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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Shipra Estate Limited - Appellant
Versus
Indiabulls Housing Finance Limited & Ors. - Respondents
Original Miscellaneous Petition (I) (COMM.) No. 213, 222, 225 of 2021, Miscellaneous Application No. 12291 of 2021
Decided On : 08-11-2021
Pledge Shares - Arbitration and Conciliation - 1996 - Section 9 - 2, 8, 10, 14, 16, 17, 18, 20, 22, 23, 25, 26, 27, 28, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55 - The court discussed the invocation of pledge in respect of the Pledged Shares and the invocation of security interests in the Property. The court found that the sale of the Pledged Shares was not required to be interdicted despite being sold at an under-value and in a non-transparent manner, as the invocation of pledge had become final and any dispute regarding the value of the shares could be adjudicated by the Arbitral Tribunal. The court also noted that any dispute regarding the value of the Pledged Shares and the agreement to accept the consideration for the Property in full and final settlement of all dues would be required to be adjudicated by the Arbitral Tribunal.
Fact of the Case:
The Borrowers sought financial assistance from Indiabulls and it sanctioned loans in favor of the Borrowers. The Borrowers executed Pledge Agreements in terms of which shares of certain group companies were pledged to secure the loans advanced by Indiabulls. Initial controversy arose between the Shipra Group of entities and Indiabulls, as the security in respect of the immovable properties was impaired. Indiabulls issued Loan Recall Notices and a notice communicating its intention to invoke the pledge in respect of the Pledged Shares. The Borrowers and Kadam filed petitions under Section 9 of the A&C Act seeking orders restraining Indiabulls from transferring/selling/alienating the shares pledged in its favor. The petitions were dismissed, and the Borrowers and Kadam filed appeals against the judgment.
Finding of the Court:
The court found that the sale of the Pledged Shares was not required to be interdicted despite being sold at an under-value and in a non-transparent manner, as the invocation of pledge had become final and any dispute regarding the value of the shares could be adjudicated by the Arbitral Tribunal. The court also noted that any dispute regarding the value of the Pledged Shares and the agreement to accept the consideration for the Property in full and final settlement of all dues would be required to be adjudicated by the Arbitral Tribunal.
Issues: The main issues were the invocation of pledge in respect of the Pledged Shares, the sale of the Pledged Shares at an under-value and in a non-transparent manner, and the agreement to accept the consideration for the Property in full and final settlement of all dues.
Ratio Decidendi: The court held that the sale of the Pledged Shares was not required to be interdicted despite being sold at an under-value and in a non-transparent manner, as the invocation of pledge had become final and any dispute regarding the value of the shares could be adjudicated by the Arbitral Tribunal. The court also noted that any dispute regarding the value of the Pledged Shares and the agreement to accept the consideration for the Property in full and final settlement of all dues would be required to be adjudicated by the Arbitral Tribunal.
Final Decision: The court dismissed the petitions and disposed of all pending applications, reserving all rights and contentions of the parties. The court clarified that all observations made were only prima facie and solely for the purposes of the petitions.
JUDGMENT
Vibhu Bakhru, J. - Introduction
1. The petitioners have filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter the A&C Act) inter alia, praying that Indiabulls Housing Finance Limited (arrayed as respondent no. 1 in these petitions and hereafter referred to as Indiabulls) be restrained from giving effect to the Legal Notice dated 03.07.2021 (hereafter the impugned notice) for the sale of 100% of the equity shares of Kadam Developers Private Limited (hereafter Kadam).
2. Kadam is a wholly owned subsidiary of Shipra Estates Limited (hereafter SEL). SEL held 9,800/- shares constituting 98% of the issued and paid-up equity shares of Kadam. Mohit Singh and Bindu Singh, two individuals, held 100 equity shares each of Kadam constituting the balance 2% of the issued equity shares as nominees of SEL. Kadam is also a part of the Shipra group of companies. The shareholders of Kadam (SEL, Mr Mohit Singh and Ms Bindu Singh) pledged their equity shareholding in Kadam (hereafter the Pledged Shares) to secure financial loans extended by Indiabulls to SEL, Shipra Leasing Private Limited (hereafter SLPL) and Shipra Hotels Limited (hereafter SHL). SEL, SLPL and SHL are collectively referred to as the Borrowers.
3. By the impugned notice, Indiabulls informed Kadam, Ms Bindu Singh and Mr Mohit Singh that it had sold the entire one hundred percent shares of Kadam to Creative Souls Technology India Private Limited, (hereafter Creative), which was a group company of M3M India Private Limited (hereafter M3M), in terms of a Share Sale Purchase Agreement dated 01.07.2021 for a sum of Rs. 900 crores.
4. Essentially, the petitioners seek that the said transaction be interdicted.
5. The present petitions were initially heard along with a petition filed by DFL Home Developers Limited (hereafter DLF) under Section 9 of the A&C Act [DFL Home Developers Limited v Shipra Estate Limited and Others: OMP(I) (Comm) 209/2021] whereby DLF had inter alia sought an order restraining Indiabulls and Kadam (and its shareholders) from alienating or creating any third party rights in a land admeasuring 73 acres [2,95,421 square meters] situated in Section 128, Noida, District Gautambudh Nagar, Uttar Pradesh (hereafter the Property)
Factual background
6. On 31.03.2008, Kadam entered into a sub-lease agreement along with Jaypee Infratech Limited and Jaiprakash Associates Limited in respect of the Property. In terms of the said sub-lease agreement, Kadam enjoyed absolute and unrestricted right, title and interest in respect of the Property. The property constitutes the sole substantial asset of Kadam and admittedly it owns no other tangible asset.
7. The Borrowers sought financial assistance from Indiabulls and it sanctioned fourteen separate loans aggregating Rs. 2,478 crores in favour of the Borrowers. Eight loans were sanctioned in favour of SEL; four loans were sanctioned in favour of SHL; and two loans were sanctioned in favour of SLPL. It is stated by the petitioners that against the aforesaid sanctioned loans, Indiabulls disbursed an aggregate amount of Rs. 1,686.15 crores to the Borrowers. It also claimed that the Borrowers have since paid a sum of Rs. 759 crores for repayment and servicing the aforesaid loans. In terms of the subject Loan Agreements, it was agreed that security interest would be created in favour of Indiabulls in respect of various assets, including by mortgage of immovable properties, pledge of shares, hypothecation of certain assets and personal guarantees by the promoters. In terms of the Loan Agreements, the Borrowers executed twenty-two separate Pledge Agreements in terms of which shares of certain group companies were pledged to secure the loans advanced by Indiabulls. In terms of the Pledge Agreements, 100% shares of Kadam; 25% shares of SEL; 100% shares of SHL; 100% shares of SLPL; 100% shares of Verve Homes Private Limited; and 100% shares of Regalia Properties Private Limited, were pledged in fa
AI
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