Partly allowed

Unity Infraprojects Ltd. and 2 Ors. v. Tata Capital Financialservices Ltd.

Bombay HC9 Dec 2014APP/43/2015

Case brief

AI extract

What is this about?

In an appeal against a Section 9 order, the court modified an injunction restraining disposal of all assets. It was clarified that for the borrower, the injunction covers only hypothecated assets excluding ordinary business dealings, while for guarantors, it covers only immovable properties, subject to asset disclosure.

What did the court decide?

Modified injunction: limited to hypothecated assets (excluding ordinary business) for Appellant No. 1; limited to immovable properties for Appellants No. 2 and 3, subject to asset disclosure.

Unity Infraprojects Ltd. and 2 Ors. Vs Tata Capital… — Arbitration | Bombay HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL (LODGING) NO. 750 OF 2014 IN ARBITRATION PETITION NO.800 OF 2014

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Unity Infraprojects Ltd. and others. ... Appellants Versus Tata Capital Financial Services Ltd. ... Respondent

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Mr. Navroz Seervai, Senior Advocate with Mr. Manish Desai, Ms. Sudeshna Guha Roy and Ms. Chinmayee Pendse i/by M/s. Vidhii Partners for the appellants.

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Mr. Mayur Khandeparkar with Mr. Hiren Mehta, Mr. Parikshit Desai i/by Mr. Hiren Mehta for the respondent.

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CORAM : MOHIT S. SHAH, C.J. &

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B.P. COLABAWALLA, J.

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December 9, 2014

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P.C.

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The appeal is directed against the order of the learned Single Judge dated 26 November 2014 passed under Section 9 of the Arbitration and Conciliation Act, 1996. In view of the order that we propose to pass, it is not necessary to set out the facts leading to filing of this appeal except to state that the respondent herein had sanctioned a term loan of Rs.50 crores to appellant No.1 for working capital requirements. Appellant Nos.2 and 3 were the guarantors to the transaction. It appears that the appellants committed defaults and in section

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9 petition, the respondent creditor contended that the loan amount of Rs.29,68,93,435/- was repayable by the appellants to the present respondent with interest with effect from 22 March 2014 till the date of payment.

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It is pertinent to note that the section 9 petition was served on the present appellants and an affidavit proving service of notice dated 6 May 2010 was on record. However, when the Section 9 petition was taken up for final hearing, none appeared for the present appellants. Broadly speaking, the learned Judge has given the following directions pending the contemplated arbitral proceedings:-

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(i) a direction to the appellants (respondents in Section 9 petition) to forthwith disclose on affidavits details of any and all assets, monies, bank deposits and accounts held by them singly or jointly (with any person or entity) and/or severally.

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(ii) appointing the Court Receiver in respect of the hypothecated assets more particularly described in the Schedule to the Deed of Hypothecation dated 13 July 2010.

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(iii) an injunction restraining the appellants (respondents in section 9 petition) “from in any manner encumbering or selling or disposing of or alienating or transferring or creating any third party right or interest in or parting with possession of the hypothecated assets more particularly described in the Schedule to the Deed of Hypothecation dated 13 July 2010, annexed at Exhibit 'H' to the petition, or any other assets or properties, movable and immovable, monies, bank accounts and deposits whatsoever, wherever situated.”

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(emphasis supplied)

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After hearing the learned counsel for the parties for some time we indicated to the learned counsel that having regard to the fact that the order was passed in the absence of the present appellants, (they were of course duly served), we proposed to permit the appellants to go back to the learned Single Judge and to file their reply and raise all available contentions. In the meantime, the directions may continue as ad-interim directions.

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Learned counsel for the appellants would, however, submit that the injunction in direction (iii) operates not only in respect of the hypothecated assets but also “any other assets or properties, movable and immovable, monies, bank accounts and deposits whatsoever, wherever situated.”

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It is submitted that on account of such a direction, the appellants' business has come to a grinding halt and, therefore, this portion of the injunction is required to be vacated and/or modified.

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The learned counsel for the respondent (original petitioner) has vehemently opposed the appeal and submitted that even in the memo of appeal, the appellants have admitted that the principal outstanding amount payable is Rs.16.75 crores and, therefore, no case is made out for variation of the impugned order dated 26 November 2014 till the learned Single Judge hears and decides the section 9 petition afresh.

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Having heard the learned counsel for the parties, we are of the view that while direction nos. (i) and (ii) do not call for any variation at this stage, in so far as assets of appellant No.1 company- Unity Infraprojects Ltd. are concerned, the injunction will continue to operate in respect of the hypothecated assets, more particularly described in the Schedule to the Deed of Hypothecation dated 13 July 2010 at Exhibit 'H' to the petition except in the usual course of business. As far as the other assets of Appellant No.1 are concerned, no injunction will operate at this stage. As far as appellant Nos.2 and 3 are concerned, who are directors of the company and had given personal guarantees to the respondent herein (original petitioner), the injunction will operate only in respect of all their immovable properties.

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While the variation for appellant No.1 shall operate immediately, the variation for appellant Nos.2 and 3 will operate only upon compliance of direction (i) regarding disclosure of the assets. It is further clarified that directions (i) and (ii) and direction (iii) as modified hereinabove shall operate as ad-interim directions till the learned Judge hears and decides the matter afresh. As this is only an ad-interim arrangement, the learned Single Judge, after hearing the parties is free to pass such orders as he thinks fit and just including varying this adinterim arrangement.

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It is further clarified that while the injunction against encumbering, selling etc. in respect of the hypothecated assets will continue to operate against appellant No.1, this will be treated as ad-interim injunction and will not come in the way of appellant No.1 company dealing with the hypothecated assets in the ordinary and usual course of business, but the appellant shall furnish a statement on affidavit disclosing the particulars of dealings with the hypothecated assets in the ordinary and usual course of business.

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The appeal is disposed of in terms of the above directions and clarifications.

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CHIEF JUSTICE

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B.P.COLABAWALLA, J.

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Unity Infraprojects Ltd. and 2 Ors. v. Tata Capital Financialservices Ltd.

Case brief

What is this about?

What did the court decide?

Unity Infraprojects Ltd. and 2 Ors. v. Tata Capital Financialservices Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

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