Full Text
HIGH COURT OF DELHI
JUDGMENT
MR.AUGOUSTINOS PAPATHOMAS ..... Plaintiff
Through Mr.Abhinav Vashisht, Sr. Adv. with Mr.Rajshekhar Rao and Mr.Amit Singh Chauhan, Advs.
Through Mr.Amit Sibal Sr. Adv with Mr.Jayant Mehta, Mr.Nitin Wadhwa, Mr.Prateek Sisodia, Mr.Kumar Sambhav and Mr.Saurabh Batra, Advs. for D-1, and D-3 to D-10
Mr.Anupam Lal Das, Adv. for D-2 Mr.Rajiv Nayar, Sr. Adv. with Mr.Ranendra Barot, Mr.Ashim Sood, Mr. Atul N. and Ms.Apoorva
Gupta, Advs. for D-16 Mr.Arvind Nigam, Sr. Adv. with Mr.Amit
Kr.Mishra, Ms. Etisha Srivastava, Mr.Akshat Hansaria, Mr. Yash Kumar, Mr.Mihil Sarda and
Mr.Mehtab Singh Sandhu, Advs. for D-17 Mr.Siddharth Dutta and Mr.Davesh Kumar
Chauvia, Advs. for D-18 Mr.Sameer Kumar and Ms.Nidhi Sahah, Advs. for
D-19 Mr.Sandeep Sethi, Sr. Adv. with Mr.Vijay Nair and
Mr. Manoranjan Sharma, Adv. for D-20.
1. By this order I will dispose of IA No. 14239/2018 filed by the plaintiff and other connected applications.
2. This suit is filed seeking following reliefs: “a. Grant leave to the plaintiff under Order II Rule 2 of the Code of Civil Procedure, 1908 to sue for any additional relief against the defendants herein or any other person(s) in terms of the application being filed along with the present suit; b. Pass a decree of declaration declaring that any and all the securities and or documents whatsoever such as power of attorneys, non-disposable undertakings, charge on assets, encumbrance, mortgage, lien, pledge of shares, etc. already created / sought to be created by the defendant Nos.[1] to 15 in favour of defendant No. 16 to 19 or any other person or entity pursuant to and/or in furtherance of the Facility Agreement dated 14.05.2018 or any other agreement are non-est, null and void: c. Pass a decree of declaration declaring all terms and conditions of the Facility Agreement dated 14.05.2018 by which the defendants No.1 to 15 have undertaken to create securities in relation to their assets, properties as non-est, null and void; d. Pass a decree of permanent injunction directing the defendants Nos.[1] to 15 not to pledge, mortgage, encumber, dispose of, sell or alienate any of their assets, shares, properties (moveable and immovable), in any manner whatsoever without obtaining the prior written permission of the Receiver of the plaintiff; e. Pass a decree of permanent injunction directing the defendant Nos.[1] to 15 not to enter into any new contract, agreement, loan agreement, financing agreement of any kind without obtaining the prior written permission of the Receiver of the plaintiff; f. Pass a decree of permanent injunction directing the defendant Nos.[1] to 15 not to give effect to any security, mortgage, pledge, lien, charge, encumbrance already created in favour of the defendant Nos. 16 to 19 or any other person or entity in furtherance of the Facility Agreement dated 14.05.2018 or any other agreement.”
3. The case of the plaintiff is that the said plaintiff, i.e., S.A.R.E. Public Company Limited (hereinafter referred to as SARE) is a company exiting under the laws of Cyprus. It is originally incorporated under the laws of the Isle of Man and is presently continuing and existing under the laws of the Republic of Cyprus. The present suit is filed by Sh.Augoustinos Papathomas who is appointed as a Receiver and Manager by defendant No.20 (hereinafter referred to as Wafra) of all the secured assets of the said plaintiff company.
4. The case of the plaintiff is that in 2011 defendant No.20 invested 50 million USD in convertible bonds issued by SARE i.e. the plaintiff through one of its managed funds. The funds were to be utilized by SARE solely or indirectly through its controlled subsidiaries to acquire, develop and sell middle-income residential projects across India, including high rise apartments, groups and row housing and gated communities. The said plaintiff and defendant No.20 executed a Secured Convertible Bond Purchase Agreement (hereinafter referred to as the ‘Purchase Agreement’) dated 28.04.2011. Thereafter, defendant No.20 purchased SARE‟s Series A Secured Convertible Bonds due 2013, subject to the terms and conditions of the Purchase Agreement. The initial scheduled maturity date was agreed to be 25.05.2013. It is the case of the plaintiff that the said agreement was executed by the plaintiff company on behalf of all its subsidiaries and itself. List of subsidiaries of the plaintiff company and their assets were specifically made part of the purchase agreement. It is further stated that the said two parties entered into several other supporting/ancillary agreements, which were forming part of the composite transaction entered into between them. The purpose of the supplementary and ancillary agreements was only to aid the execution and performance of the purchase agreement, which is the principal/mother agreement. Reliance is also placed on the Debenture dated 28.04.2011 executed between the plaintiff company and defendant No.20. The Debenture provides that security created under the debenture becomes enforceable upon occurrence of an event of default and upon security becoming enforceable. In that eventuality, defendant No.20 has the rights to appoint a receiver to perform various functions as stated in the Debenture.
5. Subsequently, the plaintiff which was registered in the Isle of Man was registered as a company continuing to exist in the Republic of Cyprus. The parties executed a supplementary agreement dated 22.02.2013 so that the Re-domiciliation of the plaintiff in the Republic of Cyprus is duly recorded.
6. The plaintiff was unable to adhere to the scheduled maturity date i.e. 25.05.2013, it requested defendant No.20 for an extension for payment of the amount due and payable. The said request was accepted and the time period for making repayment was extended up to 25.05.2015. It is pleaded that as on 30.06.2018 based on the information made available, an aggregate amount of USD 60,162,463 (approximately Rs.436,17,78,571/-) is payable by the plaintiff to defendant No. 20 on account of outstanding bonds.
7. Defendant No. 20 issued Notice of Events of Default and Reservation of Rights on 17.05.2018. It is stated that despite this notice, there has been default on the part of the SARE Group. Accordingly, it is stated that defendant No.20 exercised its rights to appoint a receiver in terms of the Debenture dated 28.04.2011. Defendant No.20 has appointed Mr.Augoustinos Papathomas as Receiver and Manager of all the secured assets of the plaintiff Company on 10.08.2018.
8. It is the case of the plaintiff company that defendants No.1 to 15 are all inter-related and they form part of the SARE Group and are chain subsidiaries of the plaintiff company. The plaintiff i.e. SARE being the Parent/Holding company of SARE Group, defendants No.1 to 10 are the subsidiaries of the plaintiff company in India. Defendants No.11 to 14 are the subsidiaries of the plaintiff company in Cyprus whereas defendant No.15 is a subsidiary of the plaintiff company in Singapore. It is pleaded that defendants No.1 to 15 are controlled subsidiaries/joint ventures of the plaintiff company and together form one single economic entity. It is also pleaded that shareholding pattern of the SARE Group shows the extent and manner the subsidiaries are bound to the parent company.
9. It is reiterated that the SARE group is a single economic entity. The secured assets/securities of the plaintiff in terms of the Debenture dated 28.04.2011 includes interest over the properties of the subsidiaries as the same are directly or indirectly owned by the plaintiff. It is pleaded that on a conjoint and meaningful reading of the Debenture along with purchase agreement, it is clear that the subsidiaries, namely, defendants No. 1 to 15 are also governed by the Debenture. It is stated that the circumstances in which they have entered into the agreement reflect a clear intention to bind the signatory and non-signatory entities within the group. It is pleaded that defendants No. 1 to 15 cannot encumber or charge, etc. their assets without prior permission of the plaintiff/receiver.
10. It is pleaded that presently, there has been one transaction done by the subsidiaries contrary to the terms of the agreement between the plaintiff and defendant No. 20. However, it is apprehended that other financial facilities are proposed to be sought by the plaintiff and its subsidiaries i.e. defendants No. 1 to 15 without a prior written permission/consent of the plaintiff‟s Receiver.
11. It is further stated that the plaintiff‟ receiver has gained knowledge of the fact that a Facility Agreement dated 14.05.2018 has been executed amongst, defendant No.3, defendants No.15 and 16 in pursuance of which a loan facility for an aggregate amount of Rs.100 crores was proposed to be advanced by defendants No.15 and 16 to defendant No.3/SARE Gurugram. To secure the said loan facilities being availed by defendant No.3, the securities proposed to be created in terms of the Facility Agreement suggested various areas including Village Lodivali and Indore. Other such agreements are also said to have been executed. Hence, it has emerged that defendant 3 has availed/proposed to avail the financial facility by illegally encumbering its properties.
12. It is further stated that the plaintiff is aware that defendant No.20 has also initiated legal proceedings against the plaintiff before the Hon‟ble Supreme Court of the State of New York, County of New York claiming a sum of USD 64,064,696. Interim order is also said to have been passed on 13.08.2018 by the said court whereby the plaintiff and its subsidiaries have been restrained from selling, pledging, encumbering or in any manner disposing of any assets in which SARE and its subsidiaries have interest. The order was subsequently confirmed on 04.09.2018. It is pleaded that the plaintiff‟s receiver has a genuine apprehension that defendants No.1 to 15 in a bid to frustrate the order may alienate and also give effect to previous agreements to alienate/encumber their properties. It is pleaded that such an act would have grave and severe repercussions on the assets of the SARE Group. Hence, the suit.
13. Various defendants have filed their written statements. Defendants No.1, 3 to 10 have filed a single written statement. They have raised various objections in their written statement as to why the suit is not maintainable/ is without merit stating as follows: i) As per clause 20(2) of the Purchase Agreement dated 28.04.2011 executed between the plaintiff and defendant No.20, the courts of the State of New York, USA have the exclusive jurisdiction to settle the disputes and determine any suit, action or proceedings. It is stated that as the plaintiff and defendant No.20 have chosen a foreign court as the court of jurisdiction and have thus ousted the jurisdiction of Indian courts, hence a suit brought in Indian courts to try the subject matter must be rejected. ii) It is further stated that in any case the suit pertains to the rights of defendant No.20 in immoveable properties. However, none of these immoveable properties owned by defendants No.1 to 10 are located within the territorial jurisdiction of this court. Hence, it is stated that even otherwise this court lacks territorial jurisdiction to entertain the present suit. iii) It is further stated that the plaintiff has failed to plead any legal rights against the answering defendants. The plaintiff has placed reliance on clause 12 of the Purchase Agreement i.e. the plaintiff has undertaken that so long as the bonds are outstanding, the plaintiff shall not itself, and shall cause each of its subsidiaries not to, directly or indirectly, create any lien upon their properties, assets or revenues. It is stated that the clause creates an obligation on the plaintiff and not on the answering defendants. There is no legal or contractual obligation of the answering defendants. iv) It is further stated that attorney holder Mr.Augoustinos Papathomas has not been validly authorized to file the present suit. The special power of attorney signed by the receiver is neither stamped nor registered under the laws of India. v) The present suit, it is pleaded is a surrogate action on behalf of defendant No.20 and seeks to circumvent the exclusive jurisdiction clause. vi) It is further stated that answering defendants are engaged in the business of real estate projects. The answering defendants have eight projects where approximately 15,000 apartments are under construction in Gurgaon, Ghaziabad, Amritsar, OMR Chennai and Kolathur Chennai. Based on this, they have 8,000 customers. It is stated that the answering defendants are separate and distinct legal entities and the plaintiff by virtue of its shareholding, would not be entitled to claim the assets of its step-down subsidiaries. The plaintiff could not have validly entered into contracts on behalf of answering defendants, much less encumber assets on their behalf in the absence of any specific authorization. There is no board resolution passed by any of the answering defendants to authorize the concerned director of the plaintiff to sign on behalf of subsidiaries. Hence, it is pleaded that the Purchase Agreement does not bind the defendants. vii) It is further pleaded that the nature of interest that seems to have been sought by defendant No. 20 from the plaintiff on behalf of the answering defendant is not permissible under the Indian Law. It is stated that the answering defendant cannot under the FEMA give a surety in respect of a person resident outside India. Such a clause would be illegal. viii) It is further stated that the defendants have raised a number of loans for execution of the real estate projects including from defendants No. 16 and 17 and have created encumbrances over assets as security for such loans. It is further stated that as and when, the aforesaid loans were availed of for execution of the real estate projects, the same were brought to the notice of the plaintiff and defendant No. 20. The said entities were fully aware of such loans being availed by the answering defendants. It is pointed out that defendant No.3 entered into a facility agreement dated 14.05.2018 with defendants No. 16 and 17 for an aggregate additional loan of Rs.100 crores. Defendants No. 1 to 13 as shareholder of defendants No. 1 and 2 committed to create certain securities/encumbrances over the assets of defendants No. 1 and 2. It is stated that this is only an additional facility pursuant to extension of an existing long standing borrowing of Rs.530 crores which defendants No. 16 and 17 granted in the month of November 2016. It is pleaded that the borrowing was in the ordinary course of business and the same was to the knowledge and awareness of the plaintiff and defendant No. 20. No objection was raised by defendant No.20 or the plaintiff at any stage.
14. Defendants No.16 and 17 have also filed their written statement taking broadly the same stand. It has been pleaded by the said defendants as follows: i) There is collusion and connivance between the plaintiff and defendant No.20. The plaintiff is seeking relief not for itself but for defendant No.20 by restraining the defendants from creating any encumbrance over its assets. ii) It is pleaded that that this court does not have territorial jurisdiction. The purchase agreement has accorded the jurisdiction only to the courts of the State of New York, USA as appropriate courts. The debenture provides for jurisdiction to the courts at Isle of Man which was later amended on 01.02.2016 to give jurisdiction to the court of the Republic of Cyprus. Hence, this suit is not maintainable. iii) Defendants No.1 to 15 are not the signatories to the Purchase Agreement and there is no privity of contract between defendant No.20 and defendants No.1 to 15.
15. I may note that IA No.14239/2018 is filed by the plaintiff company under Order 39 Rules 1 and 2 CPC seeking ex-parte injunction to restrain defendants No.1 to 15 from pledging, mortgaging, encumbering, disposing of, selling or alienating any of their assets and shares or properties in any manner whatsoever without prior permission of the receiver of the plaintiff. This court on 12.10.2018 passed an interim order restraining defendants No.1 to 10 from creating any encumbrance/charge or lien or mortgage of any of their assets, shares, properties to any third party till the next date. Defendants No.16 and 17 were also restrained from giving effect to the Facility Agreement dated 14.05.2018 to the extent of their taking lien charge, security, mortgage or pledge of any of the assets of defendants No.1 to 15 till the next date. The above order was modified on 01.11.2018 to state that the said order is not applicable to the sale of the flats/units by defendants No.1 to 10 to any individual/buyer. Further the defendants can take steps in the ordinary course of business. IA 15097/2018 is filed by defendant No.17 under Order 39 Rule 4 CPC seeking to vacate the interim order dated 12.10.2018. IA 15130/2018 is filed by defendant No.16 under Order 39 Rule 4 CPC seeking the same relief. IA 15149/2018 is filed by defendants No.3 to 10 under Order 39 Rule 4 CPC seeking vacation of the interim order.
16. Subsequently after arguments were heard in the aforenoted IAs, defendant No.3 moved an application being IA No. 11779/2019 seeking a clarification of the interim order dated 12.10.2018 that it does not prohibit creation of any encumbrance, charge, lien or mortgage on the existing assets of the applicant that have already been encumbered, charged or mortgaged to the extent that such an act may secure additional borrowings by the applicant from any lender including defendants No. 16 and 17. In this application, it was pleaded that on account of acute financial condition, there is a need to raise additional finance from defendants No. 16 and 17, etc. so as to enable the applicant/defendant No.3 to complete its ongoing real estate projects that has 1357 customers who are waiting delivery of their apartments. It is pleaded that the plaintiff has failed to infuse funds or capital into the applicant and that the work of real estate has come to a halt and salaries, payment of the contractors, etc. have been withheld. It is stated that legal actions have been initiated against the said defendant No.3 before various authorities including RERA, NCLT, etc. Arguments were heard on this application and judgment was reserved on 16.10.2019.
17. I have heard learned senior counsel/counsel for the parties.
18. Learned senior counsel appearing for the plaintiff has submitted as follows stressing that the interim order passed on 12.10.2018 be confirmed:-
(i) It is pleaded that the SARE Group consists of the plaintiff and its subsidiaries, namely, defendants No. 1 to 15. The plaintiff is the parent/holding company of the entire SARE Group. The said Group is a single economic entity as the business of the entire Group is being carried out in such a manner. Defendants No. 1 to 10 are controlled subsidiaries of the plaintiff. Defendants No. 11 to 14 are controlled subsidiaries of SARE in Cyprus. Defendant No. 15 is a controlled subsidiary of SARE Group in Singapore. It is stated that due to the structure of the SARE Group where all investments are transferred by the plaintiff into its controlled subsidiaries, the valuation of the SARE Group and the value of the shares of the subsidiaries is based on open market value of the Group‟s Property Portfolio.
(ii) It is further stated that defendant No.20 had invested USD 50 million in convertible bonds issued by the plaintiff to be utilized by the plaintiff solely or indirectly through its controlled subsidiary to acquire, develop and sell middle income residential projects across India. A purchase agreement for secured convertible bonds was entered into along with other several ancillary agreements. It is pleaded that under Clause 12.[1] of the said agreement, the entire SARE Group, namely, the plaintiff and its subsidiaries were barred from creating any lien/pledge/encumbrances/charge or any third party right on its assets. It is stated that the said agreement dated 28.04.2011 was executed by the plaintiff for itself and on behalf of its subsidiaries. Hence, it is stressed that defendants No. 1 to 15 are barred from creating any lien/pledge/encumbrance on their properties until the time bonds‟ amount payable to defendant No. 20 remains outstanding. It is claimed that as on 30.06.2018, an aggregate amount of USD 60,162,463.05 is due and payable by the plaintiff to defendant No.20 on account of outstanding bonds. It is further stated that defendants No. 1 to 15 have made a categorical admission that they have been providing information in relation to its structure, future projects, financial statements, etc. to defendant No. 20 in compliance with Clause 10 of the Purchase Agreement. It is pleaded that the conduct of these companies which form part of the SARE Group clearly establishes privity between the Indian Subsidiaries and the plaintiff as far as the obligations under the Purchase Agreement dated 28.04.2011 are concerned. Further, it is pleaded that despite having knowledge about the Purchase Agreement dated 28.04.2011 executed by the plaintiff for and on behalf of defendants No. 1 to 15, none of the said defendants took any step regarding seeking a declaration that they are not bound by the terms of the said Purchase Agreement.
(iii) It is pleaded that in complete violation of the said Purchase Agreement dated 28.04.2011, the SARE Group has entered into a financing arrangement with lenders such as defendants No. 16 and 17. A Facility Agreement dated 14.05.2018 has been executed by defendant No. 3, defendant No. 16 and defendant No. 17. Pursuant to this, a loan facility of Rs. 100 crores was proposed to be advanced to defendant No. 3. In order to secure the said loan facility, a security of the assets of defendant No. 3 and other subsidiaries are proposed to be created in terms of the Facility Agreement. Hence, it is stated that the present suit is filed seeking a declaration that the securities created by defendants No. 1 to 15 in favour of defendant No. 16 or defendant No. 17 are non-est, null and void. The plaintiff also seeks directions to restrain defendants No. 1 to 15 from disposing off/selling/mortgaging their immovable properties.
(iv) It is further pleaded that the defendants against who orders are sought are situated in and carrying on business within the territorial jurisdiction of this court. A part of the cause of action for filing of the present suit arises within the jurisdiction of this court as the Facility Agreement dated 14.05.2018 has been executed within the territorial jurisdiction of this court. Further, registered offices of various defendants fall within the jurisdiction of this court
19. Learned senior counsel appearing for defendants No. 1 to 10 submits as follows to plead that the interim order be vacated:-
(i) It has been urged that the present suit is not maintainable as this court does not have the jurisdiction to try the same. It is pleaded that as per Clause 20.[2] of the Purchase Agreement, the courts of the State of New York and the courts of the USA shall have the exclusive jurisdiction to settle any dispute and to hear and determine any suit, action or proceedings. It is hence pleaded relying upon the judgment of the Supreme Court in the case of Modi Entertainment Network and Anr. vs. W.S.G. Cricket PTE. Ltd., (2003) 4 SCC 341 to contend that where the parties have agreed to submit to the exclusive jurisdiction of a foreign court, the same would oust the jurisdiction of the Indian Court and the suit filed in Indian courts would stand rejected. Reliance is also placed on the judgment of a Coordinate Bench of this court in the case of M/s. Gupta Pigments & Chemicals Pvt. Ltd. vs. Natpar Lines (S) PTE Ltd.& Anr., 2011 (176) DLT 176.
(ii) It is further stated that even otherwise this suit is not maintainable for lack of territorial jurisdiction. The suit pertains to the alleged rights of defendant No. 20 in the immovable properties. However, none of the immovable properties owned by defendants No. 1 to 10 are located in the territorial jurisdiction of this court. Hence, it is pleaded that this court does not have the territorial jurisdiction to try this suit.
(iii) It is further stated that the plaintiff through the Receiver appointed by defendant No. 20 has no locus standi to file the present suit. It is pleaded that the Receiver is actually acting as a front for defendant No. 20 and has not filed the suit to safeguard any interest of the plaintiff. The present action is a surrogate action on behalf of defendants No. 20
(iv) It is further pleaded that the defendants are not parties to the Purchase
Agreement and hence, are not bound by the Purchase Agreement dated 28.04.2011. It is stated relying upon the judgment of the Supreme Court in the case of Vodafone International Holdings BV vs. Union of India & Anr., 2012(6) SCC 613 that subsidiaries are separate and distinct legal entitles. A holding company does not own the assets of a subsidiary. Defendants No. 1 to 10 own the properties in question and the same cannot be a subject matter of any agreement executed by the plaintiff. Hence, defendants No. 1 to 10 are not bound by the terms of the Purchase Agreement dated 28.04.2011.
(v) It is further pleaded that the alleged agreement creating a charge or security over the assets of the applicants is unenforceable. Reliance is placed on the Foreign Exchange Management (Guarantees) Regulations 2000 to submit that the same prohibits a person resident in India from giving a security to a person resident outside India.
(vi) It is further pleaded that mere undertaking by a party not to dispose of the properties during the pendency of the loan does not create any charge over the properties. Reliance is placed on the judgment of the Supreme Court in the case of Haryana Financial Corporation vs. Gurcharan Singh and Anr., (2014) 16 SCC 722. It is also pleaded that the Purchase Agreement dated 28.04.2011 has not been registered. Any purported charge or security created is unenforceable. Reliance is placed on Sections 17 and 49 of the Registration Act, 1908.
(vii) It is further stated that the interim order passed by this court has an adverse effect on the business of the defendants who are currently developing five projects in various cities. Out of 9030 units launched by the defendants, 6667 units have been sold and 4539 units have been delivered to home buyers. 2308 units need to be constructed and delivered. It is pleaded that as the projects are ongoing projects, this court may keep the larger public interest in mind while deciding the issue of injunction.
20. Learned senior counsel for defendant No. 17 has also broadly reiterated the submissions addressed on behalf of defendants No. 1 to 10. It is reiterated that the transaction in question which has been challenged in the present proceedings took place in 2015-16. The plaintiff was fully aware about the same. A sum of Rs. 650 crores was lent in 2016-17. It is reiterated that defendants No. 1 to 10 are not barred from pledging their assets.
21. Learned counsel for defendant No. 16 has also broadly urged the same contentions. He has pleaded that three agreements have been signed in 2015- 16 and 2018. A total loan of Rs. 620/- crores has been released. He states that the entire case of the plaintiff depends on Clause 12 of the Purchase Agreement dated 28.04.2011. A reading of the same does not warrant filing of the present suit.
22. Learned senior counsel for defendant No.20 has broadly pleaded as follows:-
(i) It is pleaded that admittedly there is default in payment by the plaintiff. As on 30.06.2018, an amount of USD 60,162,463 is due and payable. By the order dated 13.08.2018 passed by the Supreme Court of the State of New York, County of New York in the matter of „Wafra Capital Partners, L.P. vs. SARE Public Company Ltd.‟, the SARE Public and its subsidiaries have been restrained from selling, encumbering or in any manner disposing of any assets in which SARE Public and its subsidiaries have interest. It is stated that the present suit is an independent and distinct action filed by the Receiver.
(ii) It is reiterated that the assets of the plaintiff include the assets of the subsidiaries/joint ventures. The said subsidiaries are privy to the agreement executed by the plaintiff and defendant No. 20. Reliance is placed on the judgment of a Coordinate Bench in the case of Utair Aviation vs. Jagson Airlines Ltd. & Anr., 2012 (129) DRJ 630 to contend that privity of the contract can be created by virtue of conduct, acknowledgement and admissions. Reliance is also placed on the judgment of the Supreme Court in the case of Cheran Properties Ltd. vs. Kasturi & Sons Ltd. & Ors., (2018) 16 SCC 413 to submit that the Group of Companies Doctrine is intended to facilitate the fulfillment of mutually held intent between the parties. It is reiterated that the SARE Group is a single economic entity and defendants No. 1 to 15 cannot wriggle out of its obligations.
(iii) On the issue of jurisdiction of this court, it is pleaded that the Purchase
Agreement has a jurisdiction clause of the courts of the State of New York, USA but there is no bar for this court to entertain the present suit. Further it is reiterated that the facility agreement dated 14.05.2018 was executed between defendant No. 3 and defendants No. 16 & 17 pursuant to the loan facility within the jurisdiction of this court. Further registered offices of various defendants fall within the territory of Delhi.
(iv) It is pleaded that the defaulter like the plaintiff and defendant No. 1
23. I now first come to the crux of the whole issue, namely, as to whether defendants No. 1 to 15 are bound by the relevant clause of the Purchase Agreement dated 28.04.2011 and can be restrained from creating any charge, mortgage, etc. on their immovable properties/assets as prayed.
24. Reference may be had to clause 12.[1] of the Purchase Agreement dated 28.04.2011 which reads as follows:- “12 NEGATIVE COVENANTS So long as any Bond remains outstanding the Issuer shall not, and the Issuer shall cause each of its Subsidiaries not to, directly or indirectly: 12.[1] Liens Create, incur, assume or suffer to exist any Lien upon any of its Property, assets or revenues, whether now owned or hereafter acquired, or sign or file or authorize the filing under the Uniform Commercial Code of any jurisdiction a financing statement (or any similar filing under the Law of any jurisdiction outside of the United States) that names the issuer or any of its Subsidiaries as debtor, or sign any pledge agreement, security agreement, debenture or any other similar agreement or instrument authorizing any secured party thereunder to file any such financing statement (or similar filing), other than a Permitted Encumbrance.”
25. In terms of the above clause, the plaintiff is barred from creating any lien, pledge, etc. on their properties etc. until the bonds in question remain outstanding. The plaintiff will also cause each of its subsidiaries not to do the same regarding its properties etc. The admitted fact is that defendants No. 1 to 15 who are the subsidiaries of the plaintiff are not signatories or parties to the Purchase Agreement dated 28.04.2011. It is the plaintiff who has been enjoined to or who has to cause each of its subsidiaries not to allow any lien on its assets and properties.
26. I may deal with the issue of relationship between a Company and its subsidiary companies. Reference may be had to the judgment of the Supreme Court in the case of Vodafone International Holdings BV vs. Union of India & Anr.(supra) where the Supreme Court held as follows: “254. The Companies Act in India and all over the world have statutorily recognised subsidiary company as a separate legal entity. Section 2(47) of the Companies Act, 1956 defines “subsidiary company” or “subsidiary”, a subsidiary company within the meaning of Section 4 of the Act. For the purpose of the Companies Act, a company shall be subject to the provisions of sub-section (3) of Section 4, be deemed to be subsidiary of another, subject to certain conditions, which includes holding of share capital in excess of 50% controlling the composition of the Board of Directors and gaining status of a subsidiary with respect to the third company by the holding company's subsidisation of the third company.
255. A holding company is one which owns sufficient shares in the subsidiary company to determine who shall be its Directors and how its affairs shall be conducted. The position in India and elsewhere is that the holding company controls a number of subsidiaries and respective businesses of companies within the group and manage and integrate as a whole as though they are merely departments of one large undertaking owned by the holding company. But, the business of a subsidiary is not the business of the holding company (see Gramophone and Typewriter Ltd. v. Stanley: (1908-10) All ER Rep 833], All ER Rep at p. 837).
256. Subsidiary companies are, therefore, the integral part of corporate structure. Activities of the companies over the years have grown enormously of its incorporation and outside and their structures have become more complex. Multinational companies having large volume of business nationally or internationally will have to depend upon their subsidiary companies in the national and international level for better returns for the investors and for the growth of the company. When a holding company owns all of the voting stock of another company, the company is said to be a WOS of the parent company. Holding companies and their subsidiaries can create pyramids, whereby a subsidiary owns a controlling interest in another company, thus becoming its parent company.
257. The legal relationship between a holding company and WOS is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary and, in law, the management of the business of the subsidiary also vests in its Board of Directors. In Bacha F. Guzdar v. CIT [AIR 1955 SC 74], this Court held that shareholders' only right is to get dividend if and when the company declares it, to participate in the liquidation proceeds and to vote at the shareholders' meeting. Refer also to Carew and Co. Ltd. v. Union of India [(1975) 2 SCC 791] and Carrasco Investments Ltd. v. Directorate of Enforcement [(1994) 79 Comp Cas 631 (Del)].
258. Holding company, of course, if the subsidiary is a WOS, may appoint or remove any Director if it so desires by a resolution in the general body meeting of the subsidiary. Holding companies and subsidiaries can be considered as single economic entity and consolidated balance sheet is the accounting relationship between the holding company and subsidiary company, which shows the status of the entire business enterprises. Shares of stock in the subsidiary company are held as assets on the books of the parent company and can be issued as collateral for additional debt financing. Holding company and subsidiary company are, however, considered as separate legal entities, and subsidiary is allowed decentralised management. Each subsidiary can reform its own management personnel and holding company may also provide expert, efficient and competent services for the benefit of the subsidiaries.
259. The US Supreme Court in United States v. Bestfoods [141 L Ed 2d 43] explained that it is a general principle of corporate law and legal systems that a parent corporation is not liable for the acts of its subsidiary, but the Court went on to explain that corporate veil can be pierced and the parent company can be held liable for the conduct of its subsidiary, if the corporal form is misused to accomplish certain wrongful purposes, when the parent company is directly a participant in the wrong complained of. Mere ownership, parental control, management, etc. of a subsidiary is not sufficient to pierce the status of their relationship and, to hold parent company liable. In Adams v. Cape Industries Plc. [(1990) 2 WLR 657], the Court of Appeal emphasised that it is appropriate to pierce the corporate veil where special circumstances exist indicating that it is mere facade concealing true facts.
260. Courts, however, will not allow the separate corporate entities to be used as a means to carry out fraud or to evade tax. Parent company of a WOS, is not responsible, legally for the unlawful activities of the subsidiary save in exceptional circumstances, such as a company is a sham or the agent of the shareholder, the parent company is regarded as a shareholder. Multinational companies, by setting up complex vertical pyramid-like structures, would be able to distance themselves and separate the parent from operating companies, thereby protecting the multinational companies from legal liabilities.”
27. Clearly, the settled legal position is that the holding company and the wholly owned subsidiary are two distinct legal entities. The holding company does not own the assets of the subsidiary.
28. There is another aspect which may be noted. Admittedly, the properties are not charged in favour of the plaintiff or defendant No. 20. Reference in this context may be had to the judgment of the Supreme Court in the case of Haryana Financial Corporation vs. Gurcharan Singh & Anr.,(supra) where the court held as follows: “13. So far as the present case is concerned, no registered mortgage deed was executed by the first respondent and no title deed of the property was handed over by the first respondent to the Corporation. The mere undertaking that a person would not dispose of the properties mentioned, during the currency of the loan, would not confer any charge on the immovable properties mentioned therein. In other words, a mere undertaking to create a mortgage is not sufficient to create an interest in any immovable property. This legal position has been settled by various judgments of this Court.
14. In K. Muthuswami Gounder [K. Muthuswami Gounder v. N. Palaniappa Gounder, (1998) 7 SCC 327] this Court was dealing with the legal validity of a security bond by which parties undertook that they would not alienate the properties till the decree was discharged. Referring the said document, this Court held as follows: (SCC p. 335, para 17)
15. In Bank of India [Bank of India v. Abhay D. Narottam, (2005) 11 SCC 520] this Court was examining the scope of undertaking made for creating an equitable charge over a flat in favour of the Bank. This Court held that without a transfer of interest, there is no question of there being a mortgage and that mere undertaking is not sufficient to create a charge. The ratio laid down by the abovementioned judgment applies to the present case. In our view, the mere undertaking that the party will not dispose of the properties mentioned in an undertaking, during the currency of the loan, will not create any charge over those properties, unless charge is created by deposit of title deeds or through a registered document. We also hold that even if the purpose of the decree obtained in Civil Suit No. 767 of 1995 between the respondents was fraudulent and collusive one so as to defeat the undertaking made on 5-3-1994, that would not confer any charge over the properties, unless the undertaking is registered. We, therefore, find no error in the judgment of the lower appellate court which was affirmed by the High Court.”
29. Hence, mere undertaking of a person that he will not dispose of his properties during the currency of the loan does not confer any charge on the immovable properties.
30. In the light of the above legal position, prima facie the plaintiff merely based on the terms of the Purchase Agreement cannot restrain defendants No. 1 to 15 from dealing with their immovable assets/assets. The Purchase Agreement between the plaintiff and defendant No. 20 is not executed by defendants No. 1 to 15. There is no commitment or promise held out by defendants No. 1 to 15 to the plaintiff that the said defendants will not deal with or encumber their immovable properties. Mere execution of the Purchase Agreement dated 28.04.2011 by the plaintiff does not prima facie oblige defendants No. 1 to 15 to abide by the terms and conditions of the purchase agreement.
31. The plea of the plaintiff however is that the entire group of the plaintiff known as SARE Group including its subsidiaries is a single economic entity and the business of the entire group is being carried out in the same manner. Reliance is placed on the judgment of the Supreme Court in the case of Cheran Properties Ltd. vs. Kasturi and Sons Ltd. & Ors. (supra). It is further pleaded that it is the own case of the defendants No. 1 to 15 that they used to provide defendant No. 20 information about their finances etc meaning thereby that they were abiding by the terms of clause 12.[1] of the Purchase Agreement dated 28.04.2011. This fact, it is pleaded, establishes the privity with defendants No. 1 to 15. Reliance is also placed on the judgment of a Coordinate Bench of this court in the case of Utair Aviation vs. Jagson Airlines Ltd. & Anr.,(supra) to plead that conduct of a party by acknowledgement and admission can also create a privity of contract. It has further been pleaded that defendants No. 1 to 15 had knowledge about the agreement and clause 12.[1] of the Purchase Agreement. However, they have taken no steps nor have sought any declaration that they are not bound by the terms of the purchase agreement.
32. I may look at the above pleas. Normally, while interpreting terms of an agreement where the terms are clear, extrinsic evidence is not admissible.
33. Reference may be had to the judgment of the Supreme Court in the case of The Godhra Electricity Co. Ltd. & Anr. vs. The State of Gujarat & Anr., (1975) 1 SCC 199 where the Court held as follows:- “16. We are not certain that if evidence of subsequent acting under a document is admissible, it might have the result that a contract would mean one thing on the day it is signed but by reason of subsequent event it would mean something a month or year later. Subsequent “interpreting” statements might not always change the meaning of a word or a phrase. A word or a phrase is not always crystal clear. 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 langauge 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 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 the word or phrase when they entered into the contract. Unanticipated situation 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......” xxx
18. In these circumstances, we do not think we will be justified in not following the decision of this Court in Abdulla Ahmed v. Animendra Kissen Mitter [AIR 1950 SC 15] where this Court said that extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning and that evidence of the acts done under it is a guide to the intention of the parties, particularly, when acts are done shortly after the date of the instrument.”
34. What follows is that where meaning of a word or phrase is clear, the usual legal position is that extrinsic evidence is not admissible. It is only when there is a latent ambiguity then extrinsic evidence in the shape of interpreting statements in which both the parties have concurred would be admissible.
35. A Coordinate Bench of this court in the case of Utair Aviation vs. Jagson Airlines Ltd. & Anr.,(supra) held as follows:- “28. A reading of the aforementioned judicial opinion coupled with well recognized exceptions that the privity can be created by virtue of conduct acknowledgment and admission, it becomes clear that any case where one party is made aware about the relationship of the other party with that of a stranger and the said party proceeds to contract out only with other party in question, knowing fully well the participation and role of the said stranger, further, it corresponds with the said third party/stranger, and conduct suggests kind of relationship, then there can be said to be a nexus or a privity which can be said to have been created by virtue of conduct. The said question essentially becomes a question of fact and basing upon the said fact finding, the law has to be necessarily applied as to whether the said person is a complete stranger to a contract or whether the privity can be said to have been created by way of conduct.
29. Therefore, the said question relating to privity having been created by virtue of conduct, acknowledgment and admission becomes a mixed question of fact and law as it requires a fact finding as well as due application of law. Furthermore, once the judicial opinion exists that courts are entitled to do justice when all are before the court, then it is unwise to reject the plaint at the threshold, considering the question of privity of contract as a pure question of law when actually the conduct of the parties and the attending circumstances reveal otherwise.” As per the above judgment, privity can be created by virtue of conduct, acknowledgement and admission. The same however being a mixed question of fact and law, the said judgment may not help the plaintiff at this stage. At best, the said judgment could be pressed after evidence to record a finding that defendants No. 1 to 15 by virtue of their conduct, acknowledgement and admission have created a privity with defendant No.20.
36. The plaintiff/defendant No.20 has also relied upon the judgment of the Supreme Court in the case of Cheran Properties Ltd. vs. Kasturi and Sons Ltd. (supra). In that case the Supreme Court held as follows:- “29. As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a group of companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and nonsignatory entities within the same group. In holding a nonsignatory bound by an arbitration agreement, the court approaches the matter by attributing to the transactions a meaning consistent with the business sense which was intended to be ascribed to them. Therefore, factors such as the relationship of a non-signatory to a party which is a signatory to the agreement, the commonality of subject-matter and the composite nature of the transaction weigh in the balance. The group of companies doctrine is essentially intended to facilitate the fulfillment of a mutually held intent between the parties, where the circumstances indicate that the intent was to bind both signatories and non-signatories. The effort is to find the true essence of the business arrangement and to unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a signatory but has assumed the obligation to be bound by the actions of a signatory.”
37. The plea of the plaintiff/defendant No.20 essentially is that defendants No. 1 to 15 have made a categorical admission by their conduct including providing information in relation to its structure, future projects, financial statements, etc. to defendant No. 20 in compliance with the Purchase Agreement. It is also stated that despite knowledge of the Purchase Agreement dated 28.04.2011, none of the said defendants took steps regarding seeking a declaration that they are not bound by the terms of the said agreement. In my opinion considering the nature of the transaction, the stated acts of defendants No. 1 to 15 on which reliance is placed by the plaintiff and defendant No. 20 prima facie, does not lead to a conclusion that there is Privity of Contract between defendants No. 1 to 15 and defendant No.20/plaintiff. No such conclusion would follow merely because some interaction took place between the defendants No.1 to 15 and defendant No.20 whereby financial or operational details were shared. A categorical finding cannot be recorded that defendants No. 1 to 15 had by their conduct or acts committed to remain bound by the terms and conditions of the Purchase Agreement dated 28.04.2011. No doubt, a conclusive finding to the above effect based on the alleged conduct of defendants No. 1 to 15 etc. can be recorded after detailed evidence is led. At this stage, in view of the limited facts on record, it is not possible to return such a finding.
38. I may now deal with another contention of some of the defendants regarding the territorial jurisdiction of this court. The argument has two fold submission. Firstly, it has been pleaded that under Clause 20.2, the courts in USA would have exclusive jurisdiction to settle and determine any dispute. It is also an admitted fact that defendant No. 20 has initiated proceedings before the appropriate court in the State of New York which are pending adjudication. Based on this, a plea is raised that this court would not have the jurisdiction to adjudicate the present suit.
39. Reference may be had to the relevant clause i.e. clause 20.[1] and 20.[2] of the Purchase Agreement dated 28.04.2011. The said clause reads as follows:- “20 GOVERNING LAW AND JURISDICTION 20.[1] Governing Law This Agreement and all matters arising from or connected with it shall be governed by, and construed in accordance with, the Internal laws of the State of New York applicable to agreements made and performed in such state without regard to conflicts of law principles thereof that would require the application of the laws of a jurisdiction other than such state. 20.[2] Jurisdiction The courts of the State of New York and the courts of the United States of America, in each case, located In the County of New York, shall have jurisdiction to settle any dispute (a "Dispute"), and to hear and determine any suit, action or proceedings ("Proceedings"), arising from or connected with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement), and the Issuer (for Itself and Its Property) and the Purchaser hereby submit to such jurisdiction in connection with any such Dispute. Each of the Issuer and the Purchaser further agree that it may not, and covenants that it shall not, institute or maintain any Proceeding arising from or connected with this Agreement other than in the courts specified in the preceding sentence. Nothing contained in this clause or anywhere else in this Agreement shall prohibit the Purchaser from maintaining a Proceeding in any jurisdiction permitted under a Security Document.”
40. The above agreement is executed between the plaintiff and defendant No.20. As per Clause 20 of the Agreement, all matters arising are to be governed and construed in accordance with internal laws of the State of New York applicable to agreements. Under Clause 20.2, the courts of the State of New York and the courts of the USA in each case located in the County of New York shall have jurisdiction to settle and to hear any suit, etc. connected with the agreement.
41. The admitted fact is that defendant No.20 has filed a suit in the Supreme Court of the State of New York, County of New York against the plaintiff. In the proceedings, Defendant NO. 20 seeks the following reliefs
42. Reference in this context may be had to the judgment of the Supreme Court in the case of Modi Entertainment Network and Anr. vs. W.S.G. Cricket PTE. Ltd., (supra) wherein the Court held as follows:- “11. In regard to jurisdiction of courts under the Code of Civil Procedure (CPC) over a subject-matter one or more courts may have jurisdiction to deal with it having regard to the location of immovable property, place of residence or work of a defendant or place where cause of action has arisen. Where only one court has jurisdiction, it is said to have exclusive jurisdiction; where more courts than one have jurisdiction over a subject-matter, they are called courts of available or natural jurisdiction. The growing global commercial activities gave rise to the practice of the parties to a contract agreeing beforehand to approach for resolution of their disputes thereunder, to either any of the available courts of natural jurisdiction and thereby create an exclusive or non-exclusive jurisdiction in one of the available forums or to have the disputes resolved by a foreign court of their choice as a neutral forum according to the law applicable to that court. It is a well-settled principle that by agreement the parties cannot confer jurisdiction, where none exists, on a court to which CPC applies, but this principle does not apply when the parties agree to submit to the exclusive or non-exclusive jurisdiction of a foreign court; indeed in such cases the English courts do permit invoking their jurisdiction. Thus, it is clear that the parties to a contract may agree to have their disputes resolved by a foreign court termed as a “neutral court” or “court of choice” creating exclusive or non-exclusive jurisdiction in it. xxx
24. From the above discussion the following principles emerge: (1) In exercising discretion to grant an anti-suit injunction the court must be satisfied of the following aspects: (a) the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court; (b) if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and
(c) the principle of comity — respect for the court in which the commencement or continuance of action/proceeding is sought to be restrained — must be borne in mind. (2) In a case where more forums than one are available, the court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum (forum conveniens) having regard to the convenience of the parties and may grant anti-suit injunction in regard to proceedings which are oppressive or vexatious or in a forum non-convenience. (3) Where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein in regard to exclusive or non-exclusive jurisdiction of the court of choice of the parties are not determinative but are relevant factors and when a question arises as to the nature of jurisdiction agreed to between the parties the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case. (4) A court of natural jurisdiction will not normally grant antisuit injunction against a defendant before it where parties have agreed to submit to the exclusive jurisdiction of a court including a foreign court, a forum of their choice in regard to the commencement or continuance of proceedings in the court of choice, save in an exceptional case for good and sufficient reasons, with a view to prevent injustice in circumstances such as which permit a contracting party to be relieved of the burden of the contract; or since the date of the contract the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of a vis major or force majeure and the like. (5) Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. (6) A party to the contract containing jurisdiction clause cannot normally be prevented from approaching the court of choice of the parties as it would amount to aiding breach of the contract; yet when one of the parties to the jurisdiction clause approaches the court of choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se be treated as vexatious or oppressive nor can the court be said to be forum non-conveniens. (7) The burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein are oppressive or vexatious would be on the party so contending to aver and prove the same.”
43. I need not dwell further into the present submission of the learned senior counsel for defendants No. 1 and 3 to 10, at this stage. It is their stand that they are not signatories to the Purchase Agreement dated 28.04.2011 and are not bound by the same. As they claim to be not bound by the said Purchase Agreement, they cannot claim that the plaintiff cannot file a suit against the defendants in view of the clauses of the same Purchase Agreement. Even otherwise, defendants No. 16 to 19 are not bound by the Purchase Agreement dated 28.04.2011 or the transaction between the plaintiff and defendant No.20.
44. The second leg of this argument of the defendants No. 1 to 15 relates to the contention that the assets which are sought to be restrained from being dealt with in the suit are all located outside Delhi and hence, under Section 16 CPC, this court would not have territorial jurisdiction.
45. In my opinion, on a prima facie reading the contention appears to the misplaced. By the present suit, the plaintiff is seeking an injunction to restrain defendants No. 1 to 15 not to pledge, mortgage, etc. the movable and immovable properties without prior permission of the Receiver of the plaintiff. A declaration is also sought that the charge created in favour of defendants No. 16 to 19 be declared non-est, null and void. The suit does not seek any relief encompassed within Section 16 of CPC. In this context reference may be had to a judgment of a Co-ordinate Bench of this Court in the case of M/s.Bab Vishwanath Buildcon Pvt. Ltd. vs. Shiv Shankar Mishra, 2013 SCC OnLine Del 3216 where the court held as follows:- “6. Thus the suit which seeks either the recovery or partition or determination of any right or interest or compensation for wrong to immovable property or for foreclosure, sale or mortgage is required to be filed where the property is situated. In the present case the Plaintiff has made no prayer with regard to the recovery of the land or determination of his right or interest in the immovable property nor the suit seeks compensation for wrong to the immovable property. Hence the territorial jurisdiction would be covered under Section 20 CPC and the suit can be filed where the cause of action wholly or in part arises. The Hon'ble Supreme Court while dealing with an issue as to what is a suit for land in Adcon Electronics Pvt. Ltd. (supra) held:
15. From the above discussion it follows that a “suit for land” is a suit in which the relief claimed relates to title to or delivery of possession of land or immovable property. Whether a suit is a “suit for land” or not has to be determined on the averments in the plaint with reference to the reliefs claimed therein; where the relief relates to adjudication of title to land or immovable property or delivery of possession of the land or immovable property, it will be a “suit for land”. We are in respectful agreement with the view expressed by Mahajan, J. in Moolji Jaitha's case.
16. In a suit for specific performance of contract for sale of immovable property containing stipulation that on execution of the sale deed the possession of the immovable property will be handed over to the purchaser, it is implied that delivery of possession of the immovable property is part of the decree of specific performance of contract. But in this connection it is necessary to refer to Section 22 of the Specific Relief Act, 1963 which runs:
19. We cannot also accept the contention of Mr. Chitale that the suit is for acquisition of title to the land and is a “suit for land”. In its true sense a suit simpliciter for specific performance of contract for sale of land is a suit for enforcement of terms of contract. The title to the land as such is not the subject-matter of the suit.”
46. Admittedly some of the defendants have their registered office in Delhi. That apart, agreement dated 14.05.2018 with defendants No. 16 and 17 is said to have been executed in Delhi. In view of the above, in my opinion, at this stage, the suit cannot be returned for lack of territorial jurisdiction of this court.
47. Though I have above recorded a prima facie finding that the plaintiff has failed to make out a case to show that non-signatory parties, namely, defendants No. 1 to 15 are bound by the Purchase Agreement, however, I cannot also overlook the fact that the plaintiff have still not repaid the bond amount of USD 50 millions which they have taken from defendant No. 20. If the interim order is completely vacated, it may leave defendant No. 20 remediless. In contrast, I also cannot help noticing the plea of defendant No. 3 that they are in financial distress and need to raise funds to complete their projects. Once the projects are completed and flats are handed over to prospective buyers, defendant No. 3 would be able to recover large amount of their dues which are struck as the projects are not progressing.
48. In view of the above, in my opinion, keeping in view equities in these circumstances, it would be in the interest of justice to permit defendants NO. 1 to 10 to complete their pending projects and unlock the unsold inventory of assets which is lying on account of non-completion of projects.
49. I accordingly modify the interim order dated 12.10.2018 read with order dated 01.11.2018. Subject to further orders of the court, defendants NO. 1 to 10 are permitted to mortgage, charge or create a lien on their movable/immovable assets subject to filing an undertaking in the court by way of an affidavit that the same is being done bonafidely for the purpose of completion of the pending real estate projects of defendants No. 1 to 10 or for its day to day operations. Any such lien, mortgage or charge would be created only to complete the pending projects or for carrying out normal day to day running of the companies. Full accounts of the funds so generated by creation of such lien, mortgage or charge including how the amounts are expanded shall be filed in court on an affidavit of a director every quarterly. Subject to the above modification, the interim order dated 12.10.2018 read with clarification dated 01.11.2018 shall continue to operate.
50. With the above orders IA Nos. 14239/2018, 15097/2018, 15130/2018, 15149/2018 and IA No. 11779/2019 stand disposed of.
JUDGE JANUARY 08, 2020/v/rb