of the
Constitution Bench lays down that (i) though the decree holder
may have the right to appropriate the payments made by the
judgment debtor it could only be as provided in the decree if there
is provision in that behalf in the decree; or as contemplated by
Order 21 Rule 1; (ii) The code or the general rules do not
contemplate payment of further interest by a judgment debtor on
the portion of the principal which he has already paid. The
obligation of the judgment debtor is only to pay interest on the
balance principal remaining unpaid; (iii) “Of course ... out of what
is paid he can adjust the interest and costs first and the balance
29
towards the principal, if there is a shortfall in deposit.” Having
regard to the law laid down in Industrial Credit & Development
Syndicate (supra) and in the subsequent judgment of the
Constitution Bench in Gurpreet Singh (supra), Second Claimant
28 (2006) 8 SCC 457.
29 paragraph 49 page 483.
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Nos. 2 to 8 are justified in urging that the payments which have
been made would have to be apportioned first between the interest
and the balance towards principal since there was admittedly a
shortfall in deposit.
XI Computation
52. To obviate any controversy on the mathematical
calculation involved, both the learned counsel appearing on behalf
of Second Claimant Nos.2 to 8 and for Jet have verified the
computation of the balance due and payable by Jet to Second
Claimant Nos. 2 to 8.  Upon hearing the learned counsel the Court
has come to the conclusion that interest should be awarded to
Second Claimant Nos.2 to 8 at the rate of 9% per annum in the
facts and circumstances of the case.  The following calculation has
been made on that basis.  The computation of the amount due and
payable by the Jet to Second Claimant Nos.2 to 8 is as follows :
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Calculation of Simple Interest on the basis of Rs.1450 Crores - Period from 31.03.2008 to 30.04.2011
(Amount in Rupees)
S.No. Particulars Amount Paid Closing Balance Due Interest
Opening Balance
Amount appropriated
Due
towards interest
@9%
1 Upto 31-03-2008 5,500,000,000 1,004,200,000 - 4,495,800,000 1,108,553
2 Upto 31-03-2009 4,495,800,000 875,000,000 405,730,553 4,026,530,553 404,622,000
3 Upto 31-03-2010 4,026,530,553 - - 4,026,530,553 362,387,750
4 Upto 31-03-2011 4,026,530,553 - - 4,026,530,553 362,387,750
5 Upto 30-04-2011 4,026,530,553 - - 4,026,530,553 29,785,295
(i.e. for I Month)
Total 1,160,291,348
Total interest 1,160,291,348
Less Interest appropriated 405,730,553
Balance interest 754,560,795
Add Balance principal amount* 4,026,530,553
Aggregate amount as on April 30, 2011 4,781,091,348
Note: Further Interest on principal amount of Rs.4,02,65,30,553/- @ 9 % p.a. = Rs.9,92,843/- per day.
53. In the circumstances, the balance due and payable by Jet
to Second Claimant Nos. 2 to 8 as on 30 April 2011 is Rs.
478,10,91,348/ (comprised of balance interest in the amount of
Rs.75,45,60,795/ and a balance principal of Rs.402,65,30,553/.).
Further interest on the principal amount of Rs.402,65,30,553/ at
9% per annum works out to Rs.9,92,843/ per day. Jet has
deposited in Court an amount of Rs.275 Crores. This amount
together with the interest accrued thereon shall be released by the
Prothonotary and Senior Master to Second Claimant Nos.2 to 8.
The balance that would cover the total sum of Rs.478,10,91,348/
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together with interest on the principal sum computed at Rs.
9,92,843/ per day shall be paid over by Jet to Second Claimant
Nos. 2 to 8 within a period of two weeks from today.  Upon making
of the aforesaid payment, the attachment levied on 30 March 2009
shall stand raised and Jet shall be relieved of the undertaking
furnished in pursuance of the order of the Learned Single Judge
dated 31 March 2009.
54. On the conclusion of the judgment, counsel appearing on
behalf of Second Claimant Nos.2 to 8 seeks continuation of the
order dated 31 March 2009.  The application is opposed on behalf
of the First Claimant. Counsel appearing on behalf of the First
Claimant states that the First Claimant has sufficient resources to
meet even the enhanced payment of Rs.550 Crores in the event
that in appeal it is directed to do so and that the continuation of
the ad interim order is a matter of serious prejudice to the conduct
of the business.
55. The ad interim order dated 31 March 2009 was passed
when  there  was  no  adjudication  even prima facie at that stage
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on whether as a matter of fact Jet was liable to pay the additional
consideration of Rs.550 Crores to Second Claimant Nos.2 to 8.
This Court having come to the conclusion that Jet is not liable to
pay a total consideration of Rs.2,000 Crores but, that the liability is
to pay a total consideration of Rs.1,450 Crores, no case has been
made out for the continuation of the ad interim order. In any
event, it has been directed that the attachment levied on 30 March
2009 shall stand raised only after payment of the amount found
due, in the judgment of the Court, is made over by Jet to Second
Claimant Nos.2 to 8.
56. In view of the aforesaid finding Execution Application
161 of 2009 is disposed of. Chamber Summons 551 of 2009, 729
of 2009 and 603 of 2010 are accordingly disposed of. Counsel
appearing on behalf of Jet states that Chamber Summons 477 of
2011 will not survive in view of the judgment.
57. Notice 734 of 2009 shall stand marked as satisfied upon
payment being made by Jet in terms of the directions given in this
order.
( Dr.D.Y.Chandrachud, J.)
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Full Judgment Text