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2020 Supreme(Del) 528
IN THE HIGH COURT OF DELHI AT NEW DELHI
Rekha Palli, J.
Daiichi Sankyo Company, Limited - Appellant
Versus
Malvinder Mohan Singh & Ors. - Respondent
Original Miscellaneous Petition (Efa)(Comm ) No. 6 of 2016
Decided On : 15-10-2020
Arvind K Nigam, Advocate, Arun Kathpalia, Advocate, Amit Mishra, Advocate, Mohit Singh, Advocate, Kanika Singhal, Advocate, Samridhi Hota, Advocate, Turab Kazmi, Advocate, Shivam Pandey, Advocate, Saloni Agarwal, Advocate, Kunal Chatterji, Advocate, Aditya Shanker, Advocate, Rohan Jaitley, Advocate, Suman Yadav, Advocate, Aditya Sarin, Advocate, Shobhit Ahuja, Advocate, Sonal Gupta, Advocate, Manu Bajaj, Advocate, Nitika Pandey, Advocate, Dhruv Mehta, Advocate, Anuj Berry, Advocate, Abhik Chakraborty, Advocate, Shikhar Mehra, Advocate, Keith Varghese, Advocate, Sanjay Jain, Advocate, Saleem Hasan, Advocate, Rohit Dahiya, Advocate, Aditya Dewan, Advocate, Siddharth Chechani, Advocate, Ferida Satarawala Chopra, Advocate, Aashish Gupta, Advocate, Varun Byreddy, Advocate, Akhil Sibal, Advocate, Varun Mishra, Advocate, Pradyuman Kaistha, Advocate, Vipin Tyagi, Advocate, Pratyush Miglani, Advocate, Nikhil Varma, Advocate, Smriti Varma, Advocate, Archana Lakhotia, Advocate, Basit K Zaidi, Advocate
A status quo order passed by a court is intended to protect all of the assets of the parties to the proceedings, including assets that are encumbered by a prior charge.
Headnote:
ARBITRATION AND CONCILIATION ACT, 1996 - SECTION 48 - ENFORCEMENT OF FOREIGN AWARD - STATUS QUO ORDER - MODIFICATION - SARFAESI ACT - APPLICABILITY - AUCTION OF MORTGAGED PROPERTY - COURT COMMISSIONER - APPOINTMENT.
Fact of the Case:
Yes Bank Limited (YBL) sought to auction a parcel of land owned by Judgment Debtor No. 19 (JD-19) to recover outstanding dues under a loan agreement. The Decree Holder (DH) filed an application seeking to restrain the auction, claiming that the subject property was covered by a status quo order passed by the court. YBL filed an application seeking modification of the status quo order, arguing that the subject property was not covered by the order and that it had a prior charge over the property under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act). M/s Fortis Hospitals Ltd. (FHsL) filed an application seeking impleadment in the proceedings, claiming to have a charge over the subject property.
Finding of the Court:
The court held that the status quo order passed on 26.02.2018 was applicable to the subject property and that YBL was not entitled to auction the property without obtaining the leave of the court. However, the court also held that YBL had made out a case for modification of the status quo order and that the subject property was not covered by the order. The court further held that the SARFAESI Act was applicable to the subject property and that YBL had a prior charge over the property. The court also held that the sale proceeds from the auction of the subject property should be deposited with the Registrar General of the court until further orders.
Issues: 1. Whether the status quo order passed on 26.02.2018 was applicable to the subject property? 2. Whether YBL had made out a case for modification of the status quo order? 3. Whether the SARFAESI Act was applicable to the subject property? 4. How should the sale proceeds from the auction of the subject property be appropriated?
Ratio Decidendi: 1. The status quo order passed on 26.02.2018 was applicable to the subject property because the order was intended to protect all of the assets of the JDs, including the subject property. 2. YBL had made out a case for modification of the status quo order because the subject property was encumbered by a prior charge in favor of YBL and the order was causing hardship to YBL. 3. The SARFAESI Act was applicable to the subject property because the property was mortgaged to YBL and YBL was a secured creditor under the Act. 4. The sale proceeds from the auction of the subject property should be deposited with the Registrar General of the court until further orders because there were allegations that YBL and the JDs had colluded to dilute the JDs' assets and render the award unenforceable.
Final Decision: The court allowed YBL's application for modification of the status quo order and dismissed the DH's application for an injunction to restrain the auction. The court also dismissed FHsL's application for impleadment. The court directed that the sale proceeds from the auction of the subject property be deposited with the Registrar General of the court until further orders.
JUDGMENT
Rekha Palli, J. - E.A. 625/2020, E.A. 668/2020 & E.A. 815/2020
1. The present decision disposes of E.A. Nos. 625/2020, 668/2020 and 815/2020 all pertaining to the proposed auction by Yes Bank Limited (hereinafter referred to as ''the Bank'' or ''YBL'') of the parcel of land admeasuring 12 bigha out of the 2.5 acres of property owned by in Khasra Nos. 288-290 situated in the village of Gadaipur, Tehsil Hauz Khas, Mehrauli, New Delhi (hereinafter referred to as ''subject property'') which is owned by the Judgment Debtor No. 19 (JD-19). The first application, E.A. 625/2020 has been filed by the Decree Holder (DH) seeking to restrain the auction. The second application, E.A.668/2020 has been filed by YBL seeking modification of the order dated 26.02.2018 passed by this Court whereunder JD-19 was directed to maintain status quo with respect to all its assets. The third application, E.A.815/2020 has been preferred by M/s Fortis Hospitals Ltd.(FHsL) seeking impleadment in EA 625/2020 on the ground that being a creditor of JD-19, it also has a right over its assets and that all claims of FHsL arising therefrom ought to be considered before permitting sale of the subject property by auction.
2. Now, the necessary facts as culled out from the copious volumes of pleadings placed on record may be noted next :
i. On 14.11.2012 a dispute between the Decree Holder (DH) and the Judgment Debtors (JDs), arising out of the Share Purchase and Share Subscription Agreement executed between them on 11.06.2008, was referred to arbitration. The arbitration was held in Singapore and led to the passing of an award dated 29.04.2016 which held the DH entitled to receive a sum of approximately INR 3500 crores, which amount comprised of a principal sum of INR 2562 crores besides interest and costs.
ii. Pursuant thereto, the DH approached this Court by instituting the present enforcement petition on 23.05.2016, while the JDs challenged the award before the competent courts at Singapore. Notice in this petition was issued on 24.05.2016. On this date, although no interim protection orders were passed, the JDs tendered an assurance through the learned senior counsel appearing on their behalf that they would protect the interest of the DH to the extent of the total sum awarded under the arbitral award and that there would be no fait accompli. This assurance was, however, not recorded in the order dated 24.05.2016 at the behest of the learned senior counsel for the JDs who had sought to explain this request as a way to prevent any adverse impact on the JDs'' interests in the share market. It was pleaded that since most of the JDs'' clients were members of the stock exchange, such a statement may have the effect of diluting the value of their assets, which could possibly compromise this proceeding.
iii. On 25.07.2016, this Court directed the JDs to file affidavits disclosing their assets, which direction was reiterated on 22.08.2016 and 04.11.2016. Consequently, on 02.12.2016, some of the JDs, including JD-19 who owns the subject property, filed their respective affidavit of assets before this Court in sealed covers. The affidavit of JD-19, besides disclosing other assets as held by it on 31.03.2016, also disclosed its ownership over the property being Khasra Nos. 288-290 situated in the village of Gadaipur, Tehsil Hauz Khas, Mehrauli, New Delhi admeasuring 2.5 acres approximately.
iv. On 06.03.2017, in response to the grievance raised by the DH that JD Nos. 14 and 19 had not fully disclosed their assets, the Court granted these JDs one more week to furnish an additional affidavit bearing complete particulars of all their unencumbered assets. In compliance with these directions, both these JDs filed additional affidavits on 14.03.2017 disclosing their unencumbered assets. Pertinent to this decision is the affidavit filed by JD-19 which was accompanied by a certificate issued by its Chartered Accountant on 06.02.2017 to the effect that as on 31.12.2016, the
